MARKET RECAP
We tend to view most situations from an optimist's perspective, because optimists are more likely to see solutions that pessimists overlook; therefore, optimists tend to be better problem solvers.
Optimism, we have found, is also usually rewarded. The housing recovery has taken longer than most of us would like, but the market is recovering, and the recovery will likely gain pace as we progress through 2012.
Mortgage delinquencies are one area of continued progress. TransUnion forecasts delinquencies of 60 days or more will peak at 6 percent of all mortgages during the first quarter of 2012, and then fall to 5 percent by year's end. This is actually a continuation of a longer-term trend that has been overlooked: delinquencies this year are expected to fall 7 percent, which follows a 7 percent decline in 2010.
The trend in the National Association of Home Builders/First American Improving Markets Index is also cause for optimism. According to the index, the number of improving housing markets expanded for a fourth-consecutive month, rising 37 percent to 41 in December from 30 in November. The index states that the expansion in both number and geographic diversity of markets is proof that markets continue to grow more heterogeneous; that is, more dependent on local factors than national ones. This is a point we've been making for the past six months.
The news on pricing was less upbeat. CoreLogic reports that house prices dipped nationally month-over-month in October. Year-over-year, prices have declined 3.9 percent, but only 0.5 percent when distressed properties are removed from the equation.
A recent report by Barclays Capital should help ease pricing concerns. According to Barclays, the housing market will be buoyed by improving job growth and by the fact that prices for non-distressed properties are stabilizing without government support. On price stabilization, Barclays housing analyst Stephen Kim writes, “[W]e are amazed at how little attention it [the recovery in non-distressed homes] has been getting from the media and the street.”
We, on the other hand, are less amazed. We've been hammering the point on stabilizing prices for months, but we also know that bad news always sells better than good news.
Speaking of good news, mortgage rates continue to hold steady and near multi-decade lows. We've noticed that the yield on 10-year U.S. Treasury notes has trended lower most of this past week, which has been something of a surprise, given that the economic news, for the most part, has been positive.
Mortgage rates have been holding steady for the past month or so, but we think upward pressure is steadily building – mostly due to an improving economy and job growth (and for a reason we'll explicate below).
Economic Indicator
Release Date and Time
Consensus Estimate
Analysis
Retail Sales(November)
Tues., Dec.13,8:30 am , et
0.3% (Increase)
Important. Consumers continue to spend more than sentiment measures suggest, thus portending higher economic growth.
Business Inventories(November)
Tues., Dec.13,10:00 am, et
0.5% (Increase)
Important. Careful inventory management coupled with incremental sales growth should lead to improved job growth.
Mortgage Applications
Wed., Dec. 14,7:00 am, et
None
Important. Refinance and purchase activity point to rising lending demand.
Import Prices(November)
Wed., Dec. 14,8:30 am , et
1.5% (Increase)
Important. Rising import-price inflation could pressure interest rates.
Producer Price Index(November)
Thurs., Dec. 15,8:30 am , et
All Goods: 0.1% (Increase)Core: 0.2% (Increase)
Important. Rising core prices (less food and energy) point to rising producer-price inflation.
Industrial Production(November)
Thurs., Dec.15,9:15 am , et
0.2% (Increase)
Important. Continued production growth will eventually stimulate lagging consumer sectors.
Consumer Price Index(November)
Fri., Dec. 16,8:30 am , et
All Goods: No ChangeCore: 0.2% (Increase)
Important. Lower gasoline prices have slowed consumer-price inflation.
HARP 2.0 and Supply and Demand
A few weeks ago, we wrote about changes in the Home Affordable Refinance Program, dubbed HARP 2.0. This latest incarnation of HARP will impact the supply-and-demand dynamics in the mortgage market, namely due to the removal of the 125-percent loan-to-value cap.
More borrowers will qualify for mortgage loans; that obviously means there will be more demand for mortgage loans. What's more, demand could increase sooner rather than later, particularly if borrowers who don't need HARP, but want to exploit today's low rates to avoid the possibility of a delay, ratchet up demand.
To be sure, HARP 2.0 will be a good deal for many mortgagors who have been unable to refinance because of diminished home equity. Many of these mortgagors will benefit, even if mortgages rates were to rise a full-percentage point or more.
Now, we're not forecasting a percentage point rise in rates when HARP 2.0 kicks into gear, but more demand does tend to raise costs, including the cost of mortgage financing. This is something borrowers who don't need HARP but who could take advantage of today's rates should think about, because many of them won't benefit if mortgage rates move significantly higher.
Article courtesy of Patti Wilson, Senior Loan Officer, Mutual of Omaha Bank.
Monday, December 12, 2011
Thursday, November 17, 2011
Two Real Estate Reports Suggest Florida Rebound
CHICAGO – Nov. 17, 2011 – Two national studies – one from Realtor.com and one from Trulia – suggest that some Florida markets are poised for a real estate rebound.
“This is a positive trend for Florida,” says John Tuccillo, Florida Realtors chief economist. “While Trulia and Realtor.com aren’t completely accurate in home prices and sales – mainly because they base their numbers on only homes listed on their website – it’s useful to look at visitor behavior and note the trends. If Trulia says more visitors are doing a home search in the Miami market, for example, it probably follows that Miami is experiencing an upswing in demand.”
Realtor.com’s Top Ten Turnaround Report
In Realtor.com’s “Top Ten Turnaround Report,” six Florida cities were considered good bets for an upswing in sales. Realtor.com, which is owned by The National Association of Realtors®, says it created a formula to rank a city’s turnaround potential based on recent price appreciation, changes in inventory, median age of inventory, number of Realtor.com searches by visitors and area unemployment.
Realtor.com attributes the Florida cities’ success to year-over-year home price increases, reductions in inventory, lower unemployment rates and, in some cases, an upswing in international buyers.
Realtor.com’s turnaround list includes:
1. Miami: Ranked No. 1 in the report, Miami hit the top based on “a healthy inventory that is only half the size from a year ago,” a lower foreclosure rate than the national average, and an increase in condo sales.
2. Orlando: While No. 2, Realtor.com says Orlando had more home searches than any other city when compared to the total number of listings. It also had a significant drop in the number of foreclosures.
3. Fort Myers-Cape Coral: Median prices in Fort Myers-Cape Coral have increased year-over-year, foreclosures are down, inventory is lower and foreign buyers are attracted to the area’s real estate prices.
