It is the New Year, and as many race to forget about the past… let’s think of the opportunties that are now amongst us. It is not entirely a clean slate as we all wish, foreclosures and short sales still represent a chunk of the housing industry and more are going to be on the books. Prices have declined as a result, and sellers are having a tough time competing with the discounts available by banks and builders. On the positive side, inventory is dwindling, and homes are being purchased at one of a kind prices.  The mortgage industry is providing all time lows in rates, and re-financing is at a 5 year high. Many people are thinking about their budgets, and how to save money… it is a perfect time to start thinking of restructuring your largest debt. On the opposite side, people have been on the sidelines waiting for prices to fall and become affordable are now getting homes at the best price with best mortgage and moving up from a rental home or upgrading their home. We are at the beginning of the year, and we all should be thinking about the dream home that is now obtainable or the mortgage we wish was less expensive.

To find your dream home, sign up for our new listing alert at New Listing Alert
To look at financing options and contact a consultant about refinancing click Smith Mortgage

www.smithandassociates.com

Barely a day has gone by during the past several weeks without a mention in the news of the FDIC, the agency that is best known for handling the disposition of the assets of failed banks and making sure consumers receive their insured deposits.

To date, failures due to the current crisis in the financial world haven’t caused undue concern. But the size of some of these institutions, such as IndyMac, have some people wondering how much the FDIC can handle before it needs a bailout.

The FDIC doesn’t receive any tax dollars; instead it’s funded by the premiums paid by banks and thrifts for insurance coverage on deposits. Its deposit insurance fund is really just an accounting entry with the Treasury Department.

FDIC promises security
Christopher Whalen, co-founder and managing director at Institutional Risk Analytics, as well as a writer and former investment banker, says the FDIC will always be able to reimburse customers for their insured deposits.

“The FDIC is like any federal agency; the government runs on cash. Money comes in and money goes out and each of these little funds gets a piece of paper that says I owe you money plus accrued interest. But really, in most cases, it just evidences legal authority to spend money. In the case of the FDIC, it merely evidences funds paid in by the industry, minus losses. But it’s still just a theoretical balance because it doesn’t reflect at all the cash available to the agency to fund resolutions.”

As long as the FDIC has a positive balance in the fund, the agency is just asking for the industry’s money back. If that money is gone, the FDIC runs a tab at the Treasury because, by law, it has borrowing authority.

Unlimited borrowing authority
Traditionally, the FDIC’s borrowing authority at the Treasury is limited to $30 billion, but Congress bestowed unlimited borrowing authority temporarily as part of the Emergency Economic Stabilization Act of 2008.

The deposit insurance fund is currently at 1.01%, meaning it has $1.01 for every $100 of insured deposits. The law requires that the fund is maintained at a level of at least 1.15%. The FDIC is required to submit a restoration plan detailing how it will bring the deposit insurance fund above the minimum within a five-year period when the fund slips below the required level.

The agency has just submitted a restoration plan and is proposing to raise premiums beginning Jan. 1, 2009. The premiums are risk-based and banks are currently paying anywhere from 5 basis points to 43 basis points. The agency wants to raise that uniformly by 7 basis points. A basis point is one one-hundredth of a percent.

The sting of those premium increases will be offset to some extent by the Federal Reserve’s announcement that it will pay interest on the reserve funds that banks are required to maintain. The Fed had been slated to start paying interest on reserves Oct. 1, 2011. The Stabilization Act moved that date up to Oct. 1, 2008.

Furthermore, in the second quarter of 2009, the FDIC wants to increase assessments to institutions that rely heavily on secured liabilities and brokered deposits.

“It would include charging banks more if they have brokered deposits or secured borrowings, and then possibly giving banks a little extra credit if they have unsecured borrowing,” say David Barr, FDIC spokesman. “Unsecured borrowings can actually decrease the cost of bank failures because the losses associated with the failure are shared with the unsecured debtors.”

In addition to raising premiums and the previously mentioned borrowing authority which is, essentially, a line of credit at Treasury, the FDIC has a second line of credit at Treasury that can be called upon, Barr says.

