Open House by Jim Woodard

The real estate market will experience growth and expansion next year, according to projections from most major real estate organizations. The recession will be behind us.

That's the forecasting consensus of the National Association of Realtors, National Association of Home Builders, Mortgage Bankers Association, Fannie Mae and Freddie Mac. They are all predicting solid growth in 2010, according to a study conducted by Real Estate Economy Watch. The consensus is in sharp contrast with the market this year.

This year will show about a 36 percent drop in residential construction (housing construction starts), and a 17 percent drop in new home sales. The organizations are predicting a modest increase in existing home sales next year. This year, many sales resulted from the availability of foreclosed and other distressed properties, along with low mortgage interest rates and a substantial tax credit for first-time buyers.

In fact, foreclosure sales accounted by about 50 percent of all home sales during the first quarter of this year — 33 percent during the second and third quarters, according to a report from NAR.

The organizations generally agreed on their projections for next year's home sales, but differed on home prices. The group consensus pointed to existing home sales increasing by about 9.6 percent next year to about 5.4 million units.

Here's an interesting comment from Jay Brinkmann, chief economist for the Mortgage Bankers Association, about housing projections:

"Whenever I'm asked when the housing market will recover, I explain that the economy and housing market are inextricably linked. The number of people receiving paychecks will drive the demand for houses, and recovery will begin when unemployment stops rising. Job losses put incredible strain on all our systems, especially housing."

Q: How are luxury homes selling in today's market?

A: Very slowly. The inventory of unsold upper-end homes is rising. Many of these pricey properties are in or close to foreclosure. Even more are "underwater" with their mortgage, and owners are trying to negotiate a "short sale" agreement with their lender.

There are about 320 luxury homes on the market for prices over $20 million, according to results of a survey by Ultimate Homes. In the year since the economic crisis began, sales of these homes have all but stalled, even as the bottom of the housing market is showing some life, the report noted.

Very few of $50 million-plus homes sell even in the best of times, according to a feature in Business Week.

The last major trophy home to sell was Donald Trump's 60,000-square-foot Palm Beach, Fla., mansion. It sold to a Russian tycoon for about $95 million.

Q: How many of today's home loans are FHA mortgages?

A: About 40 percent of today's home loan applications are for FHA mortgages, insured by the Federal Housing Administration. And nearly 80 percent of those home loan applicants are first-time home buyers, according to FHA commissioner David Stevens.

The FHA provides a unique vehicle, which is helping to make this housing market sustain itself and recover at a very difficult time in the economy, Stevens said when interviewed by a reporter for the Real Estate Today radio program (sponsored by the National Association of Realtors).

The FHA is very focused on the credit quality and strength of the fund and has recently changed policies to deal with this, he noted. FHA has hired a new chief risk officer and brought in a new head of single family business. With more than $30 billion in capital, the FHA has not required any taxpayer money. There has been no bailout required, and the total combined capital ratio is over 4 percent.

When compared to other industry players who participated in this mortgage market over the last decade, the FHA is the only institution of its size that hasn't needed special funds from the government, a bailout, or hasn't failed, Stevens pointed out. The FHA sees itself today in a far better position than any of the other participants at this time in the housing cycle, he said.

Over 34 million families have used an FHA mortgage to finance their home purchase since the late 1930s. The program was created under Franklin Roosevelt's administration during times similar to our current situation.

Q: What's being done about loan modification fraud?

A: Recently, a "Loan Modification Scam Alert" campaign was launched by a coalition of federal agencies, nonprofit organizations, Freddie Mac and others. Here's what Hollis McLoughlin, senior vice president of Freddie Mac, said about the campaign:

"We applaud this new coalition for standing together against con artists who specialize in bilking the public with empty promises of quick fixes to mortgage problems. Attacking loan modification fraud has been a top priority at Freddie Mac long before the current housing crisis began. We look forward to working with the Treasury Department, Federal Trade Commission, HUD, NeighborWorks America and others to close the door on mortgage fraud."

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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