Housing to Continue in Recession with Loan Volume Slipping: iEmergent
and home financing industries, according to new projections just released by iEmergent, a Des Moines, Iowa-based market research firm for the mortgage and real estate sectors. The company warns that slow growth is also expected for 2012 to 2015.
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According to iEmergent’s national forecast, home purchases next year will tally 2.62 million loans for $490.9 billion. The company’s analysts put the 2011 refinance range at 2.18 million loans for $412.9 billion (low) to 2.63 million loans for $499.8 billion (high).
Altogether, iEmergent estimates total mortgage volumes for the 2011 calendar year will fall within the range of $903.8 billion to $990.7 billion.
“These projections indicate that housing and home financing will continue in recession,” iEmergent said in its report.
The company’s 2011 projections represent a 17 percent decrease in total origination volume from end-of-year 2010 volume estimates. iEmergent says the decline is mainly due to a 29 percent drop in projected refinances from 2010 to 2011, while home purchases are expected to drop only slightly by 0.5 percent.
According to IEmergent’s analysis, 38 percent of all U.S. households are no longer part of the 2011 pool of potential homebuyers who might be eligible, able, and willing to purchase or refinance a home.
As a result of the 2007-2010 economic collapse, the company says the total available homebuyer pool has been reduced to levels similar to those from 1995 – a key factor in the firm’s weak 2011 forecast.
“The home financing industry is now caught in a serious ‘demand trap,’ a negative feedback loop of economic and behavioral deflation,” said Dennis Hedlund, president of iEmergent. “Similar to the liquidity trap that spawned it, mortgage rates have reached unprecedented low levels, yet purchase money mortgage demand languishes as prime homebuyers are trapped by cumulative downward economic and job pressures.”
According to Hedlund, without real growth in consumer demand, which is also tied to real growth in jobs and the re-employment of millions of Americans, the demand trap will be very difficult to escape.
“Refinance demand may pop up for brief periods, but elevated volumes will be unsustainable and will diminish over time as the remaining household pools shrink faster than they can be replenished. Demand can’t be created from households that can’t buy,” Hedlund said.
iEmergent’s forecasts suggest that 2011-2015 will create considerable market and volume risks for lenders of all sizes, especially those that have been relying heavily on refinance transactions for the past two years.
Additionally, Hedlund warns that “without evidence-based intelligence that quantifies the shifting growth and behavior of lending opportunities in individual markets and communities, lenders face the very real prospect of falling into a self-induced, long-lasting and potentially debilitating ‘performance trap,’ a cycle of stagnation that loses customers, thwarts recovery, and leads to chronic underperformance.”
Mortgage Rates Set New Record Lows in Freddie Mac Survey
By: Carrie Bay
Interest rates on home loans sunk to new lows this week, according to figures released by Freddie Mac Thursday.
Although rates have been hovering near their lowest levels in more than a half-century for some time now, the GSE’s chief economist, Frank Nothaft, expressed concern that they’ve done little to pull would-be buyers from the sidelines as the housing recovery continues to slow.
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Freddie Mac surveyed about 125 lenders from across the country and found that average interest rates on 30-year fixed-rate mortgages dropped to 4.17 percent (0.8 point) for the week ending November 11. That’s down from last week’s average of 4.24 percent.
Rates for 15-year fixed mortgages averaged 3.57 percent (0.8 point) this week, down from 3.63 percent reported by Freddie the week prior.
The 5-year adjustable-rate mortgage (ARM) dropped from 3.39 percent to 3.25 percent (0.7 point), while the 1-year ARM remained unchanged at 3.26 percent (0.7 point).
Rates for all the loan products tracked by Freddie Mac were reported to set new all-time lows in the GSE’s survey.
“Following the Federal Reserve November 3rd policy announcement that it plans to purchase up to $600 billion in government securities, Treasury bond yields initially fell and then gradually rose again. This allowed mortgage rates to fall to record levels this week,” Nothaft explained.
