The Home Affordable Modification Program (HAMP) has been revamped and subsequently redubbed HAMP 2.0 or HAMP, tier 2. The changes are expected to take effect in May or June of this year and the program has been extended until December 31, 2013. Although there is much debate as to how these changes will actually affect the market, the purpose of this blog is merely to detail the modifications, such that potential participants can be made aware of qualification requirements and program benefits.
HAMP was originally created as a part of the Hardest Hit Fund and was intended to help slow foreclosures by providing an opportunity for refinancing options to homeowners who were current on their payments but underwater on the mortgages. Ideally, HAMP reduces monthly mortgage payments through refinancing or principal reductions. HAMP can lower monthly payments by to as little as 31% of verifiable family income, before taxes. As of yet, HAMP has assisted approximately 900,000 homeowners reduce their monthly mortgages.
HAMP 2.0 includes changes to eligibility requirements that will hopefully provide more families access to the benefits of the program (see below). Furthermore, new and better incentives have been worked into the second tier version of the program, such that loan providers and investors will hopefully receive the monetary encouragement necessary for their participation. Right now, it is expected that HAMP 2.0 will involve a 200% increase in incentives offered to mortgage servicers. In tandem, alongside the extended dates, President Obama and the FHFA hopes to provide relief for struggling families and slow the rate of foreclosures. In so doing, there is a potential for home values to increase as neighborhoods become potentially less burdened with abandoned or forgotten foreclosure properties.
Program Qualification Requirements (bolded text refers to the expanded program—HAMP 2.0):
- The home in question must be a primary residence. However, HAMP 2.0 will also help homeowners who currently, or intent to, rent the property.
- The mortgage must be obtained on or before 1/1/2009.
- The mortgage payment is more than 31% of monthly gross income. However, HAMP 2.0 will now provide assistance to those who do not meet said 31% dti requirements.
- You owe no more than $729,750 on the home.
- Documentable financial hardship demonstrates that you are currently (or potentially) falling behind on payments.
- As stated on the website, “You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.
See www.makinghomeaffordable.gov for more details, and see future blog posts for information regarding the effectiveness and accessibility of these changes.
Recent DataQuick numbers have provided some concrete proof that the market is, at least for the moment, doing fairly okay (okay in relation to how it was in previous years). So here is a brief summary of the date for California:
In San Francisco/Bay Area:
- Sacramento median home prices raised 1.3%, compared with March 2011 prices.
- Mill Valley was named one of the top 5 small towns to live in by Smithsonian Magazine. (Granted, not a DataQuick fact, but still an exciting tidbit for the Bay Area.)
- Homes sales 9.1% from last March across the 9 county Bay Area.
In San Diego:
- Foreclosures sales were down to 25%, from 33% at this time last year.
- 3,237 homes sold in March, the highest March sales in six years.
- Median home prices rose 5.1% from February (through dropped 1.4% from last March).
In Los Angeles/ Orange County:
- Median home price increased 4.5% from February, and 1.3% from March, 2011.
- Orange County was one of the top counties for increased home sales.
The last couple blogs have been about the increasing optimism in the real estate market. Although I admit that many are still skeptical, this blogger included, numbers, signs, and symptoms seem to be indicating upward trends in the housing market, at large. More specifically, this is a buyer’s market—has been and will be for some time—and some financial experts are predicting a definite spike in home sales during the second quarter of the year. However, part of what makes this a buyer’s market is the market saturation—there are countless, countless, countless homes on the market. So, the question is… How do you stand out? How do you make the sale? While there are lots of blogs and articles written about increasing curb appeal and staging your home (and certainly, those are important topics), in this blog I want to provide a few behind-the-scenes tips for selling your home. Besides excellent staging and eye-catching curb appeal, what can you do to make your home more marketable to the, albeit growing, small pool of potential buyers?
1. Get your home appraised before listing. Knowing the financial state of your home is vital for appropriate and aggressive pricing. An appraisal will enable you to better decide what the home is worth, what you’d ideally like to get for it, and what you will settle for.
2. Get the home inspected. Although a buyer will almost certainly require an inspection of their own, having your home inspected prior to listing demonstrates a confidence in the soundness of your home. (After all, if you had something to hide, you probably wouldn’t offer up an inspection.)
3. Be willing to offer cash incentives. For instance, offer to pay for closing costs. It’s a fairly easy, reasonably inexpensive way to make your offer more competitive.
4. Finally, choose a good agent. Find an agent who knows the area and has experience selling homes similar to yours. Don’t pick an agent who specializes in selling multi-million dollar homes if your home is only worth $500K. Also, make sure to choose an agent who can aggressively market your home. Tech savvy and creativity are important to competitive advertisement. Little to no visibility equals few to no buyers.
Over the past several years, cynicism has run rampant amidst economists, housing analysts, and social commentators. The housing crash engendered an American Dream crash. Column after column, article after article, blog after blog began predicting the end of the American Dream—the end of the dream of homeownership in this country—and for a while, it seemed inevitable. Housing prices were tanking; the economy was tanking; foreclosures seemed unavoidable; renting became the safer bet. While I do not want to challenge those economists who are predicting even lower housing prices in the future, I want to position this blog as an attempt to shine light on the bits of optimism that do exist. I can’t claim that things are going to turn around tomorrow, but I’m starting to see signs that perhaps the housing disaster is beginning to rectify itself.
