Robert Freedman is the former director of multimedia communications at NAR.
5 to Watch: September 2010
September 1, 2010
1. Location, Location, Location
Speaking at the real estate technology conference Real Estate Connect in July, Scobleizer.com blogger Robert Scoble declared that society is in the midst of the Internet era’s "third information movement." The first movement was search, represented by the launch of Google in 1997. The second was social media; there was Friendster back in 2002, followed by MySpace, Facebook, and so on. And the third is location-based Web or mobile applications, such as Foursquare.
With Foursquare, you check in from wherever you are, and the application broadcasts your location so friends can find you. People who frequent a location can become "mayor" of that particular spot. Another speaker at Real Estate Connect, Craigslist founder Craig Newmark, claimed to be mayor of San Francisco's No. 43 bus. We visited Foursquare—and it checked out!
2. Practical Is in Demand
The slow economy is influencing home design, says the American Institute of Architects. The Institute’s first-quarter 2010 Home Design Trends Survey shows that more home owners are favoring smaller spaces that are often cheaper to maintain. There’s also an increased demand for flexible, informal layouts.
"We continue to move away from the 'McMansion' chapter of residential design, with more demand for practicality throughout the home," says AIA Chief Economist Kermit Baker. "And with that there has been a drop off in upscale property enhancements such as formal landscaping, decorative water features, and gazebos." The report adds that business is finally improving at residential architecture firms, with quarterly billings increasing for the first time since mid-2007.
3. Fannie Mae Takes Aim at Strategic Defaults
Borrowers with a Fannie Mae–backed mortgage who engage in a strategic default won’t be eligible for another Fannie Mae–backed loan for seven years, the secondary mortgage market company says. Fannie also will seek deficiency judgments against borrowers if allowed by state law.
Fannie in late July was writing full-blown instructions to servicers detailing its new policies. Strategic defaults are defaults by borrowers who have the capacity to pay but don’t, or who don’t complete a workout alternative in good faith. Such defaults have been growing among underwater borrowers.
4. How Much 'Shadow Inventory' Looms?
About 2.4 million properties are considered part of the shadow inventory, according to research by NAR. Getting the exact number is more art than science because the inventory is defined differently by different people. In NAR’s definition, shadow inventory consists of REOs along with properties that are either in foreclosure or near foreclosure (those in default 90 days or more). Not counted are delinquent properties whose owners are trying to modify their mortgage or delinquent properties already on the market as short sales or foreclosure sales.
Getting a realistic number isn’t just of academic interest; if analysts believe the inventory is closer to, say, 7 million than 2.4 million, markets will be spooked. On a positive note, banks are releasing their foreclosures onto the market methodically rather than dumping them all at once, a practice that can depress prices.
5. Jumbo Loans More Available
A year ago, even the most creditworthy borrowers struggled to secure home loans of more than $729,750—the cutoff for conventional conforming loans backed by Fannie Mae and Freddie Mac. But since this spring, the interest-rate spread between conforming and jumbo loans has narrowed and the number of lenders offering the loans has jumped.
As of late July, lenders were offering jumbo loans at a typical rate of about 5.5 percent, down from almost 7 percent a year earlier and not too different from what’s available for conforming loans, according to data available on Bankrate.com. NAR Chief Economist Lawrence Yun said in a late-July press conference that sales of existing homes priced at $750,000 and above jumped 30 percent from mid-2009. "Credit was extremely tight a year ago, but now it is beginning to loosen up," he said.
Among the big players in the market: Citigroup, which says in a July 10 Wall Street Journal article that it has seen a 30 percent rise in jumbo business, and Bank of America, which in an interview with REALTOR® Magazine late last year said it was making a big push in the jumbo arena.
Updated: November 24, 2021