Wednesday, December 26, 2007

Article on pricing of New Homes with hidden Incentives

Daily Real Estate News December 20, 2007How Hidden Incentives Distort Home ValuationSome real estate attorneys and appraisers warn that the use of incentives by home builders and home sellers to entice buyers is making it difficult to adequately determine property values. Residential appraisers and lenders need to exercise caution when using the price recorded by the county clerk, as the value of incentives is rolled into that figure, experts say. However, given that incentive information is not included on the public record and that builders and real estate practitioners are not required to disclose the information to appraisers, it is virtually impossible to determine the actual price paid for a property. There are concerns that incentives used by builders conceal discounts that might anger owners in the same development who paid more for their units. Including incentives in the recorded price also may lead buyers of nearby properties to pay too much or enable lenders to make bigger loans than they would have otherwise. Source: Wall Street Journal, James Hagerty and Michael Corkery (12/19/07)Daily Real Estate News December 20, 2007How Hidden Incentives Distort Home ValuationSome real estate attorneys and appraisers warn that the use of incentives by home builders and home sellers to entice buyers is making it difficult to adequately determine property values. Residential appraisers and lenders need to exercise caution when using the price recorded by the county clerk, as the value of incentives is rolled into that figure, experts say. However, given that incentive information is not included on the public record and that builders and real estate practitioners are not required to disclose the information to appraisers, it is virtually impossible to determine the actual price paid for a property. There are concerns that incentives used by builders conceal discounts that might anger owners in the same development who paid more for their units. Including incentives in the recorded price also may lead buyers of nearby properties to pay too much or enable lenders to make bigger loans than they would have otherwise. Source: Wall Street Journal, James Hagerty and Michael Corkery (12/19/07)

Remarks from Alan Greenspan on the Roots to the Mortgage Crisis

Daily Real Estate News December 17, 2007Greenspan Pinpoints Roots to Mortgage CrisisFormer Federal Reserve chief Alan Greenspan wrote a lengthy explanation of his view of the current mortgage crisis for The Wall Street Journal. "The crisis was an accident waiting to happen," Greenspan writes. "If it had not been triggered by the mispricing of securitized subprime mortgages, it would have been produced by eruptions in some other market." Here are some other key passages:
“I do not doubt that a low U.S. federal-funds rate in response to the dot-com crash, and especially the 1 percent rate set in mid-2003 to counter potential deflation, lowered interest rates on adjustable-rate mortgages (ARMs) and may have contributed to the rise in U.S. home prices. In my judgment, however, the impact on demand for homes financed with ARMs was not major."
“Demand in those days was driven by the expectation of rising prices — the dynamic that fuels most asset-price bubbles. If low adjustable-rate financing had not been available, most of the demand would have been financed with fixed rate, long-term mortgages. In fact, home prices continued to rise for two years subsequent to the peak of ARM originations (seasonally adjusted)."
“The current credit crisis will come to an end when the overhang of inventories of newly built homes is largely liquidated, and home price deflation comes to an end. That will stabilize the now-uncertain value of the home equity that acts as a buffer for all home mortgages, but most importantly for those held as collateral for residential mortgage-backed securities. Very large losses will, no doubt, be taken as a consequence of the crisis. But after a period of protracted adjustment, the U.S. economy, and the world economy more generally, will be able to get back to business.”Source: The Wall Street Journal, Alan Greenspan (12/12/07)

Sunday, November 25, 2007

I welcome all businesses that may have a service or product that homeowners would like to know about to post their information on this blog. Simply click on "comments" and tell us your company name, address, web address, phone number and a description of your service.

Wednesday, November 14, 2007