Archive for the ‘Homes Values’ Category

The Fuzzy Math of Home Values

November 15, 2011

Alyssa Abkowitz via Smart Money

Jason Gonsalves worked hard to turn his 6,500-square-foot stucco-and-stone home in the suburbs of Sacramento into the ultimate grown-up party pad. Inside are the game room, home theater and custom wine cellar. Outside, there’s the recently added piece de resistance — a wood-burning pizza oven, kegerator and searing station, all flanking an infinity-edge pool that overlooks the lapping waters of Folsom Lake. A spread like that doesn’t come cheap, of course, so when interest rates fell recently, Gonsalves, who runs a lobbying firm, looked into refinancing his $750,000 mortgage. That’s when he got some startling news — even as he was putting the finishing touches on his home, it had dropped more than $200,000 in value over a seven-month stretch.

Or at least, that’s what one popular real estate website told him. Another valued Gonsalves’s pad at a jaw-droppingly low $640,500. And these online estimates left him all the more confused when a real-life appraiser, assessing the house for the refi loan, pinned its value at $1.5 million. "I have no idea how those numbers could be so different," Gonsalves says.

Right or wrong, they’re the numbers millions of consumers are clamoring for. In a housing market that’s been mostly a cause for gloom, so-called home-valuation technology has become one of the few sources of excitement. After years of real estate pros holding all the informational cards in the home-sale game, Web-driven companies like Zillow, Homes.com and Realtor.com are offering to reshuffle the deck. They’ve rolled out at-your-fingertips technology via laptop and smartphone to give shoppers and owners an estimate of what almost any home is worth. And people have flocked to the data in startling numbers: Together, four of the biggest websites that offer home-value estimates get 100 million visits a month, and one, Homes.com, saw traffic jump 25 percent in the three months after it launched a value estimator in May. "Consumers used to use us for home buying and move on," says Jason Doyle, vice president of Homes.com. "Now we can stay engaged with them."

Real estate voyeurism aside, the stakes are high for many of the sites’ visitors. Homebuyers use the estimates to get a feel for what’s on the market and, later on, to figure out whether their bid will entice a seller to play ball. Vigilant homeowners like Gonsalves check their values to help decide whether it’s worth the hassle of refinancing, while others who are ready to sell use them to gauge if they’re priced right for the market. Real estate agents, meanwhile, say they’re increasingly resigned to spending more time answering questions — or arguing — about the estimates. "It’s an evolution for consumers," says Gary Painter, director of research at the Lusk Center for Real Estate at the University of Southern California. Banks and other lenders are piggybacking on the trend as well, with some even showcasing the upstarts’ estimates on their own websites. While lenders say they don’t use the estimates to make final decisions about loans, they say Zillow in particular has become a go-to tool for their preliminary research on homes. "I use it every day," says Zach Rohelier, a mortgage banker at LendingTree.

But for figures that carry such weight, critics say, the estimates can be far rougher than most consumers realize. Indeed, if the websites were dart throwers, they’d seldom hit the bull’s-eye, and they’d sometimes miss the board entirely: Valuations that are 20, 30 or even 50 percent higher or lower than a property’s eventual sale price are not uncommon. The estimates frequently change, too, for reasons that aren’t always easy for homeowners to discern. According to the companies themselves, some quotes have swung by hundreds of thousands of dollars in as little as a month as new data gets plugged into the algorithms the sites rely on. (Those algorithms also change, as happened this summer when Zillow made adjustments that affected all of the 100 million homes in its database.) And while the sites say it’s probably rare that individual homeowners (or real estate agents, for that matter) game the system, they do acknowledge that people can enter information that might push estimates higher. Put it all together, say pros, and you’ve got numbers that have become head-scratching legends in one community after another: a Hollywood Hills aerie losing 47 percent of its value in one month (with no earthquakes or mud slides to explain the drop); a century-old home in Louisville, Ky., that, according to local lore, served as the inspiration for Daisy’s home in The Great Gatsby, quadrupling in value over 30 days; and one townhouse in Brooklyn, N.Y., listed now for $5 million, valued at a whopping $31 million in the midst of the real estate crash — at least according to Zillow.

Zillow says the Brooklyn valuation was an error that it subsequently corrected. And make no mistake, all of the competitors go out of their way to make it clear their numbers are guesstimates, not gospel. "A Trulia estimate is just that — an estimate," says a disclaimer on that site’s new home-value tool. Zillow deploys similar language and goes a step further, publishing precise numbers about how imprecise its estimates can be. And every major site urges home-price hunters to "always consult with a real estate agent or house appraisal specialist," in the words of Homes.com. Indeed, these sites say they have strong relationships with the real estate business in general; they get a significant share of their revenue from the industry, in the form of advertising and subscriptions.

But when the real estate version of Pandora’s box is opened, homeowners don’t necessarily pay attention to disclaimers. Consumers and pros alike say many Web surfers put enough faith in the estimates to sway the way they shop and sell. "I’m constantly explaining to clients that those numbers don’t come from a person," says Mindy Chanaud, a real estate agent in Greenwich, Conn., who launched into what she calls her Zillow spiel when shown a Zestimate of one of her listings. Frank and Sue Parks, former owners of the Gatsby house in Louisville, watched as the site put a $331,000 value on the dwelling in May; by July it had climbed to $1.5 million. (Zillow says the lower estimate reflected errors in its statistical model.) The couple got some potential buyer referrals from the site, but they had to fend off a stream of lowball offers before they sold their place this fall. They’re convinced that the estimate roller coaster accounted for some of that. Says Sue, "It really affected our ability to move the place."

For most of real estate history, of course, determining a home’s value has been an appraiser’s job. Appraisal involves gathering data on recently sold homes in the area and comparing them with the "subject property" on matters like size, condition and characteristics, before coming up with an estimate of the home’s worth. If the property has, say, a swimming pool, but most recently sold homes don’t, the appraiser might add a premium to the sale value. Still, the exercise involves as much art as science, as appraisers acknowledge. The more unique or luxurious a property, the harder it is to accurately value. "Imported marble and a view of the ocean are going to be more or less valuable depending on market conditions," says Susan Allen, a vice president at CoreLogic, a data and analysis provider in California. And critics have accused a few appraisers of inflating the value of properties or rubber-stamping other people’s estimates to ensure that deals went through.

