The Federal Reserve said Wednesday that it will hold a key benchmark interest rate near zero through late 2014.

The setting of this federal funds rate – the rate at which banks lend to one another – is one of the most fundamental and principal tools in the central bank’s chest of economic influence.

The Fed has kept the target range for the rate at 0 to 0.25 percent for three years now. The decision by its policy committee members to maintain this range for another three years is testament to just how slow the U.S. economy’s crawl back from the brink of financial ruin is likely to be.

Up until Wednesday, the Fed’s policy statement had indicated the federal funds rate would remain at its current level until mid-2013.

Fed Chairman Ben Bernanke acknowledged that the 2014 projection for keeping the rate so low is not set in stone. The decision to raise the rate before that time would be determined by the pace of economic growth.

“We have to make a best guess,” Bernanke told reporters at a press conference following the Fed’s two-day policy meeting. “Unless there is a substantial strengthening of the economy in the near term, I would think that it’s a pretty good guess that we will be keeping rates low for some time from now.”

The Fed’s policy committee said information it has received since the last meeting in mid-December suggests the economy has been expanding moderately, but that’s not enough.

“To support a stronger economic recovery…the Committee expects to maintain a highly accommodative stance for monetary policy,” according to the committee’s statement.

Members said they expect economic growth over the coming quarters to be modest, and as a result, they anticipate the unemployment rate will decline only gradually.

Projections released by the Fed committee at the conclusion of the meeting show its members are generally anticipating the national unemployment rate to range between 8.2 and 8.5 percent this year.

Strains in global financial markets also continue to pose significant downside risks to the U.S. economic outlook, according to the Fed.

Analysts say the central bank’s assessment of current economic conditions and expectations going forward indicate a third round of ‘Quantitative Easing’ (QEIII) is not out of the question, and in fact very likely this year.

Bernanke and his colleagues have made it a goal to bring more transparency to the nation’s central bank.

“The Committee seeks to explain its monetary policy decisions to the public as clearly as possible,” the Fed’s policymakers said in a statement issued Wednesday.

“Such clarity,” they said, “facilitates well-informed decisionmaking by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society.”

Fountain Hills open house

Fountain Homes for Sale

15860 E Palomino BLVD Fountain Hills, AZ open house

Housing Shortage in Phoenix?

East Valley Tribune (updated 1/18/2012 9:16:30 AM ET)

Real estate experts predict the Valley’s years-long housing glut is reaching its end and, as early as this spring, could stun home buyers by transforming into a shortage. The crunch is expected to be more pronounced in the East Valley, where some subdivisions are approaching build-out and other builders are raising prices. The prediction may seem outlandish given how gloomy real estate news has been for years, said Mike Orr, director of the Arizona State University Center for Real Estate Theory and Practice. But a growing demand and shrinking supply has driven home prices up in recent months, he said. Orr thinks that’s gone unnoticed to people who will enter the market this spring, in what is typically the peak time for sales activity.“They’re going to be surprised that it’s so hard to buy a house. They’ve been hearing for so long that there’s a glut of homes,” Orr said. “They’ll go out and find there’s not a lot to choose from and every time they bid, there’ll be three or four other offers.” The shrinking supply is a mirror image of what happened in 2006, when there was a lag before the public realized the number of new homes had ballooned into a problem, Orr said. About 58,000 homes were on the market by late 2007. The long-term average is about 33,000 homes listed at any given time. That’s down to 25,000 now or 19,000 when accounting for homes that have deals pending, Orr said. The unusually short supply will continue to shrink. “By the time we get to 2013, it’s quite likely that we’ll need a lot of new homes,” Orr said. A short supply should trigger price jumps for existing homes this year, said Jim Belfiore, president of Belfiore Real Estate Consulting. Prices went up 3.1 percent last year, but he argues they should have rose 20 percent in response to a 41 percent drop in real estate listings. He expects that 20 percent jump will happen in 2012, starting with a 6 percent to 11 percent rise by March. Belfiore’s company surveys each of the Valley’s 400 active subdivisions on a regular basis to gauge prices and sales activity. Belfiore predicts shortages will grow as 2012 goes on because 34 percent — or 136 subdivisions — will be sold out in a year. Sales are especially strong in Queen Creek, where a jump in sales has allowed eight of 20 subdivisions to raise prices. “The East Valley is a top performer,” Belfiore said. “In Gilbert, there are 58 subdivisions that are active today. It might be the most active submarket in the southwestern United States. Builders are pining for new lots. There’s a land shortage in Gilbert. Chandler is the same deal.” The number of permits issued last year was a 40-year low, at about 7,000, Belfiore said. He expects that will grow to 10,400 this year, 15,800 in 2013 and 23,200 in 2014. The construction should further boost the economy. Each new home creates 2.5 jobs for three months, Belfiore said. Belfiore expects a strong 2012 because of falling unemployment, exceptionally low prices and record low interest rates. The market could be especially strong if employment gains continue and banks relax their lending standards, he said. This year’s real estate market should be the best in five years, Orr said. It will take several years to resemble a normal market and any increases will be far short of what created the bubble, he said. “I don’t think there will be the same speculation there was, but there might be a lot of people who do want to buy a house in the next two years, thinking, ‘If I don’t buy now, I might miss out,’” Orr said.

