FHA Revitalization Bill Moving Forward

The FHA Revitalization Bill, now working its way through Congress with the president's strong support, will empower the Federal Housing Administration to make changes that will open the door wider to families wanting to purchase their own home. It will create more affordable housing nationwide.

Key provisions in the bill will include providing FHA with flexible authority to introduce new products and program changes, such as flexible down-payment programs. It will also increase FHA loan limits in high-cost areas. And it will allow improvements to be made in the FHA Home Equity Conversion Mortgage (HECM) Program.

“FHA has the potential to expand homeownership to underserved consumers, especially first-time buyers, minority and low-income borrowers,” said Regina Lowrie, chairperson of Mortgage Bankers Association. “These changes will put FHA back on track to achieve its mission of facilitating affordable housing for Americans.”

The changes incorporated in this new legislation, coupled with the widening range of new conventional mortgage plans now available to consumers, will be a big help in making homeownership achievable for many more families in the months and years ahead.

Home Prices Cooling

Sales activity for existing homes continues to soften, while prices are up only slightly over a year ago, according to a report from the National Association of Realtors. Total existing home sales – including single-family, townhomes, condos and co-ops – declined 1.3 percent in June (most recent report).

“Over the last three months, home sales have held in a narrow range easing to a level that is near our annual projections,” said David Lereah, NAR's chief economist. “That tells us the market is stabilizing. At the same time, home sellers have recognized that they need to be more competitive in their pricing given the rise in housing inventories.”

The national median existing home price for all housing types is now about $231,000 – up only 0.9 percent from a year ago.

Mortgage Foreclosures Down

The number of property foreclosures nationwide was down during the second quarter of this year, according to a report from RealtyTrac. There were 272,109 properties that entered some stage of foreclosure during the past quarter. That's about 16 percent less than the previous quarter. However, it reflects a 25 percent increase over the second quarter of last year.

Changes in Home Appraising Field

The home appraising field is in a state of transition, as more home sellers and buyers rely on brokers to help establish current market values (usually by researching sales prices of comparable properties) or using home value generating Web sites on the Internet.

Typically, when a broker solicits a home listing, he or she will provide the owner with a “market analysis report.” This includes a list of comparable properties in the area that were recently sold, and their sales prices. This is often the primary input for determining the asking price for the property. Some owners go to various Web sites that claim to provide current values for homes in most areas of the country.

One such site – Zillow.com – not only provides estimated values but aerial photos of neighborhoods where the property is located, and charts that show value fluctuations over the past week and year. It should be noted that although the Zillow.com data is quite complete in most areas, a few states such as Indiana , Texas and Louisiana , are left out due to their nondisclosure state laws.

Now that home sales are becoming more sluggish and properties remain on the market longer before a sale is consummated, homeowners are looking for ways to make their property more salable. One trend is to obtain a comprehensive report from a professional local appraiser before placing the home on the market. It's costly, but offers significant advantages. This provides the owner and prospective buyer with a complete and credible report on the current market value of the home, thus expediting a decision to purchase the property.

Lowering Title Insurance Costs

The high cost of title insurance is spurring some politicians and government agencies nationwide to take actions to control those costs. For example, Insurance Commissioner John Garamendi in California has proposed new regulations that could significantly lower the amount consumers pay title insurers. The proposed regulations would set interim maximum rates based on each company's rates in year 2000, before the sharp rise in home prices.

If implemented, this regulation would result in an immediate 23 percent reduction in title insurance rates for a home purchase, a 16 percent reduction in the cost of title policies for refinancing, and a 27 percent decrease in the cost of escrow services provided through escrow companies controlled by title insurers. A study by Garamendi's office found that little competition exists in the title insurance industry. “It's so rife with illegal kickbacks and gratuities that homebuyers and those seeking refinance mortgages must pay excessively high premiums,” Garamendi said.

The new regulations could save individual home buyers thousands of dollars on title insurance and escrow costs, he noted. It would also help put an end to illegal kickbacks, he added. “We have found company after company that were giving these illegal kickbacks to drum up business.

