Ronald Smiley's Blog

Local Market Review: "A Solidly Positive" Year

Local Market Review: "A Solidly Positive" Year

As 2012 comes to close, November housing data gives buyers and sellers reason to cheer with another encouraging month of robust activity. According to the MIBOR Monthly Indicators Report released today, the number of closed sales in central Indiana increased 25.4 percent in the three months ending in November 2012 when compared to the same three-month period last year. In November alone, closed sales increased by 34.5 percent.

Pending sales increased by 20.9 percent in the three months ending in November and 19.9 percent in the one-month comparison. The average sales price of homes decreased slightly by 0.5 percent to $159,017 in the three-month comparison and increased 0.5 percent to $159,235 in the November-only comparison. Median sales prices rose 1.8 percent to $127,100 in the three-month comparison and 5 percent in the one-month comparison to $126,000.

Perhaps the best indicator of continued housing stability is the balance of inventory. In November, months supply of inventory dropped to 6.2 months, a 27.1 percent decrease over last November's 8.5 months.

7 Smart Strategies for Kitchen Remodeling


Kitchen remodeling can turn a ho-hum room into your home’s pride and joy. Here are strategies to help your project run smoothly.
A significant portion of kitchen remodeling costs may be recovered by the value the project brings to your home. Kitchen remodels in the $50,000 to $60,000 range recoup about 66% of the initial project cost at the home’s resale, according to recent data from Remodeling Magazine’s Cost vs. Value Report.
A minor kitchen remodel of about $20,000 does even better, returning more than 72% of your investment.
To make sure you maximize your return, follow these seven smart kitchen remodeling strategies that will help you come up with great kitchen design ideas.
1. Establish priorities for a kitchen remodel
The National Kitchen and Bath Association (NKBA) recommends spending at least six months planning your kitchen remodeling project. That way, you won’t be tempted to change your mind during construction, create change orders, and inflate construction costs. Here are planning points to cover:
  • Cooking traffic patterns: A walkway through the kitchen should be at least 36 inches wide. Work aisles should be a minimum of 42 inches wide and at least 48 inches wide for households with multiple cooks.
  • Child safety: Avoid sharp, square corners on countertops, and make sure microwave ovens are installed at the proper height—3 inches below the shoulder of the primary user but not more than 54 inches from the floor.
  • Outside access: If you want easy access to entertaining areas, such as a deck or patio, factor a new exterior door into your plans.
A professional designer can simplify your kitchen remodel. Pros help make style decisions, foresee potential problems, and schedule contractors. Expect fees around $50 to $150 per hour, or 5% to 15% of the total cost of the project.
2. Keep the same footprint
No matter the size and scope of your kitchen remodel, you can protect your budget by maintaining the same footprint: Keep the walls, locate new plumbing fixtures near existing plumbing pipes, and forget bump-outs.

