Headlines – Week of July 17, 2011

July 25, 2011

New York Closing Costs Highest In Nation

According to Bankrate.com’s 2011 Closing Costs Survey, the average origination and title fees on a $200,000 mortgage total $4,070, 8.8 percent higher than a year ago, New York leads the nation with an average fee of $6,183. Texas, Utah, San Francisco and Idaho round out the five most expensive areas. Arkansas is the least expensive area, with an average fee of $3,378.

In the survey, Florida ranked 12th nationally in 2011 – the same rank it held in Bankrate.com’s 2010 survey. On average, origination costs $1,445, and title and closing costs run $2,973 for a total of $4,418.

According to Bankrate.com, most of the closing cost increases are tied to fees charged directly by lenders. On average, lenders charged about $1,614 in origination fees this year, up 10.3 percent from last year. Origination fees include lender charges for services such as underwriting and processing. Costs include fees charged by lenders, as well as third-party fees for services such as appraisals and title insurance. The survey excludes taxes, property insurance, association fees, interest and other prepaid items.

10 most expensive states for closing costs
1. New York, $6,183
2. Texas, $4,944
3. Utah, $4,906
4. California/San Francisco, $4,832
5. Idaho, $4,643
6. California/Los Angeles, $4,624
7/8. Oklahoma, $4,589
7/8. New Jersey, $4,589
9. Pennsylvania, $4,522
10. Hawaii, $4,521

10 states with least expensive closing costs
43. South Dakota, $3,682
44. Montana, $3,657
45. Kentucky, $3,627
46. New Hampshire, $3,591
47. Missouri, $3,524
48. Alabama, $3,501
49. Iowa, $3,474
50. Indiana, $3,430
51. North Carolina, $3,410
52. Arkansas, $3,378

Full Survey

Bank Failures Will Likely Increase in Southeast U.S.

According to Trepp, LLC, a New York-based real estate research firm that tracks loan delinquencies in the commercial mortgage-backed securities (CMBS) market, the Southeast continues to be plagued by a rash of bank failures caused by an excessive exposure to commercial real estate.  Their analysts say the trend isn’t expected to dissipate anytime soon. Of the four banks that closed in June, two were in Georgia, one was in South Carolina, and the other was in Florida.

Georgia continues to lead the country in bank failures with 14 through the first half of 2011 and 66 since the cycle began in 2007. Nationally, the news is more encouraging as the pace of bank closures continues to moderate. There were 48 bank failures during the first six months of this year compared with 86 during the same period a year ago.

The four banks closed in June mark the second-lowest monthly total since July 2010, according to Trepp.

However, a significant number of banks remain at elevated risk levels, and the company expects to see more closures in the months ahead.

The highest concentration of banks with an elevated risk of failure is in Georgia (53 banks), followed by Florida (38), Illinois (23), Minnesota (15) and North Carolina (13).

All totaled, more than 200 banks on the Trepp Watch List are considered to be at a high risk for failure. Nearly all (91%) of these banks have been on the watch list for a year or more. These banks are predominantly smaller, with a median asset size of $198 million. Only 16 of the highest risk banks have total assets in excess of $1 billion.

Commercial real estate loans accounted for $91 million (or 77%) of the total $119 million in nonperforming loans at the four failed banks. Construction and land loans made up $57 million, or 48% of the total. Commercial mortgages accounted for $34 million (29%) of the total nonperforming pool.

The residential real estate loan sector posted $25.2 million in nonperforming loans, or 21% of the total nonperforming balance. The remainder included commercial and industrial loans totaling $1.6 million, and $900,000 in consumer and other loans.

Three of the four bank failures in June involved loss-sharing agreements with the Federal Deposit Insurance Corp. (FDIC), with 60% of the assets acquired being covered by loss sharing. The proportion of loss-share assets is down from 73% in May and 67% in April.

Trepp’s watch list of troubled financial institutions has successfully identified 96% of the banks that have failed in the cycle that began in September 2007. Banks on the watch list are nearly 200 times more likely to fail than banks not on the list.

Foreign Buyers Drawn to Florida

Based on figures released last month by the National Association of Realtors (NAR), the U.S., and Florida in particular, remain highly desirable to international buyers. Real estate purchases by foreigners surged by $16 billion for the year ending March 2011, one of the largest increases in recent years.

The NAR’s 2011 Profile of International Home Buying Activity reports that residential international sales totaled $82 billion last year, up from $66 billion in 2010.

The sales were split evenly between recent immigrants and non-resident foreigners. International sales comprised nearly 8 percent of the combined total for international and domestic purchases of $1.07 trillion.

Florida accounted for 31 percent of the international transactions last year, the highest of any state. That figure is all the more notable given that Florida generated 10 percent of the total in 2007 and 9 percent in 2008.

Historically, foreign buyers have been attracted to U.S. property ownership for a variety of reasons, including relative value and investment potential. The combined weakening of the U.S. dollar and the real estate market has enhanced that desirability.

Nationwide, international buyers came from 70 countries, with Canada ranked first (23 percent), followed by China (9 percent). Mexico, the U.K. and India tied for third. The average price paid by international purchasers was $315,000, compared with a U.S. average of $218,000.

Florida was most popular among Canadians, Europeans and South Americans.

According to NAR data, 62 percent of the international purchases were paid for in cash, significantly higher than all-cash purchases by domestic buyers.

Foreign buyers do face challenges in financing purchases, with NAR figures showing that 32 percent encountered hurdles that killed the transaction.

Full Report

Posted by Scott R. Lodde

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