4. Phoenix-Mesa, Ariz.
5. Fort Lauderdale: Inventory has decreased and prices have increased, says Realtor.com.
6. Sarasota-Bradenton: About one in 10 foreign buyers look in Sarasota-Bradenton for a home, Realtor.com says. Listing prices have increased and inventory has decreased.
7. Lakeland-Winter Haven: According to Realtor.com, the number of distressed sales has decreased significantly and prices have gone up.
8. Boise City, Idaho
9. Fort Wayne, Ind.
10. Ann Arbor, Mich.
Trulia’s Metro Movers Report
Trulia has debuted a new report that analyzed its home searches.
In one study, Trulia looked at the number of people who searched for housing in a city – including renters – and compared it to the number of city residents looking elsewhere for a home. An area with a high number of inbound searches and a low number of outbound searches, Trulia reasons, suggests an increased demand for housing.
According to the study, the North Port-Bradenton-Sarasota area had six times more searches by inbound people than outbound people, landing it in the list’s No. 1 position, but four other Florida cities also made the top 10 list:
1. North Port-Bradenton-Sarasota
2. Riverside-San Bernardino-Ontario, CA
3. Charleston-North Charleston-Summerville, SC
4. Fort Lauderdale-Pompano Beach-Deerfield Beach
5. Cape Coral-Fort Myers
6. West Palm Beach-Boca Raton-Boynton Beach
7. Fort Worth-Arlington, TX
8. Oxnard-Thousand Oaks-Ventura, CA
9. Las Vegas-Paradise, NV
10. Orlando-Kissimmee-Sanford
Trulia also looked at the Chicago and New York City markets to see where residents wanted to move. Three Florida cities ranked in the top 10 for Chicago residents: Tampa-St. Petersburg-Clearwater (No. 4), Cape Coral-Fort Myers (No. 6) and Orlando-Kissimmee-Sanford (No. 10).
In New York City, five Florida cities made the list: Miami-Miami-Beach-Kendall (No. 2), Orlando-Kissimmee-Sanford (No. 3), West Palm Beach-Boca Raton-Boynton Beach (No. 5), Fort Lauderdale-Pompano Beach-Deerfield Beach (No. 6) and Tampa-St. Petersburg-Clearwater (No. 7).
© 2011 Florida Realtors®
“This is a positive trend for Florida,” says John Tuccillo, Florida Realtors chief economist. “While Trulia and Realtor.com aren’t completely accurate in home prices and sales – mainly because they base their numbers on only homes listed on their website – it’s useful to look at visitor behavior and note the trends. If Trulia says more visitors are doing a home search in the Miami market, for example, it probably follows that Miami is experiencing an upswing in demand.”
Realtor.com’s Top Ten Turnaround Report
In Realtor.com’s “Top Ten Turnaround Report,” six Florida cities were considered good bets for an upswing in sales. Realtor.com, which is owned by The National Association of Realtors®, says it created a formula to rank a city’s turnaround potential based on recent price appreciation, changes in inventory, median age of inventory, number of Realtor.com searches by visitors and area unemployment.
Realtor.com attributes the Florida cities’ success to year-over-year home price increases, reductions in inventory, lower unemployment rates and, in some cases, an upswing in international buyers.
Realtor.com’s turnaround list includes:
1. Miami: Ranked No. 1 in the report, Miami hit the top based on “a healthy inventory that is only half the size from a year ago,” a lower foreclosure rate than the national average, and an increase in condo sales.
2. Orlando: While No. 2, Realtor.com says Orlando had more home searches than any other city when compared to the total number of listings. It also had a significant drop in the number of foreclosures.
3. Fort Myers-Cape Coral: Median prices in Fort Myers-Cape Coral have increased year-over-year, foreclosures are down, inventory is lower and foreign buyers are attracted to the area’s real estate prices.
4. Phoenix-Mesa, Ariz.
5. Fort Lauderdale: Inventory has decreased and prices have increased, says Realtor.com.
6. Sarasota-Bradenton: About one in 10 foreign buyers look in Sarasota-Bradenton for a home, Realtor.com says. Listing prices have increased and inventory has decreased.
7. Lakeland-Winter Haven: According to Realtor.com, the number of distressed sales has decreased significantly and prices have gone up.
8. Boise City, Idaho
9. Fort Wayne, Ind.
10. Ann Arbor, Mich.
Trulia’s Metro Movers Report
Trulia has debuted a new report that analyzed its home searches.
In one study, Trulia looked at the number of people who searched for housing in a city – including renters – and compared it to the number of city residents looking elsewhere for a home. An area with a high number of inbound searches and a low number of outbound searches, Trulia reasons, suggests an increased demand for housing.
According to the study, the North Port-Bradenton-Sarasota area had six times more searches by inbound people than outbound people, landing it in the list’s No. 1 position, but four other Florida cities also made the top 10 list:
1. North Port-Bradenton-Sarasota
2. Riverside-San Bernardino-Ontario, CA
3. Charleston-North Charleston-Summerville, SC
4. Fort Lauderdale-Pompano Beach-Deerfield Beach
5. Cape Coral-Fort Myers
6. West Palm Beach-Boca Raton-Boynton Beach
7. Fort Worth-Arlington, TX
8. Oxnard-Thousand Oaks-Ventura, CA
9. Las Vegas-Paradise, NV
10. Orlando-Kissimmee-Sanford
Trulia also looked at the Chicago and New York City markets to see where residents wanted to move. Three Florida cities ranked in the top 10 for Chicago residents: Tampa-St. Petersburg-Clearwater (No. 4), Cape Coral-Fort Myers (No. 6) and Orlando-Kissimmee-Sanford (No. 10).
In New York City, five Florida cities made the list: Miami-Miami-Beach-Kendall (No. 2), Orlando-Kissimmee-Sanford (No. 3), West Palm Beach-Boca Raton-Boynton Beach (No. 5), Fort Lauderdale-Pompano Beach-Deerfield Beach (No. 6) and Tampa-St. Petersburg-Clearwater (No. 7).
© 2011 Florida Realtors®
Tuesday, November 15, 2011
NAR: Gradual recovery for housing and economy in 2012
ANAHEIM, Calif. – Nov. 15, 2011 – Although the housing market struggled to maintain an even footing in 2011, gradual improvement is expected in 2012 and beyond, according to projections at the 2011 Realtors® Conference & Expo.
