U.S. House Panel OKs Debt Forgiveness In Foreclosures

WASHINGTON – Sept. 27, 2007 – Foreclosed homeowners won’t have to pay income tax on debt forgiven by a lender under a bill that passed a U.S. House panel yesterday. Should the bill become law, the bill would also extend the tax deduction for PMI and change slightly the rules for shielding $250,000 in capital gains from the sale of a second home.

H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007, now goes to the full House for a vote.

Debt forgiveness in foreclosures

Currently, homeowners who lose their homes to foreclosure generally have some mortgage debt forgiven by the lender, but the IRS considers that forgiven debt taxable income, charging extra tax to people who just lost their home. H.R. 3648 would provide a permanent exclusion for any discharge of indebtedness (on or after Jan. 1, 2007) that is secured by a principal residence and incurred in the “acquisition, construction or substantial improvement of the principal residence.”

Long-term extension of the deduction for private mortgage insurance

The bill extends the tax deduction for private mortgage insurance for seven years – through 2014.

Gain on the sale of a principal residence

Taxpayers may exclude up to $250,000 ($500,000 if married filing a joint return) of the gain realized on the sale or exchange of a principal residence. H.R. 3648, however, changes slightly the definition of principle residence when it’s applied to second homes. Under current law, a home qualifies for the exclusion if it’s a taxpayer’s principal residence for at least two of the five years preceding a sale ending on the sale, even if the home was initially purchased as a second home.

Under the bill, the timeline changes. A taxpayer may only use the deduction on a home sale after a home becomes his principal residence. Time spent living in the home does not count toward the two-year minimum until the owner officially declares it his primary place of residence.

Qualification changes for cooperative housing corporations

Under current law, a cooperative housing corporation must follow some specific rules, including a requirement that 80 percent or more of the cooperative housing corporation is earned from the corporation’s tenant-stockholders. H.R. 3648 expands that requirement by providing two alternatives to this rule – one based on square footage and another based on cooperative expenditures.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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FAR Backs Tax Amendment

TALLAHASSEE, Fla. – Sept. 26, 2007 – For the leadership of the Florida Association of Realtors® (FAR) and Tallahassee staff, it’s steady as she goes in the fight for a property tax amendment on the January ballot – but there could be rough waters ahead.

Many unanswered questions remain, but FAR sent a memo to affected committees and local Realtor associations reaffirming its commitment to “finding relief, from high taxes” and the “lock-in effect” of the current property tax laws “as soon as possible.” Since the January amendment offers the quickest route to change – and a potential boost to state home sales – FAR’s primary commitment remains quick passage.

One question was answered this morning: Secretary of State Kurt Browning announced that he will immediately appeal the circuit court decision, by Circuit Judge Charles A. Francis of Tallahassee, with the 1st District Court of Appeal. The case will likely go to the Florida Supreme Court for a final decision.

One question not answered, however: Will the Florida Legislature consider a change in the ballot wording during its upcoming special session on Oct. 3? Gov. Charlie Crist, who is strongly committed to the January amendment, can follow through with the appeal, but he cannot unilaterally force the Florida Legislature to revisit the amendment. For that, he also needs a buy-in from Senate President Ken Pruitt (R-Port St. Lucie) and House Speaker Marco Rubio (R-West Miami) because they supervise the special session.

Senate President Ken Pruitt earlier indicated a desire to appeal the lower court’s ruling, leaving the amendment language as written and relying on a favorable judgment from a higher court. “I believe the best course of action for the Senate and for Florida taxpayers is to vigorously defend our work product,” Pruitt said in a memo to other senators. “The ruling yesterday represents the first step in the judicial process; we will appeal this decision.”

Rubio favors the appeal but is willing to reconsider the amendment language during the special session. “Burdened by taxes that they cannot afford to pay, Floridians have waited long enough for relief,” Rubio said in a release. “We must do everything in our power to preserve the Jan. 29 special election, even if that means addressing the property tax issue in the upcoming special session.”

While FAR leaders “are fairly confident in the language” of the current amendment, it presents a problem if the court ultimately rules against it. According to Florida’s secretary of state, amendments must be presented by Oct. 28, and it’s unlikely that a court ruling against the amendment would give lawmakers enough time to get an adjusted version onto the January ballot if they wait. Under that scenario, property tax reform could not be on the ballot until the November 2008 election, postponing any significant relief until at least 2009.

