The waiver on the anti-flipping rule was extended by the Federal Housing Administration (FHA) through the end of 2012, but here are some more details, courtesy of DSNews.com. The new extension 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.
“FHAremains 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 the 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% 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.
Consumer spending tepid
After a strong start on Thanksgiving weekend, a pronounced lull followed, causing retailers to mark down products heavily in the week before Christmas. While final numbers for the season are not in, analysts say they are worried that retailers had to eat into profits to generate high revenues. Consumer spending makes up 70% of the economy, so until it ignites, general growth is likely to be sluggish. Macroeconomic Advisers, a forecasting company, projects growth of around 2% for the first half of this year, down from an estimate of 3.6% in the fourth quarter of 2011 and just 1.8% in the third quarter. For consumers, the reasons for the sluggishness are clear: incomes are essentially flat, job growth is modest, and more than 40% of the new jobs in the last two years have been in low-paying sectors like retail and hospitality. While consumer spending is not “going to collapse,” said Joel Prakken, senior managing director at Macroeconomic Advisers, “there are some headwinds there.”
DSNews.com – broad-based price decline
Data released last week by Standard & Poor’s indicates the fourth quarter of 2011 started with broad-based declines in home
prices. The 20-city composite of S&P’s closely watched
Case-Shiller index was down 1.2% in October versus September, while the 10-city composite reading registered a 1.1% drop. Home prices fell in 19 of the 20 cities covered by the S&P/Case-Shiller index. Phoenix was the only metro area to see a month-over-month increase, with prices there rising 0.3%. David M. Blitzer, chairman of the index committee at S&P Indices, says Atlanta and the Midwest are regions that really stand out in terms of recent relative weakness. He notes that Atlanta was down 5.0% over the month of October, after having fallen by 5.9% in September. Chicago, Cleveland, and Minneapolis – some of the strongest markets during the spring and summer buying season – all saw monthly declines of 1.0% or more in October. On a year-over-year basis, the 10- and 20-city composites posted declines of 3.0% and 3.4%, respectively, when compared to October 2010.
Detroit (+2.5%) and Washington D.C. (+1.3%) were the only two cities to record positive annual returns. Atlanta posted the worst year-over-year result with an 11.7% decline. S&P notes, however, that 14 of the 20 metros and both composite readings recorded improved annual returns when compared to the agency’s previous report. Miami saw no change, while Atlanta, Detroit, Las Vegas, Los Angeles, and Minneapolis saw their annual rates worsen. According to the S&P/Case Shiller index, the crisis low for the 20-city composite was back in March 2011. The 20-city reading in October is about 1.9% above that recent double-dip mark. The index’s 10-city composite hit its crisis low quite earlier in the cycle, in April 2009, S&P says. October’s 10-city assessment is about 2.4% above its relative low.
Shhh – the US is broke, but don’t tell anyone!
The General Accounting Office has released its fiscal 2011 annual report. When companies and governments have bad news to release, they try to release it at the moment when journalists and the public are paying the least amount of attention — thus, hopefully, generating the least possible amount of grumbling and complaints. So it’s no surprise that the GAO released its 2011 report on the Friday before Christmas, possibly the day of the year on which the country was paying the least amount of attention. As you might expect, the GAO’s annual report on the financial condition of the United States contains tons of bad news. The country can print its own money, so it’s not “broke”
in the classic sense of the word (can’t pay its debts, can’t fund its operations). But the country is also clearly on an unsustainable course.
Here are the highlights:
- The US ran a $1.3 trillion budget deficit in 2011, flat with
2010 and the third year in a row of deficits over $1.3 trillion
- The US federal debt load continues to climb as a percentage of GDP and is expected to explode over the next few decades
- The big problem in our current and future finances is NOT spending on Defense, Education, the Environment, and the other government programs that Democrats and Republicans love to fight about.
The big problem in our budget is a combination of:
- Taxes that are currently off their peak as a percentage of GDP
- Future unfunded commitments to Medicare and Social Security
To be perfectly clear: The amount of the “unfunded liability” for our Social Insurance programs (Medicare and Social Security) is now $34 Trillion. This is an increase of $3 Trillion from last year. This number has increased at about $1.7 Trillion per year for the past 10 years. If not for some absurd assumptions about how Congress is going to eventually chop the cost of Medicare (the so-called “doc-fix” that pays doctors more for Medicare procedures that Congress passes every year), the liability would be $46 Trillion. So, what’s the implication and solution? Over the long haul, the intelligent solution is a combination of modestly higher taxes and reductions in Medicare and Social Security benefits. The other option is bankruptcy.
Miami-Dade sales up 25%
Pending home sales in Miami-Dade County jumped 25% in November from a year earlier, the Miami Association of Realtors said
Tuesday. The number of listings hit 3,348, up from 2,598 a year ago, the trade group said. Single-family home and condo sales pending during the month jumped 43% and 14%, respectively, over their November 2010 levels. “Miami pending home sales have consistently increased over the past couple of years,” said Jack Levine, 2011 chairman of the Miami Association of Realtors. “We continue to see increasing pending sales, which points to increased future closed sales, price appreciation, and market strengthening.” The pending sales home index nationally increased 7.3% to 101.1 during the same month, showing a greater deal of confidence from an level of 83.3 a year earlier, the report said.
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