December 21, 2009
Cities Where Housing Is on the Mend (from Forbes Magazine)
A recent article in Forbes identified areas of the country where housing prices have started to recover.
Forbes examined the number of loans that were foreclosed in the 100 largest metropolitan statistical areas, then calculated the percentage of loans that are descending further into delinquency vs. those that are improving. The lower the deterioration ratio, the higher the ranking.
Here is the list of cities that fared best by that measurement and are recovering the most quickly:
1. Harrisburg-Carlisle, Pa.
2. Austin-Round Rock, Texas
3. Ogden-Clearfield, Utah
4. Buffalo, N.Y.
5. Knoxville, Tenn.
6. Raleigh, N.C.
7. San Antonio, Texas
8. Syracuse, N.Y.
9. Salt Lake City, Utah
10. Moline, Ill.
10. St. Louis
10. Wichita, Kan.
10. Rochester, N.Y.
Federal Reserve Promises Low Rates (from the Associated Press)
Speaking before a recent gathering at the Economic Club of Washington, D.C. Federal Reserve Chair Ben Bernanke said that he could make no guarantees that the current economic recovery will last, but he promised to keep interest rates at low levels for “an extended period.”
But in its statement following the December 15th/16th of the , the Federal Open Market Committee indicated that it will eventually wring out excess liquidity in the financial system starting in discrete stages next year.
The committee said it will maintain the target range for the federal funds rate at 0 to 1/4 percent, and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, “are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”
Happiest States Revealed by New Research (from LifeScience)
Ever wondered if you’d be happier in sunny Florida or snow-covered Minnesota? New research on state-level happiness could answer that question.
Florida and two other sunshine states made it to the Top 5, while Minnesota doesn’t show up until number 26 on the list of happiest states. In addition to rating the smile factor of U.S. states, the research also proved for the first time that a person’s self-reported happiness matches up with objective measures of well-being.
Oswald and Stephen Wu, an economist at Hamilton College in New York, statistically created a representative American. That way they could take, for example, a 38-year-old woman with a high-school diploma and making medium-wage who is living anywhere and transplant her to another state and get a rough estimate of her happiness level.
Their results come from a comparison of two data sets of happiness levels in each state, one that relied on participants’ self-reported well-being and the other an objective measure that took into account a state’s weather, home prices and other factors that are known reasons to frown (or smile).
The self-reported information came from 1.3 million U.S. citizens who took part in a survey between 2005 and 2008.
The happiest states:
8. South Carolina
December 11, 2009
Cities with the most overpriced properties (from Forbes)
Forbes magazine recently ranked markets it considered the most overpriced based on the ratio of the median initial list prices compared to the median list prices at the time the properties actually sold. It also factored in how long the properties stay on the market.
The top 10 areas where Forbes found the most over-priced properties were:
2. Miami-Fort Lauderdale-Pompano Beach
3. Jacksonville, Fla.
6. San Antonio, Texas
8. Tampa-St. Petersburg-Clearwater
10. Austin-Round Rock
Regulators Shut 6 Banks at Cost of $2.4 Billion (from Chicago Tribune)
In early December, regulators seized another six banks in three states with combined assets of $13.4 billion, generating an estimated loss of nearly $2.4 billion for the Federal Deposit Insurance Corp.
The Federal Deposit Insurance Corp. on Friday took over Ohio’s AmTrust Bank, the fourth-largest bank to fail this year, with about $12 billion in assets and $8 billion in deposits. The Cleveland-based bank’s failure is expected to cost the federal deposit insurance fund an estimated $2 billion.
The failure of Buckhead Community Bank (Georgia) is expected to cost the federal deposit insurance fund an estimated $241.4 million; that of First Security National Bank (Georgia), around $30.1 million; Tattnall Bank (Georgia), $13.9 million; Benchmark Bank (Illinois), about $64 million; and Greater Atlantic Bank (Virginia), $35 million.
Of the six, only AmTrust had a presence in Florida, operating 24 branches in Florida with combined deposits of $4.8 billion.
For the year 2009, 130 institutions with combined $154 billion in assets and $124 billion in deposits have failed, triggering combined losses of at least $34.4 billion. In 2008, 25 banks with combined assets of $374 billion and deposits of $234 billion failed, causing an estimated loss of at least $10.4 billion for the FDIC.
Georgia leads the nation in bank seizures with 24 failures in 2009. Illinois is second with 20 failures. Rounding out the top five rankings are California with 15 failures, Florida with 12 failures, and Minnesota with six failures.
The 130 bank failures are the most in a year since 1992 at the height of the savings-and-loan crisis. They have cost the federal deposit insurance fund more than $28 billion so far this year.
Overall, 33 states have had at least one bank fail in 2009. In 2008, bank failures occurred in 13 states.
The FDIC expects the cost of bank failures to grow to about $100 billion over the next four years.
New FHA rules on condominium loans (from Federal Housing Administration)
The Federal Housing Administration issued new guidelines effective December 7, 2009 which could increase condominium sales, at least temporarily, to get FHA-backed mortgages.
The guidelines were written to address current market conditions and the glut of empty condominiums following the real estate bust.
Several of the policies, however, expire in December 2010.
The latest guidelines are described in two separate HUD/FHA documents:
- Mortgagee Letter 2009-46B (the revised guidelines for FHA approval of residential condominium projects)
- Mortgagee Letter 2009-46A (temporary guidance for condominium approvals).