For that reason, FAR is in the process of contacting the Senate President and other Florida Senators to “express our concern about not having relief before 2009.” Members are encouraged to prepare for possible calls-to-action about property tax reform and even other issues under discussion during the special session, such as state commitments to affordable housing, possible cuts in the DBPR budget and tax reform proposals. FAR also continues to update local Realtor associations/boards, other business groups, and the public at large about the benefits of Amendment 1.

Stay updated on Amendment 1 issues on floridarealtors.org’s home page under “What’s New.”

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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Florida’s Consumer Confidence Rises Slightly But Expected To Dip Again

GAINESVILLE, Fla. – Sept. 26, 2007 – Florida’s consumer confidence inched up one point to 79 in September, a new University of Florida study finds, though higher gas prices and the housing sector could impact future confidence.

“In the short run, we expect things to get a bit worse before they improve and consumer confidence to decline,” says Chris McCarty, director of the Survey Research Center at UF’s Bureau of Economic and Business Research. “The obvious culprit is the effect of the now burst housing bubble. The argument that the effect of the declining housing market will be contained has now been proven incorrect. What was a surprise was the extent to which investment in the U.S. housing market had become a global phenomenon. Central banks around the world have discovered that they cannot insulate themselves from this problem.”

There are also some signs that consequences from the housing downturn are creeping into non-housing related employment, McCarty said. Employment has been the bright spot that had been keeping the economy afloat, he said.

Gas prices also are hurting consumer confidence and they are unlikely to improve anytime soon, McCarty said.

“Gas prices have risen in September, a time when they typically fall due to lower demand following the summer travel season,” he said. “Given the Federal Reserve’s dramatic cut in interest rates, the dollar will be lower with respect to other currencies, which will ultimately make gas more expensive.”

The Federal Reserve reduced its benchmark interest rate on Sept. 18 by an unexpectedly large one-half percentage point, to 4.75 percent from 5.25 percent.

“Some economists question whether it was wise for the Federal Reserve to lower interest rates so much,” McCarty said. “This may simply delay the inevitable, which is that the prices of some houses will have to decline to levels that more closely follow the trend.”

The slight rise in consumer confidence was due to increases in three of the five components that make up the index. Expectations about U.S. economic conditions over the next five years rose four points to 81, while expectations about U.S. economic conditions over the next year increased two points to 72. Perceptions of personal finances now compared to a year ago inched up one point to 73.

The only component of the index to decline was perceptions of whether it is a good time to buy big-ticket items, which fell two points to 83. Perceptions of personal finances a year from now remained unchanged at 88.

The research center conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for September was conducted from 423 responses.

Consumer confidence is designed to help predict buying patterns by measuring the mood of consumers toward purchasing. Although other economic indicators also predict buying patterns, consumer confidence tends to be available sooner. The index is benchmarked to 1966, so a value of 100 represents the same level of confidence for the year. The value of the index is in comparing changes over time rather than looking at an isolated month.

© 2007 FLORIDA ASSOCIATION OF REALTORS

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Florida’s Existing Home Sales Ease In August

ORLANDO, Fla. – Sept. 25, 2007 – Low mortgage rates, low unemployment rates and strong demographics continued to reflect positive economic signs in Florida in August. Statewide, sales of existing single-family homes totaled 11,279 last month and were closer to activity in August 2001 and 2002 – before the peak of the housing boom years – than the August 2006 figures, when 15,252 homes sold for a 26 percent decrease in the year-to-year comparison, according to the Florida Association of Realtors® (FAR).

Florida’s median sales price for existing single-family homes last month was $231,900; a year ago, it was $246,800 for a 6 percent decrease. The median is the midpoint; half the homes sold for more, half for less. In August 2002, the statewide median sales price for single-family homes was $141,200, for an increase of 64.2 percent over the five-year-period, according to FAR records.

In July 2007, the national median sales price for existing single-family homes was $228,600, down 1 percent from the previous year, according to the National Association of Realtors® (NAR). In California, the statewide median resales price was $586,030 in July; in Massachusetts, it was $365,775; in Maryland, it was $323,838; and in New York, it was $249,700.

