From the AP:
Sales of second homes purchased as investment properties plunged in 2006, but demand for vacation homes remained strong, a real estate trade group reported Monday.
The National Association of Realtors said sales of second homes for investment fell by 28.9 percent in 2006 to 1.65 million. That was down from an all-time high of 2.32 million investment homes sold in 2005, at the peak of the five-year housing boom.
The Realtors, however, said vacation homes were not hurt by the general slump in sales last year. Instead, vacation homes rose by 4.7 percent to a record of 1.07 million units, up from 1.02 million sales in 2005.According to the NAR survey, 22 percent of all homes purchased last year were for investment, down from a 28 percent market share in 2005. The number of vacation homes purchased last year totaled 14 percent of the total market for new and existing homes, up from a 12 percent share in 2005.
David Lereah, chief economist for the Realtors, said it was not surprising that purchases of second homes for investment purposes had fallen so much because speculators, who had driven up demand during the boom years, abandoned the market last year.
After a period in which sales of both new and existing homes set records for five consecutive years, sales of both fell sharply in 2006 while prices stagnated. The slump in housing has sent shock waves through the rest of the economy, trimming overall economic growth by more than a percentage point.
…
The median, or mid-point, price of a vacation home in 2006 was $200,000, down 2 percent from a median of $204,100 in 2005.The typical investment home sold for $150,000 last year, down 18.3 percent from $183,500 in 2005.
From the Courier Post:
Couple’s trial set after 4 years
For the first time a trial date has been set for a husband and wife in a 4-year-old case charging them in an alleged scheme that defrauded 77 homeowners in mortgage foreclosure, an insurance company and the bankruptcy court of more than $350,000.
Superior Court Judge John Almeida said he cannot hold a trial for Peter and Sandra Rogers of Mount Laurel, both 62, for almost another year in a case that is already nearly four years old.
…
Peter Rogers was the president of Express Consolidated Refinance and Mortgage Consultation, Inc. He is accused of offering services to 77 homeowners in various counties in mortgage foreclosure between 1999 and 2002, taking $125,000 of their money and not delivering the service.
…
McDonnell said of the 77 homeowners, 36 lost their homes, 28 declared bankruptcy and one victim turned his property over to Peter Rogers. A few others saved their homes.
Foreclosure moratorium for Mass.
MA Declares Moratorium On Foreclosures
Massachusetts has become the first state in the country to declare a moratorium on foreclosures stemming from predatory lending.
Homeowners will now be able to submit a complaint to the Division of Banking.
The division will then call the lender and ask them not to forclose.
…
The move comes after dozens of homeowners marched on the State House last week, demanding a meeting with Gov. Deval Patrick.
The state secured 60-to-90-day freezes on foreclosure for most of the protesters.
From the NY Sun:
FBI Arrests 10 in Queens In Mortgage Fraud Scheme
A new wave of mortgage fraud cases, in which brokers allegedly purchase identities from immigrants, has mortgage lenders taking a more proactive role in law enforcement, FBI officials said.
Last week, the FBI arrested 10 people with ties to a Bangladeshi community in Queens who allegedly conspired to create a pyramid scheme in which they purchased the identities of immigrants who were leaving New York to move back to Bangladesh, according to FBI officials. The price was usually about $5,000, the officials said.
The agency has charged three principals in a brokerage group, New Generation Funding, with using the purchased identities as “straw buyers” to obtain financing for the purchase of homes. By selling the properties among the “straw buyers,” and raising their value through fraudulently inflated appraisals, the defendants were allegedly able to pocket about $100,000 on each property.
Economist Lereah to leave Realtors for Move Inc.
By Robert Schroeder, MarketWatch
Last Update: 1:05 PM ET Apr 30, 2007
WASHINGTON (MarketWatch) — David Lereah, chief economist of the National Association of Realtors, is leaving NAR to join Move Inc. as chairman and partner of a new business entity next month, NAR said Monday.
Lereah has directed NAR’s research division, regulatory and industry relations division and other activities. He will leave the association in mid-May, NAR said.
As chief economist and senior vice president, Lereah is the NAR’s spokesman on the U.S. economy and the housing and real estate markets.
California-based Move Inc. (MOVE : move inc com com
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MOVE4.64, -0.12, -2.5%) provides homebuyers and renters with information about real estate and communities before, during and after moves, according to its Web site. Move Inc. operates NAR’s Web site, Realtor.com.
Neither NAR nor Move Inc. offered details about the new entity, but a Move Inc. spokeswoman said more information would be forthcoming in the third quarter. The entity is “expected to be transformational for both consumers and real estate professionals,” according to a Move Inc. news release.
Robert Schroeder is a reporter for MarketWatch in Washington.
http://www.marketwatch.com/news/story/economist-lereah-leave-realtors-move/story.aspx?guid=%7B400443CB-51C2-4690-9132-C392B1D62488%7D&ref=patrick.net
From Bankrate:
Moral hazard is part of mortgage mess
The concept known as “moral hazard” will be important to understand as Congress, regulators and lenders address the aftermath of shaky mortgage lending.
Today’s subprime meltdown, and tomorrow’s bigger Alt-A debacle, will bring out a lot of politicians who will demand that something be done to protect consumers from bad loans. But it’s going to be hard to protect consumers without bailing out the lenders and investors who were behind those bad loan decisions. That’s where moral hazard comes in.