Lawrence Yun, chief economist of the National Association of Realtors (NAR), said home sales should be stronger. “Tight mortgage credit conditions have been holding back homebuyers all year, and consumer confidence has been shaky recently,” he said. “Nonetheless, there is a sizeable pent-up demand based on population growth, employment levels and a doubling-up phenomenon that can’t continue indefinitely. This demand could quickly stimulate the market when conditions improve.”
Yun projects growth in Gross Domestic Product to be 1.8 percent this year, then rising moderately at a rate of 2.2 percent in 2012. With job growth of 1.7 to 2.2 million next year, the unemployment rate is expected to decline to 8.7 percent by the second half of 2012. Mortgage interest rates should gradually rise from recent record lows and reach 4.5 percent by the middle of 2012.
“Housing affordability conditions, based on the relationship between median home prices, mortgage interest rates, and median family income, have been at a record high this year,” Yun said. “Very favorable affordability conditions will dominate next year as well, which will probably be the second best year on record dating back to 1970. Our hope is that credit restrictions will ease and allow more homebuyers to take advantage of current opportunities.”
Existing-home sales are forecast to edge up about 1 percent this year, and then rise another 4 to 5 percent in 2012. Based on NAR’s current projection model, existing-home sales would total 4.96 million in 2011.
Housing data
NAR says it is benchmarking its existing-home sales statistics, and it expects total sales to be lowered for recent years. However, it doesn’t expect many changes to previously reported percentage comparisons, median prices or the month’s supply of inventory. NAR expects to publish its improved measurement methodology soon.
“NAR began its normal process for benchmarking sales at the beginning of this year in consultation with government agencies, outside housing economists and academic experts,” NAR said in a release. “There will be no notable change to previous characterizations of the market in terms of sales trends, monthly percentage changes, etc.”
In the 2010 U.S. Census, the government stopped reporting home sales data, which NAR used as a benchmark. As a result, the association had to develop a new independent score to use as a baseline for its calculations. Preliminary data using the new benchmark will “undergo broad review shortly by professional economists and government agencies. After any issues that may surface in the review process are addressed, we will update monthly seasonal adjustment factors and publish revisions.”
Housing forecast
New-home sales are expected to be a record low 302,000 this year, rising to 372,000 in 2012. Housing starts are forecast to rise to 630,000 next year from 583,000 in 2011.
“Although a double-digit growth in new-home sales and housing starts sounds encouraging, the projections remain historically soft relative to long-term underlying demand,” Yun explained.
With falling inventory, the median home price should rise in 2012. “Home prices have yet to show a definitive stabilization pattern in most areas. Still, given an over-correction in prices, there likely will be moderate appreciation in 2012,” Yun said. “Once home prices turn positive on a sustained basis, consumer confidence will rise and help the broader economy to improve,” Yun added.
Richard Peach, senior vice president at the Federal Reserve Board of New York, said the economy is under-performing. “Nearly two-and-a-half years since the end of ‘the great recession,’ the economy continues to operate well below its potential,” he said. “Among the significant structural impediments are the legacy of the housing boom and bust, and fiscal contrition at the state and local level.”
Peach said the current business cycle remains 7 percent below its peak and is longer than other recession cycles since 1953. He added the employment to population ratio is historically low, and there’s been a shift in the distribution of income, with corporate profits up strongly while employment compensation is down.
Peach believes there is a sizeable level of shadow inventory that will result in rising foreclosures. “My idea is to allocate certificates to 2.5 million service members who served in Afghanistan and Iraq that could be used as a downpayment on a foreclosed home in the Fannie or Freddie portfolio,” he said.
© 2011 Florida Realtors®
Lawrence Yun, chief economist of the National Association of Realtors (NAR), said home sales should be stronger. “Tight mortgage credit conditions have been holding back homebuyers all year, and consumer confidence has been shaky recently,” he said. “Nonetheless, there is a sizeable pent-up demand based on population growth, employment levels and a doubling-up phenomenon that can’t continue indefinitely. This demand could quickly stimulate the market when conditions improve.”
Yun projects growth in Gross Domestic Product to be 1.8 percent this year, then rising moderately at a rate of 2.2 percent in 2012. With job growth of 1.7 to 2.2 million next year, the unemployment rate is expected to decline to 8.7 percent by the second half of 2012. Mortgage interest rates should gradually rise from recent record lows and reach 4.5 percent by the middle of 2012.
“Housing affordability conditions, based on the relationship between median home prices, mortgage interest rates, and median family income, have been at a record high this year,” Yun said. “Very favorable affordability conditions will dominate next year as well, which will probably be the second best year on record dating back to 1970. Our hope is that credit restrictions will ease and allow more homebuyers to take advantage of current opportunities.”
Existing-home sales are forecast to edge up about 1 percent this year, and then rise another 4 to 5 percent in 2012. Based on NAR’s current projection model, existing-home sales would total 4.96 million in 2011.
Housing data
NAR says it is benchmarking its existing-home sales statistics, and it expects total sales to be lowered for recent years. However, it doesn’t expect many changes to previously reported percentage comparisons, median prices or the month’s supply of inventory. NAR expects to publish its improved measurement methodology soon.
“NAR began its normal process for benchmarking sales at the beginning of this year in consultation with government agencies, outside housing economists and academic experts,” NAR said in a release. “There will be no notable change to previous characterizations of the market in terms of sales trends, monthly percentage changes, etc.”
In the 2010 U.S. Census, the government stopped reporting home sales data, which NAR used as a benchmark. As a result, the association had to develop a new independent score to use as a baseline for its calculations. Preliminary data using the new benchmark will “undergo broad review shortly by professional economists and government agencies. After any issues that may surface in the review process are addressed, we will update monthly seasonal adjustment factors and publish revisions.”
Housing forecast
New-home sales are expected to be a record low 302,000 this year, rising to 372,000 in 2012. Housing starts are forecast to rise to 630,000 next year from 583,000 in 2011.
“Although a double-digit growth in new-home sales and housing starts sounds encouraging, the projections remain historically soft relative to long-term underlying demand,” Yun explained.
With falling inventory, the median home price should rise in 2012. “Home prices have yet to show a definitive stabilization pattern in most areas. Still, given an over-correction in prices, there likely will be moderate appreciation in 2012,” Yun said. “Once home prices turn positive on a sustained basis, consumer confidence will rise and help the broader economy to improve,” Yun added.
Richard Peach, senior vice president at the Federal Reserve Board of New York, said the economy is under-performing. “Nearly two-and-a-half years since the end of ‘the great recession,’ the economy continues to operate well below its potential,” he said. “Among the significant structural impediments are the legacy of the housing boom and bust, and fiscal contrition at the state and local level.”