NAR’s latest market outlook notes that disruptions in the mortgage market are dampening the forecast for home sales, particularly in August and September. However, the mortgage markets will calm in the months ahead, says NAR Senior Economist Lawrence Yun. “The volume of existing-home sales this year will be better than 2002, which was the second year of the housing boom,” he says. “Conventional loans – the vast majority of available financing – are available to creditworthy borrowers. Buyers in most areas who do their homework will recognize that housing remains a good long-term investment.”

Sales of existing condominiums in Florida also decreased last month, with a total of 3,380 condos sold statewide compared to 4,522 in August 2006 for a 25 percent decline, according to FAR. The statewide median sales price for condos last month was $196,800, down 3 percent from August 2006’s condo median price of $201,900. NAR reported the national median existing condo price was $230,600 in July 2007.

Last month, interest rates for a 30-year fixed-rate mortgage averaged 6.57 percent, according to Freddie Mac, close to the average rate of 6.52 percent in August 2006. FAR’s sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

Among the state’s larger markets, the West Palm Beach-Boca Raton Metropolitan Statistical Area (MSA) reported 568 existing homes sold last month compared to 655 homes sold a year ago for a 13 percent decrease. The market's median sales price for homes was $366,200; it was $386,000 in August 2006 for a 5 percent decrease. A total of 435 existing condos changed hands in the MSA last month, down 16 percent from the 515 condos sold the previous year. The existing condo median sales price in August was $209,000; a year ago, it was $220,300 for a 5 percent decrease.

“Palm Beach offers a unique lifestyle, with beautiful beaches, cultural amenities and other wonderful opportunities,” says Norma Mirsky, president of the Palm Beach Board of Realtors and president of Mirsky Realty Group. “Mortgage rates continue to be very favorable and this is a great time to buy a home in the area, especially if you’re looking for a place to live in and call home.”

Among the state’s smaller markets, the Fort Walton Beach MSA reported a total of 219 homes sold in August compared to 255 homes a year ago for a 14 percent decrease. The existing home median sales price was $227,300; a year ago, it was $229,200 for a 1 percent decrease. A total of 51 existing condos sold in the MSA last month compared to 47 condos the previous August for a 9 percent increase. The market’s existing condo median price was $311,500; a year ago, it was $356,300 for a decrease of 13 percent.

Harry Millsaps, president of the Emerald Coast Association of Realtors and a Realtor with Prudential Coastal Properties Inc., says that home sales are returning to a more normal pace in the area, with buyers attracted by the laid-back, friendly lifestyle. “The Federal Reserve Board’s recent cut in a key interest rate could make it easier for many people to find an affordable mortgage that’s right for them,” he says. “It is especially good news for homeowners with adjustable-rate mortgages; now, as many ARMs reset their rates, those borrowers could see some savings as a result of the lower interest rates. Buyers seeking to make a long-term investment in a home of their own have more options now.”

© 2007 FLORIDA ASSOCIATION OF REALTORS

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Fed Chair to Congress: Stay Out of the Mortgage Crisis

WASHINGTON – Sept. 24, 2007 – Federal Reserve Chair Ben Bernanke asked Congress Thursday to limit its response to the mortgage crisis, saying that federal agencies are handling it.

“We are responding to the subprime problems on a number of fronts,” Bernanke said in testimony before the House Financial Services Committee. “We are committed to preventing problems from recurring, while still preserving responsible subprime lending.”

Bernanke said some legislative action may be acceptable, but Congress should tread cautiously. He recommended only expanding Fannie Mae and Freddie Mac temporarily – if at all – and urged that federal regulators, the Office of Federal Housing Enterprise Oversight, make the changes. He suggested that any congressional action should focus only on the Federal Housing Administration.

Rep. Barney Frank (D-Mass.), chairman of the panel, didn’t think that was enough. He repeatedly argued that tighter regulation could have averted the mortgage crisis.

“Appropriate, sensible regulation can help people be more confident about the economy,” said Frank, who noted that the House and Senate agree on the need for legislation to help resolve the mortgage crisis and expects a legislation package in the coming weeks.

