Monday, July 7, 2014

In the News

Presented by Prairie Title                                                     July 8, 2014
 
 
 


Commentary by Frank Pellegrini, Prairie Title CEO

 
As we all search for bright news in the real estate industry (some of which did arrive at the end of June in the residential end of the business), several segments of the commercial real estate sector show signs of vitality and a solid future. Specifically, multifamily housing and mixed-use properties are growing.
 
 
The National Association of Home Builders reported late in June that condo and co-op sales as well as multifamily lending grew. NAHB also reported in May that production of apartments and condominiums showed positive growth in the first quarter of 2014, according to its latest Multifamily Production Index (MPI). The index increased three points to 53, which is the ninth consecutive quarter with a reading of 50 or above. The MPI measures builder and developer sentiment about current conditions in the apartment and condominium market.

Anecdotally, we’ve seen growth in our commercial business at Prairie Title, with mixed-use and multifamily leading the way. Mixed-use is particularly interesting since these projects take time to develop and plan and can really add to the vitality of the community where they’re located. Think about what the new JV formed to develop the old downtown Chicago post office will do for that part of the Loop.


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A quick note on another subject: We recently said farewell, at least on a permanent basis, to Prairie Title’s resident lender pro Terri Konajeski, who retired after more than four decades in the business. Terri came to Prairie Title in 1999 as our primary lender sales contact. We wish Terri well as she turns the page on a new life which, thankfully, will include Prairie Title on a consulting basis.

Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.


Related stories we’re following:
New construction in multifamily is ahead of 2013 levels thus far this year, says Reis Inc.

Employment growth surges in June.

Interest rates hold steady.

Wednesday, June 4, 2014


In the News

Presented by Prairie Title                                  June 6, 2014

 

Commentary by Frank Pellegrini, Prairie Title CEO

 

Tired of getting whipsawed back and forth by contradictory news on the residential real estate front? Me too. It seems like whenever we read a positive story about sales or pricing, we get blindsided by dour reports. Some of the journalists who cover our industry seem to be in competition to deliver the most depressing news and conjecture the fastest. What are we to make of all this?

Think about CoreLogic’s recent price appreciation report. National home prices were up 10.5 percent in April from 2013, though they increased at the slowest rate of appreciation in 14 months. At the same time, continued inventory shortages in many markets are expected to keep driving prices higher in the year ahead. Good news if you’re selling your home. Not so good news for buyers competing for less inventory than we need to really get things moving.

One observation I would make is that optimism and pessimism move on a sliding scale in reaction to conditions in the local marketplace. All real estate is local, right? While trends certainly influence our industry at a macro level, once you get down into the weeds things can look different. I try not to let the macro have undo influence over business decisions at the micro level. 

Housing truly is the engine that can, and someday will, push the economy forward in a big way. Not today, but sooner rather than later, and in some markets sooner than others. Meanwhile, all we can do is manage our businesses to the environment and be prepared to hit the accelerator when the time comes.
 

Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com. 

Related stories we’re following:

From the Tribune: mortagage refinancings hits six year low.

From Bloomberg: Yellen Has Scant Power to Relieve U.S. Housing Slowdown

Unrelated, but worth watching: 

Affiliated Business Arrangements get closer scrutiny.

 

Tuesday, May 13, 2014



In the News

Presented by Prairie Title                                  May  14, 2014 

Commentary by Frank Pellegrini, Prairie Title CEO 

We’re coming up on six years of a lackluster, if not at times downright dismal, real estate market. Consider this statistic: seasonally adjusted housing starts were at 2.19 million in February 2006, and still as high as 1.33 million in August 2007 just before the bottom dropped out of the economy. In March of this year the rate for housing starts was 946,000, a bit better than the previous months but still well below the types of numbers we’d like to see. 

