As part of a demonstration, artists projected videos on sheets in windows, showing silhouettes of families re-enacting the 72 hours before eviction. Then they discovered a surprising paradox within the nation’s housing crisis: Their power to negotiate began after foreclosure, rather than ending there.BOSTON — Jane Petion lived in her home for 15 years and saw its value rise slowly, rise rapidly and, when the housing bubble burst, plunge at a sickening pace that left her owing $400,000 on a house worth closer to $250,000. Last June, her lender foreclosed on the property. The family received notices of eviction and appeared in housing court.
In December Ms. Petion signed a new mortgage on her house for $250,000, with monthly payments of less than half the previous level. She and her husband now have a mortgage they can afford in a neighborhood that benefits from the stability they provide. A nonprofit lender made the deal possible by buying the house from her original mortgage company and selling it to her for 25 percent more than its purchase price — a gain to hedge against future defaults.
“It was exactly what we needed to get back on our feet,” said Ms. Petion, who works for a state agency. “We have income. But another bank, it would have been easy to look at our foreclosure and say, ‘I’m sorry, we have nothing for you now.’ ”
This counterintuitive solution — intervening after foreclosure rather than before — is the brainchild of Boston Community Capital, a nonprofit community development financial institution, and a housing advocacy group called City Life/Vida Urbana, working with law students and professors at Harvard Law School.
Though the program, which started last fall, is small so far, there is no reason it cannot be replicated around the country, especially in areas that have had huge spikes in housing prices, said Patricia Hanratty of Boston Community Capital. “If what you’ve got is a real estate market that went nuts and a mortgage market that went nuts, what you’ve got is an opportunity.”
Two years into the nation’s housing meltdown, and after hundreds of billions of dollars of federal rescue programs, government officials and housing advocates denounce the unwillingness of lenders to adjust the balances on homes that are worth less than the mortgage owed on them.
Research suggests that such disparity, rather than exotic interest rates, is the main driver of foreclosures, in tandem with a job loss or another financial setback. The financial industry lobbied aggressively to defeat legislation that would empower bankruptcy judges to adjust mortgage balances to properties’ market value.
That reluctance, however, eases after foreclosure, when lenders find themselves holding properties they need to unload, Ms. Hanratty said.
“We found, frankly, the industry wasn’t ready to do much pre-foreclosure,” she said. “But once it was either on the cusp of foreclosure or had been taken into the bank portfolio, banks really do not want to hold on to these properties because they don’t know how to manage them, don’t know what to do with them.”
Working with borrowed money, Boston Community Capital buys homes after foreclosure and sells or rents them to their previous owners, providing new mortgages and counseling to the owners, who typically have ruined credit. During the process the families remain in their homes. Since late fall it has completed or nearly completed deals on 50 homes, with an additional 20 in progress, Ms. Hanratty said. The organization is now trying to raise $50 million to expand the program.
Steve Meacham, an organizer at City Life/Vida Urbana, is one reason banks may be willing to sell their foreclosed properties to Boston Community Capital. When families receive eviction notices, his group holds demonstrations or blockades outside the properties, calling on lenders to sell at market value. It also connects the residents with the Harvard Legal Aid Bureau, whose students work to pressure lenders to sell rather than evict by prolonging eviction and “driving up litigation costs,” said Dave Grossman, the clinic’s director.
“So they’re being defended legally, and we’re ramping up the pressure publicity-wise,” Mr. Meacham said. “And B.C.C. came in; they had a part that buys properties and a part that writes mortgages. It wouldn’t work without all three.”
A focus of the program has been the working-class neighborhood of Dorchester, where home prices dropped 40 percent between 2005 and 2007, compared with a 20 percent drop statewide, according to research by the Federal Reserve Bank of Boston. Foreclosures and delinquencies there are more than twice the state average, the bank found.
In such neighborhoods, lenders and residents are hurt by evictions, which often leave vacant properties that invite crime and drive down values of neighboring houses, Ms. Hanratty said. “So it’s in the lenders’ interest to get fair market value as quickly as possible, and in the interest of the community to have as little displacement as possible.”
The program is not a solution for all lenders or distressed homeowners. After months of post-foreclosure negotiations with her bank, Ursula Humes, a transit police detective, is waiting for her final 48-hour eviction notice. Her belongings are in boxes.