Source: Investor’s Business Daily, Sean Higgins (09/20/07)

© 2007 FLORIDA ASSOCIATION OF REALTORS

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Vote ‘Yes on 1’: FAR, Gov. Crist Property Tax Amendment

TAMPA, Fla. – Sept. 18, 2007 – Standing shoulder-to-shoulder with Gov. Charlie Crist, Florida Association of Realtors® (FAR) President Nancy Riley joined forces with other supporters Monday to launch a bi-partisan group, “Yes on 1 – Save our Homes NOW,” urging Floridians to vote for the largest tax cut in the state’s history on Jan. 29, 2008.

“Floridians have been suffering long enough, and the people of this great state now have the opportunity to lower their taxes by voting ‘Yes on 1’ on Jan. 29,” said Gov. Crist.

FAR President Riley added, “Passage of this amendment is critical to the future of Florida. It will provide first-time homebuyers a large tax exemption. It will begin to equalize property taxes among neighbors, and it will allow the people who are the foundation of our neighborhoods – teachers, nurses, police officers and emergency first responders – to afford to live in the communities they serve.”

The announcement came during a media conference Monday afternoon at the home of Veronica Greco, a Tampa resident who supports Amendment 1 and understands how important passage of the amendment is to Florida residents who need relief from high property taxes. Greco wants to sell her home of 15 years and downsize to a condo, but feels trapped due to the “lock-in” effects of the state’s Save Our Homes amendment. She pays a property tax bill of about $670 annually, but the next homeowner would pay about $4,000.

“This is an opportunity for homebuyers, future homebuyers and those like Mrs. Greco, who has this home for sale, but she’s locked in because she can’t find a buyer who can afford the taxes on this home,” said State Sen. Mike Fasano, R-New Port Richey. Passage of the constitutional amendment will give people the opportunity to lower their taxes, he said.

Members of “Yes on 1 – Save our Homes NOW” include: Fasano, the group’s chairman; Paul Neaville, a partner with the Markham Group, co-chair and executive director; and Roger Enzor, a Pensacola Realtor and the 1987 president of FAR.

Fasano said the group plans to educate Floridians about recent legislation passed to cut property taxes through a grassroots effort. In early summer, the Florida Legislature passed landmark legislation that required local governments to rollback taxes this year, and then to grow at a responsible rate in the future. The second part is a constitutional amendment creating a “Super Homestead Exemption” of up to $195,000 per homesteaded property. The amendment also provides additional exemptions for low-income seniors and small businesses.

The governor signed the first part of the tax break into law this summer, and Florida residents are starting to see the results. The second part of the tax break puts people in control of their own pocketbook by cutting their taxes when they vote “Yes on 1” and pass the constitutional amendment on Jan. 29, 2008.

In addition to support from citizens across the state, businesses also support the plan to cut taxes.

“The amendment that goes to voters on Jan. 29 represents a great opportunity for Floridians to help our state’s economy,” said Barney Bishop, president and CEO of The Associated Industries of Florida, who also participated in the media conference. “We have a chance to help our housing market get out of this significant slump and, as the housing market improves, the state’s coffers will expand. And that will help jump start our economic recovery.”

© 2007 FLORIDA ASSOCIATION OF REALTORS

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Crist Continues Push For Increase In Affordable Housing

JACKSONVILLE, Fla. – Sept. 13, 2007 – Gov. Charlie Crist addressed Jacksonville- area business leaders at the Jacksonville Regional Chamber of Commerce’s Cornerstone Luncheon yesterday, and provided details about his recommended economic stimulus package sent last week to Senate Pres. Ken Pruitt and House Speaker Marco Rubio.

“While economic forecasters have predicted an even tighter budget year than we had expected, we can trim our state budget without raising taxes,” Governor Crist said. “Equally important, we can take steps to re-fire our economy, especially in the building and construction industry – the area most in need of our support.”

Crist’s recommended economic stimulus package focuses on three sectors of Florida’s economy:

Housing industry

Crist has asked the Florida Legislature to appropriate $50 million from trust fund reserves to the Florida Housing Finance Corporation to provide assistance to as many as 3,000 first-time home buyers. Benefits would include $10,000 to assist with making downpayments and paying closing costs. The corporation would also offer home financing at one-quarter point lower than the market rate.