The number of foreclosures and short sales remains high but will be less of a factor in the market as time goes on, said Bob Bemis, CEO of the Arizona Regional Multiple Listing Service. Distressed homes are mostly the target of investors. Families tend to focus on new homes or traditional resales, he said. The market showed signs of returning to health last year, he said. Median sale prices rose 6.5 percent to $117,000, and average sale prices were up 3.5 percent, to $162,000. He expects a burst of activity at some point in 2012. Bemis said he expects potential buyers could dismiss a real estate professional’s rose-tinted predictions, given how they are known for saying there’s never been a better time to property. But he said skeptics should give weight to Orr, whose role at ASU divorces him from having any skin in the game. “We’re very close on agreement on where we’re headed,” Bemis said. “It’s just a matter of degree.”

Mortgage rates at an all time low

Fixed mortgage rates started the year at or near their all-time record lows, according to market data published by Freddie Mac Thursday.

The GSE reports the interest rate on a 30-year fixed mortgage averaged 3.91 percent (0.8 point) for the week ending January 5, 2012. That’s down from 3.95 percent the previous week and matches the record low set just two weeks earlier.

This marks the fifth consecutive week the 30-year rate has come in
below the 4.00 percent mark. To put things into perspective, last year
at this time, it was averaging 4.77 percent.

The 15-year fixed-rate averaged 3.23 percent (0.8 point) in Freddie
Mac’s survey this week, down from 3.24 percent the week prior.

The current average rate on a home loan with a 15-year fixed term is
just two basis points above its all-time low of 3.21 percent, which was
hit in two weeks during the month of December. A year ago, the average
15-year rate was at 4.13 percent.

Frank Nothaft, Freddie Mac’s chief economist, attributed the
declines seen among fixed rates to recent data reports which indicate
the housing market and manufacturing industry are showing signs of
improvement.

“Pending existing home sales in November jumped 7.3 percent, nearly
five times greater than the market consensus forecast, to its strongest
pace since April 2010,” Nothaft noted.

“In addition,” he said, “construction spending rose 1.2 percent in
November, supported by the residential sector which exhibited its fourth
consecutive monthly increase. Similarly, manufacturing expanded in
December at the fastest pace in six months.”

Freddie Mac’s report shows the 5-year adjustable-rate mortgage (ARM) came in at 2.86 percent (0.7 point) this week, down from 2.88 percent. This time last year, the 5-year ARM was averaging 3.75 percent.

