2010 hasn't been a great year for the real estate market, and September proved no different. Several new surveys and reports emerged with grim statistics about the state of economy and people's personal finances. Although the new ultra-low in mortgage rates was a high point, it hasn't done as much to boost the market as many had hoped: without the income to buy a house, even a good deal just isn't good enough. (A home is an asset, but it can also be an expense. Learn more in The Hidden Costs of Home Ownership.)
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That said, if you look away from the statistics, there was some lighter news on real estate, celebrity home sales and the sale of one of America's most famous (or perhaps infamous) homes. Read on to find out what happened in real estate this month.
Mortgage Rates Hit Rock-Bottom
According to a survey released on September 30 by Freddie Mac, U.S. 30-year and 15-year mortgage rates met or exceeded record lows in the final week of September. Although ultra-low rates, which average 4.32% for a 30-year, fixed-rate mortgage, can be good news for homebuyers, consumers' lack of confidence in the economy means only a few are making the leap to home ownership. Existing home sales rose 7.6% in August compared to July, according to the National Association of Realtors, but the NAR's chief economist still referred to home sales as subpar. (For more insight on the importance of interest rates, see Understanding Your Mortgage.)
No Wonder No One's Buying!
Despite the good deals out there, it's no wonder few are buying: according to the Census Bureau's American Community Survey, released September 28, more than 20% of Americans can barely afford rent. The study indicated that two-fifths of respondents reported spending more than 35% of their incomes on housing. Typically, the government considers affordable housing costs (including utilities) to be less than one-third of total income. This could be partly explained by an overall reduction in income in the U.S., with 31 states showing increases in poverty rates in 2009 over 2008.
In addition, commercial real estate prices are also plummeting; according to the Moody's/REAL All Property Type Aggregate Index, prices are only 0.9% above their October 2009 recession low. The Census report suggests that while there is plenty of fuel help start a real estate recovery, improved income and job security will have to be the first step. (For related reading, check out Too Much Debt For A Mortgage?)
While it isn't news that many homeowners are falling behind on their payments and landing themselves in foreclosure, some interesting news that emerged this month suggests that lenders aren't exactly on top of things either - and that some homeowners may have lost their homes without good reason.
It all began with GMAC Mortgage, a unit of Ally Financial, which has been under investigation by attorneys general in Iowa, Illinois and Texas, and since December 2009 after one of its employees disclosed that the company had signed off on thousands of foreclosures without checking borrowers' loan records or verifying their accuracy. According to RealtyTrac, lenders took possession of a record number of homes in August, and suspicions are mounting that many lenders may have been pressed to take shortcuts in their usual processes in order to deal with the volume.
Attorneys general in California, Colorado, Illinois and Ohio have also picked up the trail and started looking into GMAC's foreclosures in their respective states, while lawyers in Florida began questioning JPMorgan Chase & Co. after discovering that one of the company's executives failed to check the details of a claim against a homeowner. (If you're at risk of foreclosure, there are steps you can take to save your home. Find out what you can do in Saving Your Home From Foreclosure.)
As is always the case, not everyone feels the slump, as evidenced by some great celebrity real estate that went up for sale in September. NBA stars Chris Bosh and LeBron James both scored real estate slam-dunks in September. According to Zillow.com, Bosh signed on a slick $12.5 million, seven-bedroom house in Miami Beach, while James opted for a four-bedroom pad in Coconut Grove.
Another celebrity duo, the "Olsen Twins", finally unloaded a 6,000-square-foot condo in New York this month, which the pair had reportedly owned since 2004, but never occupied. Although they had to settle for considerably less than the initial $11.995 million asking price, the $7.7 million final offer still came in $300,000 over what the Olsen's paid for the place, according to Curbed NY.
Attention "Deadheads": the home of Jerry Garcia, lead guitarist and singer of the Grateful Dead, also hit the market this month. The Mediterranean-style home is located 30 miles from San Francisco and the Haight-Ashbury area, where the 1960s hippie movement took root. Garcia died in 1995, but any Deadheads with a $4 million housing budget could get the chance to see the world through is eyes.
New Owners to Haunt Infamous House
Just in time for Halloween, another very famous home got a new owner in September: the Amityville Horror House. The large, Dutch Colonial house in Long Island, New York, was the site of a brutal murder in 1974, in which Ronald DeFeo Jr. Shot and killed his mother, father and four siblings. But the home's real fame arose from the book by Jay Anson about the Lutz family's experiences in the home, which they claimed to be haunted, along with several movies and spinoffs.
According to Zillow.com, Caroline and David D'Antonio finalized the deal on the Amityville house this month for $950,000, calling it their "dream house". Whether the gruesome haunting recounted in The Amityville Horror really happened is still hotly debated, but the new owners claim they're not worried about ghosts - although with all the attention the home still gets from the book's fans and other curious onlookers, they are a little scared about Halloween night.
The Bottom Line
While the real estate market appears to be picking up a little, it's clear that the economic conditions required for a more sustainable turnaround are not in place. The market continues to be haunted by the ghosts of the real estate crash. Let's hope these ghosts are scared off in October, giving way to more positive news reports.
For the latest financial news, check out Water Cooler Finance: The End Of The Recession.