Not only will you save on demolition and reconstruction costs, you’ll cut the amount of dust and debris your project generates.
3. Get real about appliances
It’s easy to get carried away during your kitchen remodeling project. A six-burner commercial-grade range and luxury-brand refrigerator may make eye-catching centerpieces, but they may not fit your cooking needs or lifestyle.
High-priced appliances are worth the investment if you’re an exceptional cook. Otherwise, save thousands with trusted brands that receive high marks at consumer review websites, like and, and resources such as Consumer Reports.
4. Light your way
Good kitchen lighting helps you work safely and efficiently.
  • Install task lighting, such as recessed or track lights, over sinks and food prep areas; assign at least two fixtures per task to eliminate shadows. Under-cabinet lights illuminate cleanup and are great for reading cookbooks. Pendant lights over counters bring the light source close to work surfaces.
  • Ambient lighting includes flush-mounted ceiling fixtures, wall sconces, and track lights. Pair dimmer switches with ambient lighting to control intensity and mood.
5. Be quality conscious
Functionality and durability should be top priorities during kitchen remodeling. Resist low-quality bargains, and choose products that combine low maintenance with long warranty periods. Solid-surface countertops, for instance, may cost a little more, but with the proper care, they’ll look great for a long time.
If you’re planning on moving soon, products with substantial warranties are a selling advantage.
“Individual upgrades don’t necessarily give you a 100% return,” says Frank Gregoire, a real estate appraiser in St. Petersburg, Fla. “But they can give you an edge when it comes time to market your home.”
6. Add storage, not space
Here’s how you can add storage without bumping out walls:
  • Install cabinets that reach the ceiling: They may cost more--and you might need a stepladder--but you’ll gain valuable storage space for Christmas platters and other once-a-year items. In addition, you won’t have to dust cabinet tops.
  • Hang it up: Mount small shelving units on unused wall areas and inside cabinet doors; hang stock pots and large skillets on a ceiling-mounted rack; and add hooks to the backs of closet doors for aprons, brooms, and mops.
7. Communicate early and often
Establishing a good rapport with your project manager or construction team is essential for staying on budget. To keep the sweetness in your project:
  • Drop by the project during work hours: Your presence broadcasts your commitment to quality.
  • Establish a communication routine: Hang a message board on site where you and the project manager can leave daily communiqués. Give your email address and cell phone number to subs and team leaders.
  • Set house rules: Be clear about smoking, boom box noise levels, available bathrooms, and appropriate parking.

7 Smart Strategies for Bathroom Remodeling


Here’s how to get the bathroom of your dreams without making your budget a nightmare.
A mid-range bathroom remodel is a solid investment, according to Remodeling Magazine’s annual Cost vs. Value Report. An average bath remodel of $16,500 will recoup about 62% of those costs when it’s time to sell your home, and a more extensive $52,200 job returns about 55.5%. In addition, you can maximize the value of your investment by using these smart strategies, which will create a stylish yet budget-friendly bathroom.
1. Stick to a plan
A bathroom remodel is no place for improvisation. Before ripping out the first tile, think hard about how you will use the space, what materials and fixtures you want, and how much you’re willing to spend.
The National Kitchen and Bath Association (NKBA) recommends spending up to six months evaluating and planning before beginning work. That way, you have a roadmap that will guide decisions, even the ones made under remodeling stress. Once work has begun—a process that averages 2 to 3 months—resist changing your mind. Work stoppages and alterations add costs. Some contractors include clauses in their contracts that specify premium prices for changing original plans.
If planning isn’t your strong suit, hire a designer. In addition to adding style and efficiency, a professional designer makes sure contractors and installers are scheduled in an orderly fashion. A pro charges $100 to $200 per hour, and spends 10 to 30 hours on a bathroom project.
2. Keep the same footprint
You can afford that Italian tile you love if you can live with the total square footage you already have.

Keeping the same footprint, and locating new plumbing fixtures near existing plumbing pipes, saves demolition and reconstruction dollars. You’ll also cut down on the dust and debris that make remodeling so hard to live with.

