Raleigh Real Estate

Top 10 People to Blame for the Financial Crisis

TIME Magazine published last month their list of people they think should carry blame for the financial crisis. As controversial as one expect any such list to be, it is saturated with ‘the usual suspects and makes for an interesting read. Here they are the Top 10 in order.

#1. Angelo Mozilio
Co-founder and former CEO of mortgage-lender Countrywide. Countrywide wasn't the first to make exotic mortgages to borrowers with questionable ability to repay, but it did, in its all-out embrace of such sales, legitimize the notion that practically any adult could handle a big, fat mortgage. When Bank of America bought Countrywide in 2008, it allegedly had to pay billions to settle predatory lending claims waged against Countrywide.

#2. Phil Gramm
Gramm used his post as chairman of the Senate Banking Committee from 1995-2003 to champion financial deregulation. These two moves by Gramm were especially significant in their role in the financial crisis: 1) Gramm helped ensure that credit-default swaps were exempt from regulation by the Commodity Futures Tranding Commission, and 2) Gramm helped repeal the Glass-Steagall Act, which had separated commercial banks and Wall Street.

#3. Alan Greenspan
Greenspan was vocal in his disdain for regulation. It was this anti-regulation mentality in combination with the Federal Reserve Chairman's insistence on keeping interest rates low in the early 2000s that helped bring about the mortgage crisis. Greenspan has since admitted that his avid deregulation stance was somewhat of a "mistake."

#4. Christopher Cox
As the former chief of the SEC, Cox presided over an era of fairly lax regulation. Even though the number of investment advisors grew, the SEC did not bring on more enforcement and compliance officers to help oversee the industry.

#5. The American Consumer
It's easy to blame the Wall Street fat cats, the excess-loving CEOs and the government. But we should take a long hard look at our role as American consumers in the financial meltdown.

Household debt in America jumped to more than 130% of income in 2007. Yes, ladies and gentleman, we lived beyond - way, way beyond - our means, and now we're paying the price.

#6. Hank Paulson
Paulson, a former Goldman Sachs exec became Treasury Secretary in 2006. He ended up almost single handedly running the country's economic policy for the last year of the Bush Administration. That's some power. But did he make the right moves? Maybe not. The main complaints about Paulson are: 1) he was late in starting to aggressively battle the financial crisis, 2) he should not have let Lehman Brothers fail, and 3) bailout bill was a mess.

#7. Joe Cassano
Before the financial-sector meltdown, few people had ever heard of credit-default swaps (CDS). They are insurance contracts - or, if you prefer, wagers - that a company will pay its debt. As a founding member of AIG's financial-products unit, Cassano, who ran the group until he stepped down in early 2008, knew them quite well. In good times, AIG's massive CDS-issuance business minted money for the insurer's other companies. But those same contracts turned out to be at the heart of AIG's downfall and subsequent taxpayer rescue. So far, the U.S. government has invested and lent $150 billion to keep AIG afloat.

#8. Ian McCarthy
Homebuilders had plenty to do with the collapse of the housing market, not just by building more homes than the country could stomach, but also by pressuring people who couldn't really afford them to buy in. As CEO of Beazer Homes since 1994, McCarthy has become something of a poster child for the worst builder behaviors. An investigative series that ran in the Charlotte Observer in 2007 highlighted Beazer's aggressive sales tactics, including lying about borrowers' qualifications to help them get loans. The FBI, HUD and IRS are all investigating Beazer.

#9. Frank Raines
The mess that Fannie Mae has become is the progeny of many parents: Congress, which created Fannie in 1938 and loaded it down with responsibilities; President Lyndon Johnson, who in 1968 pushed it halfway out the government nest and into a problematic part-private, part-public role in an attempt to reduce the national debt; and Jim Johnson, who presided over Fannie's spectacular growth in the 1990s. But it was Johnson's successor, Raines, who was at the helm when things really went off course. A former Clinton Administration Budget Director, Raines was the first African-American CEO of a Fortune 500 company when he took the helm in 1999. He left in 2004 with the company embroiled in an accounting scandal just as it was beginning to make big investments in subprime mortgage securities that would later sour.

#10. Kathleen Corbet
By slapping AAA seals of approval on large portions of even the riskiest pools of loans, rating agencies helped lure investors into loading on collateralized debt obligations (CDOs) that are now unsellable. Corbet ran the largest agency, Standard & Poor's, during much of this decade, though the other two major players, Moody's and Fitch, played by similar rules. How could a ratings agency put its top-grade stamp on such flimsy securities? A glaring conflict of interest is one possibility: these outfits are paid for their ratings by the bond issuer.

