Harborside joins the Sotheby’s International network
Some weeks I have to give quite a lot of thought as to the subject matter for my posts. This is not one of them.
“After five years of continued success, we are excited to announce our affiliation with Sotheby’s International Realty. We now offer all the advantages of a locally owned real estate brokerage combined with the vision, power and focus of Sotheby’s International Realty.”
As an Englishman I am very familiar with Sotheby’s and the huge impact they have had on real estate sales worldwide. As the owner of a waterfront property for sale I am very excited about the increased visibility I will get from Sotheby’s national and international marketing through 700 offices in 52 countries.
If you have a property which you believe would benefit from active marketing to a wider audience please contact me.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or [email protected].
Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty
Tom and Gisele selling their LA “fixer – upper”
With real estate investing back in the news and many people looking for a property they can buy cheaply, invest a small amount in finishing touches and flip for a quick profit, I can recommend this LA “fixer-upper”.
Source: American Luxury Magazine
Click here for more photos.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 781.631.1223 or [email protected].
Andrew Oliver is a Realtor with Harborside Realty in Marblehead
Why I ignore most articles about “the real estate market”
My mother always told me to focus on quality not quantity. I think of that every day as I read the slew of real estate market “commentaries” that come across my desk and am reminded of the saying that there are no bad statistics, but plenty of bad comments on those statistics.
Here’s a good example.
“Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for February showing weak sales with total home sales falling 0.4% since January dropping 7.1% below the level seen in February 2013. ”
What’s the message here? I’d say it was that sales were “weak”.
The next sentence is: “Single family home sales also weakened dropping 0.2% from January falling a notable 6.9% below the level seen in February 2013.”
I’m not quite sure why a 6.9% drop is “notable” whereas 7.1% in the first sentence was not, but again we have “weak” sales and a “notable” drop.
Not good news for the real estate market you are thinking.
But read on.
“The median selling price increased 9.0% above the level seen a year earlier.”
So let me ask you, madam or mister home owner, which part of this story is more significant to you: “weak” sales, or a 9% increase in price?
I thought so. Me too.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 781.631.1223 or [email protected].
Andrew Oliver is a Realtor with Harborside Realty in Marblehead
Senate passes House Flood Insurance Bill: President expected to sign it into law
After the usual round of negotiations the Senate this week passed, on a 72-22 vote, the Bill the House passed last week. The White House said that President Obama would sign it into law.
Here are the details of the Bill from my post last week: Bipartisan Congress votes to roll back impact of 2012 legislation
Reform of the National Flood Insurance program is needed. Here are my suggestions:
1. Do not try to include small, frequent losses caused by flooding throughout the country, and catastrophic major disasters, in one program. The NFIP is well suited for the former, and ill-suited for the latter.
2. Enforce the current requirement that properties in flood zones with federally insured mortgages carry flood insurance. Estimates vary, but the lowest I have seen is that 40% of such properties do not have flood insurance. Why not?
3. Flood insurance should stay with the property rather than the owner so that a sale does not trigger a change in flood insurance premiums (this is in the new Act).
4. Spend the necessary money to ensure that the flood maps used are accurate (they are not in Massachusetts).
After writing several articles on this topic in recent months, I hope that this will be my last for the foreseeable future. It has taken a while but common sense has finally prevailed in Congress. Now there is the opportunity to come up with a lasting solution to the question of flood insurance.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 781.631.1223 or [email protected].
Andrew Oliver is a Realtor with Harborside Realty in Marblehead
Fannie Mae, Freddie Mac and the FHA: heroes or villains?
This week the Senate Finance Committee leaders issued new proposals for winding down Fannie Mae and Freddie Mac, while the Federal Housing Administration (FHA) announced that it would not need another bail-out this year.
FHA
With so much going on it is no surprise when we discover that we have missed a news item, but it was only while listening this week to a lecture from Yale Prof. Robert Shiller (of Case-Shiller fame and recent Nobel Prize recipient) that I discovered that the FHA did indeed receive a bail-out in September 2013 as anticipated in my article from late 2012: First Fannie and Freddie: next up FHA?
The FHA’s original role was to provide mortgage credit for low and moderate-income borrowers, but they joyfully joined the frat party that was housing in the early years of this century, including one program which allowed sellers to cover the down payment on behalf of buyers, often by inflating the price of the home.