The response, beginning in the late 1980s, was the rise of the machines. Economists started developing automated valuation models, or AVMs; instead of having a person visit the property and crunch calculations, these computer models sync the math with data about comparable sales, square footage, number of bedrooms and the like, all in a matter of seconds. Rob Walker, a managing director at AVM purveyor Lender Processing Services, says the models sped up the approval process for second mortgages and home-equity loans; indeed, for years, the tools were mostly reserved for in-house nerds at lending banks. It wasn’t until 2006 that Zillow took them to the masses, with its Zestimate. The company runs data on more than 100 million homes through its own algorithms that recognize relationships between property characteristics, tax assessments and recent transactions. "Humans don’t make these decisions," says Stan Humphries, chief economist at Zillow.

Scores like these have helped build successful business models for some companies — Seattle-based Zillow, for one, just raised $69 million in an initial public offering. And they’ve become weapons in the arsenal of consumers like Terence Avella, an attorney in Eastchester, N.Y. After he and his wife became enamored of a four-bedroom Victorian with an asking price of $650,000, Avella consulted Zillow, finding a much lower valuation: $510,000. He says the Zestimate reinforced his belief that the house would need extensive renovations — and he put up a lowball bid. By the time the process was over, Avella had settled on an offer of just $580,000 (though the negotiations later fell through). Indeed, in a market where listing prices often reflect hope more than reality, some agents and consumers say that online tools are a useful reality check. Simms Jenkins, an Atlanta marketing executive, says he’s recently relied on sites like these to both buy and sell homes. "I can’t imagine 25 years ago, when people would just go out and spend their entire Saturday looking at homes," Jenkins says. "You don’t have to do that now."

But what’s a godsend to Jenkins is an ongoing mystery to Mike Battaglia. Battaglia lives in a Frank Lloyd Wright inspired mansion in Louisville, on a historic street, across from a lush park. But his neighborhood is decidedly eclectic — homes like his sit near much smaller starter homes — making it a challenge, local appraisers and agents say, to figure out how much each home is worth. Among the online estimates, that difficulty plays out in real time. Homes.com valued the manor at $761,700, but that figure dropped $85,000 in a month. Zillow pinned its worth at $1.1 million in December 2010, then posted no Zestimates at all for several months — only to peg its value at $327,000 in May, a 70 percent haircut. By fall, it was back up to $1 million.

Battaglia, a business consultant, says he knows the numbers are only estimates, but he still thinks that notion doesn’t register with people: "It’s the perception of value that affects people’s psychology." Zillow says its wide range of estimates was a result of volatility in the local market. Homes.com’s Doyle declined to comment specifically on Battaglia’s house, but says that a home in a neighborhood like his could definitely be vulnerable to inaccuracies. "If there’s a transaction next door and someone just gave away a house, it will throw off the model," Doyle says.

Indeed, appraisers and real estate consultants say that those models veer off target with alarming frequency. Typically, data for valuation models come from two sources: records from tax assessors and listing data for recent sales. Middleman companies — the dominant ones are CoreLogic and Lender Processing Services — gather this data from more than 3,000 U.S. counties and license them out to the Web sites and other model-builders. Collection is itself a challenge, because not every county tracks properties the same way. In North Carolina’s high-tech Research Triangle, anyone can get data directly from the Wake County website, while in rural Wright County, Mo., tax rolls are available only on paper. The size of a home could be reported by square footage or by the size of each bedroom and bathroom, so data companies must "scrub" the data to make it uniform. Even then, the data isn’t always useful in the field, say real estate pros. County assessors often use AVMs in newer subdivisions where floor plans don’t vary much. But with custom homes or neighborhoods going through gentrification, the models can go haywire. "You cannot use a computer model in certain areas and expect the value to come out right," says John May, the former assessor of Jefferson County, Ky.

Some properties’ data can be too tough a nut for any computer model to crack. On a quiet street in one of Brooklyn’s grander old neighborhoods stands the brownstone that, according to Zillow, was worth $31 million in 2007. "I don’t even know if there’s ever been a home in Brooklyn worth that much," says a spokeswoman for The Corcoran Group, the agency that now lists the property on the market, for $5 million. Zillow declined to discuss why its earlier estimate was so high, but a look at the house’s records suggests one potential reason for the enormous spread: Although the address is a two-family townhouse, the current owners use the entire house, giving them square footage that’s off-the-charts big by New York City standards.

Public records are hardly the only problem. Automated models aren’t designed to account for the unique details that often make or break a deal — something their designers readily acknowledge. AVMs usually can’t capture data that determines the condition of a property, such as whether there’s been a ton of wear and tear. Is a home right next to the railroad tracks or a golf course or a landfill? AVMs can’t always answer those questions, say industry pros, though GPS technology is improving things on that score. Models also can’t decipher the motivations of a buyer or seller, says Leslie Sellers, a past president of The Appraisal Institute. A couple who’s going through a nasty divorce, for example, may have taken the first offer that came along just to unload the property. For all these reasons, says Lee Kennedy, managing director of AVMetrics, a firm that audits and tests industrial-grade AVMs, the models that banks use often add a "confidence score" to their value estimates, with a low score signaling that it’s best to send in a human appraiser.

Consumers, however, don’t get to see a confidence score; instead, they get disclaimers, some of which are eye-opening. Zillow surfers who read the "About Zestimates" page find out that the site’s overall median error rate — the amount the estimates vary from the actual fair value — is 8.5 percent, and that about one-fourth of the estimates wind up being at least 20 percent off the properties’ eventual sale price. In some places, the numbers are far more dramatic: Gibson County, home of the West Tennessee Strawberry Festival, has a 57 percent error rate; in Hamilton County, Ohio, where the Cincinnati Bengals play, it’s 82 percent. Site users are always one click away from this data, but agents say few homebuyers read it (on Zillow’s homepage, the font for the "About Zestimates" link is slightly smaller than the main home-data type — and quite a bit fainter).

The sites argue that, over time, edits and corrections will help them perfect their numbers — and many of the corrections will come from their customers. On Homes.com, for example, anyone who knows certain specifics, like a homeowner’s surname and the year the home was last purchased, can edit the details to reflect, say, a sprawling two-bedroom addition. Zillow also allows site visitors to modify its property details, and in four years, it has accepted revisions on 25 million homes — perhaps the strongest testament to how seriously consumers take the estimates. Today, Zestimates are helpful enough, says the site, to give consumers an accurate sense of any home’s value. In the meantime, says Humphries, the company’s economist, "We’re always tweaking the algorithm or building a new one."

