Washington, July 23, 2009

Existing-home sales rose for the third consecutive month with inventory easing and home prices declining less sharply in June, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 3.6 percent to a seasonally adjusted annual rate¹ of 4.89 million units in June from a downwardly revised pace of 4.72 million in May, but are 0.2 percent lower than the 4.90 million-unit level in June 2008.

Lawrence Yun, NAR chief economist, is hopeful about the gain. “The increase in existing-home sales occurred in all major regions of the country,” he said. “We expect a gradual uptrend in sales to continue due to tax credit incentives and historically high affordability conditions. Despite the rise in closed transactions, many Realtors® are reporting lost sales as a result of new appraisal standards that went into effect May 1 of this year.”

A June survey of NAR members shows 37 percent experienced at least one lost sale as a result of the new Home Valuation Code of Conduct, with seven out of 10 reporting an increased use of out-of-area appraisers. Seventy percent of NAR appraiser members said consumers were paying higher fees, while 85 percent report a perceived reduction in appraisal quality.

“Clearly the process needs to be revised, but the most logical approach is to use appraisers with local expertise, industry designations and access to local data, who make a physical examination of the property and use apples-to-apples comparisons with nearby home sales,” Yun said. “In many cases, normal homes are being compared with distressed homes sold at a discount, which often are in subpar condition – this is causing real harm to both buyers and sellers.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 5.42 percent in June from 4.86 percent in May; the rate was 6.32 percent in June 2008. Mortgage interest rates have trended lower in recent weeks.

Total housing inventory at the end of June fell 0.7 percent to 3.82 million existing homes available for sale, which represents a 9.4-month supply² at the current sales pace, down from a 9.8-month supply in May. Raw inventory totals are 14.9 percent below a year ago.

“This is another hopeful sign – if we can keep the volume of sales above the level of new inventory, prices could stabilize in many areas around the end of the year,” Yun said.

An NAR practitioner survey in June showed first-time buyers accounted for 29 percent of transactions, unchanged from May, and that the number of buyers looking at homes is up nearly 12 percentage points from June 2008.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said there are very good opportunities. “Despite some of the challenges, the housing market continues to demonstrate signs of recovery,” he said. “The temporary first-time buyer tax credit is clearly helping people make a decision and is contributing to the overall stimulus impact, but since it’s taking longer to close transactions, many would-be beneficiaries may not be able to take advantage of the credit before the December 1 expiration date. As a consequence, consumers need the expertise of Realtors® more than ever to navigate both the obstacles and opportunities in today’s market.”

The national median existing-home price³ for all housing types was $181,800 in June, which is 15.4 percent below June 2008. Distressed properties, which accounted for 31 percent of sales in June, continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes.

Single-family home sales rose 2.4 percent to a seasonally adjusted annual rate of 4.32 million in June from a level of 4.22 million in May, and are 0.2 percent higher than the 4.31 million-unit pace a year ago. The median existing single-family home price was $181,600 in June, which is 15.0 percent below June 2008.

Existing condominium and co-op sales jumped 14.0 percent to a seasonally adjusted annual rate of 570,000 units in June from 500,000 in May, but are 3.1 percent below the 588,000-unit level in June 2008. The median existing condo price⁴ was $183,300 in June, down 18.9 percent from a year ago.

Regionally, existing-home sales in the Northeast rose 2.5 percent to an annual pace of 820,000 in June, but are 4.7 percent below a year ago. The median price in the Northeast was $249,400, down 5.9 percent from June 2008.

Existing-home sales in the Midwest increased 0.9 percent in June to a level of 1.10 million but are 1.8 percent lower than June 2008. The median price in the Midwest was $157,000, which is 9.1 percent below a year ago.

In the South, existing-home sales rose 4.0 percent to an annual pace of 1.81 million in June but are 3.7 percent below a year ago. The median price in the South was $163,200, down 11.9 percent from June 2008.

