For the second year in a row, most Metro Detroit, Michigan mortgage holders are facing higher tax assessments despite a continuing drop in the market value of their homes.
That means their property tax bills likely will rise as well, though they can’t exceed the current 3.7 percent rate of inflation set by the state.
Local officials say they expect annual assessment notices - due in mailboxes around the first week of March - will spark a higher-than-usual number of disgruntled property owners lining up for appeals before local assessment review boards.
Among them will likely be Charles Weir of Bloomfield Hills. He said he isn’t pleased about the possibility of his current $15,000 tax bill going up when the average assessed value in his area has dropped 3.62 percent, as was the case with most Detroit home prices.
“I don’t feel good about that,” he said. “I think it’s wrong. I think the taxing authorities are not being realistic or fair. The real estate taxes are not reflecting the state of the market.”
The middle class may be paying the biggest price.
Dave Heiber, Oakland County’s equalization manager, said the homes that have been hardest hit by slipping values are those in the middle range - $150,000 to $300,000. Homes that cost up to $150,000 or so are holding their values, as are those priced at $300,000 and up.
That’s one of the reasons prices in an older inner-ring community such as Oak Park are increasing when many other areas aren’t; average home appreciated by 4.34 percent last year for mortgage holders in this community.
“We’re more of a starter-home kind of market these days,” said Oak Park City Assessor Dean Bush. “And there’s definitely still a market for that.”
Homeowners upset by hike
In Ray Township within the Michigan housing market, the average home assessment increased by more than 7 percent.
Dawn Bettcher, a mother from Ray Township, said she believed homes in her town were being overvalued given the moribund housing market. She cringed over her taxes jumping up again this year.
“If our house was worth that, I wouldn’t mind, but I don’t think we could get that if we wanted to sell,” she said.
To read the rest of this Detroit News article, click here.
Posted by Jed Moss on Jan 31 2007 under Michigan
From Santaquin to Alpine, the Utah housing market is hot.
How hot?
Three years ago, a $250,000 residence was a premium home in Utah Valley. Now, the average sale price of a house in the area is $254,000, according to The Deseret News.
In fact, the number of valley homes sold for at least $500,000 jumped from 95 three years ago to 368 in 2006.
Real estate expert Kevin Call now tracks the valley’s high-end housing market by counting the million-dollar homes: 44 sold last year, 73 on the market right now.
The surge is jacking up home prices at the bottom end of the market, too; great news for homeowners - but bad news for would-be Utah mortgage applicants who now can’t afford most of the properties in the Valley, said Call, executive vice president for the Utah County Association of Realtors.
How bad is the housing affordability gap?
Only 3 percent of homes on the market right now are listing for less than $160,000. Moreover, 90 percent of all houses on the market this week list for $200,000 or more.
“That’s an affordability problem in our marketplace,” Call told the Provo Kiwanis Club on Tuesday. “If you are a schoolteacher in the Alpine School District with five years’ experience and a master’s degree, you can’t qualify for 90 percent of homes on the market unless you have a second job or a spouse that works.”
Don’t expect new construction to ease the problem, either.
“You can’t find a new construction home for under $160,000,” Call said. “Even downtown Eagle Mountain has passed that threshold.”
The reason is a stark leap in lot prices. For example, in 2004, a lot in the Val Vista subdivision in American Fork sold for $75,000. Last year, a nearby lot that was the same size sold for $149,500.
The affordability situation is compounded by a low inventory: Only a small supply of homes are for sale for less than $160,000 or even up to $200,000. Adding to the problem? Rising mortgage rates in the state.
“The group that can handle the least competition is facing the most competition,” Call said of lower-income home buyers.
The good news is that homeowners are seeing an excellent return on their investments.
Last year, half of all single-family homes in Utah Valley sold for more than $213,075 in 2006, and half sold for less. That median sale price was up 33 percent from $160,000 at the end of 2004.