“We have a separate borrowing authority for what we call working capital. When banks fail, the FDIC retains assets from those banks. These tend to be illiquid assets such as physical properties or hard-to-sell loans. Since a lot of our money could be tied up in these illiquid assets, we have borrowing authority from the Treasury for working capital. It’s meant to be short-term borrowing and it would be repaid as the FDIC sells the assets.”

Not the worst banking crisis
As awful as the overall financial picture is today, the situation in the banking industry was considerably more dire 20 years ago during the savings and loan crisis.

There are 117 banks on the FDIC’s current “watch list;” about 2% of the FDIC-insured banks nationwide. In 1987 there were 2,165 institutions, or 12%, on the list. There have been 13 bank failures so far this year. In 1989, 534 institutions failed.

Institutions on the watch list are in financial trouble and are receiving increased scrutiny by the regulatory agencies. It’s important to note that, historically, only about 13% of the banks on the list have failed.

“We were in triple-digit bank failures for four or five years (back then) and we’re still here,” says Barr. “The FDIC, and the banking industry, is facing this economic downturn from a position of strength. 98% of the banks are well capitalized. That’s the highest level of capital in the regulatory arena.

“At one point we had $52 billion in our insurance fund. That’s the most we’ve ever had to help resolve troubled institutions. It’s down to $45 billion, but that’s taking into account IndyMac, Washington Mutual and Wachovia (original agreement with Citi). So, getting those behind us and still having $45 billion, that’s a strong position and we’re going to bolster it by proposed premium increases. We’re here to protect depositors — it’s what we’ve been doing for 75 years. Not a single customer has lost a penny of insured money and they never will.”

The moral to this is, don’t worry about the FDIC. Just make sure that your deposits are insured.

As seen on Fox Business online

For more information visit www.smithandassociates.com

The National Association of Realtors says pending home sales increased 7.4% from July to August; highest since June 2007.

WASHINGTON (AP) — The National Association of Realtors says pending home rose 7.4% from July to August, an unexpected piece of positive news for the battered U.S. housing market.

The group said Wednesday its seasonally adjusted index of pending sales for existing homes rose to 93.4 from an upwardly revised July reading of 87. The reading was the highest since June 2007.

Wall Street economists surveyed by Thomson/IFR had predicted the index would fall to 84.9.

The index, which sunk to a record low of 83 in March, stood at 85.8 in August 2007. 

As posted on CNN Money online 10-8-08

www.smithandassociates.com

October 8th, 2008 • Related • Filed Under

Filed Under: Real Estate

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This is good news as the combination of lower prices, low interest rates, and pent up demand may be coming to a head.

Pending homes sales in a report issued by the National Association of Realtors are up 7.4 percent in August compared to July, 2008. The numbers are up 8.8 percent over August, 2007.

While it is not time to crack open the champagne bottles, it is a sign that consumer demand and pricing are finding an equilibrium. Now we need to hope that the other external forces in the economy do not drag down the momentum that seems to have been built.

But after the meltdown on Wall Street does real estate look like the better investment now?

Pending home sales for August rose in all four of the regions tracked by the NAR.

Gains amounted to 18.4% in the West, 8.4% in the Northeast, 3.6% in the Midwest and 2.3% in the South.

July’s pending home sales index was revised to a decline of 2.7% from a prior estimate of a 3.2% decrease.

NAR says pending home-sales activity rose because of buyers taking advantage of low prices and affordable interest rates. August’s results show an “unleashing of pent-up demand” before the credit crisis worsened in September, Yun said. via Marketwatch

www.smithandassociates.com

It appears that we will see a consistent FALL season for the real estate industry in Tampa Bay. The prices have been reduced where first time home buyers are entering the market and new buyers are finding opportunities to purchase dream homes at obtainable prices. FHA loans have certainly been the key financing mechanism for those homes with minimal down payment. Inventory seems to be slowly absorbed as people are getting great deals and values from new home builders. The foreclosure and short sale market is not significant in the South Tampa market and there appears to be a constant sales pattern over the last few months. Although the short sales and foreclosures do exist, they are observered more in the price points under $250,000. The Tampa trend appears to be moving in a slight uptick of sales volume, while the sales prices stay firm. Our luxury market continues to have (luxury sales stat). Our developments in downtown Tampa, Skypoint & Ventana, have recent sales success; builders continue to move forward with Clearwater’s, Water Edge, and downtown St. Petersburg’s, Signature Place. Our open houses have had increased traffic with qualified buyers looking to write a contract. We encourage all of our clients, prospects, friends to continue to be environment conscience and utilize our website for all of your home needs.

