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http://www.barefootrealtyteam.com/mimarket/zip/37921/
Emily Lee
www.barefootrealtyteam.com
Wednesday, February 29, 2012
Cash Buyers Are 'Mopping Up Inventory'
Cash Buyers Are 'Mopping Up Inventory'
Thirty-four percent of home sales in January were paid for with cash, according to Campbell Surveys and Inside Mortgage Finance. And housing experts say the growing number of cash buyers on the market -- who are often investors -- can be a good thing in removing some of the overhang with foreclosures.
"I think a lot of people are throwing in the towel and deciding they would rather invest in real estate than have their money in a deposit account in the bank," Tom Popik, research director at Campbell Surveys, said about the increase in cash buyers in the market.
The advantage of coming with cash to a real estate transaction is that cash buyers don't have to worry about qualifying for the more stringent underwriting standards by lenders that have kept so many other buyers out of the market recently. They also have less concern about appraisals derailing a deal, another common problem plaguing many real estate markets.
That means it can be a challenge for financed buyers going up against cash buyers on the same house. A lender "might turn down a higher purchase price made by someone they feel has a questionable ability to get the mortgage," says Bob Davis, executive vice president of the American Bankers Association.
Because of that, some housing experts have criticized the upswing in cash investors as pushing home prices down even more, since banks may be more willing to take an offer for a foreclosure for a little less from a cash buyer if it means they can get it off their books quicker.
But Richard Green, a professor at the University of Southern California's Lusk Center for Real Estate, says it's probably worth any potential trade-off.
"These cash buyers are mopping up inventory, and that's probably the most important thing that can happen right now," Green told Realty Times. "You're not going to see a recovery in prices until inventories return to more normal levels."
Source: "Cash Buyers Squeezing Out Traditional Home Seekers," Realty Times (Feb. 27, 2012)
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Buffett: 'I'd Buy Up a Couple Hundred Thousand' Homes
Buffett: 'I'd Buy Up a Couple Hundred Thousand' Homes
Buffett: 'I'd Buy Up a Couple Hundred Thousand' Homes
Warren Buffett, the billionaire investor and Berkshire Hathaway CEO, said on CNBC's "Squawk Box" recently that he'd "buy up a couple hundred thousand" single-family homes if it was practical.
Buffett said that's because he believes purchasing a home with ultra-low mortgage rates and holding it for the long-term has become a better investment than stocks right now.
"Housing will come back, you can be sure of that," Buffett wrote in his annual letter to shareholders recently.
Buffett forecasts an increase in household formations, as more people who moved in with their parents or family members during the recession look to move out and get their own home soon.
"People may postpone hitching up during uncertain times, but eventually hormones take over. And while 'doubling-up" may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure," Buffett said.
Buffett said the recovery in the housing market could vary quite a bit among local housing markets, however. He did not provide a timeline of when he expected a full housing recovery, admitting that his prediction last year that a housing recovery will take shape within the year turned out to be "dead wrong."
Source: "Housing Market Forecast Beyond 2012 From Warren Buffet," International Business Times (Feb. 28, 2012) and "Warren Buffet on CNBC: I'd Buy Up 'A Couple Hundred Thousand' Single-Family Homes If I Could," CNBC (Feb. 27, 2012)
FHA Hikes Fees on Mortgages
FHA Hikes Fees on Mortgages
Home buyers with mortgages backed by the Federal Housing Administration will soon see a rise in fees, the agency announced Monday.
The agency is raising its fees in an effort to try to recoup some of its depleted reserves*, which suffered from the rising number of home owners who defaulted on their mortgages. The agency also says it’s raising fees to try to encourage the return of more private capital to the market.
FHA loans allow for smaller down payments, as low as 3.5 percent compared to traditional loans, and they often have less stringent credit requirements, which have made them soar in popularity in recent years. (The agency insures loans but doesn’t issue them.) About 40 percent of all new mortgages for home purchases in 2010 were FHA-backed mortgages.
In particular, FHA will increase two fees that borrowers pay. Starting April 1, it will increase its annual mortgage insurance premium for loans under $625,500, bringing the total cost from 1.15 percent of the loan amount to 1.25 percent. Starting June 1, larger loan premiums will see an increase of 0.35 percent of a percentage point, bringing the total premium costs up to 1.5 percent of the loan amount, The New York Times reports.
FHA also announced it will raise a fee for the upfront mortgage premium by 0.75 of a percentage point, which will now total 1.75 percent of the loan amount.
The New York Times illustrates the impact of the increase in a recent article: For example, a borrower with a 3.5 percent down payment with a mortgage of $193,000 can expect to pay an upfront mortgage premium alone of $3,377, compared to the prior $1,930. That can be rolled into the mortgage.
The new fees will also apply to home owners who want to refinance their mortgages, the agency announced.
The raise in fees is expected to bring in $1.25 billion in additional revenue to the agency through September 2013.
Read NAR's view of the FHA's decision to raise fees.
Source: “Buyers Face Higher Fees at FHA,” The New York Times (Feb. 27, 2012)
* Editor’s Note: FHA maintains two reserve funds. The first provides reserves to cover each mortgage that's insured for 30 years; the second is a congressionally required 2 percent reserve, which FHA draws on first to cover losses. This 2 percent reserve fund has dipped in recent years part because of continuing declines in home values, which increases the amount of reserves (and therefore more quickly depletes the reserve fund) that the agency must maintain for each mortgage. For more on how FHA reserves work, see "Myths and Facts" by NAR’s Government Affairs.
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