Falling home prices stir fears of new bottom
Home prices fall 0.5 percent from February to March, raising fears of a new bottom
NEW YORK (AP) — The housing slump isn’t over.
Tax credits and historically low mortgage rates have failed to lift home prices so far this year. Prices fell 0.5 percent in March from February, according to the Standard & Poor’s/Case-Shiller 20-city index released Tuesday.
That marks six straight months of declines — a sign that the housing market is going in reverse.
“It looks a little like a double-dip already,” economist Robert Shiller said in an interview. “There is a very real possibility of some more decline.”
The co-creator of the Case-Shiller index, who predicted in 2005 that the housing bubble would burst, says he worries that home prices rose last year only because of the federal tax credits. That fear is shared by other economists. They note that weak job growth, tight credit and millions more foreclosures ahead will weigh on the home market.
All that is discouraging for homeowners who have seen the value of their largest asset deteriorate sharply over the past three years. Falling home prices tend to curtail consumer spending. And they make it harder for struggling borrowers to refinance into an affordable home loan.
Prices in 13 of the 20 cities tracked by the index fell. Only six metro areas recorded price gains. One, Boston, came in flat.
In the first quarter of 2010, U.S. home prices fell 3.2 percent compared with the fourth quarter.
The numbers are especially disturbing because they show that improved sales due to the tax credits didn’t translate into higher prices, said David M. Blitzer, Chairman of the S&P index committee.
Still, falling home prices haven’t kept many consumers from maintaining their optimism about the economy.
A separate report Tuesday showed consumer confidence rose in May for the third straight month as hopes for job growth improved. The increase in the Conference Board’s Consumer Confidence Index was boosted by consumers’ brighter outlook for the next six months.
In a healthier economy, extraordinarily low mortgage rates would pump up demand for homes. But employers aren’t creating new jobs fast enough and loans are harder to come by for small businesses and individuals.
On Monday, the National Association of Realtors said sales of previously occupied homes rose 7.6 percent in April. But the sales were aided by the government incentives that have now expired. Economists don’t expect the improvements to last.
New buyers were offered a credit worth up to $8,000. Current owners who bought and moved into another home could get a credit for up to $6,500. To receive them, buyers had to have a signed offer by April 30 and must close by the end of June.
Shiller and other economists worry that prices could fall below the levels of April 2009. That was the lowest point since the peak in July 2006.
IHS Global Insight economist Patrick Newport forecasts prices will fall an additional 6 percent to 8 percent and bottom out in the third quarter of next year. Newport said the glut of homes on the market is the main reason. But he’s also worried about the rate of foreclosures.
“When banks foreclose, they sell the properties at deep discounts,” Newport said. “Foreclosures have either peaked in the first quarter or are going to peak soon, but they will remain very high for several years.”
Mortgage delinquencies reached a record high in the first quarter. More than 10 percent of homeowners with a mortgage missed at least one payment from January through March, the Mortgage Bankers Association said last week.
Since 2006, nearly 5 million homes have been lost to foreclosures or other distressed sales, according to Mark Zandi, chief economist at Moody’s Analytics. Zandi expects 3 million more to hit the market over the next two years.
Zandi noted that 15 million homeowners still owe more than their homes are worth. And 26 million Americans are either unemployed or underemployed. The underemployed include people who have given up looking for work and part-timers who would prefer to be working full time.
Loan Aid Leaves Some Worse Off
Tuesday, May 18, 2010
provided by
One in four in the government’s mortgage program is dropped. Here are tales of exhausted savings.
The government’s mortgage-modification program has left some struggling homeowners worse off than they were before.
The Treasury reported Monday that nearly one in four homeowners who were offered lower payments under the Obama administration’s 15-month-old effort have been weeded out of the program. Many people were removed from the trials because they failed to make payments, didn’t provide all the financial documents needed to qualify or were found to be ineligible.
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Homeowners are first offered trial modifications under the program, which provides incentive payments to loan servicers, investors and the homeowners. If borrowers make the payments and satisfy other criteria, those trials are made permanent, ensuring a cut in payments for five years.
While awaiting answers, some borrowers keep making payments, exhausting their savings in what may be a futile effort to save their homes. They also incur fees from the banks and delay taking action that might give them a fresh start in a more affordable home.