The median price in Orem jumped from $151,525 to $180,000 over the same period. In Provo, it went from $143,450 to $170,000. The highest appreciation was in the Highland-Alpine area, where it grew roughly 23 percent last year alone.
“I expect 2007 to be approximately the same in unit sales as it was in 2006,” Call said. “I expect prices to increase, but certainly not at 22 to 24 percent. Our market is beginning to settle, to stabilize a bit. I believe that’s healthy for our market.”
We’re sure local mortgage brokers, with their increased business, would agree.
Posted by Jed Moss on Jan 31 2007 under Utah
A slump in the Nevada housing market?
Not according to some local Realtors, who told The North Lake Tahoe Bonanza last week that any downturn has been greatly exaggerated.
Since the same homes are not sold every year, the average and median home prices don’t accurately reflect a change in property values, one Realtor said.
“The 2007 market has a good chance to do very well because 2006 was a very tough year - people just did not have confidence and did not make a move,” said Dan Schwartz of Coldwell Banker Incline Village Realty and Tanager. “I believe we’ve hit rock bottom judging from the activity we’ve had since the first of the year.”Now that prices are said to be at their lowest, first-time home buyers in the region are expected to move before they begin to rise again.
“Last year, we had a combination of a slow market and a buyer’s market,” said Tom Bruno of Tanager Realty. “With the feeling that prices were dropping, many Realtors didn’t know how to get buyers to buy and sellers to sell.”
Though the “official average” price was up in 2006, Bruno, who has worked in the area for 36 years, said he had a feeling that prices were actually dropping slightly.
With home prices reaching a low point, Bruno also expects this year’s market to experience a surge.
“Days-on-market will start to go down, while prices will either go down for the next couple months or remain stable,” Bruno said. “Prices can be expected to start rising by the end of summer due to increased activity.”
Others have noticed signs of life already this year after a disappointing 2006. Nevada mortgage activity is starting to pick up once more.
“I definitely feel that there’s been a marked improvement since the beginning of the year,” said Ken Cash, mortgage broker/owner of Century 21 Mountain Properties.
Cash, who has worked in Incline Village for 16 years, said the media often influences the public’s attitude. He said more positive predictions in the news should encourage buyers and sellers.
Posted by Jed Moss on Jan 31 2007 under Nevada
Mortgage rates have been edging up for weeks, but Utah residents should not worry about rates escalating further this year, a well-known Utah economist told the Salt Lake Tribune Tuesday.
In fact, rates for 30-year Utah mortgages could ease a bit going into the prime home-buying season of spring and summer - perhaps even falling below 6 percent, said Jeff Thredgold, a Zions Bank consultant.
“Rates [for a 30-year Utah mortgage] could be back as low as the high-5 percent to low-6 percent range by summer,” he said.
Nationally, the average rate for 30-year fixed mortgage rates averaged 6.3 percent at the end of last week, up slightly from 6.2 percent the previous week, according to Freddie Mac. As recently as December, mortgage rates were about 6 percent.
In Utah, the average 30-year home loan rate appears to be slightly higher, with many lenders advertising rates around 6.5 percent.
Many in the Utah housing market are especially concerned with the home mortgage rates these days because of the marked increase in the price of houses over the past two years.
Higher prices have made it more difficult for low- to moderate-income families to buy a house, and put many in the position of risking default, leading to the recent spike in Utah foreclosures. Moderating those increases in home values, however, has been a slight decline in interest rates that began in September 2006.
But in recent weeks, rates on the popular 30-year mortgage have been moving higher, and higher mortgage interest rates mean higher monthly payments.
The monthly payment of principal and interest on a $300,000 home loan at 6 percent, for example, is just under $1,800. The monthly payment on the same amount at 7 percent would be nearly $2,000.
In some cases, families who are barely able to qualify for a home mortgage at 6 percent might not qualify for the same amount at 7 percent.