Make the most of the space you have. Glass doors on showers and tubs open up the area. A pedestal sink takes up less room than a vanity. If you miss the storage, replace a mirror with a deep medicine cabinet.
3. Make lighting a priority
Multiple shower heads and radiant heat floors are fabulous adds to a bathroom remodel. But few items make a bathroom more satisfying than lighting designed for everyday grooming. You can install lighting for a fraction of the cost of pricier amenities.
Well-designed bathroom task lighting surrounds vanity mirrors and eliminates shadows on faces: You look better already. The scheme includes two ceiling- or soffit-mounted fixtures with 60 to 75 watts each, and side fixtures or sconces providing at least 150 watts each, distributed vertically across 24 inches (to account for people of various heights). Four-bulb lighting fixtures work well for side lighting.
4. Clear the air
Bathroom ventilation systems may be out of sight, but they shouldn’t be out of mind during a bathroom remodel.
Bathroom ventilation is essential for removing excess humidity that fogs mirrors, makes bathroom floors slippery, and contributes to the growth of mildew and mold. Controlling mold and humidity is especially important for maintaining healthy indoor air quality and protecting the value of your home—mold remediation is expensive, and excess humidity can damage cabinets and painted finishes.
A bathroom vent and water closet fan should exhaust air to the outside—not simply to the space between ceiling joists. Better models have whisper-quiet exhaust fans and humidity-controlled switches that activate when a sensor detects excess moisture in the air.
5. Think storage
Bathroom storage is a challenge: By the time you’ve installed the toilet, shower, and sink, there’s often little space left to store towels, toilet paper, and hair and body products. Here are some ways to find storage in hidden places.
  • Think vertically: Upper wall space in a bathroom is often underused. Freestanding, multi-tiered shelf units designed to fit over toilet tanks turn unused wall area into found storage. Spaces between wall studs create attractive and useful niches for holding soaps and toiletries. Install shelves over towel bars to use blank wall space.
  • Think moveable: Inexpensive woven baskets set on the floor are stylish towel holders. A floor-stand coat rack holds wet towels, bath robes, and clothes.
  • Think utility: Adding a slide-out tray to vanity cabinet compartments provides full access to stored items and prevents lesser-used items from being lost or forgotten.
6. Contribute sweat equity
Shave labor costs by doing some work yourself. Tell your contractor which projects you’ll handle, so there are no misunderstandings later.
Some easy DIY projects:
  • Install window and baseboard trim; save $250.
  • Paint walls and trim, 200 sq.ft.; save $200.
  • Install toilet; save $150.
  • Install towel bars and shelves; save $20 each.
7. Choose low-cost design for high visual impact
A “soft scheme” adds visual zest to your bathroom, but doesn’t create a one-of-a-kind look that might scare away future buyers.

Soft schemes employ neutral colors for permanent fixtures and surfaces, then add pizzazz with items that are easily changed, such as shower curtains, window treatments, towels, throw rugs, and wall colors. These relatively low-cost decorative touches provide tons of personality but are easy to redo whenever you want



The Rehabbersa€™ Guide to 203(k) Loans


The Rehabbers’ Guide to 203(k) Loans
Tight-fisted lenders have made home equity loans harder to come by. So what's a fixer-upper to do? Meet the 203(k) loan.
First, some 203(k) basics:
  • 15- or 30-year term option
  • ARM or fixed-rate option
  • 3.5% down payment; other FHA loan qualifications apply
  • Interest rate a tad higher than market
  • Higher fees compared with equity or other FHA loans, for such things as title checks, architectural plan reviews, appraisal, and FHA inspections
  • No balloon payment
  • Loan amount = projected value post-rehab, including the cost of the work
  • FHA loans take longer to close than conventional mortgages
  • More paperwork than a straight mortgage loan
Now, 13 rules for what you can and can't do with a 203(k):
1. You can buy a fixer-upper so awful it wouldn’t qualify for a regular home loan. Whether buying or refinancing, all that needed work might keep your home from qualifying for a regular bank loan. Banks don’t finance homes in ill repair because they’re too hard to resell if they have to take the house back via foreclosure.
2. You can DIY with a 203(k) if you can show you know how to DIY. You can do the work yourself, or act as your own general contractor, if you can prove you’ve got the chops, and can get the job done on time (the maximum timeframe is six months). Of course there’s a catch: When you DIY, you can only use the 203(k) proceeds for supplies. You can’t pay yourself to do the work on your own house.

3. You can use a mini 203(k) for mini-sized projects. If you’re just doing your kitchen, bathroom, or another project that costs $35,000 or less, there’s a streamlined version of the 203(k) designed just for limited-size projects.

4. You can’t use it to buy a new-construction home. The house you’re fixing up has to be at least a year old.

5. You can’t use it to buy and install a new toilet, even one of those fancy Totos. You have to spend at least $5,000 on your renovation to use the 203(k) program. And the whole mortgage, including those remodeling costs, has to be under the FHA mortgage limit for the area where you live.

