Dumb Renovation Trends

CNNMoney lists 5 Dumbest Renovation Trends.

Affluent Urban Markets Evading Subprime Slump

Subprime borrowers are rare in affluent markets because affordable homes are in short supply, says a recent Reuters article.

While home prices are falling in several sectors, properties in many desirable neighborhoods are still selling at astronomical levels, because housing stock is small while demand from affluent buyers is persistently high.

Even so, the article states that now, people are "buying for the long run."

Source: Reuters

About Where We Live

Home choices include:

• a free-standing house
  
• a house sharing common walls with its neighbors (such as a townhouse or "row house")
  
• and a courtyard house (often found in Spain and Asia)
  

Currently, says author Witold Rybczynski, about 90% percent of single-family houses in the United States are detached. He points out their advantages, including:

• light and air from all sides
  
• greater acoustic and visual privacy
  
• less danger of fire from neighboring buildings
  
• being able to pass from the front yard to the backyard without going through the interior
  

Rybczynski points out that "houses are not only investments, they are homes, and hence sources of personal pleasure and pride" and states that the decision to buy a house is emotional as well as financial.

He adds that people become richer, they spend more money on their homes. By 1970, four out of five new houses were either ranchers or splits. Today, in contrast, than one-third of new houses exceed 2,400 square feet.

Is Relief in Sight?

Three-fourths of the $600 billion of subprime mortgages in 2006 were sold by lenders and repackaged into bonds, says USA Today.

Federal Deposit Insurance Corp. (FDIC) Chair Sheila Bair is, to use her own words, "hold[ing] the [loan] servicers' and investors' feet to the fire," since it should have been clear that the loans were high-risk. The FDIC, Federal Reserve and other regulators asked lenders to work with homeowners, promising they will not face regulatory penalties for reasonable workouts. It urged them to work with consumer groups and to help borrowers avoid predatory restructuring scams.

But to do this requires working through complex tax and accounting rules that limit what servicers can do. For example, some bonds have a 5% cap on loan restructuring or are crafted in a way that some investors win and others lose if loans are changed.

Fannie Mae said yesterday that it will help borrowers refinance out of adjustable-rate mortgage (ARM) products or other loans. Consumers could move into loans that meet Fannie's standards without first having to clear unpaid bills on credit reports. Also, the maximum loan term could be stretched to 40 years from 30. (The firm estimates that as many as 1.5 million borrowers could be eligible for its loan options.)

Source: USA Today

Why Do We Live in Houses?

Because it's what people want, says author Witold Rybczynski. (i.e., it's a "cultural thing".)

Rybczynski traces back to the medieval town dwelling, "which combined living space and workplace, and was occupied by a mixture of extended families, servants, and employees."

This started to change in 17th-century Europe, he says, when people "began to live and work in separate places; children grew up with their parents (rather than being apprenticed to strangers, as before); and the home, securely under the control of what we would now call the "housewife," was restricted to the immediate family."

17th-century Dutch cities and towns were composed almost entirely of houses built in rows, side by side. The tradition of "row houses" then spread to England and Wales, and other countries, including the United States.

Today, 75% of Americans live in houses. But what kind of home do they prefer according to Rybczynski? Tomorrow, we'll look at the choices....

Source: Slate

Is Now the Time?

If home values are falling, can this really be a great time to buy or sell? After all, The New York Times recently concluded that "people who chose renting over buying in the last two years made the right move. What's more, tightening mortgage requirements are making it tougher for borrowers to get the financing they want, so there's a smaller pool of buyers to buy sellers' homes.

In an article published today, Realty Times stated that not everyone should own real estate... if they did, reasoned the publication, then who would rent investment properties?

People who shouldn't buy, it adds, include:

• individuals who will be short-term residents in a given community
  
• those with small, declining, or uncertain incomes and
  
• individuals who live in areas where both jobs and people are leaving
  

The article also quotes the NAR (National Association of Realtors), who offers good reasons why someone should buy or sell:

• interest rates are near historic lows
  
• overall, prices are stabilizing (with some communities even seeing price increases)
  
• there's a positive economic outlook, and
  
• during the past decade, real estate has been a great investment
  

Boston Housing Activist to Aid Subprime Borrowers

The Boston Globe reports that an organization run by Boston housing activist " will provide $1 billion in mortgage refinancing to homeowners nationwide who are struggling with high-cost subprime loans".

Bruce Marks, says the newspaper, "is a colorful figure who successfully used guerrilla tactics in the 1990s to pressure major US banks to fund mortgages for low- and middle-income workers".

Through Marks' organization, borrowers can replace their high-interest subprime loans with traditional 30-year fixed-rate mortgages at below-market levels. The new loans will be made available regardless of whether borrowers are in foreclosure.