Building and construction industry

Crist is encouraging the Legislature to appropriate school construction funds for school districts, community colleges and state universities within the next three to six months. Typically, $315 million of available bonding capacity would be appropriated after the next regular legislative session. However, appropriating these funds earlier than usual, as well as $168.25 million in the Public Education Capital Outlay (PECO) trust fund, will stimulate Florida’s building and construction industry.

Transportation construction industry

Crist directed the Florida Department of Transportation to fast-track road construction and port improvement projects, which will infuse $350 million into Florida’s economy. Crist also directed the department to work with the Florida Seaport Transportation and Economic Development Council to accelerate 10 projects to improve Florida’s deepwater ports, citing a study by the Florida Department of Transportation indicating that every dollar invested in ports yields $6.90 to the state’s economy.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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NAR: Mortgage Problems To Dampen Home Sales In The Short Term

WASHINGTON – Sept. 11, 2007 – Tighter credit for home mortgages will measurably dampen home sales in the short term and postpone an expected recovery for existing-home sales until 2008, according to the latest forecast by the National Association of Realtors® (NAR).

Lawrence Yun, NAR senior economist, says unusual disruptions in the mortgage market dampened the outlook for home sales, notably for August and September. “There’s been an unusual hit to home sales, starting in March when subprime problems emerged and more recently when problems spread to jumbo loans, with many potential buyers on the sidelines,” says Yun. “However, the jumbo loan market is now beginning to settle, and FHA-insured loans are helping to fill the subprime vacuum. The volume of existing-home sales this year will be better than 2002, which was the second year of the housing boom.”

Existing-home sales are projected at 5.92 million this year, rising to 6.27 million in 2008, compared with 6.48 million in 2006. New-home sales should total 801,000 in 2007 and 741,000 next year, below the 1.05 million in 2006.

“A sharp production pullback by homebuilders deep into 2008 is a healthy trend that will help trim down housing inventory,” Yun says. Housing starts, including multifamily units, are expected to total 1.37 million this year and 1.26 million in 2008, compared with 1.80 million in 2006.

“The mortgage markets will calm further in the months ahead, but it’s important to underscore the fact that conventional loans – the vast majority of available financing – are available to creditworthy borrowers,” Yun says. “Patient buyers in most areas who do their homework will recognize that housing remains a good long-term investment.”

Existing-home prices are likely to slip 1.7 percent to a median of $218,200 this year before rising 2.2 percent in 2008 to $223,000. The median new-home price is estimated to drop 2.2 percent to $241,100 in 2007, and then increase 1.7 percent next year to $245,100.

The 30-year fixed-rate mortgage is projected to average 6.4 percent for the balance of the year and then edge up to the 6.5 percent range in 2008. “We expect the Fed to cut rates two times before the end of the year, which will lower interest rates for prime borrowers and FHA-insured loans,” Yun says. “FHA modernization could buffer the fallout of subprime loans, which would raise our sales forecast in the future.”

Growth in the U.S. gross domestic product (GDP) is forecast at 2.0 percent in 2007, below the 2.9 percent growth rate last year; GDP will probably grow 2.7 percent in 2008.

The unemployment rate should average 4.6 percent for 2007, unchanged from last year. Inflation, as measured by the Consumer Price Index, is estimated to be 2.8 percent in 2007, compared with 3.2 percent last year. Inflation-adjusted disposable personal income is likely to increase 3.6 percent this year, up from 3.1 percent in 2006.

© 2007 FLORIDA ASSOCIATION OF REALTORS

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Pending Home Sales Index Falls Largely On Mortgage Tightening

WASHINGTON – Sept. 5, 2007 – Pending home sales, a forward-looking indicator, shows existing-home sales are likely to decline in coming months as mortgage disruptions work their way through the housing market, according to the National Association of Realtors® (NAR).

The Pending Home Sales Index, based on contracts signed in July, fell 12.2 percent to a reading of 89.9 in July from the June index of 102.4, and was 16.1 percent lower than July 2006 when it stood at 107.1.

Lawrence Yun, NAR senior economist, says abnormal factors are clouding the horizon. “It’s difficult to fully account for mortgage disruptions in the index, and our members are telling us some sales contracts aren’t closing because mortgage commitments have been falling through at the last moment,” he says.