6. You can expect the lender to be up in your grill about how and when the home improvements get done. An inspector will be dispatched to your home multiple times to check in on the progress, which is why rule #7 is so important.
7. You have to keep your contractor from going on a long vacation to Europe.
  • Your contractor has to start work within 30 days of the loan closing.
  • He can’t stop working on the project for more than 30 days.
  • He has to get the whole job done within six months.
Doing it yourself? The same timelines apply. So no long vacations for you until the work gets done.
8. You can use the loan to make your mortgage payments if you can’t live in the house until the work is done. This is one sweet provision of the 203(k) program because it means you don’t have to make a mortgage payment on the home you’re remodeling and pay to live somewhere else while the work is going on.
You can use the 203(k) loan to pay for up to six months of principle, interest, taxes, and insurance payments when your property is going to be uninhabitable because of the renovation work.
9. You can use it to make energy-efficiency upgrades like installing a new furnace, windows, or attic insulation. You can get a 203(k) loan to pay for 100% of the cost of energy-efficiency improvements. You don’t have to get those improvements appraised, but they do have to be cost-effective, meaning they’ll pay for themselves over their useful life. The HUD inspector will make the call.

10. You can rip the house down if you plan to build something in its place. As long as you keep the foundation of the home, you’re good to go.

11. You can have a little shop downstairs. It’s kosher to use a 203(k) loan to remodel a home that includes some commercial space, as long as you use the money only for projects in the residential part of your home and the amount of commercial space doesn’t exceed these limits:
  • 25% for one-story building
  • 49% for two-story
  • 33% for three-story building
12. You can use a 203(k) for a condo unit, but . . . your condo building must have FHA approval — which is tough to get these days — or meet VA, Fannie Mae, or Freddie Mac guidelines. Also, your building can have no more than four units, though there can be multiple buildings in the association.

13. You can’t break these rules or the lender can take its money back. Like immediately. Your lender can also refuse to advance you any more money or apply any money left in the escrow account to reduce what you owe on the mortgage.
By: Dona DeZube
Published: March 6, 2012

More Americans Expect Home Prices to Rise

More Americans are optimistic that home prices will inch up over the next year, with expectations that prices will rise at least 1.4 percent in that timeframe. That marks the highest amount ever recorded in Fannie Mae’s monthly National Housing Survey.

Thirty-four percent — also the highest ever recorded — of the 1,000 respondents in the May housing survey say they expect to see a boost in home prices in the next year. Forty-one percent say they think mortgage rates also will rise over the next year.

“Both indicators suggest the potential that consumers may consider moving off the sidelines to purchase a home,” according to the survey.

Survey respondents also say they expect rental prices to continue to edge up over next year, projecting a 4.1 percent increase in that period.

Still, a slowdown in the pace of new jobs and income growth is creating a plateau in consumer sentiment that might delay a full recovery in the housing market, according to Fannie Mae’s survey. Fifteen percent of those surveyed reported that their household income is significantly lower than it was 12 months ago, which marks a record low in the annual survey.

"Our May consumer data show that Americans are taking a 'wait and see' approach about buying or selling a home,” says Doug Duncan, Fannie Mae’s chief economist. “This is not surprising given their assessment that their income during the past 12 months and their personal financial expectation for the next 12 have leveled off. ... Current jobs data are reminiscent of the spring slowdown that continued into the summer months during the last two years. If this pattern continues, we do not expect to see any significant upturn in consumer sentiment during the summer and a meaningful housing recovery likely will be delayed once again."

Source: Fannie Mae and “Americans Expect 1.4% Increase in Home Prices: Fannie Mae,” HousingWire (June 6, 2012)

Get a Home Loan with Bad Credit


If you have a poor credit rating, getting a home loan is not going to be easy. Depending on your credit situation, it may even be impossible. Predatory lenders have been offering loans to people with poor credit, but these home loans are often dangerous financial products because of penalties and fees they carry.