The economy in general certainly is better than 2009-11. We’ve been adding jobs and the unemployment rate has been ticking down, but still the residential real estate market is in the doldrums. What’s holding us back? Consider these frustrating headlines (when read side by side) from the Wall Street Journal:
Job Growth Gathers Strength (May 2)…….Demand for Home Loans Plunges (April 24) 

In my view, three national trends have combined to prevent the emergence of the robust real estate market we’ve all been waiting for: 

1.      Interest rates have ticked lower lately but are still higher than a year ago and are likely to increase as we move through 2014.

2.      The national supply of distressed homes has dropped (CoreLogic reports a 10 percent drop in completed foreclosures from March 2013 to March 2014), so fewer bargains are available to prospective buyers.

3.      Consumer pessimism has lead to fewer listed homes and sales. 

Until we see improvement on several of these fronts I’m afraid we’re stuck in a negative cycle. It’s anybody’s guess as to when the market will get better. I suspect that when conditions improve residential real estate will take off quickly and dramatically. 

Until that time comes, we’ll just have to keep believing that the turnaround is imminent. 

Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com. 

Related stories we’re following:

Perspective on mortgage rates.  Homeowners ready to spend on housing?  Affordability a problem.

Friday, April 4, 2014


In the News
Presented by Prairie Title                                  April 4, 2014
 
Commentary by Frank Pellegrini,
Prairie Title CEO
 
It is widely accepted that a healthy housing sector is fundamental to the well-being of our economy. As such, it is not surprising that full recovery from the Great Recession hinges in great part on the strength of the housing market.
We’re watching some notable stories on that aspect of the recovery. These include discussions over the continued deductibility of home mortgage interest in plans to reform the tax code and the fate of Fannie Mae and Freddie Mac.
 
Of course, every issue has at least two sides. The argument over the mortgage interest deduction is no different. Compelling arguments are being asserted to keep it as is, limit it, or do away with it. Some experts insist that without the deduction home ownership would cease to be desirable, and others assure us that its impact on the overall decision to purchase a home is negligible. Some believe the deduction only benefits the wealthy, others try to convince us that the middle class would be deeply harmed without it. To see pros and cons you may be interested in this March piece in the Wall Street Journal.
 
What to do with secondary market giants, Fannie Mae and Freddie Mac, is equally controversial, particularly against the backdrop of the recent stellar financial performance of both entities. Nonetheless, it is the concern of many that the involvement of government and its support is too deep.
 
A recent proposal offered by Senators Tim Johnson and Mike Crapo would create a new agency and would restructure the way mortgage loans are transacted on the secondary market. Since a vibrant and fluid environment for mortgage securitization is essential to the health of housing, this and other similar proposals require close scrutiny. View the current proposals side by side here.
Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.
 Other stories we’re following:
ARMs make a comeback.
Mortgage rate watch.  
FHA’s newest policies for mortgage insurance premiums.
 
 
 
 
 
 
 
 
 

Thursday, March 6, 2014

QM Firmly In Place

In January, the "Qualified Mortgage" (QM) was born. The QM, a type of mortgage designed with consumer interests at its core, is the offspring of the Consumer Financial Protection Bureau (CFPB).

 Recognizing that consumers were harmed by aggressive marketing of mortgages that borrowers were not able to repay, the CFPB set out to create a basic standard of mortgage underwriting that squarely addresses ability to repay. The QM rule sets limits for interest rates, maturity, payment limits, and limits on upfront costs. In addition, loan originators must verify and document all information collected to establish the borrower’s financial condition. If a loan complies with the QM standards, the lender is afforded a "safe harbor " against attacks on the loan’s enforceability.


If a loan does not qualify as a QM, severe penalties may be imposed against a lender. Further, borrowers may have defenses against foreclosure if they find themselves unable to fulfill the obligations of the mortgage.