The GSE’s survey puts the 1-year ARM at 2.80 percent (0.6 point). It was the only loan product included in the GSE’s study to head higher, up from 2.78 percent last week. Flip the calendar back 12 months, and the 1-year ARM was averaging 3.24 percent.

FHA extends waiver of property anti-flipping rules

The Federal Housing Administration (FHA) is extending the temporary waiver of its property anti-flipping rule through the end of 2012.

FHA rules typically prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In 2010, however, the agency waived this regulation, and later extended the waiver through 2011.

The new extension announced late last week will permit buyers to continue to use FHA-insured financing to purchase HUD-owned and bank-owned properties, no matter how long the homeowner has held the title, through December 31, 2012.

FHA says the waiver will allow homes to resell as quickly as possible, helping to stabilize real estate prices and revitalize communities experiencing high foreclosure activity.

“This extension is intended to accelerate the resale of foreclosed
properties in neighborhoods struggling to overcome the possible effects
of abandonment and blight,” said Carol Galante, FHA’s Acting
Commissioner. “FHA remains a critical source of mortgage financing and stability and we must make every effort that to promote recovery in every responsible way we can.”

According to FHA, the waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers.

Among these conditions, all transactions must be arms-length, with no link between the buying and selling parties.

In addition, in cases in which the sales price of the property is 20
percent or more above the seller’s acquisition cost, the waiver will
apply only if the lender meets specific conditions, and documents the
justification for the increase in value.

FHA’s property-flipping waiver is limited to forward mortgages, and
does not apply to the agency’s Home Equity Conversion Mortgage (HECM) for purchase program.

Since the original waiver went into effect on February 1, 2010, FHA has insured nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition.

The agency says its own research has found that in today’s market,
acquiring, rehabilitating, and reselling foreclosed properties to
prospective homeowners often takes less than 90 days.

As a result, FHA says prohibiting the use
of its mortgage insurance for a subsequent resale within 90 days would
adversely impact the willingness of sellers to consider offers from
potential FHA buyers, namely because they
would be required to cover holding costs and the risk of vandalism that
comes with allowing a property to sit vacant over a 90-day period of
time.

Bank of America Weighs Principal Forgiveness in Settlement Talks

Gotta love those banks!

In its own private negotiations with state attorneys general and officials at HUD and the U.S. Justice Department, Bank of America is bringing principal reductions to the bargaining table, according to a report from the Wall Street Journal which cites “people familiar with the talks.”

BofA, along with the nation’s four other largest mortgage servicers,
has been in discussions with the state and federal officials to settle
investigations into foreclosure practices involving faulty paperwork and
illegal affidavits. Talks have been ongoing for months now.

The June 15th target date for a settlement, which had been set by
lead representatives for the states, has come and gone and an agreement
between the parties has remained elusive.

In a recent research note, the ratings agency DBRS described the lack of a settlement “disappointing.” The firm’s analysts wrote that the “stalemate only further

postpones potential recovery in the housing market, which is central to the broader economic recovery.”

The key sticking points for each side center around
principal-reducing modifications (the AGs want the mandate written into a
settlement while the banks have spoken out against it) and a blanket
release of liability shielding servicers from future litigation (the
banks feel the settlement should indeed settle all states’ charges but
some AGs say any joint agreement should not prevent them from pursuing
their own actions).

The Wall Street Journal’s Dan Fitzpatrick and Ruth Simon
write that as negotiations with all five mortgage servicers as a group
missed the mid-June target date, Bank of America began urging the
government officials to kick things into high gear and put forth its own
proposal for principal write-downs in exchange for liability
protections.

According to the Journal, under BofA’s plan, borrowers
would have to prove financial hardship to qualify for a modification
involving a reduced principal, and the original principal amount would
be limited to $1 million, or lower in some geographic regions.

Bank of America could reduce the amount of money it is required to
pay as part of the group settlement the more principal reductions it
agrees to, the Journal said.