But in the eyes of some skeptics, that tweaking only increases the potential for off-base estimates. Steve Levine, a real estate agent in Shrewsbury, Mass., says he recently changed his home description on one site, adding the fact that he has a finished basement. Over the next six months, his home rose from $516,000 to $558,000 — a healthy 8 percent — while a neighbor’s nearly identical home sank in value. Levine says he has no way to tell how big an impact his update made, "but being able to change the facts is one more tool for manipulating the system." The sites say they believe intentionally wrong changes are rare, but acknowledge they can only go so far policing those tweaks. "It’s not 100 percent bulletproof," says Homes.com’s Doyle.

In the end, some critics say, the sites’ business models may pose a bigger problem for consumers than their algorithms. Even their flaws help to sustain the buzz around the estimates, drawing curious visitors. The online firms earn significant revenues from advertising, and the more traffic they get, the greater that ad revenue is. Zillow says 57 percent of its revenue comes from display ads from the likes of home-supply store Lowe’s, realty franchisor Century 21 and builder KB Home. Realtor.com’s parent company, Move Inc., generates 42 percent of its sales from listings by local agents, while Homes.com says advertising is its fastest growing revenue area. Trulia expects its traffic to grow now that it has launched a beta version of an online estimator, says head of communications Ken Shuman; after all, he adds, "consumers asked for it." As long as they keep asking, say industry insiders, stumbles in reliability aren’t especially important. "It’s not about being accurate or precise; it’s about being sticky," says Kennedy, of AVMetrics. For their part, the sites say stickiness matters to their business plans, but that they take the estimates very seriously; otherwise, as a Zillow spokesperson put it, "we wouldn’t have a team of Ph.D.s trying to make them better all the time." They depict the estimates as an ongoing experiment that is likely to achieve a very high degree of accuracy — someday. (At least for now, one site is deferring to agents in the home-value game: Realtor.com says it removes its estimates from homes once they actually go on the market.)

In the future, of course, homeowners may look at today’s estimates the way they look at those enormous console televisions from the 1940s — as an awkward early phase for what became a ubiquitous, reliable technology. But in the meantime, many are content to use them, flaws and all, whether in earnest or as entertainment. In an exurb outside Phoenix, Mike Lang, a commercial-property manager, has seen his home jump almost 20 percent in value on Zillow in the past few months — he’s not sure why. Though he’s not moving any time soon, he’s enjoying his time at the top of the real estate heap. "I’ve got the most expensive house in the neighborhood," Lang says.

 

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America’s Biggest Landowners, 2011

October 24, 2011

Daniel Fisher, Forbes.com

The media business must be nerve-wracking, what with its up-and-down fortunes and constant threat of being outflanked by the next iPad-delivered Internet service. Maybe that explains why Liberty Media’s John Malone pours so much of his extra cash into land.

Earlier this year Malone passed fellow media mogul Ted Turner to become America’s Biggest Landowner with 2.2 million acres, thanks to a giant investment in New England timberland. It capped a quick ascent for the cable-television magnate, who joined the list of the nation’s land barons last year, shoving aside ranchers and timber magnates, some of whom have owned their acreage for generations. He entered the list at No. 5 after buying New Mexico’s 453-square-mile Bell Ranch in 2010, then passed Turner earlier this year after buying 1 million acres in New Hampshire and Maine from private equity firm GMO Renewable Resources.

Malone blamed heritage, not nerves, for his love of the asset whose supply will never increase. As he told Forbes writer Monte Burke in March: “My wife says it’s the Irish gene. A certain land hunger comes from being denied property ownership for so many generations.” Turner, contacted by The Land Report magazine for its annual list of the nation’s largest landowners, said he was happy to hand over the title. “I consider John a good friend and have great respect for him,” Turner said.

This list of powerful landowners is compiled by Land Report researchers with the assistance of Fay Ranches, a Western land brokerage, the list includes the usual family timber dynasties as well as the owners of the King Ranch in Texas , once considered unimaginably huge but now, at 911,000 acres dwarfed by the holdings of Turner and Malone.

No. 2, of course, is Turner, the CNN founder who began buying ranches in the 1970s and now controls 2 million acres in New Mexico, Colorado , Montana , Florida and several other states. If $1 billion separates the men from the boys in terms of raw wealth, the new land barons can judge themselves by the number of Rhode Islands they own. Turner has almost three, including the spectacular Vermejo Park Ranch straddling the border of New Mexico and Colorado which is nearly as large as the Ocean State all by itself. Malone credits his fellow media magnate for giving him “this land-buying disease.”

At his customary spot in the Top 5 at No. 3 is Archie “Red” Emmerson, whose Sierra Pacific Industries boosted its holdings to almost 1.9 million acres this year. The forest products company , now entering its third generation of Emmerson management, is the second largest U.S. timber producer and works closely with the U.S. Fish and Wildlife Service to preserve species on its land. Emmerson and his father, Curly, began their march into the ranks of big time landowners in 1949 when they leased a California sawmill. Emmerson later borrowed $460 million to buy 522,000 acres in northern California, holdings that have since spread into Washington .

At No. 4 is recent entrant Brad Kelley, a Tennessee cigarette magnate who poured the profit from the $1 billion sale of his company into 1.7 million acres of land in Florida, Texas and New Mexico. Below him by half a million acres is the Irving family of Canada, who own a little less than 1/20th of the state of Maine (plus a bunch more in Canada). The descendants of thrifty Scottish immigrants, the Irving’s are in lumber for the long haul; they’ll plant some 28 million seedlings in their forests this year.

Here are America’s five largest landowners:

#5 Irving family Owns: 1.2 million acres in Maine.

These Canadian descendants of a Scottish sawmill operator are secretive and all business. They’ve amassed roughly a 20th of the state of Maine and will plant 28 million seedlings this year to keep the timber coming.

#4 Brad Kelley Owns: 1.7 million acres in Texas, New Mexico and Florida

This Nashville, Tenn., farmer’s son sold his Commonwealth Brands cigarette company for $1 billion in 2001 and began investing in land. Big time. The Land Report estimates the tightlipped Kelley owns 1.7 million acres. Most recently he’s reported to have bulked up his holdings with ranchland in the Big Bend region of Texas.

#3 Archie "Red" Emmerson Owns: 1.87 million acres in California and Washington

In 1949 Emmerson and his father, Curly, leased a sawmill and built the business into Sierra Pacific Industries. Red borrowed $460 million to buy 522,000 acres in California, a position since increased to almost 2 million acres. When he was briefly the nation’s largest private landowner, Red joked that Ted Turner "will probably go out and buy more land." He was right, but Emmerson is close behind.

