Seventy-five percent of Americans say that “owning a home is the best long-term investment they can make and is worth the risk of ups and downs in the housing market,” according to a new survey of 2,000 bipartisan voters by the National Association of Home Builders.

Despite their situation — whether underwater on their home or even renters — the survey found Americans to be optimistic about home ownership. Eighty-one percent of those who own their homes outright, 76 percent with mortgages, 67 percent of renters, and 65 percent who have underwater mortgages cited home ownership as the “best long-term investment.”

When survey respondents were asked whether they’d recommend buying a home to a friend or family member just starting out, 80 percent of Americans said “yes.” Even home owners currently underwater— those who owe more on their mortgage than their home is currently worth — overwhelmingly (78 percent) said they would recommend home ownership to family or friends starting out.

More buyers are coming up through the pipeline too. The survey found that 73 percent of those surveyed who do not own a home said their goal is eventually to buy one.

The NAHB survey also found:

? 58 percent of Americans oppose eliminating the mortgage-interest deduction and 63 percent oppose lowering it. What’s more, 57 percent of those surveyed say they are less likely to support a candidate for Congress who wanted to eliminate the mortgage-interest deduction.
? Respondents were split on about requiring a 20 percent down payment to purchase a home: 49 percent were in favor and 49 percent opposed it. However, mortgage holders and renters aged 18 to 54 were more opposed to it: 58 percent of younger mortgage holders and 59 percent of younger renters opposed adding a 20 percent down payment requirement.

Source: “The Cook Report: The Home Front,” National Journal (June 2, 2011)

Prospective home buyers have the choice of two types of houses on the market: resale or new. Home buyers planning to buy a brand-new house or condominium often cite energy-efficiency, open layout, a warranty, and being able to select appliances, flooring, paint colors and other design elements as factors driving their choice. But builders say that buyers can be drawn to a new house for reasons that aren’t so obvious. Below are a few more benefits of a brand-new home that you may not see in the sales brochure.

Building a Community Together

A brand-new community is one of the built-in benefits of many new homes. When families move in to a subdivision at the same time, often lasting bonds of friendship and neighborliness are formed right away. Nobody is the “new kid on the block,” and many home builders host community block parties in new developments to help owners meet and connect. Popular amenities like pools, walking trails and courts for tennis and basketball offer additional opportunities for interaction among neighbors of all ages. Often new communities are comprised of home owners in the same stage of life, such as young families or active retirees, so neighbors can get to know each other through carpools, PTA meetings, tennis matches or golf games.

Entertaining

Throwing a party in an older home can be a challenge because smaller, distinct rooms make it difficult to entertain guests in one large space. Builders are responding to today’s home buyer preferences with layouts featuring more open spaces and rooms that flow into each other more easily, like the popular great room. While you are in the kitchen preparing dinner, you can still interact with guests enjoying conversation in the family room without feeling closed off. The feeling of spaciousness in today’s new-home layouts often is enhanced the higher ceilings and additional windows that bringing in more light than you would find in an older home.

A Clean Slate

For some buyers, parking the car in a sparkling-clean garage or being the first to cook a dinner in a brand-new kitchen is part of the appeal of new construction. In addition, you won’t have to spend time stripping dated wallpaper or repainting to suit your own sense of style. You can create your own home décor from the get-go! The advantages of being the first owner of a home extend to the outdoors. Instead of inheriting inconveniently or precariously placed trees, or having to tear up overgrown shrubs, you can design and plant the lawn and garden you want.

Outlets, Outlets Everywhere!

Homes built in the 1960’s and earlier were wired much differently than houses today. Builders had no way of anticipating the invention of high-definition televisions, DVRs and computers that we enjoy today — and the very different electrical requirements they would introduce. New homes can accommodate advanced technologies like structured wiring, security systems and sophisticated lighting plans, and can be tailored to meet the individual home owner’s needs. Anyone who has ever lived in an older home can also attest to the fact that there are never enough outlets, inside or out! New-home builders plan for the increased number and type of electronics and appliances used by today’s families, so you can safely operate a wine cooler, Christmas lights or your computer.

Many customers don’t realize that closing costs are negotiable, mortgage experts tell The New York Times.

“There’s a lot of room for negotiation in the costs of closing and consumers should examine every charge and not hesitate to challenge them and try to bring them down,” says Barry Zigas, director of housing policy at the Consumer Federation of America.

Closing costs can really add up when buying or refinancing, running anywhere from 3 to 6 percent of the price of the property. For example, in 2010 the average closing costs for a $200,000 purchase rose nearly 37 percent to $3,741, according to Bankrate.com.