Many homeowners have ended up in foreclosure because of subprime mortgages. If you suffer from a low credit rating but need a home loan, there are a few steps you can take to avoid these dangerous loans.

heck your credit rating before shopping for a home loan. Your credit may not be as bad as you think. A score under 620 is considered a very bad credit score. A score above 620 but below 680 is not ideal, but it is not so low as to keep you from getting a home loan.

Take the time to raise your credit score by paying off some credit cards and making your accounts current.
If your credit score is under 620, this is the only option to help you get an affordable home loan.

Create a budget to determine how much you can afford to pay for your monthly mortgage payment once you have improved your credit rating. If you have significant amounts of debt, there may not be any extra money to put toward a home loan.

Collect the money for a large down payment. The more money you can put down on your home, the more favorable your home loan terms will be, in spite of your low credit score. A large down payment shows the lender that you have some financial responsibility
and lowers your monthly payment amount.

Prepare yourself to have a high interest rate on your loan. This is the penalty for having a low credit rating. You can counter this somewhat with a larger down payment on your home.

Keep careful track of the closing costs, points, penalties and fees on any loans you are offered. This will protect you from the dangers of the subprime lending market.

Consider having someone co-sign for the loan with you if you have extremely poor credit. Your spouse or parent, for example, may be willing to sign for the loan with you, and their good credit score may help partially offset your score.

Avoid the temptation to get an adjustable rate mortgage (ARM). These have lower monthly payments at the beginning of the loan, but the payment amount increases when the national mortgage rate increases. This means your mortgage could end up being much more than you can afford in a few years.

Choose a loan with a fixed interest rate that has fair fees and the lowest interest rate possible for your situation. Keep the information on the other loans available in case you are denied for your first choice.

Housing Affordability Reaches Records

Housing Affordability Reaches Records

Housing affordability conditions for all buyers reached a milestone in the first quarter, according to the National Association of REALTORS®.

NAR’s composite quarterly Housing Affordability Index rose to a record high of 205.9 in first quarter, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power. This is the first time the quarterly index broke the 200 mark; recordkeeping began in 1970.

NAR President Moe Veissi said market conditions are optimal for home buyers. “For those with good credit, we’ve never seen better housing affordability conditions or market opportunities than we see at present,” he said. “Although home prices are stabilizing and sales are rising, some buyers still have to jump through a lot of hoops to convince a lender that they are creditworthy, even for a mortgage that would be well within their means. This is especially true for self-employed buyers.”

Veissi noted home sales would be much higher if lending standards would return to normal.

The index shows the median-income family, earning just under $61,000, could afford a home costing $325,500 in the first quarter, which is more than double the national median existing single-family home price of $158,100. The median monthly mortgage principal and interest payment for a median-priced home would take only 13.5 percent of gross income.

A companion index measuring the ability of first-time buyers to purchase a home also set a record, with the first-time buyer index reaching 135.8 in the first quarter.

Assumptions for the first-time buyer index include a lower income, at 65 percent of median family income, a starter home costing 85 percent of the median price, and a down payment of 10 percent. This index means the typical entry-level buyer could afford a home costing $182,500, which is well above the overall median price.

“It’s never been easy to buy a first home because of the cash required for downpayment and closing costs, but conditions for first-time buyers who are able to get a mortgage have never been better,” Veissi explained.

Most first-time buyers choose a loan with a lower down payment, often an FHA-insured loan with 3.5 percent down, and some use the VA program with no down payment.

Both home prices and mortgage interest rates are expected to edge up modestly as the year progresses, but housing affordability will remain very favorable with the median-income household well positioned to afford a median-priced home. For all of 2012 the index is projected to set an annual record, averaging 191 for the year.