#2 Ted Turner Owns: 2 million acres in New Mexico, Colorado, Montana , Florida and several other states.

An ardent conservationist, Turner began buying ranches in the 1970s and revived the nation’s bison herd to 55,000 head on his ranches across the upper Great Plains. No regrets about losing the title as the nation’s No. 1 land baron to John Malone: "I consider John a good friend and have great respect for him," Turner said.

#1 John Malone Owns: 2.2 million acres in Colorado, New Mexico, Wyoming, Maine and New Hampshire.

The cable-television billionaire was outed as one of the nation’s largest property owners by The Land Report two years ago and dramatically increased his holdings last year with the purchase of New Mexico’s 453-square-mile Bell Ranch. Now he passes longtime No. 1 Ted Turner with the purchase of 1 million acres of timberland in New Hampshire and Maine from an investment firm.

 

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Go Green–with Architecture

October 18, 2011

David Lachapelle, Design Boom

Natural Architecture

The natural environment still manages to fill us with a sense
of awe and amazement. despite the amount of scientific
knowledge mankind has gathered, nature still holds great
mysteries that we may never be able to unravel.
this complexity has continually daunted man. in frustration, we
try to control nature by enforcing order. as a result,
we have distanced ourselves from the earth, even though
our survival is completely dependent on it. we are now trying
to regain our close connection to nature.

There is an emerging art movement that is exploring mankind’s
desire to reconnect to the earth, through the built environment.
referred to as ‘natural architecture’, it aims to create a new,
more harmonious, relationship between man and nature by
exploring what it means to design with nature in mind.

The roots of this movement can be found in earlier artistic
shifts like the ‘land art’ movement of the late nineteen sixties.
although this movement was focused on protesting the
austerity of the gallery and the commercialization of art,
it managed to expand the formal link between art and nature.
this has helped develop a new appreciation of nature in all
forms of art and design.

The ‘natural architecture’ movement aims to expand on ‘land art’
by acting as a form of activism rather than protest. this new
form of art aims to capture the harmonious connection we
seek with nature by merging humanity and nature through
architecture. the core concept of the movement is that
mankind can live harmoniously with nature, using it for our
needs while respecting its importance.

The movement is characterized by the work of a number of
artists, designers and architects that express these principles
in their work. the pieces are simple, humble and built using the
most basic materials and skills. because of this, the results
often resemble indigenous architecture, reflecting the desire
to return to a less technological world. the forms are stripped
down to their essence, expressing the natural beauty inherent
in the materials and location. the movement has many forms of
expression that range from location-based interventions to
structures built from living materials. however all of the works
in the movement share a central ethos that demonstrates a
respect and appreciation for nature.

These works are meant to comment on architecture and provide
a new framework to approach buildings and structures.
they aim to infuse new ideas into architecture by subverting
the idea that architecture should shelter nature. instead,
the structures deliberately expose the natural materials used
in the building process. we see the branches, the rocks and
all the materials for what they are. we understand that these
structures won’t exist forever. the materials will evolve over
time, slowly decomposing until no evidence remains.
these features are intentional, provoking viewers to question
the conventions of architecture. the designers aren’t suggesting
that architecture must conform to their vision, they are just
providing ideas that they hope will inspire us all to rethink the
relationship between nature and the built environment.


‘la tonnelle’ by gilles bruni and marc babarit, 1996


‘ash dome’ by david nash, 1977


‘organic highway’ by mikael hansen 1995


‘bridge in moasi, china’ by edward ng, 2005


‘clemson clay nest’ by nils-udo, 2005


‘weidendom’ by sanfte strukturen, 2001


‘reed chamber’ by chris drury, 2002


‘running in circles’ willow and maple saplings, patrick dougherty, 1996


‘toad hall’ by patrick dougherty, 2004


‘fog pad’ by n architects, 2004


cover of ‘natural architecture’ by alessandro rocca, published by princeton architectural
press, 2007 – all the images featured in this article are taken it.

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What Home Buyers Really Want

April 25, 2011

Yahoo News

If your house is on the market then you might be at the point of tearing your hair out. After all, some sellers have had their home up for sale for years at this point. It can be maddening, and the competition is only getting more intense as prices continue to fall and more foreclosure homes flood the market.

So what, exactly, are buyers looking for this spring? In short, they’re looking for homes that are going to save them money. And when you think about it, it just makes sense. Mortgage loans are harder to come by, and thanks to an uncertain economy, people are less likely to splurge on a McMansion they’re going to have to pay to heat and cool for the next five years (i.e. save money on utility bills).

 

Even if you’re planning on staying in your home the next few years, it’s still helpful to know what people are looking for because you’re likely going to make changes and home improvements over the years. Knowing what potential buyers are interested in can help you invest your money wisely, so you have a better chance of selling when you’re actually ready. So what are people looking for?

1. Homes in Good Condition

Buyers aren’t interested in fixer-uppers right now. They don’t have a lot of cash, and they don’t want to spend money on home repairs immediately after they move in. They’re looking for homes that are in great condition and that are absolutely move-in ready. They don’t want to have to repaint, clean carpets, or cover up cracks in the ceiling. And they especially don’t want to spend money on major repairs. To increase your chances of an offer this spring and summer, make sure you do everything you can to get your home in tip-top shape. Utilize a house spring cleaning checklist and make your home spotless before showing it off.

2. Homes with Green Features

Saving money and living green are trends that aren’t likely to disappear anytime soon. Buyers are now looking for features which are going to cut down on a home’s operating costs, as well as lessen its impact on the environment. Tankless water heaters, high-efficiency furnaces, energy-efficient appliances, energy-efficient windows, adequate insulation, and solar panels are just a few that are making it on to buyers’ wish lists.

Basically, any "green" upgrade that’s going to save money on utility bills will be highly appealing to people looking for a new home. You probably don’t want to splurge on solar panels, a geothermal furnace, or other expensive green energy technologies, but there are some small changes you can make that will help potential buyers save money in your home. For instance, you could install a rain barrel or two against the house, add insulation, upgrade any old appliances to Energy Star rated models, and plant some trees to help with shading during the summer months.

 

3. Outdoor Living Spaces

In an uncertain economy, people travel less. This means that our homes are truly becoming our castles, no matter how small they are! Outdoor living spaces have always been popular, but they’re especially appealing now since so many people are taking staycations, and choosing to relax at home instead of going out at night and on weekends. If your backyard leaves a lot to be desired, then do whatever you can to turn it into an oasis. Build a deck, plant flowers, add a fountain, and turn it into an escape for potential buyers.

