Home mortgage originations will shrink by up to 20 percent and the economy as a whole clipped by 1.1 percent over the next three years if federal regulators proceed with their proposed qualified mortgage (QM) and qualified residential mortgage (QRM) rules, and international regulators proceed with implementation of international capital standards under Basel III.
That’s the assessment of analysts with American Action Forum, a public policy institute. The analysts say QM, QRM, and the Basel III standards, if implemented in their current form, would effectively lock in the extremely tight credit standards lenders have put in place since the mortgage crisis.
“One way to think about the impact . . . is that the rules essentially make permanent current credit conditions in which originators have independently scaled back activity in response to the legal and reputational costs associated with GSE [Fannie and Freddie] ‘put-backs’ and the risk thereof,” the analysts say in their October 2012 report, “Regulatory Reform and Housing Finance: Putting the ‘Cost’ Back in Benefit–‐Cost,” released yesterday. Authors are Douglas Holtz-Eakin, Cameron Smith, and Andrew Winkler.
“The bottom line effects of [QM, QRM, and Basel III] may include up to 20 percent fewer loans, resulting in 600,000 fewer home sales,” the analysts say. “In turn, the resulting tightened lending and reduced sales are estimated to cost up to 1,010,000 housing starts, 3.9 million fewer jobs, and a loss of 1.1 percentage points from GDP growth over the next three years.
“Taken as a whole,” the report goes on, “QM, QRM, and B3 [Basel III] will limit the amount and variety of mortgages that banks will hold in portfolio. They will also cause banks to be cautious in how they originate loans for sale to the GSEs [secondary mortgage market companies Fannie Mae and Freddie Mac] and FHA for fear of writing loans that will not be accepted and would then have to be held in portfolio.”
QM, QRM and Basel III are slated to be released in early 2013. Banks have said they’re already locking in their tight credit standards in anticipation of the rules. NAR has taken issue with QM and QRM as proposed, because they would lock in rigid and overly tight down payment and debt-to-income ratios and limiting lenders’ flexibility in providing reasonably priced loans to borrowers with less than stellar credit profiles. QM sets underwriting standards to ensure lenders only make loans to borrowers who have the ability to repay them, and QRM sets additional standards for loans that are securitized for sale to investors. For securitized loans that don’t meet QRM, lenders have to hold back 5 percent of the value of the loans on their books, making them prohibitively expensive for borrowers.
NAR’s forward-looking pending home sales index showed a very small rise in September, just 0.3 percent, but it’s one more data point to suggest the recovery is solidly underway even if it remains modest.
The rise represents the latest in a string of about half a dozen months in which pending sales have moved in a very narrow band, and that’s really what’s most informative about the latest release: it suggests that the underlying factors in the improved market are systemic and not due to just one or two transient factors.
In an interview yesterday, NAR Chief Economist Lawrence Yun said he expects home sales to be 10 percent higher than in 2011 at the end of the year, which would put home sales at close to 5 million, and prices to continue rising. Right now they’re at a median $183,900 on a national basis.
Thanks to slow but steady job growth, the improved market is expected to carry into 2013. “I wish job creation could happen much faster, but nonetheless [there’s been] nearly 5 million job creation and this is supporting the housing market this year and it will continue to support it next year,” he says.
Yun also said rising rents are helping to bring new buyers into the market. He cited NAR’s latest member survey in which 60 percent say they see rents rising in their markets, compared to 10 percent who see rents falling. That rental rate outlook should convert some renters into buyers in the coming months. “It’s a rising trend, and when the rents rise, that means that some of the renters will want to become owners, so there will be additional stimulus for the home sales,” he says.
In the 2-minute video above, Yun talks about the latest pending sales figures. Pending sales are based on contract signings, not transaction closings, so they’re considered a leading indicator—that is, they point to where sales are expected to be 2-3 months down the road.
Chances are, you have heard of the Realtors Property Resource® (RPR) by now. But what is it, exactly, and how can it benefit you?