Existing-home sales in the West improved by 6.4 percent to an annual rate of 1.16 million in June, and are 11.5 percent higher than June 2008. The median price in the West was $214,800, which is 24.9 percent below a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

# # #

NOTE: Any references to performance in states or metro areas are from unpublished raw data used to analyze regional trends; please contact your local association of Realtors® for more information.

¹The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 to 90 percent of total home sales, are based on a much larger sample – more than 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

²Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982.

³The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.

⁴Because there is a concentration of condos in high-cost metro areas, the national median condo price generally is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.

Existing-home sales for July will be released August 21. The next Pending Home Sales Index & Forecast is scheduled for August 4; release times are 10 a.m. EDT.

Information about NAR is available at www.realtor.org. This and other news releases are posted in the News Media section. Statistical data in this release, other tables and surveys also may be found by clicking on Research.

When applying for a mortgage, most homebuyers can document their incomes by providing evidence of a steady paycheck, tax returns, W-2’s, and bank statements, but many home buyers don’t draw a steady paycheck from a full-time employer. Some own businesses, some make infrequent commissions, others live off investments or even obtain their income from criminal pursuits. There are others, like movie stars or high-profile individuals, who don’t want to provide tax or other income documentation at the risk that the information may end up on the front page of The Enquirer. For individuals like these, limited-documentation mortgages remain a viable option, despite the tightening credit market.

Low documentation mortgages are called "low-doc" and "no-doc" due to the amount of documentation loan originators require to obtain an underwriting decision. At a minimum, obtaining such a loan will require an excellent credit score, an appraisal, and a significant downpayment. More often than not, you will need to provide paperwork such as tax returns and/or profit-and-loss statements.

There are three main types of low-doc/no-doc mortgages. These types of mortgages usually carry higher (sometimes significantly higher) interest rates than conventional mortgages, often as many as two points, which is essentially a premium that you pay for the ability to purchase without standard documentation and privacy.

Stated-income mortgages. These are for people such as self-employed individuals or those who work on commissions (like real estate agents and loan officers), who work but don't earn a regular salary. These individuals usually make significant incomes but it does not necessarily show up on their bottom line, largely due to the number of tax write-offs they can claim.

These applicants must disclose annual earnings, usually for the last two years and sometimes more. (If the income from various years varies significantly, they are usually averaged.) The buyer will probably have to provide, tax returns, bank statements, and profit-and-loss statements (for businesses) as well. They must also list assets and debts. Lenders look at two ratios: the percentage of income that goes toward the mortgage payment, and the percentage that goes for all debt, including mortgage, credit cards, auto loans and other loans.

The interest rates will vary depending on the amount of down payment, credit scores, and other factors, but they generally run as much as a point above conventional rates.

No Ratio Loans. These loans are usually obtained by wealthy people and retirees who live off investments. The buyer doesn't declare income. No pay stubs, no W2s, no tax returns. No nothing. Because this documentation isn’t provided, the lender can’t compute a debt-to-income ratio. The borrower does, however, provide a list of assets -- money in the bank, stocks and bonds, real estate, business ownership.

The interest rate for a no-ratio mortgage could go as much as 3 points higher than a conventional mortgage, depending on credit score, size of down payment, and the property appraisal.

No-doc or NINA (no income/no asset verification). These mortgages require the least documentation and are for creditworthy people who want maximum privacy and can afford to pay up to a 3 point premium to receive get it. They are for people who can afford to pay people to take care of their finances. The buyer might provide their name, Social Security number, the amount of the down payment, and property address--and that’s pretty much it. (Oh, to have that life!) The lender will only pull their most excellent credit report and order a property appraisal.

Programs vary from lender-to-lender, so please contact your mortgage professional for more information.

So you want to buy a house do you? Most of my time in the industry was spent refinancing sub, or non prime clients. The information contained in the following article is applicable for both refinancing and purchases; prime or non prime.