Some borrowers had unrealistic expectations about loan-relief programs, which were never designed to prevent all foreclosures. Another big problem is that banks often take six to 12 months to determine whether applicants are eligible.
“I had to learn the hard way and deplete my savings doing it,” said Mia Parry, a manager at a mortgage brokerage in Scottsdale, Ariz., who has spent nearly two years seeking a loan modification. She now wishes she had put her home on the market.
Most struggling borrowers do benefit from seeking help, said Aaron Horvath, a senior vice president at Springboard Inc., a nonprofit counseling service based in Riverside, Calif.
Some win modifications, cutting monthly payments by hundreds of dollars. Others who ultimately can’t get modifications at least are allowed to stay in their homes for months, making either no payments or reduced payments.
But “if you’re draining your savings” in a vain effort to hang onto a home, he said, you may end up worse off.
Eager for quick results, the Obama administration last year prodded banks to start people on trials without first obtaining documents proving they were eligible. That has led to many crushed hopes. The Treasury earlier this year changed its rules and told banks to start trials only after getting documents that proved borrowers qualified.
The Treasury said in a monthly report on the government’s $50 billion Home Affordable Modification Program, or HAMP, that about 1.2 million trial modifications had been started under the plan, and about 281,000 borrowers had washed out by the end of April.
Only about 30% of borrowers who seek help from the main foreclosure-prevention counseling program at Neighborhood Housing Services of South Florida end up with modifications, said LeeAnn Robinson, chief operating officer of the Miami-based nonprofit. Many borrowers don’t have enough income to support even reduced loan payments; others give up before completing the paperwork.
On average, it takes seven months to resolve a borrower’s situation, up from four months a year ago, Ms. Robinson said. Banks and other loan servicers can’t keep up with the demand for help, she said.
Ms. Parry bought a home in Phoenix in 2005 for $535,000, but she believes it now would sell for around $250,000. She has been seeking a modification from a unit of Citigroup Inc. (NYSE: C – News), the servicer of her two mortgage loans, since June 2008.
Ms. Parry’s application was turned down in late 2008, but President Obama’s announcement of HAMP in February 2009 rekindled her hopes. Ms. Parry decided to keep making payments on her loans because she expected to qualify for this new program.
Citigroup started her on a HAMP trial in June 2009, and she made three payments. Then Citigroup told her there had been a mistake and she would need to go through another three-month trial.
At the end of that second trial, Ms. Parry said, Citigroup told her the investor that owned her first mortgage wasn’t participating in HAMP, so she couldn’t get a modification under that plan. During her trial period, Citigroup charged her more than $1,300 of “late charges” and “delinquency expenses,” she said.
Ms. Parry said Citigroup should have been able to determine that the investor wasn’t participating before she went through the trial. Citigroup recently offered her another type of modification that she said fell short of the HAMP formula and wouldn’t lower her costs enough to make keeping the home worthwhile. Unless Citigroup improves the offer, she will try to sell the home.
A Citigroup spokesman said: “We have worked diligently with the borrower and the investor in an effort to find a solution that meets both the borrower’s needs and the investor’s requirements.”
Martha Wright, a marketing executive whose income has dropped in recent years, has been trying since February 2009 to work out a deal with J.P. Morgan Chase & Co. (NYSE: JPM – News), the bank that services the $1.1 million mortgage on her Avalon, N.J. home.
The bank denied her request last summer, but Ms. Wright said she kept trying because the responses from the bank were unclear and inconsistent, and she believed she still might qualify. Meanwhile, she said, by continuing to make payments, she cut her nonretirement savings to about $500 from $63,000 in early 2009.
A spokesman for J.P. Morgan said the bank told Ms. Wright on three occasions that she didn’t qualify for a modification. “Modifying the loan would produce less value to the loan’s owner than foreclosing,” he said.
Housing market regains momentum
Source PA News
Updated on 17 May 2010
Housing market activity bounced back during March with a 25% jump in the number of mortgages advanced to people buying a property, figures have shown.
Around 45,000 mortgages were lent for house purchase during the month, up from 36,000 in February, according to the Council of Mortgage Lenders.
The increase suggests the housing market is regaining momentum following a subdued start to the year due to the end of the stamp duty holiday and January’s severe winter weather.
Lending for house purchase was 45% higher than it had been in March 2009, the ninth consecutive month of year-on-year growth.