The job market is on the upswing. College graduates have been particularly hard hit in this financial crisis, with their unemployment rates almost doubling the nation’s unemployment rates. However, CNN recently reported that the job market is looking better for college grads—there are more jobs being posted and the salaries are increasing. According to employer reports, it is expected that 10.2% more graduates will be hired this year, as opposed to last year, and the median salary for starting college grads is $42, 569—an increase of 4.5% from last year. While the competition is still incredibly high (an average of 33 applications per job posting), the pendulum appears to be swinging back towards job availability.
How does this affect the housing market? Well, with employed 25-30 year olds come potential buyers. Record low interest rates, low prices, and a need for housing may encourage these newly employed young adults to start buying instead of renting. Moreover, as buying gets cheaper, renting gets more expensive, providing further encouragement for twenty-somethings to investigate their options. With buyers comes the potential for an upswing in property values. Foreclosed homes become occupied and renovated, and a plethora of demand will begin to temper the over-supply.
This may not be a quick fix, and perhaps the doom and gloom of many economists will prove true. Yet, I find myself less convinced that the dream of homeownership has been shot down, and I am not alone. As was recently reported in the Kansas City Star, a 2011 poll demonstrates that 9 out of 10 Americans still want to own homes someday. So, for better or for worse, the American Dream perseveres. Homeownership dreams are not dead, they may just be dormant.
Just recently, Prudential Real Estate came out with the results of a nationwide survey regarding consumer feelings on the real estate market. Results were good. As compared to last year, this survey demonstrated that the majority of Americans are optimistic about the market and still value homeownership as a staple of American life and culture. Earl Lee, President of Prudential Real Estate, asserted that “the American dream of homeownership is alive and well.”
1,251 people were surveyed, and all participants were involved in the real estate market, either as recent or soon-to-be buyers and sellers. All respondents had a family income of over $50,000.
60% of Americans have positive views of the housing market, up 8 points from last year. 96% of survey takers think that now is a good time to buy a house, and 70% believe that home values will increase within the next few years. Low interest rates and a better job market seem to be contributing to an overall feeling of optimism in regards to the housing market. Buying a home is once again accessible for many Americans, and as more and more individuals and families turn towards buying, home values will begin to creep back up.
Although, this news is coupled with an increasing sentiment of dissatisfaction as regards the recent bank settlement. Many Americans have expressed their belief that the settlement unfairly lets banks off the hook. Furthermore, the settlement clarified foreclosure processes in such a way that banks can now begin to legally move through foreclosures much quicker. As a result, foreclosures may increase significantly over the next several months.
So, it remains to be seen whether consumer confidence will bolster the market in a positive way, or whether an increase in foreclosures will once again saturate the market, such that property values continue to plummet.
Keep Your Home California is a state funded program started last February aimed at aiding underwater and/or distressed homeowners. The $2 billion program was designed to provide mortgage assistance, principal deductions, and relocation aid. Eligibility requires that the home in question be a primary residence in California. The mortgage owed cannot exceed $729,750, and some benefits require that the purchase date was on or before January 1, 2009.
As with all government funded homeowner assistance programs, there are a lot of critics who are skeptical of the program’s long-term success. Most notably, principal reductions remain scarce, as lenders seem unwilling to cooperate. However, to date Keep Your Home California has helped almost 12,000 people in California with a total of $221.4 million, according to a recent article in the San Diego Union-Tribune. Further, there are signs that the program is gaining more support and cooperation from lenders. In January, the California Housing Finance Agency announced that fifty-five mortgage servicers now participate in the program, an increase of 500% since the program’s initial launch last year.
A recent housing scam involving this program has recently been discovered. Although applying to the program is free, scammers have attempted to charge a fee for filing an application. Too inquire about the program, visit keepyourhomecalifornia.org.
Last Thursday, an approximately $25 billion settlement was announced. The settlement is the result of faulty foreclosure practices, most notably robo-signing, engaged in by five of the largest banks in the real estate market: Bank of America, Wells Fargo, JPMorgan Chase, Citi Bank, and Ally Financial. The $25 billion will go towards loan modifications, including refinancing and principal deduction, and cash compensations of approximately $2,000. In California, the Bay Area is expected to receive around $3.1 billion in relief. Below is a list of the approximated amounts for Bay Area counties. The list was taken from The San Francisco Chronicle, specifically the Andrew Ross’ article “Bay Area’s hefty share of the mortgage settlement”:
– Alameda: $757 million
– Contra Costa: $651 million
– Marin: $50 million
– Napa: $79 million
– San Francisco: $147 million
– San Mateo: $214 million
– Santa Clara: $588 million
– Solano: $267 million
– Sonoma: $334 million
Although many experts are skeptical and/or disappointed in the settlement, some going so far as to call it yet another bank bailout, I hope the relief this provides will at least be a step in the right direction. The downside is that many homes that were being held in limbo till the results of this settlement came through will now proceed to foreclosure, thus potentially reversing the 2011 downward trend in foreclosure rates.