Need to add one more to the list...
11. Barney Frank
He is the Chairman of the Financial Services Committee.
US Representative Barney Frank (D), representing the Fourth Congressional District of Massachusetts.

The original article was published by TIME Magazine and can be viewed at http://www.time.com
****Please comment if you think someone else should be added.

Couldn't We Have Seen This Coming????

Someone sent this to me.  It's amazing how the ones in charge allowed this to happen.  Actions have consequences.  I guess they knew they wouldn't be in office for the fall-out so it'd be ok.

Emerging Home Improvement Opportunities Will Boost Spending Once Market Recovers

Cambridge, MA - The US home improvement industry, much like the broader housing market, is experiencing a severe downturn, but prospects for growth are already developing, finds a new report released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The Remodeling Market in Transition, the latest report in the Improving America's Housing series, finds that in today's uncertain economic environment, owners are likely to focus remodeling spending on projects that improve the energy efficiency of homes, generate cost savings, and maintain structural integrity. While signs suggest the industry is far from reaching bottom, the outlook anticipates the correction to be less severe than that of the home building industry. Key sources of future growth include the increasing demand for green improvements, upgrades to the nation's aging rental stock, and the growing population of immigrant homeowners.

In most parts of the country, home prices are falling, discouraging discretionary home improvement spending and diminishing the amount of equity owners have in their homes. "Earlier this decade, the ability to borrow against equity created by rising home prices fueled remodeling activity, as well as broader consumer spending," says Nicolas P. Retsinas, director of the Harvard Joint Center for Housing Studies. "Now that prices have softened, owners cannot finance home improvement projects as easily. Even those with equity find credit harder to obtain due to tighter standards."

The rising number of properties in or at risk of foreclosure is also driving down remodeling activity. Expenditures on owner-occupied units accounted for 84 percent of spending in 2007. Owners at risk of defaulting on their mortgages have less incentive to invest in their homes, and those displaced by foreclosure will reduce the national homeownership rate and, in turn, lower remodeling demand. When housing markets recover, however, foreclosed properties will provide opportunities for home improvements, as banks and new owners renovate and repair these properties and state and local governments make use of the Housing and Economic Recovery Act of 2008, which allocated $4 billion for the redevelopment of abandoned and foreclosed properties.

The report also examines areas that will provide opportunities for increased remodeling demand. For example, the consumer shift toward energy-efficient products and systems will pave the way for green remodeling. "If we are going to meet the nation's energy goals, we have to continuously search for ways to improve the residential built environment. The report demonstrates that maximizing energy-efficiency in existing housing may be one of our greatest challenges, but also one of our greatest opportunities given that homes account for almost a quarter of energy consumption in our economy," says Mohsen Mostafavi, dean of the Harvard Graduate School of Design, where attention to green design is a growing focus in the classrooms and studios. "Consumer demand for sustainable design is on the rise. Architects and planners can lead the way in devising appropriate solutions."

Existing rental housing and the growing number of immigrant homeowners will also help reverse this downturn in the remodeling industry. "Years of underinvestment has left the nation's rental stock, at an average age of 36 years, in desperate need of improvement and repair," says Kermit Baker, director of the Remodeling Futures Program, "And foreign-born homeowners, who currently account for more than 10 percent of home improvement spending, are heavily concentrated in their 30s and 40s, ages when families are growing and changing the use of their home." Remodeling still rests on a solid foundation with 130 million homes-and one to two million added yearly-in continuous need of maintenance, upgrades, repairs, and adjustments to meet the nation's changing preferences and lifestyles.

The Remodeling Futures Program, launched by the Joint Center for Housing Studies in 1995, is a comprehensive study of the factors influencing the growth and changing characteristics of housing renovation and repair activity in the United States. The Program seeks to produce a better understanding of the home improvement industry and its relationship to the broader residential construction industry.

The Joint Center for Housing Studies is Harvard University's center for information and research on housing in the United States.

Will Hidden Shadow Inventory Affect Raleigh Home Values?

According to the Raleigh MLS, we have 16,678 homes for sale as of 1-27-09.  But is that an accurate number?

There are some experts that believe there is a little talked about problem that can affect our sales prices lurking in our real estate economy called Shadow Inventory.

Of course, as realtors, we know there are sellers out there who don't list their house the traditional way in the MLS.  These homes won't show up in our current inventory number.

