Year End Residential Home Sales

Read more...

FHA Boosts Qualifying Ratios

The Federal Housing Administration has increased its all-important benchmark qualifying ratios by two full percentage points.

Effective immediately on all manually underwritten mortgages, the government will accept a payment-to-income ratio of 31 percent and a debt-to-income ratio of 43 percent. For borrowers whose homes qualify as energy efficient, the new "stretch" ratios are 33 percent and 45 percent, respectively.

And as always, underwriters can approve loans with even higher ratios if they are justified by what's known in the trade as "compensating factors."

Previously, the ratios were 29 percent and 41 percent for standard FHA-backed loans and 31 and 43 percent for government-insured loans on energy efficient houses.

About half of all FHA mortgages are approved by human underwriters. The rest are approved electronically with software programs that are said to already incorporate the higher ratios.

The changes are designed to boost the ownership aspirations of low and moderate-income borrowers, said FHA Commissioner John Weicher, who pointed out that the old ratios are no longer valid because of the recent federal income tax cuts.

"Most borrowers seeking FHA mortgage insurance have enjoyed a reduction to their federal income tax during the last several years, thus increasing their buying power and disposable income," Weicher said in a letter to lenders outlining the higher ratios.

"This change will allow a larger number of deserving families to purchase their first home while not increasing the risk of default."

In another step aimed at helping single parents, the agency will also now permit "properly documented child support" to be counted as income under the same terms and conditions as other nontaxable sources of income. Previously, the FHA would not allow lenders to "gross up" child support income in figuring qualifying ratios.

The expanded guidelines come on the heels of an unusual interim rule put in place by the FHA late last month, when it said it would begin insuring five-year adjustable rate mortgages which cap annual rate increases at no more than two percentage points and limit rate hikes to no more than six points over the life of the loan.

The FHA anticipates that the new ceilings -- up from one and five points, respectively -- will generate significant demand for five-year hybrid ARMs. Such loans are the most popular form of adjustables in the conventional market. But the agency also expects that five-year FHA adjustables with one and five-point caps will remain available for borrowers who seek greater protections against rising interest rates in the future.

The change, which takes effect April 28, does not effect three-year hybrids, which can have rate change ceilings of no more than one percentage point annually and five points over the loan's term.

As always, on seven and ten-year hybrids, the interest rate can be adjusted up to two percentage points annually with a lifetime cap of six percentage points.

The change is being put into effect by an interim rule before the public has had an opportunity to comment. But Commissioner Weicher said such a step was necessary because it would be contrary to the public interest to delay the effective date any longer. However, a final rule won't be issued until comments are received and reviewed.

Published: April 20, 2005
by Lew Sichelman

Read more...

Appraisal Fraud Remains Hot Topic

Appraisal fraud is generating a firestorm of responses from the industry, both to extol efforts to publicize the issue and to offer insight a recent study may not reveal.

Appraising, the science of determining the value a home, has been under the microscope recently as part of broader law enforcement efforts to curtail growing levels of financial fraud in real estate transactions.

Questionable appraisal activity has flown under the radar for years as many appraisers succumbed to pressure (for fear of being blacklisted or losing their jobs) to value a home often based largely on the highest bid. However, law enforcement has begun to take a closer look at inflated appraisals in its crackdown on home finance industry fraud that's reached levels comparable to organized crime and racketeering.

"Why does this surprise anybody? Pressure on appraisers to 'hit the number' has been a standard of the real estate industry for years. As long as appraisers receive their work assignments from those who stand to gain financially by the transaction, the pressure will remain," wrote in David L. Fry of O'Fry Associates Valuation Management in Santa Clarita, CA.

Market forces would indicate that a home is worth whatever a buyer is willing to pay, and that's often the argument used by those exerting pressure on appraisers.

The counter argument says if an appraisal doesn't match the offer, the buyer should have to come up with the difference.

But that's not what's happening, and it's illegal and economically dangerous to set the value sky high without the benefit or authentic appraising.

According to Fry, "Enforcement efforts by state licensing boards are hampered by limited staff and budgets. Appraisers and the brokers they work for know this, so there is little fear of getting caught. Many users of appraisal services -- banks, mortgages companies, real estate services companies etc., won't report 'aggressive' appraisers to their state licensing boards for fear of angering clients or some perceived liability."