More than four years ago, the idea of a nationwide online database of comprehensive, high-value property information was conceived from an idea that came out of NAR’s Second Century Ventures (SCV) initiative. A plan was developed and approved by National Association of REALTORS® leadership to provide this as a benefit to members, and a very knowledgeable team was organized to execute the initiative.
During the past couple of years, RPR has partnered with about 440 multiple listing services throughout the United States. With those partnerships, about two-thirds of all REALTORS® are able to access RPR as of mid-October, 2012.
Even with that high level of access, as a member benefit, part of RPR’s core mission is to deliver this technology to all of NAR’s 1,000,000 REALTORS®. This is important because it allows “all members to take advantage of RPR’s high value tools, features and reporting capabilities,” says Dale Ross, CEO of RPR. To that end, RPR has announced that they are making the system available to all REALTORS® on Nov. 1, 2012.
“The RPR team is very excited about the opportunity to bring RPR to markets which have been waiting for access to the system,” adds Jeff Young, RPR senior vice president of operations. “We’ve been telling members for months that the wait is almost over.”
So what can RPR do for REALTORS®? Here are just three advantages it can provide:
1. Generate data-rich reports: RPR collects loads of data on individual properties and their surrounding communities. You can use the system to generate custom reports that can include as much of this information as your clients want. “I have never heard of any buyers and sellers who do not like the reports,” Ross says.
2. Connect with younger consumers: Homebuyers and sellers from generations X and Y are doing the majority of their property researching online, often before they contact a real estate practitioner. When they do reach out to agents, these consumers expect them to be able to immediately provide even more valuable information on certain homes. With its extensive yet user-friendly database, RPR allows REALTORS® to do just that. “REALTORS® who use RPR will certainly have more information on properties than consumers who do research online,” Ross says.
3. Provide insight into property values: With the fluctuating housing market during the past few years, it is often difficult to get a handle on a home’s value at any given time. But with RPR’s Realtor Valuation Model® (RVM), users of this system will have an authoritative source with which to provide information about property values using tax information, sale history, and comparables and other data sets. “RPR’s RVM offers best-in-class automated valuations which REALTORS® can refine with their local market knowledge to make it even more accurate,” Ross says.
Want to learn more about how RPR can benefit your business? Go to http://blog.narrpr.com/national-launch. Also, be sure to register for a free REALTOR® Magazine webinar, “A Look Ahead: RPR’s Launch to All REALTORS®,” taking place this Thursday, Oct. 25, 2012.
UPDATE: The webinar is now archived. Go here to download or playback the event recording.
The presidential race is a dead heat right now, but former Massachusetts Gov. Mitt Romney has a tougher road ahead, according to Charlie Cook, editor and publisher of the Cook Political Report and a frequent source of election information in major news outlets. The commentator talked about the upcoming election this morning at the Mortgage Bankers Association Conference & Expo in Chicago.
Romney’s performance in the first presidential debate helped close the gap between him and President Barack Obama, Cook said. However, it may not be enough to turn the tide in major battleground states such as Ohio, Virginia, and Florida, which have been saturated with anti-Romney ads since June. Cook noted that the Romney campaign has spent much of the last few months attacking Obama on economic issues at the national level instead of challenging the constant barrages on his record in the private sector in these states.
Consequently, the 2012 presidential election could be one of those rare instances in which the popular vote and Electoral College don’t go in the same direction, Cook explained. He put Romney’s odds at winning the popular vote at “better than even,” but added that Obama only needs to get 33 out of 110 “up for grabs” electoral votes to get to 270 — the amount needed for a victory. “Even if you give Romney North Carolina, Virginia, and Florida, that only gets him to 248 — 22 short of what he needs,” Cook explained.
Still, the dynamics of the presidential race could change over the next couple of weeks, and there are still unknowns, such as how high voter turnout will be among young adults and Latinos.