The limit on upfront costs (points and fees) is 3 percent of the mortgage amount. This limit includes all costs associated with services rendered by affiliates of the lender (i.e., appraisal, credit reporting, title insurance, settlement, etc.). Costs for services furnished by non-affiliates do not have to be loaded in the 3 percent cap.
Advocacy efforts by groups representing affiliated service providers have sought to change this dichotomy. H.B. 3211, currently under debate in the U.S. House of Representatives, seeks to treat all fees and costs associated with processing, underwriting and closing the loan the same (whether rendered by an affiliate or non-affiliate). The fate of the QM as Congress scrutinizes the implications of its implementation is a story all in the real estate industry should be following.

 Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.
 
 
 
Other stories we’re following:
Cyber Security guidelines:

Home sellers returning for Spring?

GSE reform closer?

Monday, February 23, 2009

FORECLOSURE RELIEF QUESTIONS

Questions continue to hover over the foreclosure relief scene like low lying clouds. Of course, we've all heard the objections of those dutifully making their payments on time. Why should the responsible assist the irresponsible, is how the argument goes. In lofty philosophical arenas, the debate will likely rage for months to come, perhaps years.
But, on a more mundane level, I have been reading that foreclosure relief measures recently enacted may not achieve great results for very basic reasons. For starters, statistics indicate that as much as one-third of residential properties are not owner-occupied. As such, these properties are not eligible for refinancing or for mortgage modification under current relief measures.
Further, it is believed that many who will take advantage of refinance or modification will fall into default again, anyway.
Finally, there is nothing to coax lenders into participating in relief programs. If enough lenders take a pass, avenues for borrowers will be limited and many foreclosures will not be averted. Even lenders willing to participate may find difficulties in trying to restructure loans that have been sold in bundles on the secondary market.
While it is good news that something is being done and plans are being crafted to fix troubled mortgages, I wish that all the well-intentioned energy of lawmakers could be directed more toward outcomes and results rather than smithing sweeping, altruistic platitudes.

Friday, January 30, 2009

Is it a home or just a house?

Just this morning (January 30, 2009), Reuters reported that sales of newly-built homes plunged to the lowest level since these statistics were first recorded. I was not surprised by the substance of this announcement. After all, we are confronted daily with indicators of the ever-deepening economic crisis. What surprised me was that statistics only go back to 1963. I suppose I assumed that such an important measure would date much further back than a mere 46 years ago.
That brought to my mind the recollection that my parents purchased their first home just one year before. It was a newly-constructed home that they bought. I guess they were included in those very early reports. It was located in a modest suburb and had a "garden" apartment to help with the mortgage payment. They had realized their piece of the American dream just seven years after arriving in the United States with family in tow.
In the same article, Reuters suggests that housing is "the root of the worst financial crisis in more than 70 years." If you have read any of my postings, you know that I could not agree more.
Having provided a backdrop, I now ask you to consider the advise of "personal finance guru", Chris Farrell, who, also just today, instructs us that now is a good to to look for housing, but not necessarily to buy. No telling how much lower prices will go is his rationale.
In other words, treat home ownership as portfolio management. It's easy: buy low, sell high (somehow, I seldom get that right). So, folks that are taking Mr. Farrell's advise are out there waiting to buy. They are waiting for prices to hit bottom so that they can make a killing in real estate.
What ever happened to the notion of house as home? We used to buy residences for shelter and to raise our families. Our homes should be reflections of who we are and extensions of our dreams and aspirations. The home is a cocoon where a family is safe and secure, is nourished, nurtured and allowed to grow. When did we begin to regard it merely as investment strategy?
I know that in 1962 my parents did not fret over whether the timing was right nor were they concerned about how fast their new home's value would rise. They were just anxious to provide a home and start realizing the rich return offered by many years of happy memories.
I agree with Reuters assessment that housing is at the root of our current economic woes. But, perhaps, it is so for more profound reasons than we think. It may be worth considering that, if we stop feeding the notion that housing is our sure-fire ticket to easy street and get back to the bedrock principle that, above all else, a house is a home, then the true recovery can begin.