Many of the fees associated with closing are negotiable and consumers should review line-by-line estimates and challenge them.

Simply ask the lender which fees are negotiable and which are fixed to find out where there’s wiggle room. Questions such as “Who is getting paid this fee, and why am I being asked to pay it?” can start the conversation, experts say.
“It’s not a time to be polite,” says Kathleen Day, a spokeswoman for the Center for Responsible Lending. “You have to have a strong stomach and a stiff spine and not bow to pressure from the other side of the table to close the deal.”

Lenders are required within three days of receiving a loan application to provide an estimate of closing costs for buying or refinancing a home. Good-faith-estimate forms provided by lenders can be used to easily compare closing costs among lenders in shopping around for the best deal too.

Source: “Curbing Close Costs,” The New York Times (Jan. 27, 2011)

Borrowers with Fannie Mae-backed loans will face higher borrowing costs and interest rates, even if they have a perfect credit score, starting on April 1.

The agency is imposing a “loan-level price adjustment” on several mortgages, in which borrowers will be charged more in cost or higher interest rate based on how much down payment — or if they’re refinancing the amount of equity in their home — as well as their credit score, explains mortgage expert Bill Gassett in the Massachusetts Real Estate News.

Prior to the adjustment, a buyer with a 700 credit score and a $160,000 mortgage who was purchasing a $200,000 home may pay an additional $800 in these fees. That cost would now be doubled: The loan’s risk-based pricing would equal $1,600, said Cameron Findlay, chief economist for LendingTree.

Borrowers who don’t have large down payments or who have low credit scores will see higher rates. But even borrowers with good credit scores will have to pay more too.

For example, Gassett explains that a buyer with a credit score over 740 who has a 25 percent or lower down payment will now pay about 0.125 percent more in rate.

For any buyer or refinancers of a condo (excluding detached condos) who have less than a 25 percent down payment will face an increase in rate of nearly 0.5 percent.

“It certainly says that even with a great credit score, they still see some risk in you,” Findlay told The Wall Street Journal.

Some lenders have already started incorporating the higher fees.

Not all loans will be subjected to the fees, experts note. For example, not all lenders sell all mortgages to the secondary market and loans insured by the Federal Housing Administration also will be immune.

Source: “Fannie Mae Mortgage Interest Rates & Costs Rising,” Massachusetts Real Estate News (Jan. 30, 2011) and “Mortgage Fees on the Rise Again,” The Wall Street Journal (Jan. 25, 2011)

Barring any big announcement from the Federal Reserve, rates on 30-year fixed–rate mortgages will climb to 5.1 percent by the end of 2011, the Mortgage Bankers Association predicts.

Jay Brinkmann, chief economist of the MBA, said he expects applications for mortgages to purchase homes to stay about the same as they were in 2009, higher than 2010, but refinances should drop.

Total mortgage volume is expected to be nearly $1 trillion in 2011, down from an anticipated $1.4 trillion this year and nearly $2 trillion in 2009.

Source: The Wall Street Journal, Amy Hoak (10/28/2010)

On July 30, 2008, President Bush signed a federal bill known as the S.A.F.E. Act. The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 requires that all states participate in a national register of mortgage loan originators (MLOs), and states must license any MLOs that do not work for an insured depository regulated by a federal banking agency or Farm Credit Administration. MLOs are formally defined as anyone who accepts a mortgage loan application, negotiates terms or makes offers, or assists consumers in obtaining a mortgage, and is compensated in return.

The registry will give the public access to the employment history and disciplinary record of all mortgage loan originators. Those MLOs subject to licensing by the state will also have to submit fingerprints for an FBI criminal background check, authorize release to the licensing agency of an independent credit report, complete at least 20 hours of pre-licensing education courses, pass a written examination, and complete 8 hours of continuing education for each renewal.

The goals are: increased consumer confidence, consumer protection, fraud prevention, accountability of mortgage loan professionals, and uniformity in training and licensing.

All states are expected to be in compliance with the Act by early 2011.

Contact us at the BOLD Company to discuss your particular situation and opportunities.

Eye on the Economy

Hopeful Signs for Housing Remain

While much of the country is in the middle of the hottest summer in recent memory, residential construction appears to be just entering an early spring — with hopeful signs of more meaningful growth ahead.

At first glance, the June housing starts report appeared to be negative, with activity declining 5.0% to a seasonally adjusted annual rate of 549,000 units, down from a pace of 578,000 units in May. But on closer examination there were some positive signs.

Single-family starts fell a modest 0.7% — from 457,000 to 454,000 — suggesting that they are at or near bottom after dropping off with the expiration at the end of April of the home buyer tax credit, which advanced a significant amount of housing demand into that month.