And with the approval of Congress the FHA backed loans of as much as $729,750 in some areas. I guess it depends on your definition of low to moderate income. By the standards of members of Congress, as the chart below of their median net worth shows, I suppose somebody qualifying for a $700k mortgage would be considered low or moderate income:
Source: Center for Responsive Politics, US News
The Bloomberg article I quoted in 2012 included this wonderful passage: “The U.S. should also consider raising the minimum 3.5 percent down payment to 5 percent or more, because research shows that mortgages with larger down payments are less likely to default.” No kidding!
During the discussion period about the new rules for mortgages Federal banking authorities proposed that borrowers needed to put 20% down when buying a home in order for the mortgage to be considered qualifying. This was watered down in the end, but I cannot help but note that while these discussions were taking place the FHA was offering loans – and still is – with 3.5% down.
Anyway, in 2013 the FHA had to draw down $1.7 billion from the Treasury in order to maintain the mandated level of its reserve funds. One of the main factors quoted by the FHA was losses on low down payment mortgages written in 2007-09. In contrast, this week the FHA announced it would not need another draw down since its capital reserve was now up to $7.8 billion. One of the reasons for FHA’s recovery is the large increase in fees it has imposed.
Senate Banking Committee proposals for mortgage insurance
Also this week the Senate Banking Committee leaders issued a proposal calling for the replacement of Fannie and Freddie with a new system of federally insured mortgage securities in which private insurers would be required to take initial losses before any government guarantee would be triggered. It seems unlikely that any such proposal will pass Congress this year, but at least we are starting to get some proposals that show how the mortgage market may look in the future.
Fannie and Freddie “dividends” now exceed bail out funds received
Separately, the White House Budget Office said that Fannie and Freddie, which have already paid more than $185 billion in “dividend” payments on their $187.5 billion Treasury bail-out, could pay a further $181.5 billion over the next 10 years. And still owe the same $187.5 billion they started with.
This is how the Wall Street Journal described the situation this week:
“By the end of March, the two mortgage-finance companies that were seized by the U.S. in 2008 will have returned $202.9 billion in dividend payments, after receiving $187.5 billion in federal support between 2008 and 2011. The budget projections released Monday by the White House Office of Management and Budget show that the companies could return an additional $163.8 billion through the 2024 fiscal year if the bailout arrangement remains in place.
By that tally, Fannie and Freddie would return $179.2 billion more to taxpayers than they were required to borrow. Last year, the budget showed that taxpayers faced a net gain of $51 billion through 2023.
Even though both companies will have soon sent more in dividends to the Treasury than the amounts they borrow, those dividends don’t reduce the $187.5 billion in stock held by the Treasury. The terms of their government support don’t provide a clear mechanism for them to redeem those shares, and the companies are currently required to send all of their profits to the Treasury as dividend payments.
The Treasury faces lawsuits from nearly 20 investors challenging the dividend terms, which were modified in 2012. They say the government’s collection of the firms’ entire profits amounts to an unconstitutional appropriation of assets and that the Treasury and the firms’ federal regulator engaged in illegal self-dealing when it made those changes.”
Heroes or Villains?
Fannie Mae was established in 1938 as part of FDR’s New Deal to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing. Fannie Mae – and later Freddie Mac – bought mortgages from banks, thereby making it possible for banks and other loan originators to issue more housing loans.
After the housing crash of 2008-10 Fannie, Freddie and the FHA accounted for some 90% of new mortgages. Over a period of 75 years one or more of these entities has provided liquidity to the mortgage market, enabling among other things banks to issue 30 year fixed rate loans. Like many others all these entities got caught up in the housing boom and like others they suffered losses.
I remain unclear as to why the solution is to dismantle Fannie and Freddie, rather than take on board the lessons learned and put in place controls to make sure that they do not deviate again from their intended aims. I fear that the answer lies more in politics – they are an easy target to blame for the crash – than economics.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 781.631.1223 or [email protected].
Andrew Oliver is a Realtor with Harborside Realty in Marblehead
Flood insurance: Bipartisan Congress votes to roll back impact of 2012 legislation
Both the Senate and House have passed bills on bipartisan votes (Senate 67-32, House 306-91) to reverse the impact of the 2012 Biggert-Waters Act. The Senate now has the option of either accepting the House Bill or seeking to negotiate the differences between the two Bills. Press reports on Friday indicated that Senate Majority Leader Harry Reid will schedule a vote next week on the House-passed legislation.