Jonathon and Tiffany Andrews of Clinton said they have been very concerned about mortgage rates in recent weeks as they have looked for a new house in Roy. And they were relieved to receive a rate lock weeks ago at around 6 percent for a 30-year mortgage.
“Had rates been a bit higher, we definitely would not have been able to afford the house we got,” Jonathon Andrews said.
Even among economists who expect rates to edge up by the end of the year, few are raising the possibility of home loan rates broaching 7 percent, which last occurred in 2002.
In his forecast for 2007, Doug Duncan, chief economist for the Mortgage Bankers Association, said there is a possibility that 30-year home mortgage loans nationally may rise to an average of 6.5 percent by the third quarter of this year. But even that rate is low by historical standards.
Hawaii’s banking commissioner is pushing once again for legislation that would allow the state to tighten the rules for mortgage brokers, who now number more than 5,000.
Nick Griffin, commissioner of the state Division of Financial Institutions, will give testimony today to the House Committee on Consumer Protection and Commerce on legislation that would enhance Hawaii mortgage regulations as the apply to mortgage brokers and solicitors.
A similar effort failed last year after the 400-member Hawaii Association of Mortgage Brokers asked state lawmakers to delay action on the bill for at least a year.
Among other things, the legislation would require a mortgage broker to be tested and would hold them responsible for the conduct of their solicitors and loan originators.
Regulators see the change as helping to better protect borrowers in the Hawaii housing market from potentially abusive practices in the industry, which is one of the state’s fastest growing.
“We’re running at the same things again - prelicensing and background checks to make sure people in the industry qualify and past muster,” Griffin said.
New home loan guidelines are being pushed by the federal government and by many individual states. In addition, many such as Hawaii are trying to tighten the reins on brokers and lenders.
A surge in bad credit home loan lending - in which borrowers with suspect credit are issued loans at low introductory rates, for perhaps more than they can afford - has raised red flags over the past 12 months.
Demand for U.S. home mortgages increased last week as both home purchase loan and mortgage refinance activity picked up, an industry group said on Wednesday.
The Mortgage Bankers Association said, in its seasonally adjusted index of mortgage application activity, that demand rose 3.2 percent to 631.1 in the week ending January 26 after dropping 8.4 percent the previous week.
The index is 0.7 percent higher than a year earlier.
The MBA’s seasonally adjusted purchase index advanced 1.3 percent to 408.0, which was 6.4 percent below its year-ago level. The group’s home purchase loan index is considered a timely reading on U.S. home sales.
The group’s seasonally adjusted refinancing application index grew 4.9 percent to 1,940.2, sending it 11 percent higher than a year earlier.
Four-week moving averages of these three readings, which help smooth out volatile weekly readings, were up 2.2 percent for the market index, 0.1 percent for the home purchase loan purchase index and 4.0 percent for the refinance index, according to the mortgage company’s survey.
Borrowing costs on 30-year fixed-rate mortgages, excluding points, rose 0.07 percent to average 6.29 percent. The going rate was up just slightly from 6.20 percent a year earlier.
The share of applications meant exclusively for the purposes of home mortgage refinancing slipped to 47.4 percent from 47.8 percent a week earlier.
The share of adjustable-rate mortgages climbed to 21.4 percent from 20.3 percent. While fixed rates rose, adjustable mortgage rates headed lower. Rates on one-year ARMs, for example, dipped to 5.86 percent from 5.91 percent.
The MBA’s survey covers about 50 percent of all U.S. retail residential home loan providers. Respondents include mortgage banks, commercial banks and thrifts.
If you’ve been waiting for the most affordable time to apply for a mortgage loan, consider the following information:
Housing prices fell in nearly every major U.S. market in November, though some Northwest markets are bucking the trend, according to the latest numbers from Case Shiller Weiss.
