Are we there yet?

Yesterday's New York Times article on housing provides further evidence that the housing market it beginning to recover. You will recall that in my last posting, I also saw signs of recovery in my neighborhood.

Now there is some objective proof being offered: the Case-Schiller Price Index reports that 8 cities including Chicago have shown increases in the price of homes, while 20 major cities are flat-lined. Further, new home sales rose in June. The measure of recovery of the housing market has been established by actual increases in the prices of homes that have sold recently as compared with the prior month or quarter. In many areas of the country, the prices of homes have not declined in the past month or quarter, and this too, is offered as proof of recovery.

In order to keep the housing market market moving, banks and other mortgage lenders are offering loans under 5%! For instance, First Sterling Mortgage in Chicagoland has a 15 year fixed rate of 4.875%, 5/1 ARM's at 4/375% and 7/1 ARM's at 4.625%. $1,000,000 loans require 25% down and $1,500,000 require 30% down.

In addition, the NAR (National Association of Realtors) is lobbying Congress to extend the $8000 first time buyer credit past its' November expiration and also asking that the amount be increased to $15,000. The beginnings of the market recovery are attributed to this credit.

On an individual level, many sellers are offering closing bonuses to buyers and their agents if their home is under contract by a certain date. Many developers are providing upgrades at no extra charge and are underwriting the costs of association dues or closing costs. Motivated sellers are doing what they can to entice buyers to select their home for purchase.

This concerted effort by the Government, business and individuals appear to be working. The Case-Schiller report provides some objective proof that recovery is under way. This good news has been long anticipated. We can finally begin to exhale.

NAR holds first ever summit

The NAR (National Association of Realtors) held their first summit in Washington DC for the purposes of sharing ideas, advocating for certain legislation that will help the housing situation and help the news media get "additional insight". Sounds like they would like to have a hand in spinning the "news".

Here is a summary of some of the more notable items coming out of this summit, which include the current president of the NAR, Charles McMillan, Robert Reich, former U.S. Secretary of Labor, Pat Buchanan, Harold Ford Jr (D-Tenn) and others.

There are currently twenty (20) million homes under water....from being behind on mortgage payments to foreclosure. This is 1 in 5 homes in the US. The "reforeclosure" rate is over 50%. Reforeclosures occur when there is refinancing allowed on a property so as to avoid foreclosure.

This problem has been aggravated by stricter requirements on small mortgage banks. The larger banks, such as Wells Fargo and Bank of America have raised the net worth requirements of these smaller mortgage bank/brokers. This makes it extremely difficult for the smaller entities to obtain capital, and lend money. This is a classic "Catch 22" situation.

The smaller financial institutions who had traditionally provided mortgages for home owners, have seen their net worth diminish through foreclosures and the declining value in the homes they have financed. With the increase in capital requirements from the larger banks, these smaller entities are unable to help their clients who are behind in their payments because they are unable to obtain more cash to help with refinancing.

Bank of America and Wells Fargo have received TARP money. Should we as taxpayers provide money to bail out these institutions, who then institute regulations that not only don't provide assistance to us, but have the potential to cause even more homeowners to face foreclosure? What do you think?