Final Thoughts

If your home is currently on the market, it’s important to do everything you can to remove any concerns buyers might have about your house. Sellers sure don’t want to continue spending money on their homes, but small changes such as planting flowers, repainting, and cleaning can go a long way towards getting you an offer. Remember, you don’t want to give people any reason not to buy your home!

Have you had any success selling your house in this market? What are some of the best methods that worked for you?

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Skin in the Game: Risk Retention Proposal Published

March 30, 2011

BY ADAM QUINONES –Mortgage News Daily

The Office of the Comptroller of the Currency, Treasury,  Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation (FDIC), U.S.Securities and Exchange Commission; Federal Housing Finance Agency (FHFA) and Department of Housing and Urban Development (HUD) have released a proposal to define Qualified Residential Mortgages (QRM). QRMs are home loans that will be exempt from the requirement that mortgage lenders retain a 5 percent share of each loan they originate that is packaged for securitization – keeping "skin in the game."

The Dodd-Frank financial reform bill already identified loans guaranteed or originated through FHA, VA, and USDA as qualified for exemption but left other products, including loans written by Fannie Mae and Freddie Mac, up to federal regulators to determine. Under the proposed definition released today,  Fannie Mae and Freddie Mac will indeed be exempt from risk retention regs at least while the GSEs are under government control. When/If Fannie and Freddie are released from conservatorship their exemption status will be revisited. For non-agency loans to meet the QRM definition and avoid being subject to risk retention regs, they must have down payments of 20% or more and DTI of 28% / 36% or less. Also, QRMs will not include products that add complexity and risk to mortgage loans, such as terms permitting negative amortization, interest-only payments, or programs with significant payment shock potential.

FDIC Chairman Sheila C. Bair delivered the following statement at the FDIC’s Board Meeting today:

"This morning we are proposing to address a key driver of the housing crisis: misaligned economic incentives arising from the widespread use of private securitization to fund mortgage lending. Almost 90 percent of subprime and Alt-A originations in the peak years of 2005 and 2006 were privately securitized. During that period, the separation of originating and securitizing loans from the risk of loss in the event of default fed a massive amount of lax, unaffordable lending which fueled the housing bubble. Since neither lenders nor securitizers appeared to hold any real risk in the transaction, the "originate-to-distribute" model of mortgage finance misaligned incentives to reward the volume of loans originated, not their quality. The consequences for our economy have been severe.

Today, the market is trying to find a new model. Title IX of the Dodd Frank Act seeks to address the defects of the prior model of securitization by imposing requirements for transparency, due diligence, representations and warranties, and retention of credit risk. The SEC has already proposed rules to address transparency.
The rule before the Board today proposes new standards for retention of credit risk to help ensure that securitizers will hold "skin in the game" which will align their interests with those of bondholders. This will encourage better underwriting by assuring that originators and securitizers can not escape the consequences of their own lending practices. Fundamentally, this rule is about reforming the "originate-to-distribute" model for securitization, and realigning the interests in structured finance towards long-term, sustainable lending. If we are truly interested in restarting securitization, then we must restore investor confidence and the soundness of the securitization model. As required by Dodd-Frank, the proposed rule creates a comprehensive framework for risk retention

The general rule set out in Dodd-Frank is to require issuers of securitized loans to retain a 5 percent interest in the risk of loss. The law provides an exception to that rule and directs the agencies to set a standard for underwriting and product features that, as shown by historical data, result in a lower risk of default such that risk retention is not necessary. The QRM is the exception, not the rule, and as such, I believe should be narrowly drawn. Properly aligned economic incentives are the best check against lax underwriting. Because QRM loans are exempt from risk retention, the proposed QRM definition sets appropriately high standards regarding documentation of income, past borrower performance, a low debt-to-income ratio for monthly housing expenses and total debt obligations, elimination of payment shock features, a maximum loan-to- value or LTV ratio, a minimum down payment, and other quality underwriting standards. This does NOT mean that under the rule, all home buyers would have to meet these high standards to qualify for a mortgage. On the contrary, I anticipate that QRMs will be a small slice of the market, with greater flexibility provided for loans securitized with risk retention or held in portfolio.
Many have expressed concern that imposing a specific LTV standard, such as 80 percent, or a specific down payment standard, such as 20 percent, will impair the access of low- and moderate-income borrowers to mortgage credit. As a consequence, we are seeking comment on the impact of the QRM standards on low- and moderate income borrowers as we consider the comments on the NPR and work towards a final rule. We take these concerns very seriously and want to make sure they are fully addressed. In particular, I would welcome comment on how and whether we can assure that the unique needs of LMI borrowers can be met through FHA programs as well as appropriately underwritten portfolio lending and risk retention securitizations.
Also included in the QRM standards are loan servicing requirements. Continued turmoil in the housing market caused by inadequate and poor quality servicing underscores the need to make sure that future securitization agreements provide appropriate resources and incentives to mitigate losses when loans become distressed. Servicing standards must also provide for a proper alignment of servicing incentives with the interests of investors and address conflicts of interest. The servicing standards included as part of the QRM requirements address many of the most significant servicing issues. I am particularly pleased that the servicing standards require that there be financial incentives for servicers to consider options other than foreclosure when those options will maximize value for investors. The proposed standards also require servicers to act without regard to the interests of any particular tranche of investors; to disclose any second-lien interests if they service the first lien; and to workout and disclose to investors in advance how second liens will be dealt with if the first lien needs to be restructured. I welcome comment on the proposed servicing reforms, whether they can be strengthened, and whether they should apply more generally to all private securitizations, not just QRMs."