While there are many tips one can give to someone shopping for a mortgage, there is one that most people will agree on. Trust. You have to find someone you can trust. While that seems simple enough it is not an easy thing to do; trusting a complete stranger. If in writing this article I can get you to focus on the individual rather than the company, then I can call this a success. Does that mean it makes no difference what company you work with? Not at all, but a bad loan officer can virtually guarantee your loan getting turned down no matter how great the company he works for is.

Some people will only feel comfortable working with a local broker who they can drop in on during the processing of their loan. Others don't feel that is important as long as they can pick up a phone and call their Mortgage consultant.

I began my tenure in the financial services industry as a stockbroker and for the longest time it amazed me that I could pick up the phone, talk to someone three thousand miles away, and they would open an account and drop fifty thousand dollars for an investment idea. Many times this happened on the first call. I believe in that instance, you have a person who trusts the system and believes in how it works. Most do not think it odd to do business with a voice in not only a different state, but at times in a different country. As a financial advisor (Stockbroker) I had clients through out the United States as well as numerous client is Australia, India, and the Netherlands. I had clients for years that I never once met in person. But then that is not such a stretch for that industry. Rather it was the excepted way of doing business.

You'll find I am spending a great deal of time on the subject of trust because it is so vital. After this issue is settled, pretty much everything else falls into place and your loan will probably get done by the first person you decide to work with.

Larger lenders like to tout their name as being the name you can trust, while smaller lenders will tout their loan officers as the ones to trust. While there are good companies and there are bad ones, the onus of getting your loan closed lies on the shoulders of your loan officer. He is the one that will make your loan painless and easy, or a long drawn out battle.

He is the one who puts together the loan. If he does a less than satisfactory job structuring your loan it will get turned down by the underwriters at the get go. However, his buddy in the cubicle next to you could have taken that same deal, re structured it, and guess what? Your loan gets done. Now how does that work?

Let me give you an example. John, your loan officer by default; he just happened to pick up the phone when you called, is reviewing your documents. Maybe it is nearing dinner time, he has been at the office all day, is hungry and tired. But, he desperately needs the loan, so he is gonna work late again. Hi is also distracted knowing that he will be in the dog house at home again for another late nighter.

John has decided to use twelve months back statements in lieu of W-2's and check stubs. He decides correctly to go this route because your W-2's do not show enough income as his wife works for cash 'under the table'. John has decided that if he were to add up all the deposits going into the account and divide by twelve months, he can show enough income to qualify. By using bank statements he will get the same rate as a traditional full doc loan.

What John failed to catch is a number of fees taken out of their bank due to insufficient funds. He does the straight calculation, enters your income in the correct field in the loan application and hits send. He then puts the physical documents into an envelope to be overnighted to his underwriters. He goes home earlier than expected tonight. The missus should be happy.

The next day John logs onto the computer and finds his loan is turned down already. What could have gone wrong? The NSF's on his clients statements tell the underwriter that the Johnsons are not able to keep up with their financial obligations despite what the deposits add up to on their bank statements. Had John not been in such a hurry he would have seen that and used a stated income, or no doc program. He goes back to the under writer with the idea of a stated deal but is quickly shut down. Once an underwriter has seen any income documentation he/she cannot turn a blind eye to it and do any other program. John's clients will have to use their W-2's and hope that their debt ratios will not be too high.

You need to get a guy in your corner that you can trust to do the loan right, from start to finish. The above example has little to do with the company or the guidelines, and everything to do with the loan officer and his job performance.

Bottom line, a lender is only as good and the loan officer is who by chance has picked up your call. I good, diligent loan officer, will excel with the giants of the industry just as he will at the mom and pop shop down the street because he has intimate knowledge of how things work. I have worked at three different Lending Institutions, and while rates and guidelines will vary, you play the game much the same way.

The English speaking man who plays chess in San Francisco will play the game much in the same way as the Spanish speaking guy in Peru.

In my next installment I will go over the other the other things you will not want to over look on your mortgage shopping spree.

Begin exploring mortgage rates here.

When you see a property advertised as a short sale, that usually (but not always) means the home is in preforeclosure and the owner and their real estate agent are listing the home on the market for less than what is owed to the lender (and often less than market value). The agent usually lists the home significantly below market value to generate interest in the property and get a contract on the home as quickly as possible.

