In what might finally be a sign that home sales are poised for a turnaround, NAR’s forward-looking pending home sales index jumped 10.4 percent in October from the previous month and is also up significantly on a year-over-year basis. Although it’s too soon to tell whether the gain will be sustained, there are trends berewing in the market that suggest it will be.
For one thing, rental rates are increasing. Historically, there’s typically been a strong correlation between rising rental rates and rising home prices. That relationship has broken down in the past few years because of the severity of the downturn in the housing market. But with rental rates now well into long-term gains, pressure is mounting for renters to jump to home ownership if only because it’s becoming cheaper to buy than to rent in a lot of markets and at a lot of price points. Of course, the hurdles to obtaining financing remain a big stumbling block, and in fact that might be a good part of the reason there’s been so much divergence between NAR’s pending sales index and actual closings.
We’ve been seeing that divergence for the last couple of years. Pending home sales will go up but actual closings won’t follow suit as closely as they have in the past. We can’t know all the reasons for this, but NAR surveys of its members have suggested that agents are seeing a lot of closings collapse because buyers can’t get financing.
In the 4-minute video above, NAR Chief Economist Lawrence Yun talks about the latest pending sales figures and what might be coming down the road, in part because of rising rental rates.
By Robert Freedman, Senior Editor, REALTOR® Magazine
After fighting a transfer tax battle in their state about half a dozen years ago and several local efforts to impose a similar tax more recently, the leadership of the Louisiana REALTORS® Association earlier this year decided to act preemptively and put a stop to any future efforts to tax the transfer of real estate.
“We were able to beat those earlier efforts back, but we could see similar efforts cropping up all across the country,” says Norman Morris, the association’s government affairs director. “So, we decided to be proactive and put together a constitutional amendment that would prevent these efforts from coming up again.”
The association reached out for help through the My REALTOR® Party initiative, the political advocacy program the NAR Board of Directors created earlier this year to help state and local associations fight exactly the kind of battle Louisiana was facing.
“It turned out to be a great partnership,” says Morris. “We really couldn’t have done it without the resources we got through the initiative.”
To tap the financial, technical, and other help that’s made available, the association filled out an application in which it was asked to detail what was happening in the state and what it wanted to do about it. The application was submitted to NAR’s Issue Mobilization Committee for its input and within a short time the association was working with NAR on its campaign.
Morris says just filling out the application was integral to the shape of the campaign because it gave the association a chance to assess its needs and goals realistically and pinpoint the best approach to take.
“It was just a great, very thorough process, and the Issue Mobilization Committee was with us all the way,” he says. “It never wavered for a moment.”
Under the plan, the Louisiana association poured its resources into what it does best — working with its state legislature — while NAR came in later, mainly on the ballot initiative.
“In Louisiana, an initiative can’t go on the ballot until it first passes both chambers of the legislature by a two-thirds vote, so that’s where we concentrated our efforts,” he says. ”Every single lawmaker ended up voting yes. Not a single one voted against it.” Continue reading »
By Robert Freedman, senior editor, REALTOR® Magazine
The affidavit that Freddie Mac requires servicers to obtain in short sales has been changed at NAR’s request to reduce what was seen as an unreasonable amount of liability risk to practitioners. Freddie Mac requires the affidavit to reduce illegal flipping and collusion between buyers and sellers but NAR members said the language held them liable for situations over which they had no control. (See a past blog post.)
Months ago NAR brought these concerns to the company’s attention, and the result is the revisions to its required language.
The biggest change has to do with what’s known as joint and several liability. In essence, this extends to agents liability for false statements made by others involved in the transaction, even if agents know nothing about the statements. To be sure, agents can fight to get the liability removed, but you can imagine the work and headache that’s required to win that argument.
The company made other changes to its language, and the bottom line is, the liability risk now is much more appropriately aligned to practitioners’ role in the transaction.
NAR has since created a resource page with more information on the change. There’s a link to Freddie Mac’s policy and to a bulletin the company put out on the change. There’s also a copy of NAR’s letter expressing its concerns.
In the video above, NAR Managing Director of Regulatory Policy Jeff Lischer talks about the new language and what to do if you’re in a transaction and the servicer is using the old language.
