Document 6503685

DECEMBER
C-4
21,2007
Estate
OlflST COMMINTARY
Recovery for existing-home sales, not for new homes
Exuting-home sales are projected
to trend up in 2008, with pending
home sales showing a slight nearterm rise, according to the latest
forecast by the National Association
of Realtors (NAR). However, a recovery for new-home sales is unlikely
before 2009.
Lawrence Yun, NAR chief economist, said he believes the worst part
of the credit crunch has already
worked its way through the data.
T h e unusual mortgage disruptions
that peaked in August were clearly
seen in lower home sales that were
finalized in September and October,
so the market was underperforming,"
he said. "Now that mortgage conditions have improved, some postponed
activity should turn up in existinghome sales over the next couple of
months, and I expect sales at fairly
stable to slightly higher levels."
The Pending Home Sales Index
PHSI), a forward-looking indicator
based on contracts signed in October,
increased 0.6 percent to an index of
87.2 from an upwardly revised reading of 86.7 in September. It was the
second consecutive monthly gain, but
remained 18.4 percent below the
October 2006 index of 106.8.
"The broad trend over the coming
year will be a gradual rise in existing-home sales, but because sales are
exceptionally low in the final months
of 2007, total Bales for 2008 will be
only modestly higher than 2007," Yun
aaid.
The PHSI in t h e Northeast return to more normal patterns in
jumped 16.0 percent in October to 2O09, perhaps rising one or two per80.6 but is 11.1 percent below a year centage points above the rate of
ago. In the West, the index rose 8.4 inflation," Yun said.
"Even with a modest decline in
percent to 87.3 but i s 16.9 percent
lower than October 2OO6. The index the national aggregate price this
in the Midwest slipped 1.4 percent in year, it's important to keep in mind
October to 85.5 and i s 11.7 percent that nearly two-thirds of the metro
below a year ago. In the South, the areas in the U.S. are showing price
index dropped 7.8 percent in October increases," he said. "The apparent
to 91.6 and is 25.3 percent below disparity results from fewer sales in
high-cost markets, so a change in the
October 20O6.
"The
improvement
in t h e mix of sales is dragging down the
Northeast reaffirms a trend appar- national median home price."
Areas showing healthy price
ent for some months now that shows
signs of recovery, noteworthy gains include disparate markets
because that was the first region to such as Gary-Hammond, Ind.;
slump, and the gain in the West indi- Binghamton, N.Y.; Corpus Christi,
cates some easing of interest rates Texas; and Spokane, Wash. "We
for jumbo loans," Yun said. can't emphasize enough how much
"Lawmakers need to understand local conditions vary, even within a
that raising the loan limits on FHA given area, so it's important for conand GSE-backed conventional loans sumers to make decisions based on
will markedly improve mortgage local market conditions," Yun said.
availability."
New-home sales are forecast at
Existing-home sales are likely to 788,000 this year and 693,000 in
total 5.67 million this year, the fifth 2008, down from 1.05 million 2006;
highest on record, rising to 5.70 mil- no sustained improvement i s seen
lion in 2008, in contrast with 6.48 for new homes until 2009. Because
million in 2006. Existing-home builders have adjusted production,
prices should be down 1.9 percent to housing starts, including multifamia median of $217,600 for all of 2007, ly units, will probably total 1.36 miland then rise 0.3 percent to $218,300 lion this year and 1.16 million in
in 2008.
2008, down from 1.8O million last
"Home price growth in the vast year. The median new-home price is
affordable midsection of America projected to drop 3 . 0 percent to
will help raise the national median $239,100 for 2007, and then decline
existing-home price slightly in 2008. another 0.2 percent t o $236,600 in
I then expect price appreciation to 2008.
How to explain the
mortgage meltdown
ING DIRECT
There will likely be more than 1 million foreclosures
this year. In many places, home prices have dropped significantly. Speculation fever has been replaced with talk
of a crisis. Even President Bush has stepped in with a
plan to help some troubled homeowners.
In a way, though, this is a much-needed correction.
We learn to swim by paddling around the wading pool
— not by diving into the deep end. Today's situation isn't
much different: People caught in the "deep end" — with
loans they can't afford and homes in peril of foreclosure
— are often those who jumped into homeownership
before learning how to stay afloat financially.