Buying a short sale will generally require the same procedure as buying any other home–with the exception of an auction property. Once you identify a property, you will need to have a contract written up by your Realtor and presented to the listing agent. The contract will usually contain some special addenda, at least one of which will indicate you are accepting the home as-is. The listing agent will then submit your offer to the bank for approval. This process could take anywhere from a few days to a few weeks, it varies from bank to bank. The bank may choose to accept, reject, or counter your offer with a higher ales price. After you’ve reached an agreement and the contract is ratified, the sale will usually proceed normally.

While short sales are great opportunities for buyers to get a good deal on a home, the short sale process isn’t always easy. So, if you've fallen in love with a short sale property, here are seven practical guidelines that will help make your process go as smoothly as possible.

Rule 1: Never Fall in Love with a Short Sale until after you have gone to settlement and the keys are in your hand. Banks essentially maintain a right of refusal throughout the entire transaction. Just because you put a contract on a home and it was accepted by the bank, and you paid your inspection costs and for the appraisal and started measuring for carpet, does not mean the bank won't cancel the transaction before closing. Why? It’s business. A cancellation of your deal may mean the bank would recover more money by foreclosing (because of private mortgage insurance) than by proceeding with the short sale. It doesn’t always happen this way, but it happens often enough that you should be aware.

Rule 2: Be Patient and Be Prepared to Submit Multiple Offers on Multiple Homes. Because the prices are so low on short sales, there's likely to be lots of competition and bidding wars when you submit an offer, especially when the home is in good condition. The likelihood that you would get the very first short sale home you like has about the same probability of a second virgin birth. You didn’t think you were the only one to notice the house was in good condition and really cheap, did you? Be patient with your Realtor and the process. Unfortunately, the process is often “hurry up and wait.”

Rule 3: Keep your Expectations Regarding Price Reasonable. Despite the state of the economy, banks are still not just giving homes away. For a bank to make a deal with you, it has to make good business sense. Banks generally won't give a home away at any price just to be rid of it …at least not yet. You can get a good deal, but it may not be as good as you perceive. Trying to get a $700,000 for $300,000 is probably not going to happen, even in this market. But to walk into a home with $25,000 to $50,000 (or sometimes more) in equity is pretty good by most standards. Many people who bought brand new construction last year are already in upside down mortgages. Ask them if they’d like that $50K in equity, and I’d bet they’d take it in a New York minute.

Rule 4: Ask for as Little Closing Help As Possible. While some banks may offer some closing help, acceptance of your offer will usually go a whole lot smoother on a short sale if you have financing that requires minimal seller concessions. The more money you can take from your own financial accounts for your down payment and settlement costs, the more likely the bank is to accept your offer. However, if you require closing and down payment assistance, it may be wise to add the necessary amount on top of the sales price. Have your Realtor conduct a market analysis to ensure your offer will bear the higher price. Also, some banks will not permit more than 3 to 6 percent in closing assistance, however, so have your Realtor check with the listing agent to ensure there are no limits on closing help before submitting an offer. That will save you time and unnecessary anxiety.

Rule 5: Minimize the Contingencies in Your Contract Offer. From the bank’s perspective, the best offer will probably be the one at or above asking price with no financial, inspection, or home sale contingencies. Lots of contingencies means it will take more time to consider. If you have to sell a home or you want to do a home inspection, these requests will usually send your offer lower down the totem pole, particularly if there are multiple offers. So keep them to a minimum.

Rule 6: Give the Bank a Deadline and Keep Shopping until You Get a Response. This is particularly for people who are in a time crunch. Getting a response from a bank can be the beginning of one long beauracratic nightmare--and you can only submit one offer on one property at a time. This is a buyer's market, and there are too many properties out there to tie up your time. If they don't get a response back to you within a reasonable time period, then you should withdraw your offer and go to the next.