For more information please refer to www.smithandassociates.com

Loving your house again

Forget the doom and gloom about a tanking market. You made a smart investment.

By Chris Ayres
Los Angeles Times - Opinion
August 17, 2008

First, let me say this: Of course I have regrets. After all, the purchase of our family home in Hollywood with an adjustable-rate mega-jumbo mortgage closed a mere 119 days before Countrywide Financial Corp. announced that — whoops! — it had, uh, run out of money. Of all the financial horror stories of last summer, this was the one that seemed to mark the official start of what is now commonly referred to as the “credit crunch” — the symptoms of which, if you’re an L.A. homeowner at least, include weeping openly in front of CNN real estate bulletins and waking up three or four times during the night to check the tumbling digits next to the satellite image of your home on Zillow.com.

So yeah, I have regrets. Like wishing I’d borrowed more money and bought a bigger house.

No, there’s no asterisk here, no small print, no catch. And yes, I’m aware that if I tried to sell my house now, I’d probably have to pay the buyer and throw in both my kidneys. Yet, this weekend, as we mark the one-year anniversary of Countrywide’s implosion — and by extension the end of the era when a real estate agent could add half a million dollars to an asking price just by installing a stainless steel refrigerator (sorry, I mean “chef’s kitchen”) — it seems appropriate for me to make a rather bold statement: Those of us who purchased nonspeculative property from 2004 to 2007 for the gratuitously self-indulgent purposes of raising a family and investing in our neighborhoods will ultimately have the last laugh.

OK, maybe not the last laugh — that pleasure is almost certainly reserved for New York hedge fund manager John Paulson, who made a handy 10-digit profit in a matter of months after finding a way to short-sell subprime mortgages.

But if you’re a boom-time buyer who can still pay the mortgage (not only do we exist, we’re in the majority), you have more than you think to feel happy about. You certainly shouldn’t harbor any envy toward the likes of Peter Y. Hong, author of an article in this very newspaper earlier this year with the headline, “How we cashed in before the crash; a Times reporter just couldn’t ignore the warning signs” — which, it has to be said, set a new standard for the sheer quantity of smugness that can be contained within a mere 2,000 words.
I can tell you’re not convinced, so let’s do some arithmetic. Say a real estate agent with a particularly reassuring grin talked you into buying a home in a decent neighborhood for $1.2 million in 2005, using $200,000 of your own cash and a million-dollar mortgage given to you by some dude you found on Craigslist. This is the higher end of the market, to be sure, but not out of the ordinary during the mortgage mania of the go-go Greenspan years. Now let’s pessimistically assume that the credit crunch has destroyed a third of your home’s value, so it’s now worth a paltry $800,000.

Chances are, you feel like impaling yourself on the three-pointed star on your real estate agent’s Mercedes. Before you do that, however, consider inflation. At its current unbowdlerized rate of 5%, inflation alone will devalue your million-dollar loan over the next decade to the “real money” equivalent of about $600,000, while at the same time causing your home to appreciate to $1.3 million (according to online inflation calculators).

Here’s another reason to pat yourself on the back: You got a mortgage before banks stopped lending to anyone other than the king of Saudi Arabia, which means your interest rate is almost certainly much lower than the rate that will be offered to the likes of Mr. Hong when he tries to get back into the market on the cheap.

Indeed, interest rates are just as important as the asking price in calculating the true cost of a house. When foreclosure vultures whine about how even post-crunch house prices are too high compared with the growth in American wages since the 1970s, they conveniently fail to mention that interest rates have moved in the opposite direction since then and even now are cheap by historical standards. In the darkest hours of the Carter administration, a loan at 20% wasn’t unheard of.