The paper says the other four servicers are currently engaging in
their own individual negotiations with the state attorneys general and
federal agencies, but it is not yet known if principal write-downs are
part of those talks.

Bank of America could not immediately be reached for comment after business hours.

Banks offering increased short sale incentives to homeowners

The nation’s leading mortgage lenders are extending extras for
short sale transactions employed as an alternative to foreclosure – both
in the form of monetary incentives for borrowers and streamlined
procedures for real estate agents.

Wells Fargo says it has been making “enhanced financial relocation assistance offers” that can be as much as $10,000 or $20,000 to certain borrowers who choose to go through with a short sale or transfer the title back to Wells via a deed-in-lieu.

This extra incentive is being offered to distressed borrowers in
Florida and other states where the foreclosure process is lengthening, a
spokesperson for Wells Fargo explained. The exact amount of the
relocation funds provided to individual borrowers varies based on a
number of factors, the company says.

Wells Fargo noted that this type of additional relocation assistance
is only available on first-lien loans that the company itself owns –
which represent only about 20 percent of the loans Wells Fargo services.
The company must follow investor guidelines for the remaining loans it
services.

JPMorgan Chase is also offering a range of incentives to borrowers that agree to a
pre-foreclosure sale “because if we can’t work out a modification, a
short sale is a better result for the borrower, the servicer, the
investor, and the neighborhood than a foreclosure,” the company said in a
statement.

Chase says the amount of the offer “depends on a number of factors”
but declined to share specific details on how much money it’s been
providing to short sellers.

One agent in Florida confirms that he has indeed received a letter
from Chase offering $20,000 to a borrower he’s representing in a short
sale transaction.

Another agent in California says he closed a short sale with Chase
where the borrower was paid $30,000 at closing for cooperating with the
short sale.

“I have closed over 200 short sales and this was the most I have seen paid to a borrower,” the agent said.

Citi has confirmed that its average incentive offer is currently $12,000 for borrowers in cases where Citi owns the loan.

“Incentives are offered to customers experiencing financial hardship
who need funds to proceed with the short sale,” a spokesman for the
lender explained.

The amount, which is agreed upon upfront, varies according to the
borrower’s individual circumstances and loan characteristics, Citi said.
It is disbursed to the homeowner when the short sale is completed.

Bank of America
says it is “committed to improving the short sale process” and has made
procedural changes to cut some of the red tape for agents working with
the bank on pre-foreclosure sales.

The lender now allows real estate agents to submit a backup offer on
a transaction if the original buyer has walked away from the sale.

This means that agents no longer have to initiate a new short sale
if the buyer changes, Bank of America explained. Instead, agents can
move ahead with the original transaction in the Equator system, BofA’s short sale technology platform of choice, and continue to work with the same short sale specialist.

Bank of America says this policy change will save its agents time by not having to repeat a number of process steps.

Housing market strengthening but…..

The year 2011 is ending on a high note as economists anticipate
some signs of recovery ahead. Prices appear to be reaching their
trough, visible supply is on the decline, and banks are beginning – just
slightly – to loosen lending standards, according to a fourth-quarter
report from Capital Economics.

However, Capital Economics warns these positive signs do not point to an immediate recovery.

Taking into account the historic ratio between disposable income and
housing prices, homes were undervalued by 23 percent in the third
quarter. Homes have not been this undervalued since at least 1975.

Since 2006, prices have declined 33 percent, countering the sharp increases of the boom years. Therefore, “[i]t is clear that prices don’t need to fall further,” Capital Economics says.

Nondistressed home prices in particular seem to have bottomed out.
While home prices declined 4 percent this year, prices of nondistressed
homes fell only 0.5 percent.

Having reached the bottom, however, prices will not jump far in the
new year. Capital Economics predicts national home prices will remain
unchanged over the next two years before seeing positive movement – a
2.5 percent increase – in 2014.