Rule 7: Ignore Rule 5 When it Comes to Home Inspections. You should always reserve the right to have a home inspection on the property - even if for informational purposes only. I usually write contracts for my clients in such a way that they will accept the property as-is but only after an acceptable home inspection. If the home inspection is not satisfactory, they can still walk away.

Starting August 1, 2009, Fannie Mae will accept mortgages with loan-to-value (LTV) ratios between 105.01% and 125% that are refinanced through the Obama Administration's Home Affordable Refinance Program (HARP). For example, if your home's value is $100,000 but you owe $125,000, you are eligible to refinance under this program provided your mortgage is serviced by Fannie Mae or Freddie Mac.

Loans modified through the program are required to lower homeowner's monthly payment or move them from an adjustable-rate mortgage to a 30-year fixed-rate loan. For more information, visit http://www.fanniemae.com or www.freddiemac.com.

Freddie Mac, the nation's second-largest residential mortgage finance company, announced today that it is planning to offer foreclosre shoppers major incentives to buy up its inventory, including up to 3.5 percent of the sales price to assist with certain closing costs and a two-year home warranty. Freddie Mac reportedly had nearly 30,000 homes in its inventory as of early 2009, more than double that at the end of 2007.

To find Freddie Mac foreclosures near you, call your local Realtor or visit www.homesteps.com .

620

Long gone are the days when you could buy a home with poor credit. Six-twenty is now the minimum required credit score to qualify for most government-backed and conventional mortgages, including Federal Housing Administration (FHA)-insured loans. Veterans with lower credit scores who apply for loans via the Veteran’s Affairs Loan Guaranty (VA Loan) program may still qualify for a mortgage; however, they generally require a minimum of 12 months with no derogatory credit or late payments.

3.5 Percent

If you want to purchase a home using an FHA-backed loan, you must now provide a minimum down payment of 3.5 percent (conventional loans usually require at least 5 percent). Although most down payment assistance programs have been abolished, some home buyers can still obtain part or all of their down payment as a gift from a family member. Despite some rumors to the contrary, the $8000 home buyer tax credit available to eligible home buyers up to December 1, 2009 cannot be used as your down payment on a home. However, FHA may allow your tax credit to be advanced to you in order to offset your closing/settlement costs and/or buy down your interest rate. Contact your mortgage professional for more information.

0

Some veterans who obtain a mortgage using the VA Loan program can still qualify for zero-down mortgages and can finance up to 102% of their mortgage (2 percent covers the VA funding fee); however, they must meet certain credit and income qualification guidelines. For more information, contact your local mortgage professional.

6 Percent

Most home buyers using conventional or government-backed mortgages to purchase a residence can obtain up to 6 percent of the sales price in seller-paid closing cost assistance to offset your settlement expenses, to include buying down your interest rate.

729,750

Maximum home loan limits for conforming conventional mortgages in high-cost areas has increased to $729,000. Why is this important to you? Mortgages that conform to Freddie Mac and Fannie Mae guidelines typically enable home buyers to obtain the most competitive interest rates because they can be sold in secondary mortgage markets. Loans that do not conform to these guidelines are usually subject to higher (sometimes much higher) interest rates. These loan limits are temporary, however, and are only valid on homes closed by December 31, 2009. To find the maximum loan limit is for your area, please visit https://www.efanniemae.com/sf/refmaterials/loanlimits/ .

625,000

Although conforming loan limits for most VA-guaranteed and FHA-insured mortgages remain at $417,000, limits for conforming FHA-insured home loans in some high-cost areas have increased to $625,500 (or higher in some areas) for loans closed through December 31, 2009. Why is this important to you? VA-guaranteed and FHA-insured loans require low to no down payment compared to most conventional mortgages and usually allow the home buyer to obtain more competitive interest rates because the loans are insured (or guaranteed) in the event that the homeowner defaults. To find out if you live in a high-cost area, visit http://www.fhfa.gov/GetFile.aspx?FileID=134 or http://www.homeloans.va.gov/docs/2009_county_loan_limits.pdf