Aha, I can hear you say, but what about the dreaded A-word? Aren’t we all doomed to bankruptcy because our mortgages will adjust? In a word, no. The payments on most pre-2007 adjustable-rate mortgages would go down if they reset today, because the indices on which they’re based remain in the low single digits. Sure, if you have an interest-only loan, the payments will go up when you start paying off the principal — but by then, inflation almost certainly will have started to work in your favor. Of course, you’ll also have to pay property taxes, but thanks to California’s Proposition 13, your property taxes won’t change dramatically until the house is sold; and as with your loan, inflation will reduce the real-money burden over time. And let’s not forget that property taxes can offset your income tax. Which brings me to my final point: the glorious all-American institution that is the home mortgage interest tax deduction.

Say you’re paying 6% — fixed for 10 years — on that eye-watering million-dollar loan. This allows you to deduct $60,000 from your taxable earnings, thus saving about $20,000 a year in the 33% tax bracket. In a decade’s time, that’s a potential saving of $200,000. Throw in another $30,000 of savings from your property tax deduction; the $200,000 you’d be theoretically saving over the same period on the difference between a pre-crunch 6% rate and, say, the 8% rate you might be offered now; and the $700,000 of equity you’ll potentially end up with after inflation’s gone to work on both your loan and the value of your home: Net result? The penalty for having bought at the height of the worst real estate bubble in history adds up to a potential $1.1 million gain.

Feeling better? Thought so. And if you ever meet someone who brags about having gotten out when times were good, ask them what inflation’s doing to their rent, how much tax they’re saving on that home-office deduction (a few hundred bucks, woo-hoo!) and, more important, where they parked all that filthy boom-time lucre they made. If they put it anywhere near the stock market, give them a hug. They’ll need all the sympathy they can get.

Chris Ayres is the Los Angeles correspondent for the Times of London and the author of “Death by Leisure: A Cautionary Tale.”

August 4th, 2008 • Related • Filed Under

Filed Under: 2009 Real Estate Forecast • Featured • Real Estate Internet • Real Estate Sales • Top 10 Real Estate Lists

‘The real estate market crash continues as home values plummet….’

‘Home sales continue to decline as the housing bubble bursts….’

‘Is the real estate market hitting a recession? Find out tonight at 11!’

Sound familiar? Those are just a few of the headlines that have been thrown around by the media lately. In a time where people are very much influenced by what’s in the news, it seems a bit irresponsible for the media to be feeding the housing panic with such gloomy headlines.

Of course, the media isn’t the only channel to blame - consumers, speculators, politicians, real estate professionals, the economy and a ton of other factors all have a hand in the state of the market. And the majority of them are being pretty pessimistic about the whole thing.

What they don’t seem to get is that pessimistic speculation can hurt the market just as much as tangible factors such as mortgage rates, employment rates, etc. The fact is, the strength of the U.S. economy, while relying on many different factors, also relies heavily on the sales industry in general and sales people specifically.

That’s right, when it comes right down to it, sales people are a driving force of our economy. An analogy may help in this case: say suddenly, all over the country, sales forces in radio advertising just stop working. No more prospecting, no more aggressive sales calls, nothing. What would happen? The radio advertising industry would plummet, crash, grind to a halt - mostly.

The bottom line is, there are many factors contributing to the appearance of a housing market crash, when in reality, the majority of the market is just leveling out and still making positive gains in value. You cannot generalize the real estate market of the entire country and expect to be accurate with your findings.

It’s time for the media to quit all the doom and gloom reporting, even if it gets more ratings than fluff stories; and for everyone to realize that what we’re REALLY seeing across most of the country is simply the leveling out of a major housing boom.

Don’t believe it? Check out these 26 facts you AREN’T hearing or reading through mainstream news media.