“These temporary problems are primarily with jumbo loans, and there are continuing issues for subprime borrowers, but there are no serious problems for the majority of buyers who qualify for conventional financing or FHA-insured loans. Some consumer concerns remain, but since mid-August the market has been stabilizing somewhat.

“If lenders focus on the essentials of creditworthiness and adjusted valuations based on comparable sales, and ignore speculation on what might happen in the future, broader stabilization will come sooner rather than later,” Yun says.

The index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

Annual changes in the index are more closely related to actual market performance than are month-to-month comparisons. As the relatively new index matures and seasonal adjustment factors are refined, the month-to-month comparisons will become more meaningful.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

The PHSI in the South declined 6.6 percent in July to 104.0 and was 15.2 percent below a year ago. In the Northeast, the index fell 12.2 percent from June to 84.3 and is 10.0 percent lower than July 2006. The index in the Midwest dropped 13.1 percent in July to 80.4 and was 15.8 percent below a year ago. In the West, the index fell 20.8 percent in July to 82.3 and was 21.8 percent below July 2006.

© 2007 FLORIDA ASSOCIATION OF REALTORS

UF study: Florida’s Housing Market Shows Surprising Resilience

GAINESVILLE, Fla. – Sept. 5, 2007 – Despite the bleak real estate outlook nationwide, Florida’s new home market appears for now to be stabilizing as a result of persistent demand for homes and lack of overbuilding, according to a University of Florida study released today.

“There’s a growing feeling of apprehension or caution, but the results from our survey remind us that the underlying markets for real estate in Florida are still in good shape,” says Wayne Archer, director of UF’s Bergstrom Center for Real Estate Studies. “Owner residential is the only area of real estate markets where there are problems at this time. Apartments, retail, office, industrial and hospitality all remain stable and healthy.”

The findings are from the center’s quarterly survey of Florida real estate trends completed in July.

New single-family home development is sluggish but considered stable by industry experts, while the condominium market continues to struggle, Archer says. However, overall the state is in better condition than the rest of the country, he says.

What sets Florida apart is its high growth rate, allowing quicker recovery from setbacks in the real estate market, Archer says. “If there is a problem with the housing market in Chicago, Indianapolis or Kansas City, people there may have to live with it for a long time because growth is relatively slow and it takes awhile for the problem to work itself out,” he says.

Another advantage Florida has is a rate of building that is moderate enough – with the exception of condos – to prevent large imbalances in supply and demand, he says.

The greatest fear right now is that subprime loans underlying many real estate securities will result in increasingly high defaults, foreclosures and losses for investors, Archer says. The crisis involving these unconventional loans has pervaded the entire financial system, causing declines in the stock market and generating fears about the kind of damage that might result in the future, he says.

“We have a liquidity crisis that is at the top of the news hour by hour and it’s very hard to conjecture how much impact this will have on the real estate picture in Florida,” he says.

The latest UF housing survey was conducted in July before the crisis had escalated. “If we could poll our respondents now, they might be quite a bit more apprehensive than they were two or three weeks ago,” he says. But Archer, who has spent most of his professional career studying mortgages, says people underestimate the tenacity of homeowners to remain in their homes.

“Even if a homeowner gets in trouble, it takes a severe disruption in their household or their life before they will abandon their mortgage and their home,” he says. “They will fight to keep that house. They’ll give up their car. They’ll take on four jobs. They’ll do whatever it takes.” The same cannot be said, though, about people buying second homes or houses as speculative investments.

Unlike second homes or condominiums, owner-occupied single-family homes continue to be a good investment, Archer says. Although there has been a flattening in single-family housing prices, with prices in some markets likely to drop over the next year to adjust to a correction in the market, Archer says he does not foresee widespread declines.

“I think homeowners have not yet come to terms with the fact that the price increases we’ve seen in the last two or three years are not going to continue,” he says.

Condos, especially in certain cities, are in much bigger trouble, Archer says. By some estimates, there are as many as 40,000 condo units for sale in Miami and not even a fraction of those are needed, he says. Unless there is some movement by foreign investors to buy these condos, the market is likely to be hurting for a long time.