Risk Retention Proposed Rule:

I. Section 941(b) of the Dodd-Frank Act

  • Section 941(b) of the Dodd-Frank Act1 creates section 15G of the Securities Exchange Act. New section 15G requires the OCC, FRB, FDIC, and SEC2 to issue joint regulations requiring securitizers of asset-backed securities (ABS) to retain an unhedged economic interest in a portion of the credit risk (not less than 5%) for assets that the securitizer packages into the securitization for sale to others, except where those assets are underwritten according to underwriting standards established by regulation.
  • Where these regulations address the securitization of residential mortgage assets, HUD and the FHFA also are part of the joint rulemaking group. The Treasury Secretary, as Chairperson of FSOC, is directed to coordinate the joint rulemaking.
  • The agencies are directed to define the appropriate form and amount of risk retention interests, to consider circumstances in which it might be appropriate to shift the retention obligation to the originator of the securitized assets, and to create rules addressing complex securitizations backed by other asset-backed securities.
  • The agencies also must implement the statutory exemption from the risk retention requirements for "qualified residential mortgages" (QRMs) with underwriting and product features that historical loan performance data indicate result in a lower risk of default. Securities backed entirely by QRMs are not subject to any risk retention requirement.
  • Section 15G also requires the agencies to establish underwriting standards indicative of low credit risk for other asset classes used in securitizations, including auto loans, commercial loans, and commercial real estate loans. Securitizations backed by assets that meet these standards may be subject to less than 5% risk retention.

II. Overall Approach

  • The proposed rule prescribes underwriting criteria for QRMs and certain other asset classes, and provides that sponsors of securitizations comprised of these "qualified assets" are not required to retain risk under section 15G.

Consistent with the statutory purpose of requiring "skin in the game" for all but the least risky assets, the QRM underwriting standards are conservative. The proposed standards also are designed to be unambiguous; they draw "bright lines" in order to facilitate transparency and enable verification by securitization sponsors and investors.

  • While the risk retention exemptions under the proposal area conservative, the proposal also contains various options for how the risk retention requirements can be satisfied for non-exempt assets. A securitizer may then chose, based on the type of asset involved and market and investor expectations, which form of risk retention to use. The agencies intended that these options would provide flexibility so that the risk retention requirements not impede the reemergence of robust securitization markets for nonexempt loans.
  • Comments received during the public comment process will be vital to the agencies in evaluating the appropriate stringency of standards for QRMs and other categories of assets exempt from risk retention, and whether the flexibility of the multiple risk retention options proposed would achieve the agencies’ objective of not impeding securitization activities for non-exempt asset classes.

III. Description of the proposal

A. Underwriting Standards

1. Qualified Residential Mortgages (QRMs)

Historical Data. The proposed rule establishes the terms and conditions under which a residential mortgage would qualify as a QRM. As required by the statute, the agencies developed these underwriting criteria through evaluation of historical loan performance data, which is described, in detail, in the preamble to the proposal.

Nontraditional Product Features. The proposed rule generally would prohibit QRMs from having product features that add complexity and risk to mortgage loans, such as terms permitting negative amortization, interest-only payments, or significant interest rate increases.

Underwriting Standards. The proposed definition of QRM would establish conservative underwriting standards designed to ensure that QRM loans are of very high credit quality. These standards include:

  • Maximum front-end and back-end borrower debt-to-income ratios of 28% and 36%, respectively;
  • A maximum loan-to-value (LTV) ratio of 80% in the case of a purchase transaction (with a 75% combined LTV for refinance transactions, reduced to 70% for cash-out refis);
  • A 20% down payment requirement in the case of a purchase transaction;Borrower credit history restrictions, including no 60-day delinquencies on any debt obligation within the previous 24 months.

Mortgage Insurance. The LTV ratio must be calculated without considering mortgage insurance. Although mortgage insurance protects investors from losses when borrowers default, and thus lessens the severity of the loss, the statute directs the agencies, in developing the QRM criteria, to consider whether mortgage insurance reduces the risk that default will occur in the first place.

Servicing Requirements. The proposal includes in the criteria for a QRM a limited set of servicing requirements that may lower the risk of default on residential mortgages The proposal requires that the originator of a QRM incorporate in the mortgage transaction documents certain requirements regarding servicing policies and procedures for the mortgage, including procedures for loss mitigation actions, and procedures to address subordinate liens on the same property securing other loans held by the same creditor.

  • The servicing requirements focus on establishing a process for the creditor to take loss mitigation activities into account in servicing QRMs, but they do not dictate particular types of actions to be undertaken, and they factor in consideration of the relative estimated economic impacts on the QRM of loss mitigation versus other approaches in dealing with distressed loans.
  • The servicing requirements included in this proposal cannot supplant the ongoing interagency effort to develop national mortgage servicing standards. Those national mortgage servicing standards would apply to residential mortgages regardless of whether the mortgages are QRMs, are securitized, or are held in portfolio by a financial institution. The primary objective of this separate interagency effort is to develop a comprehensive, consistent, and enforceable set of servicing standards for residential mortgages that all servicers would have to meet. Also, the separate interagency effort is taking into consideration a number of aspects not included in the QRM servicing standards, including the quality of customer service provided throughout the life of a mortgage; the processing and handling of customer payments; foreclosure processing; operational and internal controls; and servicer compensation and payment obligations.
  • The proposal also requests comment on whether this national approach is a more effective way to address problems of servicing than the proposed QRM criteria.

Alternative Approach. The preamble also requests comment an alternative approach that would apply less conservative underwriting standards to QRMs, including lower down payments and the use of private mortgage insurance, and would increase the risk retention requirements for non-QRM mortgages.

2. Other "qualified assets"

The proposed rule also would not require a securitizer to retain any portion of the credit risk associated with a securitization transaction if the ABS issued are exclusively collateralized by auto loans, commercial loans, or commercial real estate loans that meet underwriting standards included in the proposed rule.3 The underwriting standards proposed under this provision of 15G have been designed to be robust and ensure that the loans backing the ABS are of very low credit risk. They were developed by the Federal banking agencies based on supervisory expertise.

Auto Loan Asset Class. Given the highly depreciable nature of the collateral for auto loans, the underwriting standards associated with the auto loan asset class focus primarily on the borrower’s ability to repay the loan, comparable to industry standards for unsecured lending.

Commercial Loan Asset Class. The underwriting standards associated with the commercial loan asset class are designed to assure that the borrower’s business is in, and will remain in, sound financial condition and maintain the ability to repay the loan.

Commercial Real Estate Loan Asset Class. The underwriting standards associated with the commercial loan asset class are designed to ensure that the property securing the loan is stable and provides sufficient net operating income to repay the loan, and recognize the relatively lower risk presented by stabilized properties and multi-family properties with established tenants.

Residential Mortgage Asset Class. Section 15G also contemplates a residential mortgage asset class with reduced risk retention comparable to the proposed rules for auto loans, commercial loans, and commercial real estate loans. The agencies are not proposing a different set of residential mortgage underwriting standards than the QRM standards at this time. One issue that would be raised by an additional residential mortgage asset class  is whether the risk retention requirement should be higher than zero, and whether such a retention level would provide adequate incentive for underwriting mortgages meeting the underwriting standards for the class.

