by The KCM Crew on June 14, 2011

Despite what appears to be a non-stop wave of tough news regarding real estate, four major media players have co

me out this month with the same advice: It Is Time to Buy a Home! Here are the four articles and a breakdown as to why the advice makes sense.

The Wall Street Journal: Why It’s Time to Buy  

CBS Money Watch: Why the Time to Buy is Now

Forbes Magazine: 9 Reasons to Buy a House Now

National Public Radio: For Many, It’s Still a Good Time to Buy a Home

With prices continuing to depreciate in most regions of the country, some may wonder why these four entities are suggesting to their readership that now is the time to buy. Each organization realizes that PRICE is not as important as COST. The cost of a home can go up even if prices continue to fall. Unless you are an all cash buyer, you must take into consideration the expense of mortgaging when calculating the full cost of a home. Here is some information to consider.

Interest Rates

Currently, interest rates sit at historic lows. However, Fannie Mae, Freddie Mac, PMI and the National Association of Realtors are all projecting approximately a 1% increase in mortgage rates over the next year. A one percent increase in rate negates a ten percent fall in prices.

Lending Standards

The government has proposed a tightening of lending standards called Quality Residential Mortgage (QRM). If accepted as proposed two things will happen:

1. The qualification process for loans will become more difficult
2. The cost of a loan will increase

Bottom Line

There is a reason more and more financial organizations are suggesting to their followers that now is the time to buy a home: because the cost of purchasing a home is about to increase (even if prices continue to fall).

KCM Crew on June 10, 2011

We attempt to keep you abreast of the housing market. When will demand for housing return to historic averages? What impact will foreclosures continue to have? Where are interest rates headed? There are no simple answers to any of these questions. However, the most difficult question to answer seems to be: Where are home prices headed? Yesterday, we read two vastly different opinions on this issue.

Clear Capital claims prices seem to be stabilizing in their most recent Home Data Index Market Report.

“The latest Market Report results through May suggest that home prices are starting to ease back from the heavy declines seen over the winter. We are still far away from the strong demand needed to fully turn things around for the housing market; however, it is clear from the initial spring sales data that prices are softening, suggesting stabilization in the market.”

At the same time, Housing Wire reported that Robert Shiller, the Yale University professor and co-founder of the S&P Case-Shiller Home Price Indices, believes home prices still have a major correction ahead.

“While other people expect home prices to bounce along the bottom for a while without going up much, Robert Shiller is inclined to be more pessimistic.

There is room for home prices to decline another 10% to 25% in real terms over the next five years, according to Shiller.”

Bottom Line

As we said before, there are no easy answers to the tough questions facing the current housing market. We will try our best to keep you abreast of what reputable sources are reporting and at the same time try to explain the indicators they use to formulate their opinions.

WASHINGTON- The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury today released the May edition of the Obama Administration’s Housing Scorecard. New to this month’s report are detailed assessments for the 10 largest mortgage servicers participating in the Administration’s Making Home Affordable Program, setting a new industry benchmark for disclosure on servicer assistance to struggling homeowners. In addition to providing greater transparency about servicer performance in the program, the new assessments are intended to prompt mortgage servicers to correct identified deficiencies to improve program implementation and more effectively reach eligible homeowners. 

“While we continue to get tens of thousands of new homeowners into mortgage modifications each month, we need servicers to step up their performance to meet the needs of those still struggling,” said acting Treasury Assistant Secretary for Financial Stability Tim Massad. “These assessments set a new benchmark by providing an unprecedented level of disclosure around servicer performance and will serve to keep the pressure on servicers to more effectively assist struggling families.” 

Since the inception of the Making Home Affordable Program, Treasury has required participating servicers to take specific actions to improve their servicing processes.  The new Servicer Assessments summarize performance for the 10 largest Making Home Affordable participating servicers from reviews largely conducted throughout the first quarter of 2011 on three categories of program implementation: identifying and contacting homeowners; homeowner evaluation and assistance; and program reporting, management and governance.  Based on the reviews for this quarter, four servicers have been identified as needing substantial improvement and six servicers have been identified as needing moderate improvement.  The servicers identified as in need of substantial improvement are: 

• Bank of America, NA;
• J.P. Morgan Chase Bank, N.A.;
• Ocwen Loan Servicing, LLC; and
• Wells Fargo Bank, N.A.

The full bulletin can be viewed at:

HUD Scorecard Bulletin