On a positive note, the survey shows remarkable stability in capitalization rates, the measure of how fast an investment pays off in net cash, Archer says. If there is growing apprehension about the real estate market, capitalization rates should increase in response to lenders’ rising fears about perceived risk.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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Pending Home Sales Index Falls Largely On Mortgage Tightening

WASHINGTON – Sept. 5, 2007 – Pending home sales, a forward-looking indicator, shows existing-home sales are likely to decline in coming months as mortgage disruptions work their way through the housing market, according to the National Association of Realtors® (NAR).

The Pending Home Sales Index, based on contracts signed in July, fell 12.2 percent to a reading of 89.9 in July from the June index of 102.4, and was 16.1 percent lower than July 2006 when it stood at 107.1.

Lawrence Yun, NAR senior economist, says abnormal factors are clouding the horizon. “It’s difficult to fully account for mortgage disruptions in the index, and our members are telling us some sales contracts aren’t closing because mortgage commitments have been falling through at the last moment,” he says.

“These temporary problems are primarily with jumbo loans, and there are continuing issues for subprime borrowers, but there are no serious problems for the majority of buyers who qualify for conventional financing or FHA-insured loans. Some consumer concerns remain, but since mid-August the market has been stabilizing somewhat.

“If lenders focus on the essentials of creditworthiness and adjusted valuations based on comparable sales, and ignore speculation on what might happen in the future, broader stabilization will come sooner rather than later,” Yun says.

The index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

Annual changes in the index are more closely related to actual market performance than are month-to-month comparisons. As the relatively new index matures and seasonal adjustment factors are refined, the month-to-month comparisons will become more meaningful.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

The PHSI in the South declined 6.6 percent in July to 104.0 and was 15.2 percent below a year ago. In the Northeast, the index fell 12.2 percent from June to 84.3 and is 10.0 percent lower than July 2006. The index in the Midwest dropped 13.1 percent in July to 80.4 and was 15.8 percent below a year ago. In the West, the index fell 20.8 percent in July to 82.3 and was 21.8 percent below July 2006.

© 2007 FLORIDA ASSOCIATION OF REALTORS

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‘FHASecure’ to Help Homeowners

WASHINGTON – Sept. 4, 2007 – On Friday, Pres. Bush announced Federal Housing Administration (FHA) changes, called “FHASecure,” to help homeowners avoid foreclosure. The National Association of Realtors® (NAR) praised the move.

“NAR has been advocating for many of these FHA changes since early 2007,” says 2007 President Pat V. Combs. “In letters, testimony, speeches and meetings, we have encouraged both Congress and the U.S. Department of Housing and Urban Development (HUD) to make meaningful changes to the FHA that would stem rising foreclosures.

Under the FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset – but are now in default – to qualify for refinancing. In addition, FHA will implement risk-based premiums that match the borrower’s credit profile with the insurance premium they pay – i.e., riskier borrowers pay more. The risk-based pricing structure will begin on Jan. 1, 2008.

FHA has recently experienced an threefold increase in the number of conventional borrowers refinancing into FHA products, with total 2007 transactions projected to surpass 100,000 loans. The FHASecure program is expected to increase that number. The number of these refinancing transactions has tripled since the start of 2006.

The FHASecure initiative will operate under the same guidelines as FHA’s existing mortgage insurance program. Eligible homeowners will be required to meet strict underwriting guidelines and pay a mortgage insurance premium. FHASecure will be underwritten to ensure the borrowers have the ability to repay the loan, will require escrow for taxes and insurance, and will continue to offer foreclosure prevention assistance. FHA does not include pre-payment penalties or use teaser rates.

To qualify for FHASecure, eligible homeowners must meet the following five criteria:

1. A history of on-time mortgage payments before teaser rates expired and loans reset.
2. An interest rates resets between June 2005 and December 2009.
3. 3 percent cash or equity in the home.
4. A sustained history of employment.
5. Sufficient income to make the mortgage payment.

In addition to helping homeowners, FHASecure should bring liquidity to the mortgage market. FHA expects more lenders to offer FHA-insured loans, pool them and securitize them with the Government National Mortgage Association (Ginnie Mae). Since the U.S. government backs Ginnie Mae, it’s mortgage-backed securities appeal to investors looking for low risk, which should channel greater capital into the housing market.

For more information about FHASecure and other FHA products, call (800) CALL-FHA or visit www.fha.gov and www.hud.gov. For a list of local homeownership centers or a HUD-approved housing counseling center, go to www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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