Home Building and Sales Still Healthy

Nationally, the housing market is experiencing a cooling process, but some states continue to show growth, according to a report from the National Association of Home Builders. “We are coming off a very strong couple of years for the housing industry and markets are now cooling to more sustainable levels,” said David Seider, chief economist for NAHB. “Each market has different factors that affect its local economy and housing market, but overall we are forecasting an orderly slowdown in housing activity.”

Home prices increased nationally by 13.2 percent last year, with the strongest gains primarily in states along the West and East coasts, the report noted. Much slower price increases are forecast for this year and in 2007. While home construction is expected to decrease in most states, it will increase in other states. The same scenario is expected with the home resale market.

The effects of last year's hurricane season are still being felt in several states. This is spurring more multifamily housing construction starts this year and will drive an even bigger jump in construction activity next year, the report predicted. While the rebuilding and repair process is proceeding slowly, the pace of that activity is expected to pick up in 2007.

Changing Trends with Second Homes

The purchase of a second home is becoming more appealing to today's consumers and it doesn't have to be located within a days drive from the buyer's primary home. Maybe it's the rising cost of gasoline, but today's second home buyers are now much more willing to fly to the property's location for get-away trips to their second home as opposed to driving. With this trend in mind, a second home could be located almost anywhere in the country.

This was revealed in a recent survey taken by HomePages.com. After surveying 1,300 adult consumers they found that 21 percent say they are considering the purchase of a second home within a year. Another 42 percent said they are considering such a purchase within the next two to six years.

The old “rule of thumb” was that a second home should be no farther than a comfortable day's drive from the buyer's primary home. But today, nearly a third (29 percent) of those considering the purchase of a second home say its proximity to their current homes is not a major factor, it was noted in the survey responses. And they are very willing to fly to those destinations. Vacation and investment homes remain a strong and prominent part of the real estate market, both as a means of providing an escape and providing supplemental short-term and long-term income.

About Real Estate commissions

The Governmental Accountability Office and House Financial Services Committee say that far too many home sellers still pay 6 percent or more for brokerage commissions. An increasing number of consumers agree that the previously accepted 6 percent commission is too much in today's market, considering the rising level of home prices in recent years.

A study and report issued by Real Trends and Harris Interactive reveals that 62 percent of today's brokerage firms feel pressured to negotiate commissions. And 81 percent say competition is the main reason for lowered commissions, rather than discount realty firms or consumer resistance. And 40 percent report that competition is intensifying.

However, the same study determined that 59 percent of consumers don't think of what they pay for realty services as a percentage amount, but more as a total dollar amount. Among the consumers who do consider realty costs on a percentage basis, almost half said their rate was 5 percent or less in their last transaction. Less than 30 percent said it was 6 percent.

“It's time for regulators and media representatives to print the truth about competition in real estate services,” a spokesman for the study said. “Based on our studies, competition has never been so fierce nor have consumers ever had more choices available to them as they have today.” The 110-page report, now available in its entirety, is titled, “Consumer Tsunami.” For information, e-mail Steve Murray at: smurray@realtrends.com.

Evolving Trends for New Homes

New homes being designed and built in today's market are significantly larger and offer more amenities than homes built two or three decades ago., according to a report on new home characteristics released by the U.S. Census Department in June. The information provides a snapshot of changing aspects of home design in recent decades, including the continued expansion of new home sizes through last year.

The average floor area in a newly built home last year reached an all-time high of 2,434 square feet. That's up from an average 2,349 square feet in 2004 and just 1,645 feet in 1975. The Northeast Region had the largest average new home size, with the Midwest reporting the smallest sized new homes.

Jim Woodard writes a nationally syndicated newspaper column on real estate news and trends, carried in about 230 U.S. newspapers – along with freelance features.  Reproduction of this report, in part or entirety, is prohibited without the express permission of the author. E-mail: storyjim@aol.com.