For example:
- Boston housing market prices have swooned by 5 percent for the 12 months through November
- Detroit dropped by 4.5 percent
- Of 20 major cities tracked, all but three showed declines in November and seven recorded 12-month losses
Northwest cities have best weathered the storm with Seattle showing a year-over-year increase of 13 percent and those seeking an Oregon mortgage in Portland facing a gain of 11.6 percent. In November, Miami led all other markets with growth of 7.4 percent.
Case Shiller’s 20-city composite index, which also includes Chicago, New York, and San Diego, dropped 0.4 percent in November, after inching down 0.2 percent in October. For the 12 months, the index was up 1.7 percent, a far cry from its performance in 2005, when the index gained 15.7 percent.
“Country-wide, home price declines appear to show no signs of slowing down,” said Robert Shiller, chief economist at MacroMarkets LLC, in a release. “But while the downward trend is visible on a national level, it is clear that certain cities, like Boston and Detroit, have been more susceptible to the price correction.”
Some of the smart money is betting that the decline will continue. Assuming this is the case, power in negotiations with sellers shifted significantly to home mortgage loan applicants.
The derivatives may, however, exaggerate the market’s pessimism. According to Shiller, not only are the futures too thinly traded still to be a very accurate guide to market sentiment but there is also a risk premium to be taken into account.
At this point, more traders are interested in protecting themselves against loss than are interested in buying into a growing market. That imbalance drives down the prices of the futures.
Countrywide, the biggest U.S. mortgage lender, reports that fourth-quarter profit fell 2.7 percent and that weaker home sales will limit this year’s earnings as well.
According to Bloomberg.com, the California-based company forecasts its 2007 earnings around $3.80-4.80 a share, compared with $4.30 for 2006.
Change is definitely in the air as Countrywide Mortgage issued 9 percent fewer home loans during the fourth quarter as applications tied to home purchases dropped industrywide to a three-year low.
CEO Angelo Mozilo cut more than 900 jobs as part of an effort to trim $500 million in annual expenses. Now Countrywide is talking with Bank of America about forming a joint mortgage company, a person with knowledge of the matter said last week.
“Looking ahead to 2007, the industry will likely see continued pressure on margins as loan origination volumes decline and industry capacity is rationalized,” Mozilo said in a statement. “We are also preparing for increased borrower delinquency and continued credit deterioration.”
Analysts predicted the home mortgage company would earn $1.04 a share in the fourth quarter, according to the Bloomberg survey. For all of 2006, profit improved 5.8 percent to a record $2.67 billion as revenue rose 14 percent to $11.4 billion.
“Countrywide is a reflection of the overall home mortgage market,” according to Frederick Cannon, an analyst at Keefe Bruyette & Woods, who called the 2007 forecast a cautious outlook. “The company stayed up longer than expected, but 2007 certainly has its challenges.”
The company said in its preliminary monthly reports it funded about $122 billion of mortgage loans during the three-month span, 9 percent less than a year earlier. Sales of previously owned homes fell 0.8 percent for the month of December, capping their biggest annual slump since 1989.
Mozilo said in today’s statement that 2007 will likely be the bottom of the housing market cycle and predicted improvement in 2008. In October, he said that the housing market already had a hard landing and that it will likely tread water in 2007 as bad credit mortgage lenders close or combine.
Profit from mortgage banking climbed to $453 million from $434 million a year earlier. Countrywide earned $1.26 billion from selling home loans to investors, 44 percent more than a year earlier. The company’s profit margin doubled from selling sub-prime (or bad credit home loans) that it made to borrowers with blemished credit records.
“That figure really jumped out at us,” said Cannon, who rates Countrywide shares as underperforming this year. “That’s a bit of a surprise because at other companies we’ve seen some weakness in that margin.”
Michigan might be in a one-state recession, but according to the Grand Rapids Press, at least one economist insists better days are coming.
“We are not sad sacks,” Dana Johnson told the Economic Club of Grand Rapids’ meeting at Amway Grand Plaza Hotel on Monday.