The Fed’s decision to pump more capital into the nation’s sluggish economy is intended to keep interest rates low in the hopes of sparking economic growth. The central bank
bought $1.7 trillion in mortgage-backed securities (MBS), GSE debt, and Treasury bonds from November 2008 to March of this year, and that effort did prove successful in pushing mortgage interest rates down.
But some analysts say they don’t expect the same results from this second round of the Fed’s quantitative easing initiatives.
It’s been suggested that the effects of the central bank’s policy move have already been priced into rates because the market had been anticipating the decision for several weeks prior. It’s also true that mortgage rates have remained at historically low levels even after the Fed made its first exit from the securities market back in March, meaning the market is holding its own without the government intervention.
A separate report released by Bankrate Thursday shows that mortgage rates are rising despite the Fed’s policy decision, at least at some larger banks. Bankrate’s study averages rates from the top 10 banks and thrifts in the top 10 U.S. markets.
The tracking company found that the average rate on the benchmark conforming 30-year fixed mortgage increased to 4.46 percent (0.34 point) this week, up from 4.42 percent reported last week.
The average 15-year fixed mortgage increased from 3.81 percent last week to 3.84 percent (0.33 point) this week, according to Bankrate, while the larger jumbo 30-year fixed rate rose from 5.04 percent to 5.08 percent.
Adjustable rate mortgages were mostly higher in Bankrate’s study as well, with the average 5-year ARM rebounding to 3.62 percent and the average 7-year ARM climbing to 3.95 percent.
Bankrate also surveys a panel of mortgage experts each week to gauge the direction rates are headed over the next seven days.
Half of the panelists forecast mortgage rates to rise over the next week. Only 29 percent predict mortgage rates will fall, and the remaining 21 percent expect mortgage rates to remain more or less unchanged in the coming week.
Current Mortgages Turning Delinquent Rises for First Time in a Year
By: Carrie Bay 
During the third quarter of this year, 2.7 percent of current mortgage balances transitioned into delinquency, according to new data from the Federal Reserve Bank of New York. That’s up from 2.6 percent that became newly delinquent in the second quarter.
Fed officials called the quarterly increase “slight” but noted that the rise follows a full year of declines in new delinquencies.
The New York Fed said it observed a similar pattern in the third quarter of 2009, which might suggest this is simply a seasonal effect, but the federal bank says it plans to “closely monitor” the development.
According to the New York Fed’s report, about 457,000 individuals received home foreclosure notices on their credit reports between July 1 and September 30, 2010. Officials say this represents a 5.5 percent decrease from the second quarter and a 6.4 percent drop from a year earlier.
The Fed says consumers are continuing to trim their debt. It’s a trend that has been evident for the previous seven quarters, though the pace of decline has slowed recently. Since peaking in the third quarter of 2008, nearly $1 trillion has been shaved from outstanding consumer debts, the federal bank reports.
Excluding the effects of defaults and charge-offs, available data show that non-mortgage debt fell for the first time since at least 2000. Also, net mortgage debt paydowns, which began in 2008, reached nearly $140 billion by year-end 2009.
The Fed says “these unique findings suggest that consumers have been actively reducing their debts, and not just by defaulting.”
“Consumer debt is declining but only part of the reduction is attributable to defaults and charge-offs,” said Donghoon Lee, senior economist in the Research and Statistics Group at the New York Fed. “Americans are borrowing less and paying off more debt than in the recent past. This change, which we continue to study carefully, can be a result of both tightening credit standards and voluntary changes in saving behavior.”
The fact that consumers are reducing their debt with payments rather than non-payments would seem to be a good thing. But analysts say because outstanding debt balances are shrinking, it signals consumers aren’t spending – a bad sign for an economy to struggling to gain its footing.
With this report, for the first time, the New York Fed addressed the question of how the decline in overall consumer debt has been achieved. They correlated it to a “sharp reversal” in household cash flow from debt, indicating a decrease in available funds for consumption.
According to newly available data through year-end 2009, the payoff of debt by consumers reduced their cash flow by about $150 billion, whereas between 2000 and 2007, borrowing had contributed more than $300 billion annually to consumers’ cash flow, the Fed explained in its report.