Peach said the current business cycle remains 7 percent below its peak and is longer than other recession cycles since 1953. He added the employment to population ratio is historically low, and there’s been a shift in the distribution of income, with corporate profits up strongly while employment compensation is down.
Peach believes there is a sizeable level of shadow inventory that will result in rising foreclosures. “My idea is to allocate certificates to 2.5 million service members who served in Afghanistan and Iraq that could be used as a downpayment on a foreclosed home in the Fannie or Freddie portfolio,” he said.
© 2011 Florida Realtors®
Saturday, November 12, 2011
Market Recap November 14, 2011
Keeping you updated on the market! For the week of November 14, 2011
MARKET RECAP
If we were to survey the landscape to see if people rate the decline in housing prices as either a curse or a blessing, we are sure most would say curse. After all, most homeowners have suffered a loss of equity over the past five years.
However, there is an upside to the decline in home prices, particularly for first-time homebuyers and owners looking to trade up, and that's affordability. According to financial data provider Fiserv, the monthly mortgage payment for a median-priced single-family home is 40 percent cheaper than it was five years ago, falling to $700 from $1,140.
Lower prices are really the only way to remedy a supply glut. Watching an asset's price fall is unpleasant, to be sure, but prices fall only so far and the glut clears, and then prices generally rise.
For example, Miami was one of the most overbuilt metropolitan regions and suffered serious price deflation. But the glut in Miami appears to have cleared, thanks to lower prices stimulating more demand. In the third quarter of 2011, Miami home sales jumped 51 percent from a year ago. What's more, prices are again on the rise: the average sales price in Miami for a single-family home has risen 19 percent year-over-year.
It is more informative to focus on local numbers than it is to focus on national numbers. The National Association of Realtors reports that the national median single-family home price slipped 4.7 percent year-over-year to $169,500 in the third quarter. That said, the NAR's national median price really doesn't mean much to any specific local market.
The bottom line for us is that we've seen enough evidence of markets clearing to suggest more markets will resemble Miami in 2012. Fiserv, though expecting some price weakness over the next few months, expects most major markets to post significant price gains in the second half of 2012.
What will financing rates look like in 2012? We thought mortgage rates would be higher this year than in 2010; that hasn't been the case. The Federal Reserve has plainly stated that it is buying long-term securities in order to hold long-term borrowing rates low. It can be silly to fight the Fed.
Then again, markets can be potent forces. Consider this past week: news that another Mediterranean country, Italy , is close to insolvency did little to move interest rates or mortgage rates. In other words, investors weren't rushing into U.S. Treasury securities. In fact, Treasury rates and mortgage rates held steady for the week.
When the Greek crisis occurred, Treasury rates and mortgage rates dropped perceptibly. The fact mortgage rates hardly moved with the latest crisis suggests markets might be less willing to accept ultra-low rates in exchange for a haven from risk.
Economic Indicator
Release Date and Time
Consensus Estimate
Analysis
Producer Price Index(October)
Tues., Nov. 15,8:30 am, et
All Goods: 0.2% (Decrease)Core: No Change
Important. Underlying producer price inflation is easing but remains at elevated levels.
Retail Sales(October)
Tues., Nov. 15, 8:30 am , et
No Change
Important. The long-term sales trend suggests consumers are more optimistic than confidence measures state.
Mortgage Applications
Wed., Nov. 16,7:00 am, et
None
Important. Purchase activity continues to post steady (and encouraging) gains.
Consumer Price Index(October)
Wed., Nov. 16,8:30 am, et
All Goods: 0.1% (Decrease)Core: No Change
Important. A decrease in CPI will relieve pressure for interest rates to rise.
Home Builder Index(November)
Wed., Nov. 16,10:00 am, et
18 Index
Important. Gains in homebuilder stocks point to growing builder confidence.
Housing Starts(October)
Thurs., Nov 17,8:30 am, et
605,000 (Annualized)
Important. More regions are experiencing a rising level of starts.
Learn from the Past, But Focus on the Future
This is advice we try to pass onto our clients. It's important to learn from the past, but it's just as important to focus on the future.
What we've learned from the past is to avoid an asset whose short-term growth rate has far exceeded its historical average annual growth rate. That's not what we have today with housing. We have an asset class – residential real estate – that has reverted to historical norms and is priced to appreciate going forward.
This is a difficult concept for many people to accept. We naturally anchor to the recent past, but doing so can mislead. In 2006, many people thought home prices could only go up; in 2011, many people think home prices can only go down. What we can learn from the past is that trends don't last forever. Buying assets people are selling, and selling assets people are buying, can be very profitable.
We've been saying for the past year that residential real estate is priced to be profitable. Our belief hasn't changed, which is why we continue to say real estate financed with a mortgage loan will be one of the better performing assets over the next decade.
Courtesy of Patti Wilson, Mutual of Omaha Bank. (239) 357-0739
MARKET RECAP
If we were to survey the landscape to see if people rate the decline in housing prices as either a curse or a blessing, we are sure most would say curse. After all, most homeowners have suffered a loss of equity over the past five years.
However, there is an upside to the decline in home prices, particularly for first-time homebuyers and owners looking to trade up, and that's affordability. According to financial data provider Fiserv, the monthly mortgage payment for a median-priced single-family home is 40 percent cheaper than it was five years ago, falling to $700 from $1,140.
Lower prices are really the only way to remedy a supply glut. Watching an asset's price fall is unpleasant, to be sure, but prices fall only so far and the glut clears, and then prices generally rise.
For example, Miami was one of the most overbuilt metropolitan regions and suffered serious price deflation. But the glut in Miami appears to have cleared, thanks to lower prices stimulating more demand. In the third quarter of 2011, Miami home sales jumped 51 percent from a year ago. What's more, prices are again on the rise: the average sales price in Miami for a single-family home has risen 19 percent year-over-year.
It is more informative to focus on local numbers than it is to focus on national numbers. The National Association of Realtors reports that the national median single-family home price slipped 4.7 percent year-over-year to $169,500 in the third quarter. That said, the NAR's national median price really doesn't mean much to any specific local market.
The bottom line for us is that we've seen enough evidence of markets clearing to suggest more markets will resemble Miami in 2012. Fiserv, though expecting some price weakness over the next few months, expects most major markets to post significant price gains in the second half of 2012.
What will financing rates look like in 2012? We thought mortgage rates would be higher this year than in 2010; that hasn't been the case. The Federal Reserve has plainly stated that it is buying long-term securities in order to hold long-term borrowing rates low. It can be silly to fight the Fed.