“We have to grit our teeth, we have to get through the first half of the year… but I think we’re less than 12 months away from the bottoming out of the Michigan economy,” said Johnson, a Senior V.P. and Chief Economist at Comerica Inc.
His economic forecast for 2007 was met with some skepticism from the crowd, many of whom are worried about Michigan mortgage problems taking over the state, during the Q&A period and after his talk.
But he remains upbeat.
“People are really down in the mouth in Michigan, and I think one of my key messages that I wanted to impress is that we shouldn’t be as down in the mouth as we are,” he said.
The announcement last week by Pfizer that it would cut 2,400 research and development jobs in Kalamazoo and Ann Arbor was not only a blow to the state’s morale, but to the Michigan housing market.
This was especially true because the jobs in question were in the life-sciences sector, which has appeared to be on the rise.
“Those 2,500 jobs at Pfizer represent 0.06 percent of the jobs in Michigan. If Michigan were growing in a healthy fashion, we wouldn’t be much concerned about what’s going on at Pfizer,” Johnson said.
Loss of market share by the Big Three automakers General Motors, Ford and DaimlerChrysler further hurt their balance sheets, leaving Michigan in recession and staring down myriad foreclosure problems.
Meanwhile, the rest of the country is recovering - at least in everything but the housing market.
“What happens when you destroy jobs and income, you also destroy housing values. You create this fear; people don’t buy new houses,” he said.
While the auto industry buyouts and reductions in salaried work force will hurt, they front-loaded the pain and after those cuts the state will start to recover, he said.
“Only one out of 20 jobs in Michigan is in auto and auto-parts manufacturing,” Johnson said.
Johnson said Internet search engine firm Google’s announcement to create 1,000 jobs in Ann Arbor is typical of the kind of knowledge-based work that will improve the state’s future.
Such companies soon will realize the state makes for cheaper operations than San Jose, Calif., because the cost of living is lower in Michigan, while California mortgage loan costs are exorbitant.
Wondergem Consulting President Tim Wondergem asked Johnson if the state can be competitive with a pool of displaced manufacturing workers.
Johnson replied workers are smart enough to see the changes coming and will adapt, pointing to retraining being among ways they can do that.
“I’m still not convinced … that Michigan has found the right systemic strategy to identify how to leverage everything it’s got left behind, to the benefit of playing in the new economy,” Wondergem said.
James Conner, West Michigan regional manager for Granger Construction Co., said while his commercial construction business is doing well, his colleagues in residential construction are hurting.
“I like his optimism,” he said. “I wish it was a little more contagious.”
Posted by Richard Barber on Jan 31 2007 under Michigan
Permits for residential remodeling hit a three-year high in 2006, according to BuildEx, according to the Community Press, which cites the Home Builders Association of Northern Kentucky’s permit tracking service.
A surge in home improvement loan activity helped spark a total of 1,197 permits for home remodeling projects were issued last year in the region, for a dollar volume of $37.6 million.
In 2006, Boone County issued 444 permits, followed by Kenton County with 415 permits, Campbell County with a total of 265 permits and Grant County with 73 permits.
A total of 1,095 permits were issued in the Northern Kentucky housing market throughout 2005, while 947 permits were issued in 2004.
Last year’s dollar volume of $37.6 million was 43.5 percent higher than the dollar volume of $26.2 million registered in 2005, when Kentucky mortgage demand was at its peak, along with most of the U.S. The total came in 56 percent higher than 2004’s dollar volume of $24.1 million.
Boone County’s 444 remodeling permits last year were off slightly from the 451 issued in 2005. The 415 housing permits issued in Kenton County last year were up dramatically from the 320 issued in 2005. Campbell County’s 264 permits issued in 2005, were only one less than the 265 issued in 2006.
The association attributes the increase in remodeling to a combination of factors, including a growing percent of homeowners who prefer to make changes in their existing space to accommodate a changing lifestyle.
In addition, experts believe a number of homeowners have opted to remodel rather than move, due to the slowdown in existing home sales.