But only 112,000 loans were advanced during the whole of the first quarter, down from 171,000 during the three months to the end of December.
However, the CML stressed that no trend could be inferred from this, as the figures were distorted by people rushing through transactions on lower value properties before the stamp duty holiday ended.
First-time buyer activity rebounded quicker than that for home movers during March, with 17,300 first-time buyers taking out a mortgage during the month, 27% more than in February.
A further 27,500 mortgages were taken out by former owner-occupiers, 24% up on the previous month’s figure.
Overall, advances to all people purchasing a property totalled £6.3 billion during March.
Michael Coogan, director general of the Council of Mortgage Lenders, said: “The figures indicate there is currently some momentum to house purchase lending. But for the sake of the future health of the housing and mortgage markets, the new Government will need to focus on the critical issue of funding and how to address the issues arising from the repayment of the emergency support provided during the financial crisis.”
N.Z. Will Spend NZ$1 Billion to Repair Rotting Homes
By Tracy Withers
May 17 (Bloomberg) — New Zealand’s government will spend NZ$1 billion ($702 million) over the next five years to help repair rotting homes.
The government will contribute 25 percent of the cost, matched by local councils, to assist home owners repair their homes, Building Minister Maurice Williamson said in an e-mailed statement today. Owners will pay the remainder, with the help of a guarantee from the government for their borrowing, he said.
As many as 89,000 houses built from 1992 to 2008 leak because of poor design and use of materials, causing them to rot, according to a report the government received in July. Assuming 42,000 homes are seriously affected, the cost of repair would be NZ$11.3 billion, the report by PricewaterhouseCoopers showed.
While the government has no legal liability for the faulty construction, the problem is too large to resolve without state involvement, Williamson said today.
“Affected homeowners have been stuck in a complex and costly disputes process for too long with little prospect of being able to fix their leaky home,” he said.
Homes started rotting after a 1992 change in building codes allowed greater use of plastered exterior wall panels that weren’t always properly installed. The problem was compounded by a 1998 decision allowing the use of untreated timber in framing. Councils have also been sued for approving plans that proved deficient and for not spotting faults during construction.
Auckland Properties
About three-quarters of the affected properties are in the greater Auckland area, where an apartment boom was occurring as people moved to the nation’s fastest-growing city. Only about 3,500 homes have been repaired nationwide, the government said today, citing industry estimates.
Today’s package delivers “a big win for home owners throughout the country and in particular Auckland” and will see money spent on reconstruction rather than lawyers, Auckland Mayor John Banks said in a statement.
Fletcher Building Ltd., New Zealand’s biggest construction materials supplier, fell 0.2 percent to NZ$8.16 at the 5 p.m. close in Wellington. The NZX 50 Index fell 0.6 percent.
The cost of today’s package will be included in the May 20 budget and assumes owners of about 16,500 homes take up the offer, Williamson said. Including the cost of administration, the government’s share rises to about 29 percent, he said.
Building codes have been tightened to prevent a recurrence. In 2006, the previous government established a resolution service to speed repairs for property owners unable to borrow against damaged homes to fund refurbishing work. Few settlements were made under the program which imposed a 10-year limit on claims.
That time limit has been retained for the new package, which property owners don’t have to take up, Williamson said. People can still sue builders and councils directly, and can also opt to use the existing resolution service, he said.
Homeowners joining the latest program are barred from taking action against local councils though they can still sue builders, manufacturers and other advisers, he said.
Eight of the world’s strangest houses
By Brian Clark Howard
As more and more people rebel against ticky-tacky, cookie-cutter homes, options are growing for more unique, satisfying dwellings.
Popular Mechanics‘ Chris Sweeney recently created a great list of 18 of the world’s strangest homes. And though there are arguably some even stranger ones out there (the toilet-shaped home, for one, or the coral castle), one of the things we like about Popular Mechanics’ list is a strong focus on sustainability.
The Popular Mechanics collection focuses on designs that think outside of the box and approach sustainability from a holistic perspective. Some include recycled materials, but recycling itself isn’t usually the central theme.
You don’t have to live in a house built out of discarded tires, bottles, or vehicles to “go green.” There are many ways that we can all go green in our homes, no matter what they look like or where they are located. Switching to more efficient light bulbs and appliances, trying out energy monitoring devices, and boosting insulation are a few examples.