Then again, markets can be potent forces. Consider this past week: news that another Mediterranean country, Italy , is close to insolvency did little to move interest rates or mortgage rates. In other words, investors weren't rushing into U.S. Treasury securities. In fact, Treasury rates and mortgage rates held steady for the week.
When the Greek crisis occurred, Treasury rates and mortgage rates dropped perceptibly. The fact mortgage rates hardly moved with the latest crisis suggests markets might be less willing to accept ultra-low rates in exchange for a haven from risk.
Economic Indicator
Release Date and Time
Consensus Estimate
Analysis
Producer Price Index(October)
Tues., Nov. 15,8:30 am, et
All Goods: 0.2% (Decrease)Core: No Change
Important. Underlying producer price inflation is easing but remains at elevated levels.
Retail Sales(October)
Tues., Nov. 15, 8:30 am , et
No Change
Important. The long-term sales trend suggests consumers are more optimistic than confidence measures state.
Mortgage Applications
Wed., Nov. 16,7:00 am, et
None
Important. Purchase activity continues to post steady (and encouraging) gains.
Consumer Price Index(October)
Wed., Nov. 16,8:30 am, et
All Goods: 0.1% (Decrease)Core: No Change
Important. A decrease in CPI will relieve pressure for interest rates to rise.
Home Builder Index(November)
Wed., Nov. 16,10:00 am, et
18 Index
Important. Gains in homebuilder stocks point to growing builder confidence.
Housing Starts(October)
Thurs., Nov 17,8:30 am, et
605,000 (Annualized)
Important. More regions are experiencing a rising level of starts.
Learn from the Past, But Focus on the Future
This is advice we try to pass onto our clients. It's important to learn from the past, but it's just as important to focus on the future.
What we've learned from the past is to avoid an asset whose short-term growth rate has far exceeded its historical average annual growth rate. That's not what we have today with housing. We have an asset class – residential real estate – that has reverted to historical norms and is priced to appreciate going forward.
This is a difficult concept for many people to accept. We naturally anchor to the recent past, but doing so can mislead. In 2006, many people thought home prices could only go up; in 2011, many people think home prices can only go down. What we can learn from the past is that trends don't last forever. Buying assets people are selling, and selling assets people are buying, can be very profitable.
We've been saying for the past year that residential real estate is priced to be profitable. Our belief hasn't changed, which is why we continue to say real estate financed with a mortgage loan will be one of the better performing assets over the next decade.
Courtesy of Patti Wilson, Mutual of Omaha Bank. (239) 357-0739
Monday, October 17, 2011
Market Recap Week of October 17, 2011
MARKET RECAP
We've reported frequently on the encouraging data on home prices. The most recent encouraging data comes courtesy of Zillow, which shows that home prices inched 0.1 percent higher in August, with the average home price moving to $172,600. Zillow's data also show that the national foreclosure rate dropped to 9.2 homes out of every 10,000 homes, down from 10.9 homes out of every 10,000 in 2010.
Unfortunately, the good vibes on pricing and foreclosures were tempered by a warning that foreclosures will accelerate once the controversial robo-signing imbroglio passes. In fact, Zillow believes foreclosure inventory will pressure home prices and that prices won't bottom until 2012 “at the earliest.”
It's possible we could see national average and median home prices fall. Locally, prices could just as easily fall, stagnate, or rise. In fact, a rise might be more in the offing for many local markets. After all, national data is skewed by a few regions – Nevada , Arizona , Central Florida and Central California . Overall, we still see prices firming and rising in many markets, though that trend might not be reflected in national numbers.
As for mortgage rates, we can say categorically that they have been rising nationally and locally since last Friday, thanks in part to an employment report that showed the economy created more jobs in September than most economists had expected. In many markets, rates were up 20 basis points on the 30-year fixed-rate loan. This shouldn't come as a surprise; the yield on the 10-year US Treasury note – the foundation for long-term mortgages – has risen 35 basis-points over the past 10 days.
To be sure, mortgage rates could reverse course and return to the long-term down trend, but there is a real danger to a strategy predicated on returning to the long-term trend in a market that has been trending higher; that is the obvious: the short-term trend might not reverse.
Another danger is supply and demand. Falling mortgage rates do stimulate demand, but if supply isn't rising at an accommodating pace, there is no guarantee that an ultra-low mortgage rate will be filled. Loans, like all good and services, are rationed by price. If you can get a higher price for your product, you get it.
In short, if someone is satisfied with his rate, the best strategy is to ignore the daily vicissitudes and lock. Regret is a tough emotion to overcome, particularly in a market that is showing signs of wanting to move higher.
Economic Indicator
Release Date and Time
Consensus Estimate
Analysis
Industrial Production(September)
Mon., Oct. 17,9:15 am, et
0.2% (Increase)
Important. The rising production trend is encouraging for the economic outlook.
Producer Price Index(September)
Tues., Oct. 18,8:30 am, et
All Goods: 0.4% (Increase)Core: 0.1% (Increase)
Important. Producer prices remain subdued and non-inflationary.
Home Builders Index(October)
Tues., Oct. 18,10:00 am, et
14 Index
Important. Activity remains at multi-decade lows, though some markets are showing increased activity.
Mortgage Applications
Wed., Oct.19,7:00 am, et
None
Important. The uptick in purchase applications could signal improved October home sales.
Consumer Price Index(September)
Wed., Oct.19,8:30 am, et
All Goods: 0.3% (Increase)Core: 0.1% (Increase)
Important. Consumer prices are pushing the Federal Reserve's upper-range target and could turn inflationary.
Housing Starts(September)
Wed., Oct.19,8:30 am, et
590,000 (Annualized)
Important. Starts remain at a three-year depressed level.
Existing Home Sales(September)
Thurs., Oct. 20,10:00 am, et
4.9 Million (Annualized)
Important. After surging in August, sales are expected to pull back to the longer-term trend.
Mortgage Market Debate
It's no secret that a lot of mortgage lending is in government-backed loans. Nationally, Fannie Mae, Freddie Mac, and the FHA back nine in 10 new mortgages. The federal government is looking to pull back and see if more private investors and lenders can be lured into the market.
There are legitimate concerns with a prospective federal pull back. There is the possibility of reduced available credit, thus leading to fewer sales and lower home prices. We've already seen some reduction in volume in higher priced homes when limits on loans backed by Fannie and Freddie declined at the beginning of October.