"Home Insecurity: How Widespread Appraisal Fraud Puts Homeowners At Risk" recently released by public policy think tank, New York City-based Demos said too many home owners risk financial ruin because appraisal fraud allows them to borrow more than their home is really worth. Should home values tumble and reflect homes' true market value, home owners with "upside down" mortgages (mortgage balances larger than a home's true value) who face hardship that forces them to sell their home will have to come up with the difference.

Widespread depreciation in over-inflated home values could have a devastating impact should it affect local, regional and national economies many of which today are driven, in part, by the booming housing market.

The study said, more than half, 55 percent, of all appraisers have reported feeling pressures from lenders, brokers and their bosses to overstate property values.

Some appraisers say the problem has been over stated and that most appraisals are fair, accurate and based on professional valuations.

"Appraisers feel pressure on the job, so do many others in lots of professions. If you work with the bottom of the barrel brokers who try to push every deal through the system with no regard for market value or ethics, then life is rough. If however, you refuse to work with the unethical brokers and only work for the true professionals then life is good," said P. David Rij, owner of San Diego Appraisal Company, Inc. in San Diego, CA.

He went on, "I believe fraud is a very small part of the appraisal industry and the fudging of values does occur. For years I performed appraisal reviews for lenders throughout California and I learned that the vast majority of appraisals completed, at least the thousands that came through my office, were appraised at or very near the true market value. On average, 10 percent of the time the reviewer did not concur with the appraisal value estimate, but keep in mind, the reviewer almost never sees the interior of the subject property and many times does not leave the office to perform the review," he added.

Others say it isn't just an appraisal industry problem after the fact, but begins with the listing, when the home is originally priced and put up for sale.

"Appraisers are under a lot of pressure, but they should not fall victim because real estate agents don't do their job," said Jennifer S. Warburton, a real estate broker from Orange County, NY.

"I recently moved from Long Island to Orange County, NY, where I have noted that list prices on houses are a far cry from appraised prices. I see deals die constantly (something that has never happened to me before) because listing agents are pricing houses according to a supposed market increases. Price a property right and it will sell. Price it wrong and we all suffer," she added.

Published: April 20, 2005
by Broderick Perkins

Read more...

February home sales up slightly

(March 16, 2005) Last month's home sales were up slightly over one year ago. The 1,436 residential home sales were 2.2 percent higher than the 1,405 homes sold in February of 2004 according to the Columbus Board of REALTORS® Multiple Listing Service.

"That's the highest number of homes ever sold during the month of February," said Doug McCloud, 2005 President of the Columbus Board of REALTORS®. "So far, Central Ohio home sales are up about 1.6 percent for the year."

The average sales price jumped 6.6 percent from $159,581 last February to $170,177 last month. "From an investment perspective, housing here in Central Ohio continues to provide valuable appreciation," comments McCloud. "But with continued low rates, buyers can still afford the price of a home. It's the best of both worlds."

Read more...

High end home sales up in January

(February 17, 2005) Home sales in Central Ohio last month were up slightly over the beginning of 2004. However, the average sale price jumped up 11 percent last month from $151,058 to $167,888 according to the Columbus Board of REALTORS® Multiple Listing Service.

“We saw a large increase in sales of homes over $250,000 in January – almost 35 percent,” said Doug McCloud, 2005 President of the Columbus Board of REALTORS®. “This is a switch from 2004 as, throughout the year, homes in the lower price ranges were selling in higher numbers.”

With 1,252 residential homes sales, January 2005 sales were up slightly – about 1.6 percent over the 1,232 homes sold last year.

REALTORS® helped sell over $2.1 million dollars worth of homes last month, a 12.9 percent increase over January of 2004. “Although it’s only the first month of the year,’ adds McCloud, “it’s a pretty healthy start for 2005.”

Read more...

Welcome to the Columbus Ohio Blog!

Thanks for stopping by our blog! This is a service of Real Estate Warehouse, and will be updated as often as possible. We plan on keeping you as up-to-date as possible on what's happening here in Columbus and Central Ohio. If you have any questions, please feel free to send us an e-mail. You can also visit any of our websites by using the links along the side of this page. Check back often, as we plan on updating this page frequently and providing you with as much info as possible. Thanks for stopping by, and enjoy the site!

Thanks,
Real Estate Warehouse

Read more...