News Flash: On May 24, the Supreme Court decided in favor of NAR’s position on the Quicken case (discussed in this April 30 post). Here’s a link to the decision. Guidance from NAR will be forthcoming soon.
Earlier this month, the magazine hosted a webinar with two NAR attorneys—Ralph Holmen and Finley Maxson—in which we examined six cases (including one still pending) and their potential impact on your business. Some of you have said you’d like to see a written summary rather than listen to the 60-minute session. Fair enough! Because the cases are complex, however, I’ll cover one at a time.
Here’s a look at the first case, plus additional commentary and resources. The usual warning applies: Brokers and salespeople who have questions about how or whether these laws or cases apply to their situation should seek the counsel of a qualified attorney.
Issue: Does the RESPA prohibition on unearned fees apply to transaction fees?
The Law: One year before the Home Mortgage Disclosure Act, three years before the Community Reinvestment Act, and 38 years before the Consumer Financial Protection Bureau, there was RESPA. RESPA—the Real Estate Settlement Procedures Act—was passed in 1974 to prevent kickbacks in the provision of settlement services, and it has been a source of angst and debate among real estate, title, and mortgage professionals ever since. One contentious provision, Sec. 8(b), prohibits settlement service providers from imposing so called “unearned fees” on borrowers. Seems simple enough. Not really.
The Case: We looked at Freeman v. Quicken Loans, in which a group of Louisiana borrowers, led by Tammy Foret Freeman, charged Quicken with violating RESPA’s prohibition on unearned fees. Quicken argued that the fee in question, discount points paid to reduce the mortgage interest rate, was standard practice across the industry. Quicken prevailed in District Court and the Federal Circuit Court of Appeals, but the plaintiffs appealed to the U.S. Supreme Court.
The Wall Street Journal today says the housing market nationally is bottoming out, the essential first step before it can start rising again. But the Journal is a little pessimistic that the upward bounce is coming any time soon. It says the market could drag along the bottom for a while, thanks in part to the uncertainty over how banks’ “shadow inventory” will be handled over the next few years and the continuing trouble borrowers are facing getting financing.
“There are more signs than there were a year ago that housing isn’t getting any worse,” the paper says, “and that it may slowly be getting better.”
But how slowly? The Journal says prices nationally are still falling. It cites February data from CoreLogic that prices fell 2 percent from a year earlier. Recent Case-Shiller data also show prices continuing to fall. NAR data, which draws directly from MLS data, differs from these two data sets. In February it showed prices with a slight, 0.3 percent gain, and in March with a more substantial 2.5 percent gain. These figures take into account distressed sales, which comprise about a third of all existing-home sales today and have a dampening effect on prices, so price gains would be higher if these sales were taken out of the data.
Time will tell which data set is more accurate. Several months will need to go by before we can look back and see what’s actually happening today with prices, but in any case, NAR Chief Economist Lawrence Yun is optimistic about what the market will look like later this year.
First, distressed homes are getting snapped up by bargain hunters, both investors and owner -occupants. That softens the impact that banks’ shadow inventory will have on markets in the months ahead as more properties are released. Second, inventory levels are down to six months, which historically has been the level at which prices stabilize.
To be sure, inventories have been down to six months only for a short amount of time, so it’s too soon to say there’s a trend here. But if inventories stay down at this level for several more months, the stage could be set for better news on prices.
One point made by the Journal that is certainly the case is the continuing trouble borrowers are having getting loans. As the paper says, banks are maintaining tight credit standards in part because of their concerns that Fannie Mae and other secondary market entities will make them buy back any loans that go bad. So, their standards are ratcheted up, and that’s causing even creditworthy borrowers headaches.
It’s safe to say that, until the difficulty of getting financing eases back to a more normal level, even today’s brightening picture can’t be taken for granted, and the Journal’s concerns about a prolonged stay at the bottom could prove true.
By Wendy Cole, Managing Editor, REALTOR® Magazine
Is it an art show or an open house? Brett Bender, a sales associate with Prudential Fox and Roach in Philadelphia, has decided that his listing for a 4,000 sq ft. single-family home in the City of Brotherly Love can do double-duty. Bender, who is also an artist, is taking advantage of the big marketing push behind the REALTOR® Nationwide Open House this weekend, April 28 and 29, to “stage the walls” of the unfurnished home with dozens of his journal drawings and paintings. He’s using Facebook to spread the word about the art reception he’s holding in the house on Sunday, and hopes the event will generate buzz for both the property and his evocative creative work.
REALTORS® and real estate associations across the country and worldwide hold thousands of open houses in their communities as part of the event, which is intended to give a boost to the spring buying season. Practitioners should keep in mind that nearly half of all home buyers visit open houses during their home search, according to the 2011 Profile of Home Buyers and Sellers survey conducted by the National Association of REALTORS®. And the extra atttention this weekend, along with record home affordability, could well bring a notable foot traffic boost to homes on the market.
What other distinctive ideas are you incorporating into open houses this weekend?
Existing-home sales last month were down slightly but they remain at about a 4.6 million level, as they have since January, so if that level holds for the remainder of the year we could see a strong 2012, NAR Chief Economist Lawrence Yun said at a press conference in Washington today.
The relatively strong performance this first quarter stems from the improving economy, Yun said. But it also has to do with the pent-up demand that’s been building for the last several years. At some point, people doubling up or living with parents will start forming households, as they always do when the population increases, and many of these households will buy. Yun thinks we’re seeing signs of this now.
Along with the relatively high level of sales, inventories are down, which helps on prices, and that’s reflected in the numbers. The national median home price is up more than 2 percent from last year.
It’s possible larger homes are being sold (normal for this time of year), so that could account for some of the price increase. But also distressed sales as a percentage of the market are starting to decline. So, that could be having an impact on prices, too.
All in all, despite the slight dip in volume, the picture looks relatively good going into the spring buying season.
By Brian Summerfield, Online Editor, REALTOR® Magazine
During the early 20th Century, economist Joseph Schumpeter popularized the concept of “creative destruction,” which refers to the upheaval of old processes and technologies and their replacement by more innovative ones. The difference between Schumpeter’s time and our own as far as creative destruction goes is speed.
Today, disruption is all around us, constantly. A major, game-changing product or service can move into obsolescence in mere months, as Marc Davison of 1000Watt Consulting pointed out in his presentation at the RE Tech South (RETSO) conference this afternoon.
Technology is typically a catalyst for disruption, but it’s not the only factor. In real estate, changes in consumer habits and preferences have given rise to “smart customers,” who do much of the research into how to buy or sell a home and properties on the market before contacting a real estate agent. Consequently, real estate professionals today are often contacted much later in the process than in years past.
“Where you are in the transaction, how you’re paid, and how you’re found is going to change dramatically,” Davison said. He added that practitioners can choose to be upset about this, or they can respond by recognizing these changes and shifting their priorities and skills accordingly.
The winners in business now and in the future will have a built-in disruption mentality, meaning they’ll stay on top of trends and adjust quickly instead of waiting too late to react to critical changes in their field. Davison offered Apple, a company that goes so far as to disrupt its own products, as an example of this.
Here are Davison’s 10 tips for forging a disruptive mindset: Continue reading »