The Coolest Home Upgrades
Fewer people are buying new homes these days, opting instead to do home renovations – you know, just to spice things up a little.
Maybe you turn your bathroom into a high-tech spa or get some smart appliances in the kitchen. Maybe you do some green upgrades or maybe you do something purely for luxury.
So, what’s the new rain showerhead, the new infinity pool?
We talked to contractors, designers and developers all over the country and here are the 10 Coolest Home Upgrades.
Hidden, Wall-mounted TV
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| Photo: Electronichouse.com |
It’s go big or go home with televisions these days – but when you bring one of these drive-in movie-sized screens home, it can often wreck the design of the room. When a guest walks in, they won’t say, “Wow, what a nice house,” but rather, “Wow, what a big TV you have!”
Well now, you can have it all – a big screen and big style. Designers are increasingly choosing to hide gigantic televisions in the wall and cover them with a mirror or artwork so when they’re not in use, you don’t even know they’re there!
When it’s above the fireplace, it can be a framed mirror or piece of art. In the photo at left, this Samsung 37-inch LCD is mounted in the closet behind the mirror, hidden by a removable panel in the closet.
You probably want a pro to do this – TVs require proper ventilation.
Water Feature With Fire
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| Photo: MerchantCircle.com |
Fountains aren’t new and fire pits aren’t new but put them together – maybe even add some LED lighting – and shazam! Welcome to the future.
A water feature with fire shooting out of the middle can instantly remind you of that Hawaiian vacation (maybe pump some hula music into the outdoor speakers) or just ensure that you not only keep up with the Joneses but knock their socks off when they come over for a barbeque.
They can be rectangular trough-like structures with broken glass in the middle where the fire shoots out, or circular like this one in the picture at left. They can be freestanding, attached to a pool or create a big ridge of fire in a stoned wall. Have a seat because you can control it all by remote control!
OK, who wants toasted marshmallows?
Home Golf Simulator
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| Photo: Truegolf.com |
Golfers have been practicing their swing at home for years but not quite like this – a floor-to-ceiling golf simulator with a massive screen to let you “play” on some of the coolest courses in the world from Hawaii to England.
A golf simulator like the one from Trugolf at left is the ultimate addition to your game room next to the pool table and pinball machine.
Not only do you really feel like you’re on the course but it helps you with your game, with sonic ball-tracking sensors and a program that gives you valuable feedback on your swing. They run from $20,000 to $60,000 or more.
She winds up the swing, good form and… Four!
Glass Rooms on the Patio
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| Photo: Cotton & Co. |
Outdoor patios with full kitchens are getting even huger these days, with some nearing 10,000 square feet, said Stephann Cotton, owner of the real-estate sales and marketing firm Cotton & Co.
They’ve got the Rolls Royce of grills, outdoor wine fridges, fireplaces, sweeping views — you name it. But guess what else they’ve got? Bugs.
Cotton said his high-end clients with penthouses in Boca Raton, Fla., are increasingly asking for these glass structures, out at the end of the patio where the best views are. They’re turning them into everything from outdoor dining areas and zen gardens to man caves and music studios.
A four-sided glass structure means there aren’t just northern views or southern views, Cotton says, there are north, south, east and west views!
Exotic Landscape Lighting
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| Photo: Robert Davie |
So you’ve got spotlights and those little solar path lights but this is taking your backyard to the next level and doing exotic landscape lighting.
Maybe it’s uplighting on the palm trees, Cotton explained, or in the waterfall that spills over into the pool.
The cool thing is, Cotton said, you can even use solar lights – so it won’t cost you an arm and a leg in electricity! Take a solar light, put it in a spotlight and turn it upside down shooting up into your landscaping or water feature like a fountain or koi pond.
“Landscape lighting in the water is fairly easy to do,” Cotton said. “You get that constant reflection – It’s very romantic mood light. It produces a romantic and flickering light – just like a fire does.”
Check out more ideas, like the one at left, from Robert Davies landscape design.