Source: NAR

Supreme Court Unanimously Decides in Favor of Property Rights in Sacke

Supreme Court Unanimously Decides in Favor of Property Rights in Sackett vs. EPA

The U.S. Supreme Court handed private property owners a victory with a unanimous decision on March 21 allowing a couple to appeal an EPA ruling that their property contains a wetland. The ruling is supported by the National Association of REALTORS® (NAR) which, along with other organizations, submitted a friend of the court brief in the case. NAR argued in its brief that the property owners in this case were being denied due process because the compliance process is time-consuming and the costs are significant--all before the main question of whether the property contains a wetlands is even considered. The Court ruled that property owners facing an EPA compliance order under the Clean Water Act (CWA) can seek judicial review before being forced to comply. The case, Sackett vs. EPA, involved the Sacketts, a couple in Priest Lake, Idaho, who bought a piece of property in an already developed subdivision, near Priest Lake in Idaho. After they started building their house, they were ordered by the EPA to stop construction out of a concern that the property contained a wetland, even though the property was adjacent to other developed properties. The Sacketts could have been subject to steep fines for not complying with the EPA’s request. This decision will change how the EPA enforces the Clean Water Act and will have implications for how EPA uses compliance orders under other environmental statutes. With this important unanimous decision, Mike and Chantell Sackett can finally get their day in court.


3 Predictions for Distressed Properties in 2012

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3 Predictions for Distressed Properties in 2012

It’s hard to know exactly what will happen with foreclosures, REOs, and short sales in the coming year. Factors such as employment, home values, and consumer confidence will determine whether they go up or down. The one thing that’s certain is that they’ll still be around and affecting the housing market.

“Foreclosures aren’t going away right now,” says Andy Firoved, CEO of CounselorDirect, a technology company that specializes in automating processes for various government foreclosure-prevention programs. “We’re going to have a certain level. The question is, how many?”

Apart from quantity, there are certain things regarding distressed properties that can be predicted with some level of assurance, says Firoved, whose clients include housing departments in states with the highest unemployment and biggest declines in home values — the so-called “Hardest Hit.” Here are three of his prognostications for 2012:

Prediction #1: Government home owner assistance programs will get more effective.

Most of the government’s initial efforts at helping home owners who were threatened with foreclosure due to problems like job loss or medical expenses came up short. This was primarily due to a combination of poor promotion of the programs and arcane, overly bureaucratic processes.

Fivored says the underlying issue here was that federal and state governments were in too much of a rush to roll out these programs. “People came in with the best intentions, but had problems with the execution,” he adds.

However, newer initiatives, such as the “Hardest Hit” mortgage assistance programs and the revamped Home Affordable Refinance Program (HARP), will likely get more traction because they’re better publicized and administered.

“The word is getting out, and people are starting to get assistance,” Fivored says. “These programs are starting to find higher-level efficiencies as well.”

Prediction #2: The amount of evictions will stay the same or even go down.

While the number of evictions that have taken place over the past couple of years seems high compared with healthier economic times, they actually aren’t as high as they could be. “The majority of [delinquent and foreclosed-on borrowers] have not been evicted,” Fivored says.

Why? For one thing, banks are hesitant to pursue foreclosures because of the robo-signing issue, which still hasn’t been settled. Also, evictions are labor-intensive and involve some thorny legal procedures, Fivored explains. Many banks simply don’t have the will or the resources right now to evict all of those borrowers. “The problem is that there are a lot of people out there who haven’t paid their mortgage in a while, and they have gotten used to it,” he says.

Although “the party’s got to stop at some point,” Fivored is guessing it’ll keep going, for the most part, through 2012.

Prediction #3: Banks will get creative in dealing with REOs and delinquent home owners.

That’s not to say that lending institutions will remain passive this year. “In 2012, the theme is going to be managing the shadow inventory,” Fivored says. “That’s going to be two different things: REOs and delinquent home owners who they haven’t done anything with yet.”

According to him, banks will accomplish this by working out special deals, such as leasing foreclosed and bank-owned homes to their former owners. They may even allow foreclosed-on and delinquent borrowers to continue living in homes without making any payments — at least in the short term —because they want properties maintained for eventual resale, Fivored says.