While I have heard no reports locally of sales affected by the threat of higher flood insurance premiums,the National Association of Realtors has estimated that some 40,000 sales nationally have been cancelled or delayed because of the confusion over the proposed changes under the 2012 Act. It is not possible to know, however, to what extent such confusion has contributed to buyers deciding not to make an offer on properties in flood zones.Certainly, questions have been asked.
Whereas the Senate Bill basically delays the impact of Biggert -Waters by up to 4 years, the House Bill deals directly with the most important issues.
The main features of the House Bill are:
– the sale of a property will no longer trigger the end of existing premium subsidies
– the restoration of grandfathering, which prevents a property’s rate from being increased if it is mapped into a higher risk zone
– mandating that the rate on any individual property cannot increase by more than 18% per annum.
The House Bill also levies a small fee ($25 for primary residences; $250 for secondary residences and businesses) on policyholders. According to the Congressional Budget Office the fee will make the House Bill revenue neutral, whereas the delays in the Senate Bill would result in the loss of $2 billion in revenues.
Another key feature for us in Massachusetts is that the House Bill requires FEMA to certify that its mapping process is technologically advanced and to notify and justify to communities that the mapping model it plans to use to create the community’s new flood map are appropriate.As I have previously reported, it has been alleged that FEMA has applied Pacific Coast mapping technology to Massachusetts.
The proposed legislation provides a stabilization while a longer-term solution to the finances of the national Flood Insurance Program is sought. The huge and widespread debate in recent months should ensure that the final solution comes after an informed and public process.
Here’s a good summary of the House vs Senate Bills from the Tampa Bay Times.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 781.631.1223 or [email protected].
Andrew Oliver is a Realtor with Harborside Realty in Marblehead
Fannie Mae and Freddie Mac continue to finance Government deficit
My goal in this post is just to report the facts. My opinions on the ethics of the change the Treasury imposed on the terms of the bail-out of Fannie and Freddie have been expressed in previous posts. The result of the change is that by the end of March 2014 Fannie and Freddie will have repaid more than they borrowed from the Treasury but, because these payments have been deemed by the Treasury to be dividends rather than capital payments (like interest rather than principal on our mortgages) the two companies still “owe” the Treasury as much as before they made payments.
The “dividends” from Fannie and Freddie in calendar 2013 totaled $134 billion which contributed to a reduction in the budget deficit as shown in the chart below. Bear in mind that the numbers relate to a September 30 year end but the basic argument is intact:Fannie and Freddie have been helping to reduce the deficit. (more…)
Widespread flooding hits the UK: a different approach to flood insurance
Today England has posted two severe flood warnings, meaning a danger to life, for the Somerset Levels, as well as more than 160 flood warnings and over 300 flood watches covering every other region of England. It is, therefore, topical to ask: How does the UK deal with the problem of flood insurance?
I spoke yesterday to Matt Cullen, Policy Advisor on Flood at the Association of British Insurers. One huge difference between the UK and the US is that in the UK flood is included in a standard homeowners policy, whereas it is excluded in the US. A second is that the UK has really accurate flood maps, while as we have seen of late not only are existing flood maps widely out of date in the US but there have been suggestions that the new maps, in Massachusetts for example, are not being produced using appropriate techniques.
One of the basic tenets of insurance is to spread risk over as many people as possible. In the UK there are about 20 million homes of which more than 90% carry property insurance and 70% contents insurance. Since flood is included in standard policies, the cost is shared widely. By way of comparison the Congressional Research Service in a February 2013 report stated:”Nationally, recent reports suggested that only 18% of Americans in flood zone areas have flood insurance.” Another report suggests that 40% of federally backed mortgages, required to carry flood insurance, do not do so. (more…)
2013 Housing Market in 4 numbers
If you are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 781.631.1223 or [email protected].
Andrew Oliver is a Realtor with Harborside Realty in Marblehead
Flood insurance:What’s up between Harry Reid and President Obama?
On Monday the Senate, as anticipated, voted to move ahead with the Homeowner Flood Insurance Affordability (HFIA) Act, to delay the implementation of the Biggert-Waters Act. That night came a White House statement in support of Biggert-Waters, but on Thursday the Senate went ahead and the Bill passed on a 67-32 vote.
In his State of the Union address on Tuesday President Obama said that free-trade deals with Asia and Europe were a top priority of his second term.The next day Harry Reid (D), Senate Majority Leader said “I think everyone would be well-advised just not to push this right now”.
