Monday, August 1, 2011

MARKET UPDATE

MARKET UPDATE

AUGUST 2011

ARIZONA REAL ESTATE SALES HIT RECORD

The Arizona MLS reported 10,509 as the number of sales for June 2011. The previous record was 10,252 sales in June 2005. (Grand Canyon Title Agency) At the time of this publication, that number had not yet been verified, but if the number is remotely close, it is good news for the Arizona real estate market.

WELLS FARGO GETS THEIR HAND SLAPPED

Wells Fargo was fined $85 million by the Federal Reserve for loan fraud and steering customers into high cost loans. The fine by the Fed was the largest of its kind to date. Up to 10,000 borrowers were involved between 2004-2008. (housingwire.com)

This month (July) Wells Fargo posted record net income of $3.9 billion for the second quarter on more than $20 billion in revenue

U.S. HOME PRICES TREND HIGHER

“U.S. home prices continued to show upward trends in May, extending April gains for two consecutive months of positive price momentum, according to FNC Inc. Despite record foreclosure activity and rising unemployment rates in recent months, the single-family housing market continues to show signs of price stabilization in line with rising activities in new housing starts and building permits. Home prices rose 0.5% in April, according to FNC's RPI.” (housingwire.com)

DODD-FRANK ACT IS NOT THE SOLUTION

“According to the Grant Thornton bank executive survey released Thursday, nearly half of bankers believe financial reform under the Dodd-Frank Act will not effectively prevent another taxpayer-led bailout. The results are published in association with Bank Director Magazine. In the survey 48% of bankers polled said Dodd-Frank will not effectively detect broad risks capable of driving the economy back into a recession. Only 4% believe the sweeping reforms of the new law will be totally effective while 34% expect Dodd-Frank will only partially protect against economic risks.” (housingwire.com)

Once again, the intention is noble, regulation to protect the consumer, but the implementation is flawed. Dodd-Frank Act takes ahold of the mortgage industry in August. The Act will continue to drive up the costs to the consumer, slow the lending process, and prevent more prospective homebuyers from obtaining financing.

Without government regulation, the consumer will once again be thrown to the wolves (Wall Street) in our boom-bust economy. We the public forget fast and we will have another housing bubble. With the current government regulation, the consumer will only be slightly protected and at a cost; the financial cost to the consumer and the cost of a slower recovery. You just can’t have your cake and eat it too.

RISING COSTS & REGULATION

“Homebuyers who obtain mortgages in this environment of tightened lending standards are paying 8.8% more in closing costs than a year ago, according to Bankrate Inc. Origination and title fees are averaging $4,070 on mortgages for $200,000, according to the financial data firm's 2011 closing costs survey. That compares to average closing costs of $3,741 a year ago. The year-over-year change wasn't nearly as high as the 36.6% increase in closing costs between last year and 2009, when fees averaged $2,739 on a $200,000 home loan.” (housingwire.com)

The rising cost to homebuyers in 2011 is due to the Federal Reserve’s amendment to Regulation Z regarding loan originator compensation that went into effect April 6th, 2011. In 2010, the increase in closing costs is attributed to RESPA reform that went into effect January 1st, 2010. Dodd-Frank Act will drive costs up further starting in August 2011. The perception of protection comes at a cost.

Financing for High priced homes on the chopping block

Rep. John Campbell (R-Calif.) and Rep. Gary Ackerman (D-N.Y.) introduced a bill Friday that would extend the current conforming loan limit for government-backed mortgages for another two years. The Conforming Loan Limits Extension Act, or H.R. 2508, would allow the government-sponsored enterprises and the Federal Housing Administration to guarantee or buy mortgages worth as much as $729,750 in most neighborhoods. If Congress does not pass this bill, the loan limit will drop to $625,500, though the limit will vary by county. A recent report from the National Association of Home Builders showed 17 million homes would become ineligible for less expensive federal funding. The drop could affect as many as 669 counties across 42 states.

Federal Reserve Chairman Ben Bernanke, however, told the House Financial Services Committee this week that he believed the private market, including investors and insurers, was ready to take over for the government — albeit at a higher cost to the consumer. (housingwire.com)

Chris Tiller, Realtor
The Brett Tanner Team
Keller Williams Realty
3540 E. Baseline Rd., Suite 120
Phoenix, AZ 85042
Cell: 602-561-1346
Fax: 1-888-292-0678
christiller@brett-tanner.com

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