Two big barriers to FHA financing have been a requirement that 51 percent of a condominium be owner-occupied, and a rule banning loans to buildings with “right of first refusal.”
Changes include reducing the number of units in a new condominium that must be owner-occupied, allowing condo boards to refuse buyers as long as it doesn’t violate the Fair Housing Act, and cutting the expensive requirement of having an attorney certify condominium documents before a sale.
The new temporary guidelines allow for 50 percent of units to be owner-occupied and doesn’t count units that are bank-owned, rented out, or vacant.
Allowing condos with “right of first refusal” access to financing is a permanent change.
The highlights of the New Guidelines are as follows:
- Condominium project approval is not required for condominiums comprised of single family totally detached dwellings (no shared garages or any other attached buildings).
- Until December 31, 2010, at least 30% presale level must be reached before any FHA mortgage can be granted on any unit. After 12/31/10, 50% presale level must be reached.
- 50% owner occupancy rate for the entire project.
- No more than 15% of unit owners can be delinquent (over 30 days late) on their condominium fees.
- Capital reserve funding: The reserve study requirement has been eliminated, along with the requirement of at least 60% of the fully funded reserves. The new requirement requires merely that at least 10% of the association’s annual budget be set aside for reserves.
- Budget review: Lenders must review the condominium budget to determine that the budget is adequate and: (i) includes allocations/line items to ensure sufficient funds are available to maintain and preserve all amenities and features unique to the condominium project; (ii) provides for the funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 10% of the budget; and (iii) provides adequate funding for insurance coverage and deductibles.
- No more than 25% of space allocated to commercial use.
- No more than 10% of units held by a single investor.
- The 1year waiting period for conversion condominiums is eliminated.
- Unit owners must obtain individual HO6 insurance policies if the master policy doesn’t cover unit interiors.
- Fidelity insurance must be obtained for 20+ unit projects.
- Recertification required every 2 years.
Posted by Scott R. Lodde
December 4, 2009
This is the first of series of article summaries I find interesting as I peruse the interest each week.
Fastest-Growing ‘Burbs Dive in 2008 (from USA Today)
Twenty-four of the nation’s largest suburbs-cities that grew at least 10 percent every decade since 1970-lost population from 2006 to 2008, according to the U.S. Census.
Five cities that grew fastest prior to 2006, but lost population since:
Mesa, AZ Anaheim, CA
Arlington, TX Santa Ana, CA
One-Fourth of Borrowers Are Underwater (from the WSJ)
More than 23 percent of people with mortgages owe more on their properties than they are worth.
Another 2.3 million homeowners are within 5 percent of being underwater, bringing the total of those who are upside down or close to it to about 28 percent.
About 5.3 million U.S. households have mortgages that are at least 20 percent higher than their home’s value, the First American report says. Borrowers owing more than 120 percent of their home’s value are the most likely to default, First American calculates.
The majority of underwater mortgages are in the following states:
- 1. Nevada: 65 percent of home owners are underwater
- 2. Arizona: 48 percent
- 3. Florida: 45 percent
- 4. Michigan: 37 percent
- 5. California: 35 percent
The report also notes that most U.S. homeowners have home equity, and nearly 24 million owner-occupied homes don’t have any mortgage at all, according to the U.S. Census Bureau.
Commercial loan defaults highest since 1993 (from Reuters)
The default rate on commercial real estate loans held by banks hit 3.4 percent in the third quarter, up 0.52 percentage points from the second quarter.
- At 3.4 percent, the default rate is the highest it has been since 1993 when it hit 4.1 percent.
- The default rate on apartment buildings is even higher, reaching 3.58 percent, up from 3.14 in the second quarter.
Bank failures tripled in a year (from UPI.com)
The number of U.S. banks shut to date in 2009 is triple the number that failed in 2008.
Most of the banks that failed this year are small, regional banks that fell victim to losses on real estate and consumer loans when unemployment surged to a 25-year high. However, many large institutions closed in 2009.
The cost to FDIC of closures on Friday alone was about $446 million.
The number of problem banks is 416 in the most recent quarter, the highest in 15 years.
The FDIC anticipates roughly $70 billion in losses during the next five years due to the failure of insured institutions.
For Florida, ‘end of an era’ of population growth (from USA Today)
The state that made population growth the linchpin of its economy for more than 60 years lost a net 58,000 people this year.
The state’s twin economic engines – tourism and construction – are sputtering.
The recession has had a measurable impact on the traditionally mobile USA by forcing more Americans to stay put because they can’t sell their homes or find new jobs.
For the first time since Florida became a state in 1845, more people are moving out of the state than in.
The number of migrants from the Northeast – traditionally Florida’s largest source of newcomers – has dropped almost in half since its peak five years ago as the state’s allure faded.
Florida, once the fifth cheapest state to live in, now is the 14th most expensive.
Is Boomer boom for real? (from news-journalonline.com)
Boomers are people born during the population burst between 1946-1964.
No. 1 in the nation was Flagler County with an astounding 53.5 percent increase in Boomer population between 2000 and 2006. No. 2 was Sumter County, home of The Villages, with 29.1 percent.
University of Florida’s Bureau of Economic and Business Research says in 2030, more than one in four Floridians will be 65 or older. Currently, 17 percent of the state’s population is 65 or older.