Moral hazard is an economic and insurance term that describes how people behave recklessly when they’re insured or protected in some way. If you sell flood insurance, people will build on flood plains. If you make airbags and anti-lock brakes standard in all cars, people will drive faster and tailgate more closely. If you introduce fat-free cookies (fat-free, but still loaded with calories), people will eat more cookies than before, and get just as fat.
All examples of moral hazard.
JB: You mentioned yesterday you are doing part-time MBA. Which school are you attending, if I may ask. I am exploring options.
Thx.
I’m going to throw up a red flag and ask for a review. Is there really a difference between a vacation home, investment property, speculation property, or second home….if its not your primary residence. To a mortgage company there isn’t a difference. When you are talking with your realtor, do you disclose what your purpose of your purchase? So I’m wondering how they account for a difference between them.
fyi: Here’s Motley Fool’s Seth Jayson on The Corrupt David Lereah
His column looks straight from HP today (come on Seth – at least give us a link) but nice to see the knives come out against The Corrupt David Lereah…
http://housingpanic.blogspot.com/
Quick Take: Housing’s Biggest Cheerleader Moves
By Seth Jayson
I’ve written over and over again about the housing-market pumping in which National Association of Realtors Chief Economist David Lereah has engaged. His ability to make bad predictions was, to my mind, only surpassed by the magnitude of his bombast, or perhaps his ill timing.
This is a guy who looked at dwindling numbers from the likes of Hovnanian Enterprises and KB Home, saw subprimes melt down at New Century Financial, watched Alt-A get worse for the likes of Indymac and Motley Fool Income Investor pick Washington Mutual, yet consistently told the press that all was well.
I still have no idea how self-respecting business journalists anywhere could have parroted his biased misinformation for so long.
For those of us who simultaneously looked forward to and loathed his monthly trade-group propaganda, today is a day of mixed emotions. Apparently, Lereah is moving on to Move.
Move runs Internet real estate sites, something I think is a pretty bad business to be in, unless you’re The Google and can throw something together that just might up-end the entire apple cart.
According to an NAR press release, Lereah will be in charge of a new venture. Note to self: Look at Move and get ready to short.
ISM and Pending Home Sales due out at 10am.
jb
Should be interesting to see which talking head NAR selects for the today’s PHS release. It could give us some insight into who the NAR might select as it’s new spokesman/economist.
jb
2008 buyer –
I worked in a bank. When we were doing home equity loans and lines, there was a difference between vacation homes and investment properties. We didn’t do home equities for investment homes, but we did for vacation properties (at least not at the branch level).
#7 2008Buyer, I have the same question.
I am thinking if the house is rented (reported to IRS, but how is tracked?) then it becomes investment property and if it’s empty its considered “vacation”?
Can the RExperts please chime in?
Sales of second homes purchased as investment properties plunged in 2006, but demand for vacation homes remained strong
I question the distinction between “investment property” and “vacation home”. In many cases, a vacation home is simply an investment property by the ocean. Unlike a flip, where the goal is to install granite countertops and stainless appliances and get it back on the market ASAP, the vacation home (or second home) is often a longer-term investment, where the goal is to hold it for a few years and use it for vacation in the mean time. It’s often used as a retirement play, where the goal is to purchase a vacation home and then cash-in either the primary residence or the vacation home upon retirement. Given that the median vacation home purchaser is 44 years old and plans to keep the place for 10 years, this seems to fit with the retirement cash-out theory. Also, 28% said they plan to sell their primary home & move into their vacation home eventually.
Also, given the negative press about investors getting caught with their pants down, you have to wonder about survey bias. When the phone call comes, how many people will call their investment property a vacation home because they don’t want to admit buying at the top? Even so, the survey showed that 34% purchased their vacation home to “diversify their investments”.
rentlord –
from my experience, the underwriter looks at where it is. for example, they are not going to believe that you have a vacation property in jersey city. they also ask for specific utility bills showing that you pay the utilities. – many times they look at tax returns, if you show income from the property, then they know it’s investment.
To JB or anyone with access:
Please provide history on MLS 2379493.
Is it sold, if yes how much.
What was the last sold price and when.
it is no longer on GSMLS or Realtor.com. However it is still on the realtor’s website.
it is nicely renovated Cape in Summit, it’s listed for 949k.
CC
U.S. March pending home sales fall 4.9%
http://www.marketwatch.com/news/story/us-march-pending-home-sales/story.aspx?guid=%7B7ED4F887%2DE6BB%2D423E%2DAA50%2D115FA524D416%7D
Pending sales of U.S. homes fell by 4.9% in March, indicating sales closed in April are likely to remain soft, the National Association of Realtors reported Tuesday. The group’s pending home sales index was down 10.5% from March 2006 and is the lowest in three years. David Lereah, the NAR’s chief economist, predicted that home sales will be “relatively sluggish” in the second quarter but that a “modest uptrend” is on the horizon for the second half of 2007.
Thanks t c m!
cc,
MLS# 2379493 is still under contract, anticipated closing date is 6/2007.
jb
JB…thx.
Shocked that the MA mortgage moratorium hasn’t gotten alot of attention in the media yet. Gotta think that if I was a lender in that state, my rate would go up immediately to take this extra risk into account.
From Forbes.com VIDEO OF Prof. G. Schilling !!!
Recession in ’07
(255 sec.) One of Wall Street’s biggest bears tells us why investors should look out below
http://www.forbes.com/video/?video=fvn/moneymasters/vj_mm122806&partner=yahootix
Is Wallstreet in Denial right now ?