What about foreclosures owned by banks & mortgage companies, developers & builders holding some of their inventory back, sellers who want to sell but are expired listings, and vacant homes not in foreclosure just sitting unsold & uninhabited?  Where do these homes fit into our numbers?

If we have a 7 month supply of inventory, what economists are really saying is that if no other homes come onto the market and based on how many homes are currently selling per month, and then it will take 7 months to sell our current inventory.

If you are a seller, the higher the number, the more competition you have, which ultimately drives down prices. However, I've noticed in Raleigh, that our sales prices are staying pretty steady.  Most sellers aren't drastically reducing their prices.

This might change because of Shadow Inventory.

Based on the December 2008 numbers, there was a 1% decrease in homes coming onto the market compared to December 2007.  It sounds like there is less inventory; however, re-sale listings are up by 63% and new construction is down by 21%.

Builders control which homes they enter into the MLS.  In order to maintain the developments property values, builders aren't listing all of their homes.  Yes, they've slowed down in construction.  Experts predict that once the economy picks up some, builders will once again list those homes for sale. 

In the past 6 months, there have been 7,402 sellers that want to sell but haven't been able to.  These include new construction as well.  Sellers are either choosing to sell on their own, which won't show up in our MLS stats, or are waiting until the market picks up.

According to the Census Bureau, there are about 6 million vacant homes either for sale or for rent.  About 10% of the homes built for owner-occupancy since 2000 are vacant.   It is hard to judge how many vacant houses will come onto the market at any given time but most will eventually find their way into the MLS.  Unfortunately their competition against re-sales can drive down sales prices.

Most foreclosures are sold through a real estate company.  A few are sold directly to investors by the bank.

RealtyTrac reports foreclosures based on bank/lender information and public records.  I've noticed throughout my career in real estate that some of the houses listed weren't in the MLS.  I thought that maybe Realtytrac had their information wrong or the house was sold. 

I didn't think the Raleigh area had a problem with Shadow Inventory until someone posted an article and referenced the RealtyTrac website.  I commented not to believe in those online websites because their information isn't accurate.  What I thought was their inaccuracy could possibly be shadow inventory. 

Then I noticed on Realtytrac there was a home in my farm neighborhood which wasn't in Raleigh MLS.  I knew this house was foreclosed on because I had listed it before the seller lost it to foreclosure.  Eventually it got listed but it took the lender 6 months to put it back onto the market for sale, $25,000 less than I was trying to market for.  It's a good deal in that neighborhood and will probably sell soon.

With lots of fresh inventory waiting to hit the market, we are at the tip of the iceberg in the Raleigh Real Estate Market for sales prices declining.  Economists are predicting we're nearing the bottom though. 

Aggressive marketing is your best bet for getting your house sold in 2009.

Steps for a First Time Homebuyer

I received a call today from a man wanting to buy a foreclosure.  Seems he signed up on a Foreclosure Website because they told him there is government money out there for him to be able to buy a home.

I cautioned him because there are also scammers trying to "sell" him a foreclosure.  Please be careful with what people tell you because it could end up costing you more money than you need to spend.  

Your first step to buying a home is going to your banker and getting prequalified.  Questions you need to determine.  How are you going to pay for the house, FHA, VA or Conventional loan?  How much money do you have to put down?  What is your credit score?

Yes there is government money out there but it's based on your credit score.  In order to qualify for a loan your credit score needs to be at least in the 600s.  I'd personally recommend you learn how to improve your credit score all the way up to 700 to get the BEST rates.  This will allow you to buy a nicer house for the same amount of money than if your credit score was lower and you got a higher interest rate.  

Also TELL the banker how much money you want to COMFORTABLY pay monthly as a mortgage payment.  Don't let them tell you how much you qualify for (my personal opinion again).  The banker will tell you that $xxx Sales Price will get you the monthly mortgage payment you want.  Then you'll know how much to stay UNDER when searching for a house.  

After you determine that you can qualify for a loan, then narrow down the area you want to live in.  I can set up your email address to receive daily updates on houses for sale that meet your criteria.   Start searching for houses for sale.

My next suggestion is that you drive by the houses to make sure you like the lot and location.  We realtors take nice photos of the listing but we won't show you the neighbors or the area :)  

After you narrow down your search to about 10-20 houses that possibly meet your needs, email me your showing list.  We'll set up a time to meet and go out and look inside houses.  We'll evaluate each house and it's potential for your family.  I like to scale houses from 1-10 (one being you'd never buy it and 10 being you want it now - no 5's, its not fair).