By Brian Summerfield, REALTOR® Magazine

5 Events That Really Mattered For Housing in 2011 & Beyond

Government, the mortgage industry and forces of nature all shook the housing market in 2011. They had both an immediate impact and slow-burning effects, setting the stage for a bumpy 2012 with more foreclosures, political battles and local market risks.


1)      Robo-Signing Reverberations

The “robo-signing” scandal – where banks were accused of approving foreclosures with incomplete or incorrect documentation – exploded in October 2010, but where are we now? Banks want a settlement in order to avoid costly, drawn-out lawsuits. One is shaping up that could reduce loan balances or interest rates for current homeowners, give payments to people who lost their homes and establish new mortgage servicing standards for the future.

What Really Mattered: The threat of robo-signing lawsuits made banks gun-shy about pursuing foreclosures in 2011, which left many homes stuck in the foreclosure process. But once a settlement is reached, we’ll see a rush of foreclosures in 2012.

2)      The Debt Ceiling and the Budget Deficit

In August, the government played a game of chicken over whether to raise the debt ceiling, but this should have been just a formality. It’s actually reducing the deficit that’s the hard part. Long before the debt ceiling debate, we all knew that the federal budget was in bad shape, and the federal credit rating downgrade itself didn’t change anyone’s view on this.

What Really Mattered: After the debt ceiling debate, the back and forth deliberations by the unsuccessful bipartisan deficit-reduction supercommittee teased us with some proposals that will surely rear their heads again. One idea that both Republicans and Democrats didn’t totally disagree about was reducing the mortgage interest and other tax deductions. If and when that happens, high-income homeowners with mortgages would pay a lot more in taxes.

3)      The Expansion of HARP

In October, the Federal Housing Finance Agency (FHFA) said seriously underwater homeowners will be able to refinance through the Home Affordable Refinance Program (HARP). But there is a catch – borrowers must be current on their payments.

What Really Mattered: Borrowers who strategically fell behind on their payments in hopes of negotiating a loan-modification won’t be helped. What this plan will do is stimulate the economy without having to get Congress to agree on additional stimulus.

4)      Natural Disasters Cause Insurance Disaster?

In 2011, several tornados, floodings and a hurricane temporarily halted what little construction there was to begin with, but this was just a short-term slowdown. The bigger long-term effect was the near-collapse of the federal government’s National Flood Insurance Program (NFIP). Still struggling financially under debt amassed after Hurricane Katrina, the NFIP’s insurance premiums don’t fully cover insurance claims when disaster strikes. Hurricane Irene and its flood damage returned this problem to center-stage.

What Really Mattered: In flood-prone areas, you can’t get a mortgage if you don’t have flood insurance. Without NFIP, housing markets in these areas would skid to a stop. As part of last week’s payroll tax agreement, the program got a last-minute extension until May 2012, but its future remains uncertain.

5)      Lowering the Conforming Loan Limit

Starting in October, the government lowered the upper limit for loans backed by Fannie Mae or Freddie Mac or insured by the Federal Housing Administration (FHA) from $729,750 to $625,500. Why? Government agencies now back or insure most loans, but it’s time to make the housing market less dependent on the feds. Lowering loan limits is one step in that direction; however, the real estate industry has urged the government to push the loan limits back up. And you know what? They scored a half-win in November, raising the loan limit back up for FHA loans but not for Fannie and Freddie.

What Really Mattered: Mortgage lenders are willing to charge lower rates for loans that are backed by Fannie or Freddie; with a lower conforming loan limit, a small number of loans that used to qualify for federal backing no longer do.

Jed Kolko is the Chief Economist at Trulia, a real estate resource for homebuyers, sellers and renters, where he leads housing research. He translates economic trends and public policy on Trulia Insights, helping people understand what really matters in housing. Find him on Twitter at @jedkolko.

Read more:

What Is A Short Sale?


If You Are No Longer Able To Pay Your Mortgage & Are Facing Foreclosure, Watch This Video on Short Sale Then Call Me @ 317-966-6004 For A FREE Private Evaluation Of Your Situation.