  • The agencies are requesting comment whether a residential mortgage asset class should be created, whether private mortgage insurance should be included, what other appropriate underwriting criteria might apply, and what level of risk retention would be appropriate.

Other Asset Classes. The agencies have the authority to develop underwriting rules for more asset classes, but the agencies are not proposing to do so at this time. Although there are additional asset classes in the ABS market, they exhibit significant differences among underwriting factors for different loans within the class, or tend to be higher risk assets. As a practical matter, this makes it difficult to establish robust underwriting standards for an entire class through regulation. Moreover, the agencies’ proposed risk retention alternatives present a great deal of flexibility that should facilitate securitization activities in these other asset classes.

3. Quality Control

The proposal contains two provisions to guard against abuse of the QRM and other qualifying asset exemptions.

  • First, the process of selecting and assembling the assets for securitization must be performed according to adequate internal supervisory controls to ensure they were underwritten in accordance with the rule, and the sponsor must provide a selfcertification as to the adequacy of these controls to potential investors in the securitization.
  • Second, if any of the loans are subsequently determined not to have been underwritten in accordance with the standards, the sponsor must buy them back from the pool for cash (at unpaid principal balance plus accrued interest) within 90 days.

4. Other exempt assets

Federal and State Guarantees. Consistent with section 15G, the proposed rule also exempts government-guaranteed securitizations and assets from the risk retention requirements.

Pass-through Re-securitization Transactions. The rule also exempts single class resecuritizations providing for the pass-through (net of expenses) of principal and interest received on underlying asset-backed securities for which credit risk already has been retained in accordance with section 15G (or which were exempt).

B. General Risk Retention Requirements

1. Scope of Application.

Sponsor. The proposed rules generally require that a securitization "sponsor," or one of its consolidated affiliates, hold the required risk retention. Practically speaking, of all the various parties involved in a typical securitization transaction, the "sponsor" is the true decision-maker behind the securitization transaction and determines what assets will be securitized. In light of this, the proposed rule provides that a sponsor of an ABS transaction is the party required to retain the risk under the rule. The proposed rule defines the term "sponsor" in a manner consistent with the definition of that term in the SEC’s Regulation AB.

Originator. The proposed rule would permit a securitization sponsor to allocate a proportional share of the risk retention obligation to the originator(s) of the securitized assets, subject to certain conditions. This would have to be voluntary on the originator’s part, however, through a contractual agreement with the sponsor.

  • The proposed rule defines "originator" as the person that "creates" a loan or other receivable. This only covers the original creditor-and not a subsequent purchaser or transferee.
  • To ensure the originator has "skin in the game," the proposal requires the originator to be the originator for at least 20 percent of the loans in the securitization, take on at least 20 percent of the risk retention, and pay up front for its share of retention, either in cash or a discount on the price of the loans the originator sells to the pool.

2. Acceptable Forms of Risk Retention.

Consistent with the statute, the proposed rule generally would require a sponsor to retain an economic interest equal to at least 5% of the aggregate credit risk of the assets collateralizing an issuance of ABS (the "base" risk retention requirement). The agencies have sought to structure the proposed risk retention requirements in a flexible manner that will allow the securitization markets for non-qualified assets to function in a manner that both facilitates the flow of credit to consumers and businesses on economically viable terms and is consistent with the protection of investors.

The proposed rule provides several options for the form in which a securitization sponsor may retain risk. These include:

  • A 5% "vertical" slice of the ABS interests, whereby the sponsor or other entity retains a specified pro rata piece of each class of interests issued in the transaction (that is, the sponsor must hold 5% of each tranche);
  • A 5% "horizontal" first-loss position, whereby the sponsor or other entity retains a subordinate interest in the issuing entity that bears losses on the assets before any other classes of interests;
  • An "L-shaped interest" interest whereby the sponsor holds at least half of the 5% retained interest in the form of a vertical slice and half in the form of a horizontal first-loss position;
  • A "seller’s interest" in securitizations structured using a master trust collateralized by revolving assets whereby the sponsor or other entity holds a 5% separate interest that participates in revenues and losses on the same basis as the investors’ interest in the pool of receivables (unless and until the occurrence of an early amortization event);
  • A representative sample, whereby the sponsor retains a 5% representative sample of the assets to be securitized, thereby exposing the sponsor to credit risk that is equivalent to that of the securitized assets; or
  • For certain "eligible" single-seller or multi-seller asset-backed commercial paper conduits collateralized by loans and receivables and covered by a 100% liquidity guarantee from a regulated bank or holding company, a 5% residual interest retained by the receivables’ originator-seller. This option would not be available to ABCP programs that operate as SIVs or securities arbitrage programs.
  • The rule also provides that Fannie Mae and Freddie Mac will be able to satisfy the risk retention requirement through their guarantees (which cover 100% of principal and interest) as long as they continue to operate under the conservatorship or receivership of the FHFA and with direct government support through the Treasury Department’s Senior Preferred Stock Purchase Agreement.

Premium capture cash reserve account. In addition to the base credit risk retention requirement, the proposed rule would prohibit sponsors from receiving compensation in advance for excess spread4 income to be generated by securitized assets over time. The proposed rules accomplish this by imposing a "premium capture" mechanism designed to prevent a securitizer from structuring an ABS transaction in a manner that would allow the securitizer to take an up-front profit on a securitization (before any unexpected losses on the securitized assets appeared) that would pay the sponsor more up front than the cost of the risk retention interest it is required to retain. o If a sponsor structures a securitization to monetize excess spread on the underlying assets-which is typically effected through the sale of interest-only tranches or premium bonds-the proposed rule would "capture" the premium or purchase price received on the sale of the tranches that monetize the excess spread and require that the sponsor place such amounts into a separate "premium capture cash reserve account" in the securitization.

  • The amount placed into the premium capture cash reserve account would be separate from and in addition to the sponsor’s base risk retention requirement under the proposal’s menu of options, and would be used to cover losses on the underlying assets before such losses were allocated to any other interest or account.

("Excess spread" is the difference between the gross yield on the pool of securitized assets less the cost of financing those assets (weighted average coupon paid on the investor certificates), charge-offs, servicing costs, and any other trust expenses such as insurance premiums, if any.)