Our first facts come from a government study done by the Office of Federal Housing Enterprise Oversight:

1. Coincidentally, the 3 states that have had the sharpest decline in home sales & prices are also 3 of the states that experienced the biggest booms (sharpest appreciation) during the early 2000s
2. Over half of all metropolitan statistical areas (MSAs) are showing price appreciation each quarter.
3. Only 15 out of 50 states have shown any actual price decline in the past year. The rest still show modest appreciation in home values.
4. Only 3 states have shown significant price declines from the first quarter of 2007 to the first quarter of 2008.
5. There are still many areas showing 5% or more appreciation over the past year, including but not limited to Bayou Cane LA with 11.22%, Wenatchee WA with 8% and Idaho Falls ID with 5.06%.
6. The type of annual appreciation we’ve seen since 2005 (ranging from 1.8% to 3.7%) is similar to the type of appreciation the U.S. experienced in the mid to late 90s, right before the real estate boom.

Let’s look at some other facts:

7. A “boom” in economic terms means a period of unsustainable growth - with the term unsustainable being the keyword. In the real estate world, a boom market is considered one in which prices have risen over 30% in 3 years, while a bust market is one in which home prices have dropped by at least 15% over a 5-year span. By that definition, very few markets are experiencing a bust. It is more likely that prices are simply bottoming out from the big boom. (According to the Federal Deposit Insurance Corporation.)
8. Rural land is much more valuable due to rising food costs, demand for corn-based ethanol, and city-folk desiring to get away to the country.
9. Demand for big boat docks is so high that having one in your backyard can double your property’s value. A dock that sold for $700,000 in 2004 sold for $2 million last year. (Facts 9 & 10 are courtesy of June Fletcher over as the Wall Street Journal.)
10. Areas that did not experience skyrocketing home values during the big boom (like Houston TX) still have hot real estate markets. Agents in Houston give the market a 3.5 on a scale where 1 means prices are falling hard and 5 indicates prices skyrocketing.

Our next facts come from the National Association of Realtors (NAR) and from their Chief Economist, Lawrence Yun:

11. A recent online study shows that nearly a quarter of potential homebuyers are waiting for the right time to buy - if something can spur the group on as a whole to start buying, it could be just the push the market needs to take off again.
12. The national median existing-home value for all house types is down 6.1% this June from June 2007, however, there have been way more short sales and foreclosures this year than last, which skews the numbers and makes it impossible to do an apples to apples comparison.
13. The average 30 year, fixed-rate mortgage is still lower than it was in June 2007 (meaning it’s still a smart time to buy).
14. Many markets are seeing home sales double from last year - like Colorado Springs CO, Sacramento CA and Spartanburg SC.
15. It’s still a very attractive market for buyers, with large inventory, attractive interest rates and sellers willing to negotiate.
16. Housing affordability is likely to improve by 15 percentage points to 127 for all of 2008, according to NAR’s housing affordability index.
17. Our economy is not headed into recession - not yet anyway. The gross domestic product (GDP) growth is forecast at 1.6% for 2008 and 1.4% for 2009 - not spectacular growth, but still positive gains.

To be fair, some media outlets ARE posting positive news about the market, with CNNMoney.com being one of the biggest contributors. According to several stories on their site:

18. June’s home sales may be down a bit (a little over .5%) but it still came in well above economists’ predictions - meaning things aren’t as bad as people think and the market is much stronger than many professionals believe.
19. The housing inventory is lowering slowly but surely - June came in at a 10-month supply, while May’s numbers showed a 10.4-month supply.
20. Most of the decline is seen around 2 main types of markets: weak, industrial economies that are under pressure from the struggles of the Big Three automakers; and the areas that were previously part of the biggest boom markets.
21. A third of the market still shows significant gains in pricing (such as Binghamton NY) and in general the Northeast is still seeing home value increases.
22. Surprisingly the condo market is booming - just not in the area you might expect. Condo values in Bismarck ND rose a whopping 36.4% compared to last year.
23. A housing rescue bill is being passed around the Senate (having already been passed in the House) that will allow thousands of at-risk borrowers to refinance their old, unmanageable mortgages into low-cost fixed-rate loans insured by the Federal Housing Administration (FHA).