The fate of the HFIA is uncertain in the House, where Speaker John Boehner (R) said two weeks ago:“While I don’t support repealing the 2012 law, we’re listening to members and the alternative ideas they are offering on this issue. There have been ongoing discussions with members, and the House may consider changes to the law in the weeks and months ahead that both help homeowners and protect taxpayers.”
So let me try to get this straight. On Monday the Senate voted to proceed with debate on the HFIA Act and on Monday night the President issued a statement in support of the original Act, but the Senate passed the Bill anyway on Thursday. On Tuesday the President talked of his desire to see free-trade deals and on Wednesday Mr.Reid said, in effect, no.
Meanwhile, the Republican House Speaker appears to be siding with the President.
I think the Polar Vortex must be affecting people in Washington.
If you are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 781.631.1223 or [email protected].
Andrew Oliver is a Realtor with Harborside Realty in Marblehead
Year end reviews
I shall be publishing year-end reviews over the course of this weekend. The best way to know when they are published is to sign up on www.OliverReports.com to receive email alerts of new articles. Here’s a screenshot showing where you can sign up on the home page.
If you are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 781.631.1223 or [email protected].
Andrew Oliver is a Realtor with Harborside Realty in Marblehead
New FHFA Head moves to delay fee increases
According to the Wall Street Journal’s Nick Timiraos, Rep. Mel Watt (D., N.C.), the incoming director of the regulatory agency that oversees Fannie Mae and Freddie Mac, said on Friday night he would delay an increase in mortgage fees charged by the housing-finance giants, which was announced earlier this month by that agency.
Upon being sworn in, “I intend to announce that the FHFA will delay implementation of the loan-fee increases until such time as I have had the opportunity to evaluate fully the rationale for the plan,” said Mr. Watt in a statement.
(more…)
Flood insurance (4): vote to delay Act set for early January
According to multiple media reports, Senate Majority Leader Harry Reid is planning to fast track legislation for a January vote that would require 60 votes and there are reported to be enough support to pass it. The proposed legislation would delay the implementation of the new flood rates for up to 4 years. (more…)
Conforming mortgage loan limits raised for Essex County
While the Federal Housing Finance Agency (FHFA) has announced that the 2014 maximum conforming loan limits for mortgages acquired by the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, will remain at $417,000 for one-unit properties in most areas of the country, the limit in Essex County will increase from $465,750 to $470,350.
Earlier this year FHFA had announced that it was contemplating a reduction in loan limits for 2014, but that announcement was met with a tsunami of protests.
With the change in the rules for Senate approval of most nominees, it is highly probable that the FHFA will soon have a new head, Rep. Mel Watts, who is expected to be more amenable to carrying out the Administration’s goals in the housing market.
Here is an article with comment on some of the effects expected with Mr. Watts in charge.
Conforming Loan LimitFannie Mae and Freddie Mac are restricted by law to purchasing single-family mortgages with origination balances below a specific amount, known as the “conforming loan limit.” Loans above this limit are known as jumbo loans. The national conforming loan limit for mortgages that finance single-family one-unit properties increased from $33,000 in the early 1970s to $417,000 for 2006-2008, with limits 50 percent higher for four statutorily-designated high cost areas: Alaska, Hawaii, Guam, and the U.S. Virgin Islands. Since 2008, various legislative acts increased the loan limits in certain high-cost areas in the United States. While some of the legislative initiatives established temporary limits for loans originated in select time periods, a permanent formula was established under the Housing and Economic Recovery Act of 2008 (HERA). |
If you are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 781.631.1223 or [email protected].
Andrew Oliver is a Realtor with Harborside Realty in Marblehead.
Flood Insurance (2): the facts
While waiting to hear whether Congress will take up a bill to delay the implementation of the new flood insurance premiums they voted into law before they understood the consequences ( telling the National Flood Insurance Program, NFIP, which is losing money to end subsidies and go to full actuarial rates results in premiums going up. Apparently nobody in Congress took any economics courses in college and this has come as a surprise to them – or maybe it was just because they don’t read Bills before voting on them), I have been digging into the history of the NFIP. In particular I have looked at the record of Massachusetts as a whole, by County and by Town.
It is extraordinary how many reports I have read on flood insurance without any of them providing basic data. Tracking down what follows has been a challenging task but I think the numbers are accurate and provide an understanding of the magnitude of the subject.
I will start with the overall NFIP.
As of September 2013, there were 5.6 million flood insurance policies in force (PIF).Two-thirds of the policies were in just 6 States; Massachusetts has just 60,000 of the 5.6 million policies, or 1.1%: (more…)
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