For more information about how the Bay Area will be effected, see “Bay Area’s hefty share of the mortgage settlement.”
Last November, I blogged about a potential refinancing program that could help underwater, responsible homeowners refinance at the current record low interest rates. Last Wednesday, the president announced a plan that does just this, but through the government—the Federal Housing Association (FHA). If this plan were to pass through congress, which many political analysts say is a long shot, the plan would allow underwater homeowners who have been current on their mortgage payments for the past 6 months to refinance through the government. The FHA would then assume all risk of future foreclosure, an insurance which is expected to cost between 5 and 10 billion dollars.
I looked back over the blog from November and am in agreement with the author’s opinion (my opinion) of this potential legislative change. Great, if it passes—which it probably won’t. Some critics are saying that we’ve heard all this before through previous Obama refinancing plans, and none of these plans have worked. Perhaps this critique is true. However, this new plan attempts to close the holes, such that its effect could be widespread, efficient, and substantial. Experts are estimating that approximately 3.5 million homeowners could qualify for refinancing, which is expected to save them an average of $3000 per year, a fairly conservative estimate. Although some of that money may be reinvested into savings of sorts, the hope is that at least some will trickle back into the economy, such that it helps continue the recent upswing.
According to Standard and Poor housing index, San Diego, Los Angeles, and San Francisco all felt significant real estatehits in recent months. Although San Diego and Los Angeles housing prices took the smaller hits (a decrease of about 0.9% and 1.0%, respectively), San Francisco housing prices fell by 1.9%. Consequently, Obama’s plan could prove very useful, and perhaps even necessary, for many California homeowners who find themselves more and more underwater. As per usual (it seems, politics are getting in the way of passing this act. In this the election year, Obama will prove his point about an ineffective, inactive republican congress, while republicans will shout for less government interference. I read a blog in Financial Times which poses the claim that this bill is great, but 3 years too late, and I’m inclined to agree. While I hope that this bill will be given serious consideration and be pushed into effect, I remain increasingly and incredibly skeptical of our current stand-still Washington.
Yet, despite my cynicism, I’ll end this blog on an idealistic note. Let’s put the struggling homeowners first. Let’s get some money back into their pockets so that they can put it back into the economy’s pockets. Let’s put election politics aside and try for something that might actually be effective, spark hope, and create change.
Recently, Forbes released its top 10 list of real estate markets in the country. San Jose, CA was on that list. According to MSNBC, San Jose is expected to have an increase of 3.3% in jobs. Further, there has been a huge influx of people over the past two years. As is demonstrated by the rapid growth in housing construction, San Jose is slotted for a stellar year in the real estate market. If you are looking to invest, look towards San Jose. If you are looking to sell, this may very well be your year. Below is a little information about the city. To learn more about the Bay Area at large, visit lealrealtyonline.com.
San Jose, the county seat of Santa Clara County, is the largest city in the San Francisco Bay Area with a land area of 178.2 square miles. Surrounded by mountains on three of its sides, San Jose has a mild, Mediterranean climate with an average temperature of 73 degrees and over 300 days of sunshine annually. San Jose has its own airport that is primarily serviced by Southwest and Alaska Airlines. The city offers culturally diverse neighborhoods, such as Japantown, which is home to the Japanese American Museum of San Jose. Despite its size, San Jose provides all the amenities of city living within a relaxed, laid-back atmosphere.
If your home is on the market during the holiday season, it’s important to find a compromise between creating a decorated house that is still appealing to buyers and still enjoying your holiday season. Some people may say that holiday decorations are a don’t when your home is on the market because, if done incorrectly, they can be very off-putting to potential buyers. While there is some truth to this concern, I contest that buyers could actually be compelled by well-done decorations that highlight the home’s positive features. Here are a few tips to follow if your home is on the market during the holiday season:
1. Less is more. You should avoid, at all costs, cramping the space of your home. Buyers need to be able to move comfortably from room to room and oversized trees or excessive lights can make the home seem small and cluttered. Thus, I would suggest limiting your decorations to very specific areas of the home. Also, if you have a smaller house, opt for a smaller tree. Large trees immediately shift the focus to the room-size. You want to highlight the home’s good qualities, not draw attention to its downsides.
2. Outside lights should emphasize the architectural details of the home. Too many lights can be overbearing, but a few lights that line the perimeter of the home and the outlines of the windows can catch the eye of a potential buyer driving by. Also, consider classic, neutral colors, nothing too flashy.
3. Finally, be sure to take your decorations down!! Keeping decorations up until mid-January will create a confused atmosphere for potential buyers. You want your home to look fresh, not stuck in the already-passed holiday.
The holidays can be a great opportunity for sellers to have their home viewed by travelling buyers, buyers who may not have had the opportunity to see your home in person during other times of the year. Thus, embrace the spirit of the season, but be ever-cognizant of the atmosphere your decorations are creating.
