74.6 percent of homes affordable to median-income households, trade group finds

Housing affordability hit a new high in the first quarter, surpassing the previous high set in fourth-quarter 2010, according to the National Association of Home Builders and Wells Fargo.

The Housing Opportunity Index found that 74.6 percent of new and existing homes sold in the first quarter were affordable to families earning the national median income of $64,400. That’s up from 73.9 percent in the fourth quarter of 2010, and it’s the highest level in the more than 20 years the index has been measured.

“With interest rates remaining at historically low levels, today’s report indicates that homeownership is within reach of more households than it has been for more than two decades,” Bob Nielsen, chairman of the National Association of Home Builders (NAHB), said after the index was issued last week.

“While this is good news for consumers, homebuyers and builders continue to confront extremely tight credit conditions, and this remains a significant obstacle to many potential home sales.”

The Seattle metropolitan area also became more affordable with 67.5 percent of homes within reach of those earning the median income of $85,600. That number is the highest recorded since the index started in the first quarter of 1999.

Before 2009, the national index rarely topped 65 percent, the association said. Last quarter was the ninth straight quarter the index was above 70 percent.

Indiana, Ohio and Michigan dominated among the most affordable metro areas. Among metro areas with populations under 500,000, Kokomo, Ind., was the most affordable area, with 98.6 percent of homes affordable to households making a median income of $61,400. The median sales price in the area was $88,000 in the first quarter.

California dominated among the least affordable metro areas. San Luis Obispo-Paso Robles, Calif., was the least affordable among the smaller metro areas with 47.6 percent of homes affordable to households making the median income of $72,500. The median sales price in the area was $320,000 in the first quarter.

Among metro areas with populations of 500,000 or more, Syracuse, N.Y., was the most affordable to households making the median income of $64,300. The median sales price in the area was $80,000 in the first quarter.

Another New York market, New York-White Plains-Wayne, N.Y.-N.J, was the least affordable among both the larger metros.

Less than a quarter of homes, 24.1 percent, were affordable to families making the median income of $65,600 in the first quarter. The median sales price was $425,000.

In other cities in Washington state, Spokane was the most affordable with 82.2 percent of homes within reach of those earning the median income of $60,300. Olympia recorded 81.8 percent; Tacoma, 78.5 percent; Bremerton-Silverdale, 70.1 percent; Bellingham, 69.7 percent; and Mount Vernon-Anacortes, 60.5 percent.

Source: By Inman News

Rebuilding scores — if you ask

Some credit experts call it the best-kept secret in home-mortgage finance. Others say, so what?

Millions of Americans whose credit scores have declined in recent years because of economic stresses could start rebuilding their scores if their rent, utilities, cellphone, insurance and other monthly accounts were reported to the national credit bureaus.

But typically they are not, and as a consequence fail to show up as positive factors on credit-scoring systems such as FICO or VantageScore. These on-time payments essentially go to waste for consumers, even though monthly rents often can be as large as mortgage bills, and years of utilities and other payments are widely recognized as strong indicators of creditworthiness.

Now for the best-kept secret: Under federal law, these unreported accounts need not go to waste. You as a mortgage applicant are guaranteed the right to bring evidence of your unreported on-time payments to lenders, and they in turn are required to consider those records in making a decision on granting you a home loan — provided you request it. If a loan officer refuses, he or she could be open to legal penalties.

Though federal financial regulators generally acknowledge the right to present supplementary data that consumers enjoy under the Equal Credit Opportunity Act, only one — the National Credit Union Administration — has published guidance informing lenders they are required to comply.

Factoring in so-called nontraditional credit accounts not only could provide important help to buyers and owners with recession-scarred scores but could also aid the estimated 35 million to 54 million consumers who don’t show up — or barely show up — in the files of Equifax, Experian and TransUnion, the three national credit bureaus. Many of these are young people with so-called “thin” files with just a couple of credit accounts, and many are minorities.

So where’s the disconnect here? Why aren’t more consumers documenting their otherwise unreported monthly payments? And why are loan officers likely to stare at account records and say: Are you kidding? We only look at credit files.

The problem is complex. Almost no one in the consumer-finance field has paid much attention to the Federal Reserve’s “Regulation B” that interprets the rules on treatment of alternative credit. Lenders who know about it don’t want the hassles of sorting through “shoe box” records that may or may not be accurate. Major players in the mortgage market such as the Federal Housing Administration, Fannie Mae and Freddie Mac all say they’ll accept alternative credit data but have restrictions on what they will consider. FHA, for example, does not permit applicants with low credit scores to boost them by adding positive, nontraditional data.

The credit industry is eager to incorporate accurate, nontraditional information but is ill-equipped to deal with sources that cannot provide large and regular amounts of verified reports.

