Even as Rents Drop, More Apartments Sit Empty

Apartment vacancy rates reached an average of 7.2 percent in the first quarter of 2009, a 1 percent increase over the previous two quarters and the highest level since 2004, according to real estate research firm Reis Inc.

At the same time, asking rents fell 0.6 percent and effective rents—what landlords are actually able to collect—declined 1.1 percent.

Metro areas where Reis says rents have fallen the most are:

  • San Francisco, -2.8 percent
  • New York, -2.6 percent
  • San Jose, -2.5 percent
  • Long Island, N.Y., -2.3 percent
  • Fairfield County, Conn., -1.9 percent


Metro areas where rents have increased the most:

  • Portland, Ore., 0.8 percent
  • Miami, 0.7 percent
  • Houston, 0.4 percent
  • St. Louis, 0.4 percent
  • Tampa-St.-Petersburg, Fla., 0.4 percent


Source: The Wall Street Journal, Nick Timiraos (04/2009)

The Fed: Coming to a Theater Near You

The Federal Reserve is taking over the big screen, showing ads at movie theaters that warn against foreclosure fraud.

The spots will run in 14 cities with high-foreclosure rates and an abundance of financial scam artists who often result.

The ads last 30 seconds and feature photos of individuals and families. They open with the question, “Are you facing foreclosure?” and close with the reassurance, “It shouldn’t hurt to get help!” Before the fade, there are foreclosure tips.

“Everyone goes to the movies at some point,” says Sandra Braunstein, director of the Fed’s Division of Consumer and Community Affairs “The more attention we can put on this, the more consumers can protect themselves from scam artists.”

Source: The Wall Street Journal, Sudeep Reddy (03/27/2009)

Government Struggles to Keep Interest Rates Low

Mortgage rates are rising, despite the government’s efforts to hold them down.

 

The government can’t control all the factors that affect mortgage rates. Mortgage interest has climbed because more borrowers refinanced when rates fell and boosted the supply of mortgage bonds.

 

Experts also attribute rising rates to expanded borrowing by the government to pay for stimulus packages, worries about Fannie Mae and Freddie Mac, and concerns about whether the central bank will continue to purchase mortgage bonds after June.The suggestion that the government solve the problem by creating an entity that offers 30-year mortgages at preset rates of 4 percent or 4.5 percent has drawn criticism.

 

“Not a lot of buyers are likely to want to buy a 3.5 percent mortgage-backed security, so the government may end up being a significant holder of these loans,” said Nicholas Strand, a mortgage strategist with Barclays Capital.  “And that number could run up to trillions of dollars.”

 

Source: The Wall Street Journal, Prabha Nataraian (02/03/2009)

Buyers Being Lured to 100% Loan Program

More buyers in search of home loans are turning to an obscure program operated by the United States Department of Agriculture.

The program allows no-money-down purchases. In fact, including a mortgage insurance policy, a borrower can seek up to 102 percent.

To be eligible, buyers can’t have income that exceeds 115 percent of the median county income. The loans are restricted to low-density areas, generally towns of no more than 25,000 residents. The loans are made by private lenders, then insured by the government.

Some home builders are promoting the use of this program. “It’s one of our main tools right now,” says John Bargnesi, vice president for sales of Scottsdale, Ariz., home builder Meritage Homes.

Source: The Wall Street Journal, Nick Timiraos 

Loan Company Tries Cutting Mortgage Principal

 At least one loan servicing company is retooling mortgages to lower the loan balance as well as the rate in order to keep borrowers in their homes. Reducing the principal on mortgages is “a last resort,” says Paul Koches, executive vice president at Ocwen Financial Corp., a West Palm Beach, Fla., loan servicer. Ocwen has reduced the amount owed on 10,884 delinquent mortgages as of Sept. 30. That’s about 25 percent of all loans modified by Ocwen this year. Dropping the principal has looked like a last resort to many lenders and servicers because they fear investor backlash. Ocwen says the writedowns are generally less than the company’s average loss of $122,000 on a foreclosure. Ocwen is the nation’s sixth-largest subprime-mortgage servicer, according to Inside Mortgage Finance, with about $45 billion of mortgages under management.

Source: The Wall Street Journal, Ruth Simon