“In a race this close, everything matters,” Cook said. “We’ve got a photo finish vote coming up. Watch Ohio more than anyplace else.”
Cook also predicted that Republicans would pick up seats in the Senate, but said there were too many extremely tight races across the country to determine if they would win a majority. “I think there’s a fair chance that on the day after the election, we won’t know which party has the majority in the U.S. Senate,” he said.
Many of NAR’s initiatives to help keep REALTORS® at the center of the real estate transaction despite the flood of change that’s surrounded the industry over the years have come from NAR’s strategic planning efforts. NAR’s Second Century Ventures is a great example of the kind of forward-looking thinking that comes out of strategic planning . Second Century Ventures is a venture capital fund whose mission is to harness cutting-edge technology like the lockbox technology from SentriLock and the commercial data technology of Xceligent for the long-term benefit of REALTORS®.
Today, NAR is innovating in the strategic planning process itself. With the goal of tapping the insight of REALTORS® across the country, in small markets and large, NAR earlier this year launched an effort to “crowdsource” the development of its next strategic plan through REThink the Future of Real Estate. With this initiative, NAR’s Strategic Planning Committee will be writing the association’s next long-term plan with the help of as many as 20,000 association members. At workshops across the country, members can share their ideas of where they expect to see their industry in the near- and long-term future and what kinds of tools they think they’ll need to stay successful, even if the landscape looks very different than what it does today.
The first of these workshops have already been held, and more will be held at the 2012 REALTORS® Conference & Expo in Orlando next month. More will be held through the balance of 2012 and into 2013. The workshops are scheduled to wrap up in May. At that point, the Strategic Planning Committee will take everyone’s input from the workshops and use that as raw material for writing its plan.
The result will be for the first time a roadmap for the future that reflects the direct input from a significant share of REALTORS®.
Getting perhaps as many as 20,000 NAR members to participate over the next six months or so will be a challenge. But based on the experience of NAR members who’ve participated in the workshops so far, participation is time well spent. Participants say the workshops are stimulating and thought-provoking and have changed the way they think about and plan for the future in their own business. That in itself has been worth the couple of hours they invested in the process, they say.
If you’re interested in participating , you can see if there’s a workshop planned in your area by looking under the “Events” tab at the initiative’s website, www.REThinkFuture.com. If you don’t see one in or near your area, you can check with your local association to see if its planning to host one. If it’s not, you might suggest it consider doing so. Shortly, you’ll be able to participate entirely online, separate from the local workshops. Look for that option at www.REThinkFuture.com shortly after the 2012 REALTORS® Conference in November.
You can get a look at how the REThink initiative works, and see the different ways the future is discussed at the workshops, in the 5-minute video above.
Home sales dropped a bit over the last month but they remain strong compared to this time last year and price gains remain robust.
NAR Chief Economist Lawrence Yun released NAR’s September 2012 existing-home sales figures on Friday last week, and they’re down 1.7 percent from August figures, to an annual sales pace of 4.75 million units. That’s still 11 percent above where they were last year, suggesting that the long-term upward trend continues.
The upward trend of prices continues as well. The median price, at $183,900, is up a strong 11.3 percent from year-ago levels. Part of that increase stems from the mix of houses being sold today. We’re seeing fewer distressed sales as a percentage of the market, and prices are reflecting that more favorable mix. But Yun said on Friday that the increase is also reflective of genuine price appreciation. Indices that look at price changes of the same assets over time, like Case-Shiller and the Federal Housing Finance Agency price index, are showing similar price increases. So, the gains aren’t just from a change in the mix of homes being sold; they’re also from asset appreciation, Yun said.
Two other notable data points from Friday’s release:
1. Inventory is dropping, so you can expect upward price pressure to continue. The supply of homes available for sale is now at 5.9 months, the first time in a number of years the number has dropped below 6 months. Total inventory stands at 2.32 million units.