For the greenest of Popular Mechanics’ strange houses, look below:
Photo: Courtesy of Free Spirit Spheres
Free Spirit Spheres
Looking like something from Star Wars, suspended tree houses known as Free Spirit Spheres excite the imagination. Made by Tom and Rosy Chudleigh from British Columbia, the “tree houses for adults” are handmade from local wood.
The spheres are recommended for meditation, photography, canopy research, leisure, wildlife watching and other activities, and they can be ordered fully loaded with plumbing, electricity and insulation. Some are available for rental, and DIY kits are offered. They reportedly sway in the wind.
Photo: www.arquitecturaorganica.com
The Nautilus House
Perhaps what Gaudi would have envisioned if he were asked to decorate a sea shell, the Nautilus in Mexico City was completed in 2006 by architect Javier Sensonian of Arquitectura Orgánica. Sensonian practices what he calls “bio-architecture,” and has designed buildings shaped like snakes, whales and other living things.
The Nautilus was built for a young family who wanted something that felt more integrated with nature, and it is filled with lush vegetation. The front door blends into the colorful mosaic facade.
Photo: RobertBruno.com
The Steel House
One glance at the fantastical Steel House, and you’ll never forget it. Designer Robert Bruno wanted it to look somewhere between animal and machine, and we think he succeeded. The unique home is perched on a bluff near Lubbock, Texas, and minimizes disruption to the area by resting on top of four skinny legs.
Steel is long-lasting and highly recyclable, so green builders have been giving it a second look in recent years, especially for roofing. Inside, the Steel House looks more H.R. Giger than Martha Stewart, and it doesn’t look like the most practical living space, but it definitely is thinking outside of the four-walled box.
Photo: dRRM Architects
The Sliding House
In a final form that quite closely resembles the the Barn House by Belgian architectural and planning firm BURO II (which reworks an existing barn), London-based dRRM Architects created the Sliding House in Suffolk, England.
This unique dwelling is designed to be flexible, allowing the owners to take advantage of fluctuations in light and temperature, maximizing energy savings through passive heating and cooling. The 20-ton outer shell can be retracted in six minutes, revealing an inner layer that’s mostly glass. It’s like layering up in clothing!
Photo: Gigaplex Architects
Montesilo
At Dancing Rabbit Ecovillage in Missouri, residents cobbled together a livable two-bedroom apartment from an old grain bin. Considerably more upscale is the attractive Montesilo in Woodland, Utah, finished in 2006 by Gigaplex Architects.
The Montesilo was made by joining together two corrugated grain silos, and it has a modest, space-efficient size of 1,800 square feet. The home sits in a gorgeous natural setting, near the Provo River, and the ample windows and balcony help bring the outdoors in.
Photo: Christian Patterson for Popular Mechanics
Amory Lovins’ House
Leading green thinker Amory Lovins of the venerable Rocky Mountain Institute lives in a gorgeous home in Old Snowmass, Colorado, that costs a miserly $5 per month to power, thanks to passive solar design, 16-inch-thick walls, xenon-filled windows, and a pair of wood-burning stoves. The home is festooned with solar panels, and there’s a passively controlled greenhouse that yields tropical fruit.
Begun in 1982, the house was way ahead of its time, and has recently been updated with LEDs, the latest energy-monitoring technology, and other green tweaks.
Photo: Future Systems
222 House
The remarkable 222 House in Wales leaves a nearly nonexistent footprint on the region’s southwest coast. According to designers Future Systems, “The soft, organic form of the building is designed to melt into the rugged grass and gorse landscape, the roof and sides of the house being turfed with local vegetation.”
Completed in 1994, the bathroom and kitchen are prefabricated pods that were lifted into the site during construction. The home needs little energy input due to the natural insulation of the ground.
Photo: Wikipedia Commons
Bubble Dream Castle
The space-age Bubble Dream Castle in southern France, near Cannes, was begun in 1975 by Antti Lovag. Inside, the livable sculpture resembles a set from vintage Star Trek, but with more light, since the windows are designed to take advantage of Mediterranean sun.
One of the goals of the visionary designer was to unify the home with its natural surrounding, by bringing outdoor elements inside. Today, the complex boasts 10 suites decorated by different artists, a reception hall seating 350, an outdoor auditorium, and a massive garden.