3. B-Piece Buyers in CMBS transactions.

As contemplated by section 15G, the agencies propose to permit, for certain securitizations of commercial mortgage-backed securities (CMBS), a form of horizontal risk retention in which the horizontal first-loss position initially is held by a third-party purchaser (known as a "B-piece buyer") that specifically negotiates for the purchase of the first-loss position and conducts its own credit analysis of each commercial loan backing the CMBS.

  • Since B-piece buyers also typically serve as the special servicer of troubled assets in the pool, investors have sometimes complained that they manipulate their servicing powers to benefit the residual interest they hold (offsetting the consequences of poor underwriting for the firs-loss piece) To address this concern, the agencies are proposing to require appointment of an independent Operating Advisor to oversee servicing.

4. Prohibition Against Hedging or Transferring Required Risk Retention

As a general matter, the proposed rule prohibits a securitizer from hedging its required retain interest or transferring it, unless to a consolidated affiliate.

  • The rule would permit hedging of interest rate or foreign exchange risk; pledging of the required retained interest on a full recourse basis; and hedging based on an index of instruments that includes the asset-backed securities, subject to limitations on the portion of the index represented by the specific securitization transaction or applicable issuing entities.

D. Disclosure Requirements

The proposed rule also includes disclosure requirements specifically tailored to each of the permissible forms of risk retention. The disclosure requirements are designed to provide investors with material information concerning the securitizer’s retained interests, such as the amount and form of the interest retained, and the assumptions used in determining the aggregate value of ABS to be issued (which generally affects the amount of risk required to be retained). Further, the disclosures are designed to provide investors and the agencies with an efficient mechanism to monitor compliance.

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House votes to end HAMP

March 30, 2011

by JON PRIOR –Housingwire.com

The House of Representatives voted Tuesday 252-170 to terminate the Home Affordable Modification Program roughly two years early.

Rep. Patrick McHenry (R-N.C.) introduced H.R. 839 as part of a wide effort by Republicans to shut down programs designed by the Obama administration to aid borrowers and localities in the middle of a foreclosure crisis. The Treasury set aside $30 billion for HAMP but has spent roughly $1.2 billion so far.

The House already voted to cut the last $1 billion from the Neighborhood Stabilization Program, the yet-to-begin $1 billion Emergency Homeowner Loan Program from the Department of Housing and Urban Development and the recently started Federal Housing Administration Short Refi program.

But the Obama administration reiterated its threat to veto the HAMP-termination bill late Monday. And the Democratic-controlled Senate is unlikely to pass the legislation.

Servicers participating in HAMP have started 600,000 permanent modifications since the program launched in March 2009, but at its current pace the program will not reach the 3 million to 4 million originally estimated.

Rep. Spencer Bachus (R-Ala.) said HAMP has caused more harm than good, and that taxpayers should no longer fund bailouts for the banks through a program that promotes strategic default.

"We should not waste taxpayer dollars on failed government programs that do not work and actually make things worse for struggling homeowners," Bachus said. "These programs may have been well-intentioned, but they’re doing more harm than good."

House Democrats sent a letter to Treasury Secretary Timothy Geithner Monday night outlining changes to HAMP they would like to see, most notably fines for underperforming servicers. On Tuesday, the Treasury said it would begin grading the top servicers in the program.

"I certainly believe that HAMP can be improved – and I call on the administration to make immediate improvements – but the legislation before us today makes no effort to strengthen this program," Rep. Elijah Cummings (D-Md.) said. "Instead, it simply abandons families on the brink of losing their homes, it harms investors, and it threatens our nation’s entire economic recovery."

Acting Treasury Secretary Tim Massad denounced ending the program in a statement released Tuesday night.

"This program has helped hundreds of thousands of families across the country avoid foreclosure, and each month it continues to help tens of thousands of additional homeowners. Moreover, it has helped establish better standards for the mortgage industry that have resulted in millions more being able to stay in their homes," Massad said. "If we end this program now, we will simply make it harder to prevent unnecessary foreclosures and for our country to recover from this housing crisis."

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Mortgage fraud greater in areas riddled with foreclosures: Interthinx

March 28, 2011

by KERRI PANCHUK –Housingwire.com

Two indices that measure employment-income fraud, as well as identity fraud, are up more than 30% over last year, according to Interthinx, a firm that measures fraud practices by analyzing fraud risks within mortgage applications.

In its latest Mortgage Fraud Risk Report, Interthinx said mortgage fraud risk in 2010 was highest in areas with heightened levels of foreclosure activity. The report concluded that "criminals may be migrating to those areas" to make a profit.

This  heightened risk comes at a time when fraud schemes are designed to take advantage of distressed housing markets through the deflating of short sale values to generate profits, the report claims.

“As lenders acclimate to changing government regulations and economic conditions, so do the fraudsters,” said Kevin Coop, president of Interthinx. “Our most recent analysis indicates that fraud risk is on the rise again and that fraudsters are migrating to stay ahead of efforts to stop them. Most disturbing is the link between foreclosure activity and mortgage fraud."

Areas with more foreclosure activity — California and Nevada — are experiencing greater fraud risks, according to the report.

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Monthly pending home sales rise, still below 2010 levels

March 28, 2011

by KERRI PANCHUK –Housingwire.com

Pending home sales increased 2.1% in February even though the index measuring sales activity is still 8.2% below year-ago levels, according to the National Association of Realtors.

NAR’s Pending Home Sales Index is a barometer of home sales, which bases its analysis of pending home sales activity on the number of sale contracts signed each month.

The index rose 2.1% between January and February, hitting 90.8 last month on the index scale, compared to 88.9 in January. The index for the same month in 2010 held at 98.9.

"Month-to-month movements can be instructive, but in this uneven recovery it’s important to look at the longer term performance," Lawrence Yun, NAR chief economist, said. "Pending home sales have trended up very nicely since bottoming out last June, even with periodic monthly declines. Contract activity is now 20 percent above the low point immediately following expiration of the home buyer tax credit."

He added, "All of the regions saw gains except for the Northeast, where unusually bad winter weather may have curtailed some shopping and contract activity."

The pending home sales index in the northeast fell 10.9% last month to 65.5, 18.4% below year ago levels.

Meanwhile, in the Midwest, the index rose 4% in February, hitting 81.1%. Pending home sales in the south also increased 2.7% with the index reaching 100.3; and in the west the index rose 7%, hitting 105.6.

"We may not see notable gains in existing-home sales in the near term, but they’re expected to rise 5 to 10 percent this year with the economic recovery, job creation and excellent affordability conditions providing confidence to buyers who’ve been on the sidelines," Yun said.

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