Here's how it happened. In the mid-1990s, the housing
market grew dramatically. The creation of a secondary
market for sub-prime loans made credit available to
those who were historically underserved. At the same
time, a roaring stock market
gave people the assets to
purchase more expensive
We must accept
homes.
that not everyone is
When the dot-com bubble
investors
sought
ready for bomeown- burst,
refuge from volatile stocks
ership.
by pumping money into real
estate. In short, the booming
stock market that launched
the housing bubble inflated it even more when stocks
plummeted. Also during that time, to stem a crisis of consumer confidence, the Federal Reserve began a series of
interest rate cuts that cheapened credit.
Within a few years, the homeownership rate hit an alltime high. Constant for more than 20 years around 64
percent, homeownership soared from 1995 to 2006 — hitting nearly 70 percent.
This rise was mostly due to people who dove into the
deep end. Before the mass-merchandizing of sub-prime
lending, and seemingly cheap credit, many of these buyWESTFIELD — Harvey earned membership in the ers
CRANFORD — ERA
would never have qualified for a conventional mortTekel, branch manager of President's Club and is rec- gage.
Meeker Realty Co. has
Weichert,
Realtors ognized in the top 1 percent
named Virginia Garcia the
Some took out oversized loans without understanding
Westfield Office, announced of the company's 18,500 how
office's Sales Associate of
much debt they were assuming and how much their
sales
associates.
that
sales
associates
were
the Month for October
interest
and payments could change. Others dove in
recognized for their indusJim Euwer led the office with fullrates
2007.
knowledge
— gambling on a superheated martry successes in the month in units. Euwer is a mem"Virginia is an invaluket to boost their home's value, so that they'd be able to
of
November.
ber
of
Weichert's
Sales
and
able contributor to our
handle high-priced loans by refinancing later at lower
Kerry McDevitt led the Marketed Clubs.
office," said Vita Zoltak,
rates.
Others hoped to make money by "flipping" their
The
Westfield
office
led
office
in
sales
and
volume.
owner of ERA Meeker
properties.
McDevitt is a member of the region in resales, resale
Realty Co. This award is a
For a few years, it seemed to work. In much of the
Weichert's
Sales and marketed listings, resale
testimony to the quality of
revenue units and resale country, prices steadily increased. Homes — traditionally
Marketed Cluba.
her commitment to cusviewed as places to live and long-term financial commitKathleen Gwaldis led dollar volume.
tomer satisfaction as well
These top-producing real ments — became short-term investments.
the office in listings.
a i a reflection of her profesBuyers, who were already deep in mortgage, datffcypt in
Gwaldis also led the estate professional^ c*lf be
sionalism and commitment
out
at Weichert's even deeper by using their homes as ATMs, cashing
Weichert region in resale reached
to offering her clients outJ
marketed listings. A mem- Westfield Office at (908)the equity created by the real-estate appreciation.
standing real estate guidVIRGINIA GARCIA
But many of these borrowers weren't in a position to
ber of Weichert's Sales and 654-7777. The office i s
ance. She strives to meet
keep up with their loans if the housing market cooled.
the specific needs of both Professional (ASP) designa- Marketed Clubs, Gwaldis located at 185 Elm St.
When it did, they faced the prospect of owing more than
homebuyers and sellers."
tion.
their homes' retail value, or of coping with a mortgage
Specializing in new and
ERA Franchise Systems
that would soon reset to a much higher monthly payment.
resale residential
real is a global leader in resiMany people who got in over their heads are hurting.
estate, Garcia is a member dential real estate industry
WESTFIELD — Kim "While providing exem- So are the companies holding the securities backed by
of the National and New for 30 years in developing
Jersey Associations of consumer oriented prod- Gibson has been named the plary customer service, these loans — for the same reasons.
Realtors as well as the ucts and services. Each sales associate of the these sales associates have
To prevent a similar crisis from happening again,
Greater Eastern Union ERA office is independently month for October at the acquired top-notch negoti- some common sense is needed. To begin, we must accept
Westfield
office
of ating skills to ensure their that not everyone is ready for homeownership.
County Board of Realtors. owned and operated.
Prudential
New
Jersey
client satisfaction." said
This year Garcia has
Garcia can be reached at
In the past, young people entering the work force typWilliam O. Keleher, Jr., ically rented for a while to establish good credit and save
earned the Sales Associate ERA Meeker Realtor Co., Properties.