And our last 2 significant facts:

24. Many real estate agents are helping to fuel the supposed ‘market bust’ by giving in to fear and worry. They believe what the media and politicians are saying and are simply giving up, using the excuse that ‘the market’s no good.’ If agents’ were out there working hard, cultivating prospects and persuading people to buy or sell, the market would show definite improvement.
25. Somehow, even though the residential real estate market is apparently ‘in shambles,’ there are still agents doing nearly $750 million in real estate transactions (congratulations to Dolly Lenz) while in 2005, with the market still in boom mode, the highest sales volume only hit close to $250 million (by Mr. Harald Grant). If the market was really as bad as they say, Dolly wouldn’t have been able to hit those kind of numbers. (courtesy of The Wall Street Journal’s 2007 Real Estate Top Professionals).

There you have it - 25 little known facts the media’s not hot to spread around. While the state of the market isn’t the media’s fault (at least, not ALL their fault) it’s important for the news media to be aware of how their reporting can affect the U.S. Just as it’s an agent’s responsibility to be aware that if they give up on aggressive prospecting, they’re also adding to the problems of the real estate market.

The bottom line is that the market isn’t nearly as bad as everyone says. It appears that Americans took the boom for granted, and just can’t cope with leveling prices. It’s just about time for the media, the agents, and the government to step up and shine a little ray of hope onto the real estate world.

This guest post was submitted by Ashley White who works in in the real estate marketing industry.

August 5th, 2008 • Tom Royce • 2 comments • Related • Filed Under

Filed Under: Real Estate Sales • real estate indicators

First of all, if your sole criteria is a lower commission in this market you better have 2 things going for you. The perfect house and the perfect price. Otherwise, you are much better off finding the best real estate agent you can find.

…

“Real estate commissions are determined between the sellers and their agents, but the best advice I can give home sellers is that it is far more important to focus on an agent’s performance, especially in today’s housing market,” said Alex Perriello, president & CEO, Realogy Franchise Group.

Most respondents to the Consumer Reports study said they found service from the larger real estate chains and independent brokers to be “very satisfying.”

The survey was based on 9,141 responses to the Consumer Reports National Research Center’s Annual Questionnaire about selling or trying to sell homes from 2004 to 2007. Despite the shift in the housing market in that time span, Kotkin said there was no significant difference in the outcomes by year. via SignOnSanDiego.com

Florida’s Gulf Coast metropolis has less glamour - and lower prices.It’s not the Atlantic coast of Florida, with symbols of opulence like lavish Palm Beach estates or multimillion-dollar spec homes. But Tampa, with its more blue-collar feel, offers the same brand of South Florida living at a far more affordable price. How much more affordable? Prices are consistently lower by 50%, estimates Deborah Farmer, president of the Greater Tampa Association of Realtors.

To be sure, Tampa lived large during the boom years; prices rose 100% from 2001 to 2006. That was fueled in large part by speculators just looking to flip, and when they started vanishing in 2006, thanks to the slowing market and a tightening of credit, so did those massive annual increases. Real estate values have fallen 17.5% in a year, according to the Case-Shiller index.

But more than other markets, Tampa could be nicely positioned for a rebound. Its relatively strong local economy, coupled with the fact that the bust hit here earlier than in some other markets, means that the downside may have largely played itself out. The median price is now $222,000, down from $275,000 last year, and top NAR economist Lawrence Yun has singled Tampa out as well prepped for price recovery, estimating 20% or more appreciation in the next five years.

A prime spot for high-end bargain hunters: Gulf-front luxury condos in nearby Clearwater or St. Petersburg, which might have gone for a minimum of $1 million a few years ago, can now be snapped up in the $600,000 range.

Source: Fortune Magazine Online click below to read the full story and to see the other 5 cities that made the list.

http://money.cnn.com/galleries/2008/fortune/0806/gallery.Fortune40_real_estate.fortune/5.html

Alliance Says It Has Increased Loan Workouts

Hope Now, an alliance of lenders under pressure by regulators to curb home foreclosures, announced Wednesday that workouts had increased to 522,000 in the second quarter up from 482,996 in the first.

For the first time, more than half of the workouts were contractual changes to subprime loans, Hope Now said. These kinds of modifications are viewed as a better solution than simply extending the payment over a longer period of time.

The total number of foreclosures prevented by mortgage servicers since July 2007 has risen to approximately 1.9 million, the alliance said.

Source: Reuters News (07/30/2008)