There is also the concern that sellers will find that fewer potential buyers qualify to purchase their properties. Less liberal down payments and lower loan limits could also hamstring trade-up buyers who want to tap their home equity as a down payment for their new residence.
Here's the conundrum: If we went to return to a more market-driven lending environment, we have to attract private investment, which means rates would have to rise. Private lenders and investors require a greater return than public sources of funds. It's worth noting, though, that many private lenders are flush with money they could put to work. What's more, private lenders and investors will add diversity to the market, which it is currently lacking.
The point is, we can see the mortgage market changing. We can't say whether it will be a net positive in the short term, but we think it raises the uncertainly level enough for borrowers to seriously consider taking advantage of the mortgage market as it is today.
This Mortgage Matters Compliments of Patti Wilson,
Senior Loan Officer Mutual of Omaha Bank.
Email to: patti.wilson@mutualofomahabank.com
We've reported frequently on the encouraging data on home prices. The most recent encouraging data comes courtesy of Zillow, which shows that home prices inched 0.1 percent higher in August, with the average home price moving to $172,600. Zillow's data also show that the national foreclosure rate dropped to 9.2 homes out of every 10,000 homes, down from 10.9 homes out of every 10,000 in 2010.
Unfortunately, the good vibes on pricing and foreclosures were tempered by a warning that foreclosures will accelerate once the controversial robo-signing imbroglio passes. In fact, Zillow believes foreclosure inventory will pressure home prices and that prices won't bottom until 2012 “at the earliest.”
It's possible we could see national average and median home prices fall. Locally, prices could just as easily fall, stagnate, or rise. In fact, a rise might be more in the offing for many local markets. After all, national data is skewed by a few regions – Nevada , Arizona , Central Florida and Central California . Overall, we still see prices firming and rising in many markets, though that trend might not be reflected in national numbers.
As for mortgage rates, we can say categorically that they have been rising nationally and locally since last Friday, thanks in part to an employment report that showed the economy created more jobs in September than most economists had expected. In many markets, rates were up 20 basis points on the 30-year fixed-rate loan. This shouldn't come as a surprise; the yield on the 10-year US Treasury note – the foundation for long-term mortgages – has risen 35 basis-points over the past 10 days.
To be sure, mortgage rates could reverse course and return to the long-term down trend, but there is a real danger to a strategy predicated on returning to the long-term trend in a market that has been trending higher; that is the obvious: the short-term trend might not reverse.
Another danger is supply and demand. Falling mortgage rates do stimulate demand, but if supply isn't rising at an accommodating pace, there is no guarantee that an ultra-low mortgage rate will be filled. Loans, like all good and services, are rationed by price. If you can get a higher price for your product, you get it.
In short, if someone is satisfied with his rate, the best strategy is to ignore the daily vicissitudes and lock. Regret is a tough emotion to overcome, particularly in a market that is showing signs of wanting to move higher.
Economic Indicator
Release Date and Time
Consensus Estimate
Analysis
Industrial Production(September)
Mon., Oct. 17,9:15 am, et
0.2% (Increase)
Important. The rising production trend is encouraging for the economic outlook.
Producer Price Index(September)
Tues., Oct. 18,8:30 am, et
All Goods: 0.4% (Increase)Core: 0.1% (Increase)
Important. Producer prices remain subdued and non-inflationary.
Home Builders Index(October)
Tues., Oct. 18,10:00 am, et
14 Index
Important. Activity remains at multi-decade lows, though some markets are showing increased activity.
Mortgage Applications
Wed., Oct.19,7:00 am, et
None
Important. The uptick in purchase applications could signal improved October home sales.
Consumer Price Index(September)
Wed., Oct.19,8:30 am, et
All Goods: 0.3% (Increase)Core: 0.1% (Increase)
Important. Consumer prices are pushing the Federal Reserve's upper-range target and could turn inflationary.
Housing Starts(September)
Wed., Oct.19,8:30 am, et
590,000 (Annualized)
Important. Starts remain at a three-year depressed level.
Existing Home Sales(September)
Thurs., Oct. 20,10:00 am, et
4.9 Million (Annualized)
Important. After surging in August, sales are expected to pull back to the longer-term trend.
Mortgage Market Debate
It's no secret that a lot of mortgage lending is in government-backed loans. Nationally, Fannie Mae, Freddie Mac, and the FHA back nine in 10 new mortgages. The federal government is looking to pull back and see if more private investors and lenders can be lured into the market.
There are legitimate concerns with a prospective federal pull back. There is the possibility of reduced available credit, thus leading to fewer sales and lower home prices. We've already seen some reduction in volume in higher priced homes when limits on loans backed by Fannie and Freddie declined at the beginning of October.
There is also the concern that sellers will find that fewer potential buyers qualify to purchase their properties. Less liberal down payments and lower loan limits could also hamstring trade-up buyers who want to tap their home equity as a down payment for their new residence.
Here's the conundrum: If we went to return to a more market-driven lending environment, we have to attract private investment, which means rates would have to rise. Private lenders and investors require a greater return than public sources of funds. It's worth noting, though, that many private lenders are flush with money they could put to work. What's more, private lenders and investors will add diversity to the market, which it is currently lacking.
The point is, we can see the mortgage market changing. We can't say whether it will be a net positive in the short term, but we think it raises the uncertainly level enough for borrowers to seriously consider taking advantage of the mortgage market as it is today.
This Mortgage Matters Compliments of Patti Wilson,
Senior Loan Officer Mutual of Omaha Bank.
Email to: patti.wilson@mutualofomahabank.com
Monday, September 26, 2011
Home Listing Prices Rising in Florida
ORLANDO, Fla. – Sept. 26, 2011 – Prices are rising in Florida.
Florida cities have had the largest year-over-year increases in average list prices, according to the latest real estate data from Realtor.com. Based on August data of 2.2 million listings in 146 markets, Florida cities make up nine of the top 10 places for highest year-over-year list price spikes.
Nationwide, the average list price is $320,325, up 2.36 percent year-over-year.
Here are the top 15 cities boasting the highest percentage of year-over-year increases in average list prices.