As a condition of receiving a loan from his organization, borrowers are required to participate in housing activism in their communities. This will enable Marks to "lead mass protests of borrowers with high-cost mortgages at company headquarters and the homes of their executives."

Source: The Boston Globe

Did Craigslist break FHA laws?

In a typical month, Craigslist (www.craigslist.com) allows its users to freely post more than 10 million free ads on its Web sites, which are localized by city.

Recently, a group of Chicago lawyers sued Craigslist Inc., says Inman.com, alleging violations of the federal Fair Housing Act (FHA). They claimed that Craigslist publishes housing notices that blatently "indicate preference, limitation or discrimination on the prohibited basis of race, color, national origin, sex, religion or familial status."

Craigslist argued that it wasn't liable, because of the immunity afforded to Web site operators by the federal Communications Decency Act (CDA) for third-party content.

The judge ruled in Craigslist's favor, affirming that the service isn't liable for the content provided/posted by its users.

The article did not state whether the lawyers were going to sue the individual posters of the discriminatory ads.

Source: Inman News, via Yahoo

Realty Times: The Market Doesn't Matter

Insightful article (URL below) includes these key take-away points:

-- The market hasn't changed; it has moved on. And it certainly hasn't returned to normal and never will. There isn't any such thing as a normal real estate market because each market is new and different and unique to now, and driven by not one event but several, some of which never repeat themselves.

-- Today, there is a loan for anyone who is responsible with money and has a decent job.

-- For some real estate practitioners, 2007 will go down as their best year ever. That will be entirely determined by what they do, not what the so-called market does.

Source: Realty Times (via Yahoo)

Who's to Blame?

Today, CNN Money takes a look at who is -- and isn't -- responsible for the subprime lending situation.

Their candidates and assessment:

1) Mortgage Brokers: Did brokers steer borrowers to loans they couldn't afford?
No, says the National Association of Mortgage Brokers, who puts the blame instead on lending companies. "It's the lender's money," said an organization representative. "They're reviewing the loans. They put loan programs out there and it's the mortgage broker's job to sell the programs."

2) Appraisers: Did inflated appraisals put home buyers in jeopardy?
Appraisers don't bear the primary responsibility for all the bad loans, says CNN Money. But more accurate appraisals could have lessened the severity of the problem, it added.

3) Regulators: Did Government agencies drop the ball?
Although regulators could probably have acted sooner to stem the worst abuses, the majority of the loans being done by companies like New Century and Countrywide were not under the control of bank regulators.

4) Lenders: Did they relax underwriting standards too much?
Lenders made far too many loans to borrowers they knew -- or should have known -- would not be able to pay them back.

5) Wall Street: Did investors purchase loans that were too risky?
Although it's not a primary cause of the subprime crisis, it certainly enabled it.

6) Real estate agents: Did agents encourage consumers to buy far more house than they could afford through the use of exotic mortgage products?
Perhaps on occasion. But ultimately, borrowers have to take on responsibility for staying on budget.

NH FTHB Web Site Launches

I'm pleased to announce the launch of the NH First-Time Homebuyers Club ® Web site at www.NHFirstTimeHomebuyer.com.

Getting the Best Loan When Credit is Tight

CNN Money says that now --more than ever -- it pays to be a prime borrower.

While changes in the subprime market can be alarming, says the media source. However, not everyone is at risk: in fact, prime borrowers can still get competitive terms.

CNN outlines some basic steps you may want to take in order be considered a prime borrower in today's lending environment. They include:

• Pay down your debt balances
  
• Pay your bills on time
  
• Resist new credit
  
• Fix errors in your credit report
  

Investing in Foreclosures

The growing number of homeowners who are falling behind on their mortgage payments could provide opportunities for real estate investors, says Pat Mertz Esswein of Kiplinger's Personal Finance.

Most of the problems, says the publication, are among homeowners with "subprime" mortgages, whose interest rates are spiking as low introductory rates expire. Some 700,000 of these loans are projected to go into foreclosure between now and the end of next year.

We agree that investing in a foreclosure is not an easy, quick, inexpensive, or surefire route to wealth. The typical deal comes with more problems than the average "do-it-yourselfer" can handle. Even so, it can be a rewarding experience if you're willing to do your homework.

The slower the local real estate market, the greater the chance that you'll find a bargain. This is because sellers and lien holders are forced to offer bigger discounts to lure a smaller pool of buyers.

Experts recommend that you try to buy homes for

• 20% to 30% less than their market value if you plan to "flip" the properties
  
• 10% to 20% less than their market value if you plan to rent them out with the option to buy, and
  
• 5% to 10% less than their market value if you intend to rent them out indefinitely.