By Robert Freedman, senior editor, REALTOR® Magazine
The first thing to note about the congressional super committee’s failure to agree to deficit cuts is that MID is spared for the time-being. Among the deals the members of the deficit-cutting committee looked at was a change to itemized deductions, including the mortgage interest deduction. That change was rejected, and in any case no broader deal was worked out. So, MID is off the table for the moment. But it’s worth noting that it was one of the few big-ticket items that got a serious look, which suggests that it will remain a target into the foreseeable future.
What happens next? According to NAR Tax Director Linda Goold, unless Congress passes legislation to change things, some $1.2 trillion in federal programs will be automatically cut in 2013. If that happens, communities in which defense bases and other defense resources play a big role will be hit hard, because defense is slated to take the biggest cut of all. That means bases could be scaled back, and if that happens, the communities in which those bases are housed will see reduced demand for home sales and rentals.
HUD programs will be cut, too. That will mainly hit rental subsidy programs, but it will also hit community development block grants (CDBG) and HOME Investment Partnership grants, which provide grants to communities for affordable housing.
Of course, the broader impact is what all this is doing to our economy. Long-term rates are expected to remain low, if only because the Federal Reserve has said it intends to keep them low. But could the U.S. see another cut in its credit rating? At what point will investors, including foreign investors, start reducing their Treasury purchases?
Plus, there are some wildcards: some estate tax laws are expiring in 2012, as are the tax cuts that were put into place by President George W. Bush in 2001. And in 2013 the deficit ceiling will have to be raised again. What all this means is that we’re looking at another year of deficit-cutting debates in Congress.
NAR Tax Director Linda Goold looks at what we can expect as a result of the super committee’s lack of agreement in the five-minute video above.
The U.S. House and Senate yesterday restored FHA loan limits to the level they were at before they were allowed to expire at the end of September. As a result, the limits will rise to 125 percent of the area median home price from 115 Percent, up to a maximum $729,750, from $625,500. NAR estimates that several hundred counties where FHA loan limits fell at the end of September will now rise back up to the previous level.
“The reinstated loan limits will help provide much needed liquidity and stability to communities nationwide as tight credit restrictions continue to prevent some qualified buyers from becoming home owners and the housing market recovery remains fragile,” said NAR President Moe Veissi in a statement released last night.
President Obama is expected to sign the legislation shortly. The restored loan limits are in a broad-based bill that includes funding for a wide variety of federal operations and programs.
The maximum conforming loan limits for secondary mortgage market companies Fannie Mae and Freddie Mac also expired at the end of September, but lawmakers did not include a restoration of those limits in the bill. As a result, conforming loan limits will remain at 115 percent of the area median home price, up to $625,500.
Once President Obama signs the bill, the limits will go into effect. FHA will release a mortgagee letter to its approved lenders shortly. The mortgagee letter will contain a list that’s been updated to reflect the new limits. NAR analysts say it will take the agency a short period to update its database and release the mortgagee letter, maybe a couple of weeks.
The funding bill also extends the National Flood Insurance Program (NFIP) until December 16 to allow lawmakers time to consider long-term authorization of that program, which is an NAR priority.
By Erica Christoffer, multimedia Web producer, REALTOR® Magazine
It was a truly a “small world after all” in Anaheim Thursday night. More than 300 representatives from 30 countries gathered for the International Welcome Reception during the REALTORS® Conference & Expo.
Annemieke Cronje of Annemieke Properties in Kmysha, Garden Root, South Africa, was one of nearly 100 South Africans in attendance. “We want to see what the rest of the world is doing, network, and form a community,” she said. “We want to learn how we can help each other in this economy.”
Sponsored by Century 21, the event highlighted ways NAR is expanding its global reach through several new initiatives. A new global site, www.REALTOR.com/International, launched on Nov. 3. Friday was also “Global Day” during the conference, framed with educational sessions on working with international clients. The nearly 1,200 international attendees were able to enjoy sessions via translation headsets in French, Japanese, Portuguese, Chinese and Spanish.
Today, NAR is recognizing the 313 new Certified International Property Specialists awarded their designation this year. CIPS has grown to include nearly 2,500 designees and candidates worldwide.
“More than a quarter of REALTORS® had international clients this year and we are seeing more and more enter the global real estate field,” said NAR President Ron Phipps. “To help REALTORS® diversify their clientele, NAR has built a truly global neighborhood with over 80 bilateral agreements and affiliations with nearly 60 countries.”