2. Time on market has dropped to a median 70 days, with roughly a third of all sales closing in 30 days or so. At this time last year, the median time on market was more than 100 days, so the trend is positive.
You can learn more in the 5-minute video from Yun’s press conference above.
Access NAR’s news release on the latest figures.
Foreclosures, minimum wage, and Generation Y were among the varied issues discussed at last week’s Workforce Housing Forum. 
But the theme of REALTOR® advocacy for affordable housing for working Americans permeated nearly every speech, panel, and breakout session.
Every meeting room, hall, and ballroom at this National Association of REALTORS® event echoed the call to real estate professionals in attendance: We need your voice.
NAR President Moe Veissi started the day’s events acknowledging that, while REALTORS® understand the value of the American Dream, they need to communicate it in different ways.
“There’s another part of this that we don’t pronounce as much as we should,” Veissi said. “You’ve got to tell them that there’s more than an economic benefit to owning a home… the people who live in that home are healthier.”
Illinois Housing Development Authority Executive Director Mary Kenney encouraged forum attendees to help shift the way the public discusses new housing solutions for the nation’s workers.
“Together, we are changing the dialogue from affordable housing to maintaining a competitive workforce,” she said. “We need to work together to help educate our legislators about the needs of our communities.” Continue reading »
There’s a dark secret lurking in the throats of the National Association of REALTORS® employees. I personally uncovered this closet skeleton on a reconnaissance mission in the Chicago Association of REALTORS®’ professional development wing.
I walked up to the desk and announced that I was reporting for duty to cover the Certified International Property Specialist (CIPS) class. Except here’s how I said it:
Meg White: Hi! I’m from REALTOR® Magazine, here for the “sips” class.
Patsy Smith Wyant: Oh great; we’re so glad to have you! Except it’s C-I-P-S.
Meg: Really? Not “sips”?
Patsy: Yep! It’s C. I. P. S. [flashing hugely welcoming, forgiving smile]
Meg: [blushing] Oh geez. I’ve never heard anyone at NAR pronounce it like that. I’m sorry.
Patsy: No problem! Happens all the time, really. David [Wyant, Patsy’s partner and the instructor for my class] always jokes, “It’s not a drink that you sip!” And, you know, people don’t talk about being a “gry” [GRI, Graduate, REALTOR® Institute] or a “cree” [CRE, Counselor of Real Estate].
Meg: Makes total sense, now that you mention it. But I imagine hearing “sips” all the time would have the same effect as it does when the rest of us down at 430 N. Michigan hear “real-it-or” or “nahr.”
Patsy: Haha, yeah. It is kind of like that!
So, as you can see, I started at the absolute bottom when it came to the knowledge required to become a certified international property specialist. With that baseline set, let me share a few other items I learned from the globetrotting Wyants during Global Real Estate: Transaction Tools. While some of these information nuggets won’t be a huge surprise to global experts out there, there were others that had the whole class in disbelief, saying, “Really?”
Q: Do you need a social security card to purchase property in the U.S? Continue reading »
Miami is known for its colorful vibrancy, but 23,000 vacant condos put a dark cloud over the south Florida market at its peak inventory in 2008. Do you know what happened? They’ve all sold — largely due to the purchasing power of international investors.
As foreign buyers’ interest in U.S. real estate continues to surge, REALTORS® are seizing this opportunity and arming themselves with education.
CIPS course at the Chicago Association of REALTORS®
A window into this trend could be seen in Chicago this week as about 20 REALTOR® students, some who traveled from several states away, attended the Certified International Property Specialist (CIPS) course at the Chicago Association of REALTORS®. I had the pleasure of sitting in on the first day as instructor David Wyant of Wyant Realty and Across Borders School of Real Estate in Ormond Beach, Fla., covered local markets. CIPS is a real estate designation that has seen exponential growth, with more than 2,000 recipients and courses taught in 50 countries.
Why are foreign buyers eyeing the U.S. real estate market?