Outdoor Shower
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| Photo: Karmasamui.com |
No, we’re not talking about the kind you put next to the pool so the kids can wash off the sand, dirt or chlorine.
These are luxurious showers, usually off of the master bath, made of high-end stone and other natural materials, with lush foliage that create your own personal Eden.
You’ll already find this type of outdoor shower in resorts in Bali, Fiji and the Caribbean, but now, homeowners are bringing the resort home.
“It’s a very sexy thing,” said Walid Wahab, president of Wahab Construction in south Florida. “It’s your private shower — you can get completely naked and take a shower outside in your private garden.”
Wahab said the construction is getting very creative – things like a shower head coming out of a tree.
Master Control for Energy Consumption
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| Photo: Control4.com |
You know you can control your entire house now from a laptop, iPhone or iPad. Everything from the lights and thermostat to the stereo – and even the pool. Here’s taking it to the next level – a master control for energy consumption.
“This is very, very new – people are just experimenting with it,” said Ron Rimawi, who co-owns Digital Interiors in Atlanta. “It helps make you more aware and more conscious of your energy usage, so you don’t waste energy.”
Basically, they’re small digital panels that connect with the utilities and track various appliances and systems in your home. They can tell you everything from your usage to the temperature and how much it’s all costing you!
“We have long held the belief that the promise of the Smart Grid can only be realized if the consumer is front-and-center in the design of demand-response systems,” said Control4, which makes the master control for energy consumption pictured at left.
Pop-up Ventilation for the Kitchen
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| Photo: Dacor.com |
No one wants the lingering smell of smoke and cooking fumes in the kitchen – particularly with how hot the open-concept kitchen-living area is right now. But hoods, no matter what high-end materials you use, can be clunky, not to mention they get greasy and dirty.
Enter the pop-up hood vent – You can sink it into an island or other countertop (of course, with an underground vent to the outside) and then at the press of a button, it comes up, sucks all the smoke and fumes out and then press the button again and – poof! – it vanishes again.
This is not only great for kitchen design, but also to lure other members of the family into the kitchen to help.
Make it high-tech – and they will come!
Cooling Drawer
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| Photo: Electronichouse.com |
Let’s face it – kitchens are getting cool. From sleek granite to smart appliances, this isn’t your grandma’s kitchen.
One of the places where the most innovation is taking place is in the refrigerator. Maybe they have double French doors or are hidden by paneling that makes them blend in with the cabinets.
One of the coolest things – literally – is a cooling drawer, like the one shown left from Fisher Paykel. These are drawers with several different temperature settings, so you can store soda, wine, snacks for the kids – even ice cream.
They’re individual drawers, so you can have any number of them scattered around the house.
Picking up real estate pieces in divorces
People in Real Estate
By Mary Umberger, Monday, November 1, 2010.
Joan RoglianoSometimes, the most satisfying days for real estate agent Joan Rogliano are the ones when she goes to a listing appointment and the homeowner decides not to sell.
Rogliano, who owns Rogliano Realty Group in Littleton, Colo., specializes in sales related to divorce, a niche she began to cultivate after her own marriage ended several years ago and she became painfully aware of the confusion and anxiety that can surround that major marital asset.
“When you’re going through a divorce, you’re out of control, for the most part,” she said. “You’re scared to death. Your friends say to do one thing with the house, your kids say another. Here I was, a Realtor, and even I wasn’t sure of what to do.”
Deciding that her own anxiety over the house — as well as other financial confusion that seems to go hand-in-hand with marital breakups — couldn’t have been a unique experience, she decided to become more familiar with divorce law. And she talked to financial planners. She assembled groups of newly single women to talk about their concerns.
About three years ago, she completed a two-day “Real Estate Divorce Specialist” course offered by Boulder, Colo., financial planner Carol Ann Wilson.
Rogliano was well on her way to creating a steady business niche. Although she said she’s unsure of how much of her business is specifically divorce-related (she also handles many high-end listings in the Denver area), it’s now a significant part of her practice.