Although single-family building permits fell 3.4% in June — from 436,000 to 421,000 — this was due to a 7.8% decline in the South; the other regions were either flat (the West) or up slightly (the Northeast and Midwest).

Even multifamily construction, which continues to struggle against forces such as weak rents and the scarcity of financing, provided some basis for optimism. Largely responsible for the drop in total starts in June, multifamily starts fell 21.5% to a yearly rate of 95,000, down from May when they were running at a 12-month high of 121,000.

But the picture is not so bleak when viewed in the broader context of quarterly averages, which remove much of the noise created by the volatile monthly numbers.

Multifamily production in the second quarter proceeded at an annual pace of 111,000 units, which was up 19.4% from 93,000 in this year’s first quarter and up 45.0% from 76,000 in the fourth quarter of 2009.

Meanwhile, multifamily building permits in June jumped 19.6% to 165,000, their highest level since February 2009, from May’s 138,000. On a quarterly basis, permits rose 9.5% to 142,000 in the second quarter, up from 130,000 in the previous quarter.

At worst, multifamily construction appears to have found a solid bottom, and more optimistically appears to be on a steady, if erratic, upward course.

NAHB is forecasting that residential construction will slowly improve throughout the second half of this year and into next year, bolstered by continued low mortgage rates, affordable housing prices and an improving jobs market.

But Builders, Consumers Are in a Pessimistic Mood

Conducted and released before the June housing starts and building permits numbers were reported, July’s NAHB/Wells Fargo Housing Market Index (HMI) fell to 14, down from 16 in June, indicating that builders see little grounds for optimism at the present time. Expiration of the home buyer tax credit, ongoing competition from foreclosed properties and short sales and difficulty in obtaining AD&C credit all contributed to the downbeat mood of the builders surveyed by NAHB.

Traces of rising optimism were found in the Northeast and the Midwest where the index rose, albeit to levels that remained low, and that improvement was supported by an increase in June’s single-family building permits for the two regions.

At the same time, slipping building confidence in the South was matched by a drop in the region’s permits. The HMI for the West also indicated an erosion of confidence, but the region’s single-family permits were flat.

Meanwhile, portraying gloomier consumers, the University of Michigan’s Consumer Sentiment Index dropped to 66.5 in July from June’s 76.0. Beneath the surface there was positive news for housing, with 76% of the households surveyed believing that now is a good time to purchase a house, the second highest reading over the past 14 months and only one percentage point below the peak level for this period.

Further improvement in the economy may enable more households to act on this belief.

The Economy Struggles Through a Slow Patch

The dejected spirits of builders and consumers have not been helped by recent indications that the economy is slowing down. Industrial production rose a mere 0.1% in June, though it was still up a healthy 8.2% from a year earlier. Meanwhile, capacity utilization held steady at 74.1%, its highest level over the last year and a half.

Consumers retrenched in June, cutting retail sales 0.5% from May, the second monthly reduction in a row. Nonetheless, sales were still up 4.9% from a year earlier.

Even small movements in consumer spending, which is responsible for two-thirds of the gross domestic product (GDP), can have major implications for growth. NAHB believes that consumer spending will slowly increase over coming months, helping to support the economic recovery.

Inflation Still Under Control

The seasonally adjusted monthly Consumer Price Index (CPI) was down in June for the third consecutive month, falling 0.1% following a decline of 0.2% in May, but up 1.1% from a year earlier. Meanwhile, core inflation — excluding food and energy prices — rose a modest 0.9% from a year earlier.

The low rate of inflation gives the Federal Reserve the room to maintain its expansionary monetary policy and to keep mortgage rates low.

For the past year, the rental component of the CPI has been essentially flat, and as of June, it was down 0.1% from a year earlier. Homeownership “prices” — measured by using an owner’s equivalent rent, which is largely driven by the rent index without utilities — has also been drifting down, declining 0.3% over the past year.

The rent and owner components of the CPI make up 31% of the CPI. The soft rental market and excess vacancies have kept rents from rising, which has been a challenge to apartment owners who have seen other costs increase. It also has made it more difficult for multifamily projects to obtain financing.

The June Producer Price Index for finished goods also fell for the third month in a row, down 0.5% after declining by 0.3% in May. Nonetheless, the June reading was up 2.8% from a year earlier.

Weakness in construction contributed to a 0.7% drop in June for overall building materials prices for both single-family and multifamily construction, their first decrease in eight months. However, they were still up 3.9% and 3.5%, respectively, from a year earlier. Major contributors to June’s price decline were falling lumber, energy and copper prices.