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House Prices: Where They Will Be in the Spring

House Prices: Where They Will Be in the Spring

by The KCM Crew on October 18, 2011

Disclaimer: This blog covers the national housing market as a whole. Please check with a local real estate professional to discover how the following information will impact your region. – The KCM Crew

Many sellers want to wait until the spring before putting their home on the market. This might be for any of several reasons:

  1. They don’t want to be inconvenienced during the holiday season.
  2. They believe that they will see more potential buyers and as a result will get a higher price.
  3. In the northern part of the country, they might not want people walking through the snow and then into their house.
  4. All of the above

In a normal real estate market, this may make sense. However, this market has been anything but normal. This spring will also see some abnormalities. The biggest difference will be the direction prices will take.

In years past, the spring market would favor the seller because increased demand would outpace any increase in supply: the number of houses coming onto the market would not be as great as the number of buyers newly entering the market. In most situations, when demand is greater than supply, prices increase.

The reason this spring will be different is that the supply of homes coming to the market will be dramatically impacted by foreclosure properties being released by the banks. Many believe this increase in inventory will far outweigh buyer demand. In situations where supply is greater than demand, prices decrease.

Will This Actually Happen?

RealtyTrac, in their latest foreclosure report, explained:

“U.S. foreclosure activity has been mired down  since October of last year, when the robo-signing controversy sparked a flurry  of investigations into lender foreclosure procedures and paperwork. While foreclosure activity in  September and the third quarter continued to register well below levels from a  year ago, there is evidence that this temporary downward trend is about to  change direction, with foreclosure activity slowly beginning to ramp back up.

This will impact prices.

What Do Experts Believe the Impact Will Be?

Here are the pricing projections by several major entities:

  • Zillow believes we will not see a bottom in prices until the first quarter of 2012.
  • Standard & Poors thinks prices will drop %5 in the next few months.
  • JP Morgan Chase believes prices will depreciate 6 to 7% over the next six months.
  •  Barclays says prices will fall 7% by the end of the first quarter of 2012.

Bottom Line

You may pay a hefty price for the convenience of not having your property on the market right now.

Common Sense Isna€™t Common Practice


It used to be that there was logic applied in the world of mortgage lending. An appraiser determined the value of a home by the axiom, “what a reasonable buyer would pay a reasonable seller”. An underwriter weighed the plusses and minuses of a file (after analyzing the income, the assets, the credit profile and the appraisal) and made a judgment call based on their experience.
Loans with sizable down payments used to be more flexible with how income was documented or what quality of credit was required. Even the decision of what made up “good credit” has been reduced to a FICO score. Determining the risk of a loan affected its approval or denial. Further, loans deemed riskier were given less favorable terms (higher rates and/or costs or larger down payments).
But today, everyone has tried to quantify everything and put everything into a matrix. Credit scores are numerical, and the number determines eligibility and cost. Gone is the concept of explaining why you have defects in your credit. We don’t care why, we just look at your score. Appraisers now are being scored and their data being scrutinized to a level most would find mind-boggling. Amenities that make a home worth more for a particular buyer (like a pool or upgraded basement) are virtually ignored. Underwriters have primarily become fact-checkers and quality control as a computer software program underwrites the vast majority of mortgages today.
Gone is common sense. It has been replaced by numerical formulas and a cover-my-behind, justify-everything-with-data mentality. Basically, the pendulum has swung too far. It used to be that lending was too easy (see the subprime debacle), but now we have eliminated too much of the human element. We need common sense back.
People who have saved 30% for a down payment know what they can afford monthly. Don’t they?
People who had a medical challenge two years ago that is not likely to reappear should not have a twenty year credit history destroyed. Should they?
People aren’t likely to overpay for a home with so much inventory and all the media exposure about falling prices. Are they?
Bring back some common sense when we need it most!

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Ronald Smiley
Associate Broker
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Carpenter Realtors
2270 Greenfield Ave
Noblesville, IN
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