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Home prices rise in July in 20 major U.S. cities

Home prices kept rising in July across the United States, buoyed by greater sales and fewer foreclosures.

National home prices increased 1.2 percent in July, compared to the same month last year, according to the Standard & Poor’s/Case Shiller index released Tuesday. That’s the second straight year-over-year gain after two years without one.

The report also says prices rose in July from June in all 20 cities tracked by the index. That’s the third straight month in which prices rose in every city.

Steady price increases and record-low mortgage rates are helping drive a housing recovery.

In the 12 months ending in July, prices have risen in 16 of 20 cities. In Phoenix, one of the cities hardest hit by the housing bust, prices are up 16.6 percent in that stretch. Prices in Minneapolis and Detroit have risen more than 6 percent.

“We are more optimistic about housing,” David Blitzer, chairman of the S&P’s index committee. “Stronger housing numbers are a positive factor for other measures, including consumer confidence.”

Prices fell from a year earlier in Atlanta, Chicago, New York and Las Vegas.

The S&P/Case-Shiller index covers roughly half of U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The July figures are the latest available.

Home prices are still 30 percent below their peak in June 2006, according to Case-Shiller. That was the height of the housing boom.

Other measures of home prices are also showing steady gains. CoreLogic, a private real estate data provider, said earlier this month that prices rose in July from a year earlier by the most in six years. And a federal government housing agency has also reported annual increases.

Rising home prices are one of many signs that the housing market is slowly recovering.

Sales of previously occupied homes jumped in August to the highest level since May 2010. Builder confidence is at a six-year high and construction of single-family homes rose last month to the fastest annual rate in more than two years. Even with the gains, home sales and construction remain well below healthy levels.

The broader economy is likely to benefit from rising home prices. When home prices rise, people typically feel wealthier and spend more. And more Americans are likely to put their houses up for sale, which could further energize the market.

Home sales have been bolstered by the lowest mortgage rates on record. The average rate on the 30-year fixed mortgage touched a record low of 3.49 percent last week and has been below 4 percent all year. A limited supply of homes has also helped drive prices higher.

Prices are also rising because of a decline in foreclosures and sales of other deeply discounted homes. Many homes in the foreclosure process will likely come on the market in the coming months, which could drag on prices.

Still, many Americans, particularly first-time homebuyers, are unable to qualify for a mortgage or can’t afford larger down payments required by banks. That’s holding back sales.

Home sales could get a further boost from the Federal Reserve. The Fed said two weeks ago that it would purchase $40 billion of mortgage-backed securities each month until the economy and hiring improve substantially. That’s likely to keep mortgage rates at record-low rates for some time.

homebuyers - Arizona Business Magazine May/June 2012

Homebuyers Bounce Back

The rules have changed a bit, but it’s still a perfect time to purchase a home.

If you have good credit and a good job history and can put money down for a house, it’s a great time to buy, say experts in real estate and finance. In fact, the sooner the better, because it may soon turn into a seller’s market for housing.

And mortgage rates could be climbing as well. Mortgage buyer Freddie Mac recently announced that the average rate on 30-year loans had jumped to the 4 percent level for the first time in three months.

According to attorney Kevin Nelson of Tiffany & Bosco, whose practice focuses on mortgage and real estate, homebuyers can get very attractive packages if they have the solid down payments and credit. “Homeowners can also refinance if they have substantial value in their homes. But lenders are still very cautious about permitting homeowners to have lines of credit,” Nelson says. “And they probably still will be until the financial problems in Europe and unrest in the Middle East calm down.”

Both larger banks and mortgage companies say business is very good. “In the past 10 years, we have never done as many loans per month as we are doing right now,” says Tim Disbrow, regional sales manager for Wells Fargo Bank. “We are the No. 1 lender by a longshot for all mortgages across the state, including Fannie and Freddie and FHA.”

Although some in the lending industry say big banks are moving very slowly in making home loans and can’t keep up with the volume, Disbrow disputed that. “Consumers who go to banks for mortgages are just being asked to document their savings, job history and salaries, something that they weren’t asked to do in the boom years,” he says.

The same rules apply with all lenders now, he says, whether they are banks or mortgage companies. Customers everywhere have to meet the same requirements based on Fannie and Freddie guidelines.

For conventional conforming mortgages of $417,000 or less that are insured by Fannie Mae and Freddie Mac, down payments must be 5 percent or more. Down payments for FHA loans are 3.5 percent. Jumbo loans also seem to be widely available, but lenders generally do not sell them to Fannie Mae and Freddie.

“The big difference between us and mortgage companies is that customers may have to pay other loan originators more in fees,” Disbrow says.

Foreigners are helping fuel the rising demand for homes in the Phoenix area, but plenty of Americans are buying as well. Canada, New Zealand and Australia are well represented. Many foreign buyers pay cash, but some mortgage companies offer loan programs for them. Buyers are often investors attracted to the housing market by low home prices and the potential for high rents.

Eric Bowlby, president of AmeriFirst Financial in Mesa, estimated that about 40 percent of the homebuyers in Maricopa County are cash buyers, while 60 percent get mortgages.

Surprisingly, even those who lost their homes in a foreclosure or short sale can finance homes with mortgages, but they must put down fairly substantial down payments. They can even get an FHA-insured loan from three to five years after losing their previous home.

But to get a Fannie Mae-backed mortgage or one from Freddie Mac, someone who had a foreclosure has to wait from five to seven years. However, if a buyer can verify that some hardship led him or her to walk away from their property – like the loss of a job or an illness – they may get relief from the time requirements.

According to Bowlby, even if someone was upside down in their mortgage and walked away, AmeriFirst has a hard money hedge fund that will finance mortgages almost immediately for those who have the income to qualify and make a 25 percent down payment.

“Even those who are one day out of foreclosure or bankruptcy may be able to qualify,” he says, “but the interest rate is 12 percent.

The rate may be high, he says, but it’s still cheaper to buy than to rent because of the homeowner’s tax deduction and the current increases in rental rates.

ATTRACTING BUYERS

Recently, Wells Fargo announced that it is bringing a new pilot program to Phoenix in an effort to help stabilize housing markets.

The Neighborhood LIFT program, already available in Atlanta and Los Angeles, is designed to help communities attract qualified prospective homebuyers to neighborhoods that are struggling with high inventories of unsold homes.

In Phoenix, the bank has a five-year goal of making $3 billion in such loans. Prospective homebuyers can qualify for down payment assistance grants of up to $15,000, covering home and renovation financing and will also participate in home buyer seminars and tours of properties for sale. There are limits on the amount of income families can have and limits on the size of loans.

Arizona Business Magazine May/June 2012