Once you've narrowed down your list to about 3, we'll take a second look to decide which one you'd like to make an offer on.  In the meantime, I will do research on each potential house so that you'll know that the price is in line with the neighborhood and there is no issues to worry about.

Then we'll meet to write up an offer.   Once the negotiations are done, you'll be officially under contract and we start inspections. I can go on and on but it starts with getting prequalified. Good luck and stay in touch with me.  I'd love to help.

Foreclosure Activity Increases 81 Percent In 2008

IRVINE, Calif. - Jan. 15, 2009 - RealtyTrac® (realtytrac.com), the leading online marketplace for foreclosure properties, today released its 2008 U.S. Foreclosure Market Report^TM, which shows a total of 3,157,806 foreclosure filings - default notices, auction sale notices and bank repossessions - were reported on 2,330,483 U.S. properties during the year, an 81 percent increase in total properties from 2007 and a 225 percent increase in total properties from 2006. The report also shows that 1.84 percent of all U.S. housing units (one in 54) received at least one foreclosure filing during the year, up from 1.03 percent in 2007. Read More...

Uncovering a hidden secret to the foreclosure impact on your credit

How does a foreclosure effect your credit report is a perplexing question. This is because Fair-Isaac Company, who started the credit scoring system, will not share this information. What complicates the issue even further is that all the credit information reported is calculated into the individuals' credit score as it occurs. The credit score is updated instantly whenever there is an inquiry, otherwise it sits waiting for some person or institution to access it.

To get negative information on your credit report concerning a foreclosure, the homeowner must not have paid his mortgage or loan payment for 30 to 90 days. So to begin with, his score is decreased by the late payments. Usually, the homeowner is also late on other bills because of his financial crisis and has additional late payments, collections, or judgments. So if he had his credit pulled on a specific date before he started his personal financial decline, he would have seen one score (i.e. 680). The next time he pulls his credit report, after he has been served with his foreclosure notice or even after the foreclosure is completed; he sees his new score (i.e. 450). He is probably shocked and dismayed, especially when he realizes how much more interest the lenders want because of his low credit score. For example, an auto loan to an "A+" credit customer could be 0% interest while for a "D" credit customer, it could be 11% or higher. What does that actually mean? It means that the "D" credit individual will pay $5,500 to $8,000 more for the same car as the "A" credit buyer! The collateral for the loan is the same car, so the "D" credit person is unfairly penalized for his credit situation.

Your credit score "before and after" the foreclosure is no conclusive answer as to how much the foreclosure has hurt your credit report, but it is an indication. Homeowners tend to believe that once they have had a foreclosure they can never buy a home again. This is absolutely untrue, as we see people buying homes in Raleigh within a year of losing their previous home. They will have to pay a higher interest rate unless their down payment is substantial, usually 15% to 20% of the purchase price. But this sizable down payment is often obtained from friends or family members and carried as a second lien on the property. Also the credit score reduction for the foreclosure is reduced as time goes on, until it settles at a minimal number after a few years.

The foreclosure's immediate impact on an individual's credit report is estimated to be about 100 to 140 points. The bigger impact is from the late payments on other bills which quickly mount up. Doing a "deed in Lieu of Foreclosure" with the lender reports the same as a foreclosure. It is generally believed that a foreclosure stays on your credit report for seven years, but it can stay on longer because it is part of the public record, which could be open for 20 years. So make certain when you do your credit restoration you have it taken off, if it isn't removed automatically.

Thank you to Dave Dinkel.

What You Need to Know When Buying a HUD Home

Buying a home thru HUD and closing the deal is completely different than anything you have ever done before.  We have created a brochure for you as well.  Here are some of tips.

* Real estate agents MUST be a HUD approved
* Agent & buyers work with the management company (not HUD)
* New HUD listings begin with a "bid process" submitted to the management company
* Each property has it's own "incentives" and it's important to know the "codes"
* Homes that will be owner-occupied are given first preference
* Can bid MORE than offered price but buyer must pay the difference
* HUD has an appraisal - but it's not automatically provided and has to be requested by the buyer
* There is a property condition statement for each home
* It's recommended that the buyer get a home inspection (their expense)
* Can be purchase non-owner occupied and HUD could offer 85% LTV loan
* Penalty of $10 per day if closing does not occur according to the date on the contract.
* HUD provides the title work

Click here to search for North Carolina HUD homes by county

I am a HUD-certified realtor who can walk you through the process when you are ready to bid on a HUD home.  Let me know if you'd like a HUD Brochure explaining the process further.