1. Miami
Average list price: $640,332
Year-over-year increase: 27.4%
2. Fort Myers-Cape Coral, Fla.
Average list price: $443,570
Year-over-year increase: 26.27%
3. Central-Fla. rural service area
Average list price: $405,809
Year-over-year increase: 19.41%
4. Punta Gorda, Fla.
Average list price: $267,066
Year-over-year increase: 16.37%
5. Macon, Ga.
Average list price: $193,520
Year-over-year increase: 15.98%
6. Sarasota-Bradenton, Fla.
Average list price: $466,785
Year-over-year increase: 15.86%
7. Naples, Fla.
Average list price: $713,087
Year-over-year increase: 15.13%
8. West Palm Beach-Boca Raton, Fla.
Average list price: $591,895
Year-over-year increase: 14.68%
9. Ocala, Fla.
Average list price: $193,360
Year-over-year increase: 12.07%
10. Lakeland-Winter Haven, Fla.
Average list price: $181,409
Year-over-year increase: 11.48%
11. Orlando, Fla.
Average list price: $319,419
Year-over-year increase: 10.56%
12. Portland-Vancouver, Ore.-Wash.
Average list price: $314,537
Year-over-year increase: 10.52%
13. Boise City, Idaho
Average list price: $212,588
Year-over-year increase: 10.43%
14. Springfield, Illinois
Average list price: $174,537
Year-over-year increase: 9.12%
15. Shreveport-Bossier City, La.
Average list price: $211,414
Year-over-year increase: 8.34%
Source: Melissa Dittmann Tracey, Realtor® Magazine Daily News
© 2011 Florida Realtors®
Florida cities have had the largest year-over-year increases in average list prices, according to the latest real estate data from Realtor.com. Based on August data of 2.2 million listings in 146 markets, Florida cities make up nine of the top 10 places for highest year-over-year list price spikes.
Nationwide, the average list price is $320,325, up 2.36 percent year-over-year.
Here are the top 15 cities boasting the highest percentage of year-over-year increases in average list prices.
1. Miami
Average list price: $640,332
Year-over-year increase: 27.4%
2. Fort Myers-Cape Coral, Fla.
Average list price: $443,570
Year-over-year increase: 26.27%
3. Central-Fla. rural service area
Average list price: $405,809
Year-over-year increase: 19.41%
4. Punta Gorda, Fla.
Average list price: $267,066
Year-over-year increase: 16.37%
5. Macon, Ga.
Average list price: $193,520
Year-over-year increase: 15.98%
6. Sarasota-Bradenton, Fla.
Average list price: $466,785
Year-over-year increase: 15.86%
7. Naples, Fla.
Average list price: $713,087
Year-over-year increase: 15.13%
8. West Palm Beach-Boca Raton, Fla.
Average list price: $591,895
Year-over-year increase: 14.68%
9. Ocala, Fla.
Average list price: $193,360
Year-over-year increase: 12.07%
10. Lakeland-Winter Haven, Fla.
Average list price: $181,409
Year-over-year increase: 11.48%
11. Orlando, Fla.
Average list price: $319,419
Year-over-year increase: 10.56%
12. Portland-Vancouver, Ore.-Wash.
Average list price: $314,537
Year-over-year increase: 10.52%
13. Boise City, Idaho
Average list price: $212,588
Year-over-year increase: 10.43%
14. Springfield, Illinois
Average list price: $174,537
Year-over-year increase: 9.12%
15. Shreveport-Bossier City, La.
Average list price: $211,414
Year-over-year increase: 8.34%
Source: Melissa Dittmann Tracey, Realtor® Magazine Daily News
© 2011 Florida Realtors®
Tuesday, September 20, 2011
Keeping you updated on the market!
For the week of September 19, 2011
MARKET RECAP
The major mortgage servicers are getting their house in order, as foreclosures have accelerated in the past month. RealtyTrac reports that mortgage servicers started foreclosure on more than 78,800 properties in August, a 33-percent increase from July levels.
Most of us were aware that the foreclosure lull was only a temporary reprieve. That said, the growing rate of foreclosures has revived concerns over excessive inventory. The Cato Institute, an economic think thank, estimates an oversupply of three million houses, about a million more than actually demanded.
With so much inventory on the market and more to come, pricing becomes an issue: More supply means lower prices, which, in turn, means more negative equity. Concerning the latter, CoreLogic estimates that nearly 11 million properties, roughly 22.5 percent of all U.S. homes, were worth less than the underlying mortgage in the second quarter of 2011.
The prospect of more price depreciation and more negative equity has increased calls for more government action. Problem is, efforts to date have had only marginal benefits or have had negative unintended consequences: Cato reports that government efforts to revive housing have helped the most expensive markets while actually depressing prices in the cheapest markets.
At this point, it might be best to let the market run its course. We’ve noted in past editions that when prices fall, demand increases, then prices increase. We've seen this economic truism at work to encouraging effect in a few hard-hit markets. The Orlando Regional Realtor Association reports that the median price for homes in its area has increased 15.1 percent year-over-year.
We've also often noted that real estate is local. The national numbers on foreclosures and negative equity can be big and scary, but they also carry no relevance to any one particular market.
Mortgage rates are another matter; they tend to adhere closely to a national average. Rates at the national level dropped a few basis points this past week on most mortgage products.
There are many reasons for the drop in mortgage rates. One of the more interesting is a rumor that the Federal Reserve is contemplating purchasing longer-term Treasury securities (such as the 10-year note) to drive down long-term interest rates, which would help keep mortgage rates low. Because markets are forward looking, it is possible that the market is getting a jump on the Federal Reserve.
We've been in the minority in questioning the economic benefits of ultra-low mortgage rates. Our rationale is that low rates, and the anticipation of even lower rates, are delaying buying and refinancing decisions today. Our rationale isn't unfounded. Richard Fisher, president of the Federal Reserve Bank of Dallas , believes low rates are limiting economic growth because businesses have an incentive to delay borrowing for expansion. They see no reason to act today if interest rates are expected to stay low tomorrow. We see the same effect in housing.
Economic Indicator
Release Date and Time
Consensus Estimate
Analysis
Home Builders Index(September)
Mon., Sept. 19,10:00 am, et
16 Index
Important. A slowdown in existing-home sales is causing more cancellations of new-home contracts.
Housing Starts(August)
Tues., Sept. 20,8:30 am, et
590,000 (Annualized)
Important. Starts remain anemic with mild strength in the multifamily component.
Mortgage Applications
Wed., Sept. 21,7:00 am, et
None
Important. A pick up in purchase applications suggests improving sales for September.
Existing Home Sales(August)
Wed., Sept. 21,10:00 am, et
4.75 Million (Annualized)
Important. Economic uncertainty is slowing sales volume.