“The [national] bureaus know that alternative data is highly predictive,” says Barrett Burns, CEO of VantageScore, a joint venture created by Equifax, Experian and TransUnion. “We think millions of people could benefit” if it were collected and loaded into scoreable files. Experian already collects positive rent-payment data on approximately 8 million units in large apartment complexes and incorporates the information into its scores, he said.

But Burns noted that the industry has had difficulty accessing information on utilities payments in some states, and collection of cellphone-account records has raised privacy issues. Without accurate information being available in large quantities, he said, it is difficult to assist large numbers of consumers.

Nonetheless, efforts are under way to mine unreported credit data — potentially the untapped shale gas of the mortgage market — and transform it into something useful. A private firm, Trycera Credit Services, has announced an agreement with the National Credit Reporting Association — a trade group representing companies that provide the merged credit-bureau reports and scores used by mortgage originators — to independently verify the accuracy of consumer-supplied payment records. Those records can then be provided to lenders as part of the standard credit reporting and scoring information used in mortgage underwriting.

Michael G. Nathans, president of Trycera Credit Services, says the project is just getting off the ground but that preliminary information is available at the company’s website, www.trycera.com. The service will cost $20 to verify rental and mortgage payments, $15 for other verifications. Trycera also offers Visa debit cards that can help consumers document their nontraditional credit payments in a scoreable format.

Of course there are no guarantees that lenders will accept your alternative credit data. But federal law requires them to at least “consider” it — if you ask.

Source: By Kenneth R. Harney, Syndicated Columnist

Renters finding landlords have upper hand in this market

Angi Ramos and her former college roommate Laura Waltner have been looking for months for a place to call “home.”

They’ve been trawling websites and have inspected a half-dozen units.

They’d prefer a newer building in Capitol Hill or Queen Anne — vibrant neighborhoods with lots of young people, restaurants and nightlife. Their search so far for a two-bedroom apartment under $1,500 a month has yielded only slim pickings.

“One unit had a great common area,” says Ramos, “but the washing machine was in the kitchen and the dryer was in one of the bedrooms.”

New, attractive buildings, such as the Illumina Lake Union Apartments, are full and expensive, says Ramos. Still, she says, the landlord suggests they check back every month to see when there might be an opening.

Similarly, when Hoa Do set out to find an apartment earlier this year, she says she did not expect to pay as much as $850 per month to rent a vintage studio near Seattle University. What’s more, the college senior regrets that her landlord would not relent on a nine-month lease.

“As a student, I prefer to pay month-to-month, because I never know if I will be studying abroad, or going home to visit family,” says Do, who is from Vietnam.

It’s a story being repeated all over Seattle. As vacancy rates dip below 5 percent, landlords are raising rents and offering fewer concessions or perks.

According to Apartment Insights, a web-based information service, the vacancy rate in the Seattle metro area hasn’t been this low since the latter part of 2007, and rental incentives are drying up in downtown Seattle, Capitol Hill and downtown Bellevue.

“The rental market is changing quickly from a renter’s market to a landlord’s market,” says Cassie Walker Johnson of Windermere Property Management, Lori Gill & Associates. Vacancy rates in highly desirable neighborhoods, such as Capitol Hill, Queen Anne and Fremont, are about 3 percent, the lowest in Seattle, she notes.

In contrast, rental markets with vacancy rates above 6 percent include SeaTac, Federal Way and Kirkland, according to Apartment Insights.

Landlord Christopher T. Benis, who is also a partner in the law firm Harrsion, Benis & Spence and represents tenants and landlords alike, calls the market “balanced.”

“We are raising rents now that we can, but all we are doing is trying to get them [rents] back to 2007 levels,” says Benis, who owns rental properties in Seattle.

Tenants ought to shift their attitudes to reflect the changes, he says. “If they [tenants] think they can look at 20 properties and then come back to the ‘best one,’ that best one will probably be long gone.”

Little in the way of new development and declining home values contribute to a tight rental market.

Tom Cain, president of Apartment Insights, says fewer than 1,870 units are scheduled for completion this year, about 60 percent of last year’s level, and less than one-third of the 6,349 units built in 2009.

Walker Johnson, who specializes in leasing single-family dwellings, condos and small apartment buildings, says population growth is also driving down vacancy rates.

“About 75 percent of my new tenants are moving here from all over the nation to work at larger corporations who are hiring in our area,” she says.

Telltale signs of just how far the pendulum has swung include tenants plunking down more than the list price on rental homes and signing longer leases to qualify for a desired property.

“We are starting to see multiple applications in some situations,” says Walker Johnson, who expects to see hikes of up to 10 percent for rental homes from May through September.

For a Queen Anne family, the possibility of a rent increase on a four-bedroom Craftsman, where they’ve been living for nearly a year, weighs heavy.