Mrs. Humes owed $440,000 on her home; her lender offered to sell it to Boston Community Capital for $260,000. But after assessing Mrs. Hume’s finances, the nonprofit asked for a lower selling price, and the lender refused.
On a recent evening, Mr. Grossman of the Harvard law clinic counseled Mrs. Humes on her options. “This is a case that doesn’t have a happy ending,” Mr. Grossman said.
Mrs. Humes said, “I depleted my retirement account and everything I owned, but I’m still going to lose it.”
Many commercial lenders, similarly, would shy away from such a program because it involves writing mortgages for borrowers who have already defaulted once — a high risk for a small reward.
For other homeowners, though, the program is a rescue at the last possible second. Roberto Velasquez, a building contractor, lost his home to foreclosure last November, owing the lender $550,000. After extensive wrangling, during which his family stayed in the house, he bought it again in March for $280,000, a price he can afford.
On the night after he closed, he joined other members of City Life/Vida Urbana at a foreclosed four-unit building in Dorchester from which most of the tenants had been evicted. A group of artists projected videos on sheets in the windows, showing silhouettes of families re-enacting their last 72 hours before eviction. Garbage filled one of the units. Mr. Velasquez said it hurt to stand amid such loss, but he was jubilant at his own perseverance.
“We’ve been fighting for so long,” he said, “and we win, because we’re still in the house.”
A reverse mortgage is a tempting route to take for cash-strapped seniors who own their homes, but this road to riches can be curvy.
Do you wish you could tap your home equity without having to make loan payments every month? If you’re 62 and own a house that’s paid for, or at least nearly paid for, then your genie in a bottle just might be a reverse mortgage. With a reverse mortgage, you can receive a handsome payout in the form of a lump sum, monthly distributions, a credit line, or as some combination of the three.
The exact amount you can transform to liquid cash from the illiquid value of your property depends on your age (generally the older, the better), accrued equity, the property’s market value, and current interest rates. The real beauty is you don’t have to repay the loan during your lifetime as long as you occupy the house and remain current on taxes, insurance, and repairs.
Finding a reverse mortgage is the easy part About 90% of all reverse mortgages are provided through a Federal Housing Administration program called HECM, short for Home Equity Conversion Mortgage. The rest can be “proprietary” loans from private lenders that tend to charge higher fees, or loans from state and local programs that may attach strings to how the money can be used (like for home repairs or paying off overdue property taxes). Virtually all seniors should stick with FHA-approved lenders that offer HECMs.
Qualifying for a HECM reverse mortgage is fairly straightforward. You need to be 62 or older; have either no mortgage, or just a small balance; live in the property as your principal residence; and not be delinquent on any federal debt like taxes or student loans. You’re also required to meet with an approved counselor for at least an hour to discuss the risks and obligations of a reverse mortgage. Call the U.S. Department of Housing and Urban Development—the FHA is part of HUD— toll-free at 800-569-4287 for the name of a counseling agency.
One of the key things a counselor will explain is that unlike a conventional mortgage, which you pay down every month until it reaches zero, a reverse mortgage’s balance grows over time. Remember, you’re not bringing down the principal by making monthly payments. The mounting debt generally isn’t paid back until you die, sell the house, or move out permanently. That ever-ballooning balance is a big reason why this type of loan should be held out as a last resort for homeowners who can’t access cash any other way.
Adding up the considerable costs For cash-poor but house-rich seniors, a reverse mortgage sounds dreamy until you start tallying the bill. Third-party closing costs—think appraisal, title search and insurance, inspections, recording fees, credit checks, mortgage taxes, and the like—quickly snowball. Add to those fees for origination, mortgage insurance premiums (MIPs), and loan servicing. While this money doesn’t come out of your pocket immediately because it’s rolled into your loan, it does come due eventually—and with a vengeance, thanks to compounding interest.
Many factors go into deciding where to live -- schools, proximity to public transportation, green space -- but the recession has moved one component to the top of the list for many people: stability of real estate values. That’s why this year’s top spots are all places that didn’t fare too badly or even gained value during the economic downturn. If you already own a home or condo in one of the communities on our list, chances are if you had to sell you wouldn’t take a loss and might even come out ahead. And if you’re looking to buy in these areas, you can do so with a degree of confidence about the future.
