news-record.com

How are luxury homes selling in today’s market?

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 deepened, 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 $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.

FHA loans add up

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.

Loan fraud

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. ...”
   

To find out more about national real estate columnist Jim Woodard, visit the Creators Syndicate Web site at www.creators.com.