The award is presented chairman and CEO offor a down payment. Mortgages were harder to get, but
of the Month award four located at 124 South Ave.
times and achieved the East in Cranford, at (908)monthly to honor outstand- Prudential New Jersey they were solid.
ing sales professionals in Properties. "Their dedicaAccredited
Staging 272-2570, ext. 37.
Lenders who offered zero-down home loans and loweach of the company's 25 tion and enthusiasm has cost,
rates to "cram" buyers into homes that
offices
statewide who set them apart and they are they introductory
couldn't
otherwise
afford were irresponsible. But so
t h e highest appreciated by their clients were the borrowers who
Email usyour news! union@njnpuMishing.com demonstrate
cast caution to the wind and
level of professionalism.
throughout the buying or either overpaid for a house, or bought into a house or
selling process."
locale beyond their means.
Information on home
Further, lenders should hold and manage the loans
buying and selling in the they create. When lenders sell off the loans they write to
Mortgage Fruduct Advertisement
area, access to all real investors, they have every incentive to "move as much
M O K K i . U . K ( ; i ll)i
Information provided by
INFOTRAK National Data Services
estate related services, and paper" as possible — as long as they're not the ones holdRatci M of 11/14/0?
details about a career in ing worthless paper at the end of the day.
hllp://ii j.com/morf ^ajicci'iiti
real estate are available by
Put another way, the "mortgage meltdown" should
contacting Prudential New teach both borrowers and lenders to behave more rationJersey Properties' Westfield ally.
APR Lack
Rate
A M Ltwfc
office at 215 North Ave.
The author is the head of lending services for ING
American Enterprise Bank or FL 877-247-7107
West
or
(908)
232-5664.
DIRECT.
30-yr Fixed
6.125
0.000
6.I4K
30
Sales associates recognized
V Garcia is associate of
the month at ERA Meeker at Weichert in Westfield
Gibson earns praise at PNJP
15-yr Fixed
5.750
0.00O
5.787
30
30-yr Jumbo
7.000
0.000
7.040
30
30-yr FHA
6.250
0.000
6.275
30
5 STAR National Lender raled by Consumers.
FDIC Insured Bank
wwiv.ucbn.com
Now is the time to turn that
adjustable rate loan into a
low-interest fixed-rate loan.
4655 Salisbury Rd. Sti- 100. Jacksonville. FL
National Average Mortgage Rates
This Week
Product
Last Week
30 yr Fixed
5.K43
5.652
15 yr Fixed
5.4 5 8
5.206
5/1 ARM
5.759
5.601
30 yr Juinbo
6.718
6.605
15 yr Jumbo
6.304
6.227
5/1 ARM Jumbo
5.806
5.778
Index
Key Financial Indexes
This Week
Last Week
1-yrT-Bill
3.170
3.250
10-yrT-Bill
3.970
3.940
Prime Rote
7.250
7.500
II"1 District COF
4.233
4.233
6 Month LtBOR
4.910
4.910
Key Rate Trends 2007
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Mortgage Help Center
Kales bated on S 175,000 limn for single family htmic Jumbo rale?* (loans over S417.0<)Ol bastd nn S4SU,tKH> loan. A l l rales arc tx'licvtfd ti» be accurate but
cannot be guaranteed ond art? subject In change wilhc>ul nt>tiLe Minimum dmxn payment rcquirrmenls and other reslrictinns may apply. Closing costs
rtiay vary. To Jctcrminc estimated closing LO'Jt-'.. click nn "i e t V in the "Current Rales" secium (if the mortgage guide websue and ctiniuct each company
for details- Companies pay u Tec lo he in this tiuiik'. I'ts points, which include origination and ditcuunt Ices. APR - annual percentage rale nnd is
calculated hv euth company - includes ctnli in i>htain loan and pniiile inonyugc insurance i f requited- 1 ock ' rale link period. ARM (adjustable rale
mortiuittc) rales arc subject Hi change ulicr initial penoj The (iluucchtci L'i"inty 1 irncv, llridgcinri'Millvitle New. s and Today's. Sunbeam and nj.com
receive these rules than a third party and do not unnunly their utcuracy None uf the above rales constitute an ofTer. Please contact each lender for
details- Companies in Ihis guide are !:cjtial Housing Opportunity lenders
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