“One of the maxims you hear from real estate brokers is that you should buy the least expensive house on the most expensive street,” says Timothy Warren, CEO of the Warren Group, a Boston-based real estate tracking firm that provided us with median prices for 2005 and 2009 (2005 was considered the market peak in Massachusetts; since then, the median single-family home price has shrunk by 20 percent statewide). “If you take that to the town level, look for the most expensive town you can afford.”
Greater Boston, Warren says, has held its value better than some other parts of the country because space is limited, so the area didn’t experience an unsustainable building boom, and because of the kinds of industries the region has attracted, from hospitals to universities to high tech. Nonetheless, within Greater Boston there are clear winners and losers. For example, our top spot, Wenham, experienced a 5 percent
increase in median single-family home prices from 2005 to 2009; meanwhile, Chelsea plunged 48 percent and Brockton dropped 40 percent, to name just two.
In several of the communities on our list, condo prices in particular saw a spike in the past few years. Usually, that’s because the community got a new development or two -- often for people 55 and older -- which increased the number of condominiums sold. But that doesn’t mean the numbers don’t tell an accurate story. “The condo market in general in all of Massachusetts was especially hard hit by this downturn,” Warren says. “In that kind of environment, if certain towns are able to have an increase in the number of condos sold and an increase in the median price, then that says something positive about people’s reactions to that community.”
Here and on the following pages, our list features 10 top spots in Greater Boston, plus two on the Cape and islands.
1. Wenham Median single-family home price in 2009: $550,000
Change since market peak in 2005: +5% Median condo price in 2009: $599,000 Change since market peak in 2005: +87% Population: 4,788 Residential tax rate: $15.56 per $1,000 of assessed value
With its winding roads, rambling stone walls, tranquil lakes, and acres of woodlands, sleepy Wenham can still be considered rural, but it’s got a sophisticated edge. The town boasts a strong sense of history, a high level of education among residents, a median household income almost double that of the state as a whole, and a penchant for sports like polo and golf. It has a generally small inventory of single-family homes -- only 20 sold last year -- that appeal to parents with kids, and two new condo developments that sold briskly to empty nesters. Though the commute to downtown Boston is about 45 minutes, residents feel it’s worth it for the small-town feel. “People are very connected and caring,” says Sarah Johnson, the town finance director. “They watch out for each other.”
2. Jamaica Plain Median single-family home price in 2009: $529,000
Change since market peak in 2005: +6% Median condo price in 2009: $316,650 Change since market peak in 2005: -2% Population: 38,074 Residential tax rate: $11.88 Once known as a place for renters, especially students, Jamaica Plain’s owner-occupancy rate has gone up in recent years as prices have risen for its intricate -- and often huge -- Victorians. The neighborhood has much that is appealing, with a lot of diversity, dozens of ethnic eateries, easy access to downtown, and green space galore, such as Jamaica Pond, the Arnold Arboretum, and Forest Hills Cemetery. And there’s something in every price range: “A low-income first-time buyer can get a three-bedroom right now in the old JP high school for $170,000,” says Karen McCormack, a realtor with McCormack & Scanlan Real Estate in Jamaica Plain. “And there’s another condo on the market for $1.65 million -- a 3,900-square-foot three-bedroom across from the pond.” Single-family homes, too, run the gamut, but there are plenty under $600,000. A small price to pay for an area with so much going for it.
3. Cambridge Median single-family home price in 2009: $680,000
Change since market peak in 2005: +2% Median condo price in 2009: $408,000 Change since market peak in 2005: -3% Population: 105,596 Residential tax rate: $7.72 “It’s so accessible to everything,” says Lisa J. Drapkin, a realtor with Coldwell Banker in Cambridge. “I can walk to everything I need and still be able to jump on the Pike if I need to go farther out.” Timothy Warren of the Warren Group also cites Cambridge’s walkability when extolling his hometown, adding that the city’s diversity is another draw. “A lot of people appreciate that their kids are not growing up in a homogeneous suburban neighborhood,” he says. The diversity extends to the restaurants, which run from frugal falafel stands to more elegant -- and pricey -- options like Harvest and UpStairs on the Square. And with Harvard at one end of Mass. Ave. and MIT at the other, Cambridge’s intellectual cred is not open to question. “I love the cultural stuff that’s available to us,” says Drapkin, “and the political climate. People in Cambridge are very engaged, and everyone’s got an opinion about something.”