Is it because the value of the dollar has fallen? Yes, the lower dollar value equals deals for foreign buyers. But according to Wyant, that’s one reason among many.
“Investing in real estate is great for individuals and for sovereign nations,” Wyant explained. “Real estate has its ups and downs, but it’s never worth nothing. It’s tangible, it holds its value and it’s around for a long time.”
Of all the countries in the world, the U.S. is still leading the way in providing the most stable and secure real estate investment environment, above Germany, Canada, France, Australia and the UK. Why? The stability of the economy and laws the U.S. has protecting private property rights. “That means a lot if you’ve ever had anything taken away from you,” Wyant said.
The internet has helped quicken globalization. It’s led to the migration of jobs across borders, and as countries evolve and economies diversify or move from farming to industry, creative centers have emerged and trade has expanded. Sunsetting tariffs, 24-hour markets, ease of air travel, and countries specializing in specific industries and trades have all contributed to globalization.
Who’s buying in the U.S.? Continue reading »
Ever since health care reform was enacted into law more than two years ago, rumors have been circulating on the Internet and in e-mails that the law contains a 3.8 percent tax on real estate. NAR quickly released material to show that the tax doesn’t target real estate and will in fact affect very few home sales, because it’s a tax that will only affect high-income households that realize a substantial gain on an asset sale, including on a home sale, once other factors are taken into account. Maybe 2-3 percent of home sellers will be affected.
Nevertheless, the rumors persist and the latest version that’s circulating falsely say NAR is advocating for the tax’s repeal. But while NAR doesn’t support the tax (it was added into the health care law at the last minute and never considered in hearings), it’s not advocating for its repeal at this time.
The characterization of the 3.8 percent tax as a tax on real estate is an example of an Internet rumor, says Heather Elias, NAR’s director of social business media. Elias and Linda Goold, NAR’s director of tax policy, sat down for a discussion of how the tax works and how Internet rumors work and you can find their remarks in the 6-minute video above.
Goold says the tax will affect few home sellers because so many different pieces must fall into place a certain way for the tax to apply. First, any home sale gain (principal residence) must be more than the $250,000-$500,000 capital gains exclusion that’s in effect today. That’s gain, not sales amount, so you really have to reap a substantial amount for the tax to even come into play. Very few people are walking away with a gain of more than half a million dollars today, even in the high-end home market, so right off the bat only a few home sellers would be a candidate for the tax.
For the few households that do see a gain of more than the $250,000-$500,000 exclusion (that’s $250,000 for single filers and $500,000 for joint filers), only the amount above the exclusion would be factored into the tax calculation, and that would still only apply to high-income households, which the law defines as single people earning $200,000 a year and joint filers earning $250,000 a year.
So, if you are a households with annual income of $250,000 or more and you earn a gain of more than $500,000 on your house (again, that’s after the $500,000 exclusion), any amount of gain above the exclusion would be plugged into a formula to see if it’s taxable. If it turns out that it’s taxable, then the amount could be subject to the 3.8 percent tax. If the household had a gain of more than $500,000 but only earned $249,000 a year in income, the tax wouldn’t apply.
(Note that these are just hypothetical examples. To know if a case would really be subject to the tax, a professional tax preparer or tax attorney has to look at all the particulars of the tax filer’s case. Only a tax professional is in a position to say the tax is applicable, but the examples cited here could help you get a sense of how the tax works.)
The other thing about the tax worth noting is that, although it takes effect in 2013, any impact on taxes wouldn’t happen until 2014. That’s because the tax filer would do the calculation in 2014 for the 2013 tax year. Because it’s not a tax on a real estate sale but rather on a capital gain, it’s not calculated at the time of an asset sale, whether that asset is a house or something else. It’s calculated at the time the filer figures his or her tax.
This is all explained clearly in the video, so if you have questions about how the tax works, or if you’re still hearing rumors about the tax and you’re not certain of the accuracy of what you’re hearing, the video should prove helpful.
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