“We feel the renewal negotiations are a huge strategy game, and we are fearful we will have to leave ‘our home’ or accept an increase that we simply don’t feel comfortable with economically,” say the husband and wife, who are not being identified due to ongoing negotiations with their landlord.

“This year, you have to jump when you find the right home, unlike a few years ago when properties languished on the market, for months, in some cases.”

Lawyer Lauren Sancken, who signed a one-year lease in April for a Capitol Hill flat with a patio garden and a spectacular view of the Space Needle, says she wishes she had signed a lease extension to lock in her rate.

“It is far more competitive than I expected, especially when several people are willing to submit applications and deposits right away. I found myself offering cookies, muffins, just to try to get a bit of an advantage on places that I really liked,” says Sancken.

Not surprisingly, tenants with limited means are being hit the hardest, says Jonathan Grant, executive director of the Tenants Union of Washington State.

“Many low-income tenants displaced by the foreclosure crisis, sometimes evicted by no fault of their own due to a landlord’s default on their mortgage, are now finding an even tighter market, while many former homeowners are returning to renting after losing their homes,” says Grant.

Adding insult to injury, many of those low-income tenants will have an eviction on their record from the foreclosure, further complicating their ability to secure housing, he says.

Ramos says she is not daunted. “We are willing to wait for a good one,” she says.

 Source: By Elizabeth M. Economou, Seattle Times

New-Home Sales Gain Momentum

After three straight months of declines, sales of new homes got a boost last month, jumping 11 percent, according to the Commerce Department’s latest new-home sales report released Monday.

New-home sales rose in March to a seasonally adjusted rate of 300,000 homes, up from February’s 250,000. However, the number is still far from what economists view as a healthy 700,000-a-year pace for the sector.

The median price of a new home increased 3 percent from February to $213,800. New-home prices are about 34 percent higher than the median price of existing homes, according to economists.

Regionally, new-home sales saw the biggest boost in the Northeast, jumping nearly 67 percent in March. The West saw an increase in new-home sales last month by nearly 26 percent; the Midwest posted a 13 percent increase; and in the South, new-home sales dipped 0.6 percent.

The new-home market continues to be battered by a high number of foreclosures that continue to dampen home prices across the country. With 1.2 million foreclosures forecast this year, the new-home sales market may not see a major turnaround for years, according to RealtyTrac Inc.

However, while residential construction has decreased considerably in recent years, reports have recently shown building permits have increased 28 percent for apartment and condo buildings.

Source: “The number of people who bought new homes jumped 11 pct., but pace is far below healthy level,” Associated Press (April 25, 2011)

Property-tax deadline looms; need some help?

With the first installment of property taxes due May 2, Barbara Alsheikh has her work cut out for her.

“For many people, it is the first time they have really looked at the property-tax bill,” says Alsheikh, supervisor for the King County Tax Advisor Office.

“And before writing the check, they have questions about the value of their property, the levy rate and the amount due.”

The Tax Advisor Office is independent from the assessor and provides residents with advice and assistance, including appeals.

“We are, in effect, a one-stop shop for property questions,” she says.

The primary complaint this year, says Alsheikh, is that a drop in house values did not result in lower tax bills.

“It is a very tough year for many taxpayers,” she adds.

The property-tax bill is not based on real-estate markets at all. Like Ohio, Washington state operates under a “budget-based” property-tax system in which taxing districts, such as fire departments and library and school districts, submit their annual budgets to the assessor, who then determines the taxing rate necessary to meet the adopted budgets.

King County Assessor Lloyd Hara says several factors are at play.

“The most common is that voters approve a property-tax measure, typically a school levy, and that increases the overall property-tax levy that is reflected on the 2011 bill.”

Taxpayers in King County, on average, will pay about 3.33 percent more in property taxes this year, according to Treasury Operations Manager Scott Matheson.

Only 17 percent (or $624 million dollars) of property taxes support King County purposes, says Phillip Sit, Department of Assessments communication and outreach coordinator. The other 83 percent is divvied up among state and local government.

While taxpayers cannot appeal their property taxes, they have the right to appeal the valuation (assessment) of their property — the basis upon which their taxes are calculated — to the King County Board of Equalization, an independent board made up of citizens appointed by the King County executive. Generally, this must be done within 60 days from the time official property-value notices are received.

Alsheikh said her office typically handles about 800 calls in the first two weeks after billings are mailed in February.

Assessed value should not to be confused with market value, which is defined as the amount a buyer, willing but not obligated to buy, would pay to a seller, willing but not obligated to sell.

Assessed value is determined by actual sales and the real-estate market, rather than the current market, notes Alsheikh; assessed values use historical data, which lags behind real time by one or two years.

“Like any business, the budget for a public service tends to increase over time as employees’ wages and benefits, energy costs, transportation and facilities’ costs increase. In addition, voter-approved ballot issues tend to increase the taxes each year,” says Alsheikh.