This past year has seen some positive movement in housing inventory
with a 20 percent decrease in the number of homes listed for sale over
the year. However, supply will remain an obstacle moving forward as the
current shadow inventory is estimated at 4 million.

Demand will also continue to be an issue. However, the report notes
the market has seen a slight increase in home sales, which it attributes
to first-time buyers.

Banks are contributing to rising demand and supply absorption by
allowing loans with loan to value ratios of 80 percent or even slightly
higher, something that has not occurred since mid-2008, according to
Capital Economics.

The overall economy will not help boost the housing market in the
coming year as the U.S. will continue to be affected by the euro-zone
crisis.

The rental market will continue to be the best-performing segment of the market.

Lender Processing Services (LPS) has released new data detailing mortgage performance at November month-end. The most troubling statistic shows a nearly 3 percent month-over-month increase in the number of loans 30 or more days past
due but not yet in foreclosure.

LPS says 8.15 percent of the nation’s mortgages fell into this category as of the end of November. That’s up from 7.93 percent at the end of October – a 2.7 percent increase – and is the first time in four months the company has reported a rise in the
national delinquency rate.

On an annual basis, the stats pan out better, with November’s delinquency rate down 9.6 percent from a year earlier.

The monthly increase in the delinquency rate can be attributed to a buildup of seriously delinquent mortgages.

LPS says as of November, there were
1,809,000 properties on which mortgage payments were 90 or more days
past due but the case had not yet been referred to foreclosure. The
number of properties in this bucket stood at 1,759,000 in October.

In contrast, borrowers who were behind on their payments by 30-89
days declined to 2,279,000 in November, down from 2,329,000 in October.

According to LPS’ analysis, 4.16 percent of the nation’s mortgages
were part of the foreclosure pre-sale inventory in November. That ratio
is down 3.0 percent from October but up 2.0 percent from November 2010,
and equates to 2,116,000 homes.

All in all, LPS says 6,260,000 borrowers were behind on their payments or in foreclosure as of the end of November, representing one in eight residential mortgages.

States with highest percentage of non-current loans – which combines
foreclosures and delinquencies – include: Florida, Mississippi, Nevada,
New Jersey, and Illinois.

Montana, South Dakota, Wyoming, Alaska, and North Dakota have the lowest percentage of non-current loans.

Mortgage Rates Sink to Record Lows Again

Daily Real Estate News |Friday, December 16, 2011

Fixed mortgage rates dropped even more this week, continuing the trend
in reaching new record lows this year, Freddie Mac reports in its weekly
mortgage market survey. The 30-year fixed-rate mortgage averaged 3.94
percent this week while 15-year rates sank to 3.21 percent — both
all-time lows from their previous record lows set on Oct. 6. The 5-year
adjustable-rate mortgage also set a new record this week.

The Federal Reserve at a meeting this week reaffirmed its commitment
from this summer that it would keep interest rates low for the next two
years.

Here’s a closer look at rates for the week ending Dec. 15.

30-year fixed-rate mortgages: averaged 3.94 percent —
a new record low — with an average 0.8 point, dropping from last week’s
3.99 percent average. A year ago, 30-year rates averaged 4.83 percent.
15-year fixed-rate mortgages: averaged 3.21 percent —
also a new record low — with an average 0.8 points, a drop from last
week’s 3.27 percent average. Last year at this time, 15-year rates
averaged 4.17 percent.
5-year adjustable-rate mortgages: averaged 2.86
percent this week, with an average 0.6 point, dropping from last week’s
2.93 percent average. Last year at this time, 5-year ARMs averaged 3.77
percent.
1-year ARMs: averaged 2.81 percent with an average
0.6 point, inching up slightly from last week’s 2.80 percent average.
Last year at this time, 1-year ARMs averaged 3.35 percent.

Source: Freddie Mac

City Select Price Range Property Type Beds? Baths?

Contact me

Real Estate @ WordPress.

Phoenix Valley Real Estate

Phoenix Valley home sales