Federal Reserve FOMC Meeting Announcement
Wed., Sept. 21,2:15 pm, et
Federal Funds Rate: 0.0% to 0.25%
Important. Markets will be parsing the Fed's transcripts for directions on long-term rates.
FHFA Home Price Index(July)
Thurs., Sept. 22,10:00 am, et
0.5% (Increase)
Important. Despite sluggish summer home sales, prices should continue to improve.
A Novel Solution, But Can It Work?
We like it when people think outside the box. Radar Logic, a data and analytic firm, has sent a proposal to Washington on a loan-restructuring plan we find intriguing.
Mortgage News Daily offers an example of Radar logic's plan in practice: A loan with an original balance of $190,000 has been paid down to $186,000, then goes into default. A foreclosure occurs and a subsequent sale of the REO property nets $99,000. The loss suffered by the lender would be $87,000. Under Radar Logic's plan, a restructuring occurs based on borrower information and the appraised value of the home to produce a new loan of $125,000. The restructuring would result in a loss of $61,000 for the lender, but a 26-percent larger recovery.
So what's the incentive for the lender? The restructured loan would also include an equity participation certificate (EPC). While the homeowner would be granted a portion of the appreciation rights, the lender would hold an equity position through the EPC in anticipation of appreciation of the underlying collateral.
There are a couple obvious risks: 1) Radar Logic's contention that its plan will reduce the perception of over-supply and prices rise fails to materialize; and 2) the borrower defaults on the restructured loan. That said, at least Risk Logic is thinking, and we like that.
Courtesy of Patti Wilson, Senior Loan officer, Mutual of Omaha Bank.
Email to: patti.wilson@mutualofomahabank.com
Check all the current listings for the Sanibel/Captiva Islands here www.SanibelHomeSeeker.com
MARKET RECAP
The major mortgage servicers are getting their house in order, as foreclosures have accelerated in the past month. RealtyTrac reports that mortgage servicers started foreclosure on more than 78,800 properties in August, a 33-percent increase from July levels.
Most of us were aware that the foreclosure lull was only a temporary reprieve. That said, the growing rate of foreclosures has revived concerns over excessive inventory. The Cato Institute, an economic think thank, estimates an oversupply of three million houses, about a million more than actually demanded.
With so much inventory on the market and more to come, pricing becomes an issue: More supply means lower prices, which, in turn, means more negative equity. Concerning the latter, CoreLogic estimates that nearly 11 million properties, roughly 22.5 percent of all U.S. homes, were worth less than the underlying mortgage in the second quarter of 2011.
The prospect of more price depreciation and more negative equity has increased calls for more government action. Problem is, efforts to date have had only marginal benefits or have had negative unintended consequences: Cato reports that government efforts to revive housing have helped the most expensive markets while actually depressing prices in the cheapest markets.
At this point, it might be best to let the market run its course. We’ve noted in past editions that when prices fall, demand increases, then prices increase. We've seen this economic truism at work to encouraging effect in a few hard-hit markets. The Orlando Regional Realtor Association reports that the median price for homes in its area has increased 15.1 percent year-over-year.
We've also often noted that real estate is local. The national numbers on foreclosures and negative equity can be big and scary, but they also carry no relevance to any one particular market.
Mortgage rates are another matter; they tend to adhere closely to a national average. Rates at the national level dropped a few basis points this past week on most mortgage products.
There are many reasons for the drop in mortgage rates. One of the more interesting is a rumor that the Federal Reserve is contemplating purchasing longer-term Treasury securities (such as the 10-year note) to drive down long-term interest rates, which would help keep mortgage rates low. Because markets are forward looking, it is possible that the market is getting a jump on the Federal Reserve.
We've been in the minority in questioning the economic benefits of ultra-low mortgage rates. Our rationale is that low rates, and the anticipation of even lower rates, are delaying buying and refinancing decisions today. Our rationale isn't unfounded. Richard Fisher, president of the Federal Reserve Bank of Dallas , believes low rates are limiting economic growth because businesses have an incentive to delay borrowing for expansion. They see no reason to act today if interest rates are expected to stay low tomorrow. We see the same effect in housing.
Economic Indicator
Release Date and Time
Consensus Estimate
Analysis
Home Builders Index(September)
Mon., Sept. 19,10:00 am, et
16 Index
Important. A slowdown in existing-home sales is causing more cancellations of new-home contracts.
Housing Starts(August)
Tues., Sept. 20,8:30 am, et
590,000 (Annualized)
Important. Starts remain anemic with mild strength in the multifamily component.
Mortgage Applications
Wed., Sept. 21,7:00 am, et
None
Important. A pick up in purchase applications suggests improving sales for September.
Existing Home Sales(August)
Wed., Sept. 21,10:00 am, et
4.75 Million (Annualized)
Important. Economic uncertainty is slowing sales volume.
Federal Reserve FOMC Meeting Announcement
Wed., Sept. 21,2:15 pm, et
Federal Funds Rate: 0.0% to 0.25%
Important. Markets will be parsing the Fed's transcripts for directions on long-term rates.
FHFA Home Price Index(July)
Thurs., Sept. 22,10:00 am, et
0.5% (Increase)
Important. Despite sluggish summer home sales, prices should continue to improve.
A Novel Solution, But Can It Work?
We like it when people think outside the box. Radar Logic, a data and analytic firm, has sent a proposal to Washington on a loan-restructuring plan we find intriguing.
Mortgage News Daily offers an example of Radar logic's plan in practice: A loan with an original balance of $190,000 has been paid down to $186,000, then goes into default. A foreclosure occurs and a subsequent sale of the REO property nets $99,000. The loss suffered by the lender would be $87,000. Under Radar Logic's plan, a restructuring occurs based on borrower information and the appraised value of the home to produce a new loan of $125,000. The restructuring would result in a loss of $61,000 for the lender, but a 26-percent larger recovery.
So what's the incentive for the lender? The restructured loan would also include an equity participation certificate (EPC). While the homeowner would be granted a portion of the appreciation rights, the lender would hold an equity position through the EPC in anticipation of appreciation of the underlying collateral.
There are a couple obvious risks: 1) Radar Logic's contention that its plan will reduce the perception of over-supply and prices rise fails to materialize; and 2) the borrower defaults on the restructured loan. That said, at least Risk Logic is thinking, and we like that.
Courtesy of Patti Wilson, Senior Loan officer, Mutual of Omaha Bank.
Email to: patti.wilson@mutualofomahabank.com
Check all the current listings for the Sanibel/Captiva Islands here www.SanibelHomeSeeker.com
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