Meanwhile, taxpayers who are unable to pay their property tax in full are encouraged to contact the Assessor’s Office. Additionally, seniors or disabled persons, may be able to qualify for a property-tax exemption or deferral program.

Alsheikh, for her part, won’t be slowing down anytime soon. She says her busiest season will begin in a month or two, when new official (property) value notices will be mailed out.

“We strive to put each taxpayer on “equal” footing with the assessor’s staff,” she says. “But we don’t take sides; we aren’t out to ‘beat’ the assessor. The goal for all three agencies [including the Office of the Assessor, the Treasury, and the Tax Advisor] is the same: fair and equitable distribution of property taxes.”

Of the 6,000 to 7,000 phone calls the office gets, Alsheikh said, perhaps 10 percent are asking for research and appeal advice.

At the end of last year, nearly 12,300 accounts, including households and undeveloped property for a business, hadn’t paid any taxes for 2010; and just below 12,750 accounts paid only the first half of their taxes owed for the same year according to Scott Matheson, Treasury Operations Manager for King County.

Together, those figures represent 3.7 percent of the 681,757 accounts that were billed last year. “Our historical collection rate,” notes Matheson, “has held steady at around 98 percent for the last several years, and we don’t expect to see a change this year.”

Source: By Elizabeth M. Economou, Seattle Times (4/22/2011)

House Flippers Return, Still Finding Profits

More investors are taking on the risk of flipping homes, despite falling home prices and sluggish real estate markets across the country. But investors say there are still profits to be made in the house flipping business.

Nearly 1 million homes were bought as investment properties in 2010, according to the National Association of REALTORS®, and a record number of buyers purchasing properties with cash currently are flooding the market.

Flipping homes for profit is easier in rising markets, but not many markets are reporting increases in home prices, analysts say. In Washington, D.C., Justin Konz of RestorationCapital says his clients are going through four of five properties a month and are making gross profit margins of 35 percent or higher.

Where to Find the Deals

Flippers mostly are finding their homes through foreclosures auctions, REOs, and short sales. They seek homes at rock-bottom prices that will have low fix-up costs, no more than about 5 percent or 10 percent of the purchase price.

In Florida, where investors are finding it more difficult to flip homes because of the drastic drop in prices and high inventories, flippers are targeting inner-city properties that are being sold at steep discounts. For example, some of houses are selling for $30,000 when they once sold for $200,000.

Perry Henderson, a real estate agent and investor in Austin, Texas, says the biggest opportunities in flipping are the “ugly” houses that have lingered on the market or “old houses that somebody’s grandma lived in for 40 years and didn’t do anything to. Now, she’s passed away and her family wants to sell quickly.”

Real estate investor Brian Fuller, who with partners buys and sells more than 200 properties a year in the San Diego area, says he’s drawn to the “biggest eyesore on the block.” He says they then “ turn it into the best looking house there. We’re helping pull up values in the neighborhood.”

Source: “Vulture Investors Flipping Their Ways to Big Profits,” CNNMoney.com (April 13, 2011)

Foreclosure Activity Drops to 3-Year Lows

New data released from RealtyTrac on Thursday show the foreclosure crisis is easing: Foreclosure notices filed during the first three months of 2011 dropped 27 percent compared with the first quarter of 2010. More than 681,000 homes received a foreclosure filing during the first quarter of 2011.

And while 215,046 borrowers lost their homes, that marks a 17 percent decrease year-over-year.

However, while the improvement may be encouraging, experts warn that the decrease in foreclosure activity is likely temporary.

“The nation’s housing market continued to languish in the first quarter, even as foreclosure activity fell to a three-year low,” says James Saccacio, RealtyTrac’s CEO. “Weak demand, declining home prices, and the lack of credit availability are weighing heavily on the market, which is still facing the dual threat of a looming shadow inventory of distressed properties and the probability that foreclosure activity will begin to increase again as lenders and servicers gradually work their way through the backlog of thousands of foreclosures that have been delayed due to improperly processed paperwork.”

Following this fall’s “robo-signing” scandal, in which banks were accused of processing foreclosures without proper reviews, banks have slowed their pace of foreclosures until they clean up their paperwork procedures, experts say. Otherwise, the number of foreclosures would be much higher for the quarter, says RealtyTrac spokesman Rick Sharga.

Meanwhile, Nevada continues to post the highest rate of foreclosure activity, followed by Arizona and California. Nevada alone had 32,000 properties, or one in every 35, receiving a foreclosure filing.

Source: “Foreclosures Off 30% This Year,” CNNMoney.com (April 14, 2011) and “Processing Delays Cut Foreclosure Activity by 27% in 1Q 2011: RealtyTrac,” HousingWire (April 14, 2011)