4. Winchester Median single-family home price in 2009: $710,000
Change since market peak in 2005: -3% Median condo price in 2009: $360,000 Change since market peak in 2005: +9% Population: 21,090 Residential tax rate: $11.51 With a cost of living almost 72 percent higher than the national average, Winchester is at the high end of the financial spectrum, but many might be surprised to learn that, as of this writing, a three-bedroom condo could be had for $269,000, and 11 single-families under $600,000 were on the market. The town’s popularity stems in part from its location less than 10 miles from downtown Boston, its two commuter-rail stops, and its great MCAS scores, but also from its friendly atmosphere. “People just really love that sense of community,” says Susan Russo, sales manager at Century 21 Commonwealth in Winchester. “It’s an Ozzie and Harriet, Leave It to Beaver kind of life.” In addition to several parks and the Middlesex Fells Reservation, there are town-sponsored events throughout the year, book clubs, fund-raising soirees, and educational activities for children. Homes are often older, the lots are typically large, and inventory can be low. “People tend to stay even after their kids grow up and move on,” Russo says.
In certain communities, shrewd buyers are using the home inspection as a way to slash thousands off their final offer. But the tactic doesn’t always work.
Heather Logrippo can’t help but giggle when recalling the deal she negotiated on her dream house in Shrewsbury. Built in 1822, the slate-roofed Colonial was an historic gem boasting a swimming pool crafted from large stones and a hidden bar believed to have been a Prohibition-era speak-easy. By the time Logrippo and her husband, Jason, were considering buying the nine-bedroom home, it had been languishing on the market for two years. The humbled owners had lowered the asking price from $1.5 million to $750,000, but Logrippo, publisher of Distinctive Homes of New England, a magazine of real estate listings, managed to squeeze them for more. A previous home inspection made available to her by the agent revealed a slew of maintenance needs. The list was so daunting that, according to Logrippo, other potential buyers had simply walked away. To her way of thinking, however, the home inspection report wasn’t a threat -- it was leverage.
She presented the owners with an offer: She would pay $715,000 for the property, but only if they took care of some major repairs. Most costly were a French drain system and sump pumps to dry out the soggy basement, and replacements for 50 or so drafty windows. All told, the list of repairs added up to about $70,000 worth of work, Logrippo says. Attaching such a hefty contingency to her offer was bold, and potentially risky, but Logrippo’s timing was right. The owners agreed.
That was in November 2007, when housing prices were partway down the steep trajectory that has only recently showed signs of easing. Yet Logrippo believes the deal she negotiated was good enough to buy her some immediate value. Thanks to the low sale price, the previous owners’ fixes, and her own investment in a new heating system and patio, a recent bank appraisal valued her home at closer to $1 million, she says. “I benefited from the market, but I also benefited from the home inspection. Frankly, I probably would have paid more for it. But -- and I know this sounds terrible -- I could sense how desperate they were.”
Any offer to purchase is typically contingent on the outcome of a home inspection -- a simple safeguard in the take-it-or-leave-it climate of the real estate boom years -- but many buyers today have come to view the inspection as a way to whack yet again at the price. (Logrippo’s case is a bit unusual in that she benefited at the outset from an inspection done by a previous potential buyer.) It’s a pattern that repeats itself every time there’s a downturn, says Laura Cahill, a realtor at
Re/Max Landmark/Cahill Properties in Milton. “You spend three days going back and forth, and they negotiate the socks off you. You finally get down to your bottom-line price. Then they go do the home inspection and come back wanting to knock $5,000 off. You want to lie down in the street and let the cars run you over.”
The balance of negotiating power has begun to even out in some markets in and around Boston. Driven in part by the soon-to-expire federal tax credit, bidding wars are back for houses in great condition at lower price points. In those locations and price ranges where inventory is high and listings stagnate, however, sellers should prepare for buyers who feel entitled to use home inspection reports as a way to whittle down their original offer or gain considerable concessions, even when the flaws in question are minor.
A home inspection is typically considered a way of rooting out problems that aren’t obvious,
The soft real estate market and soon-to-expire tax credit may tempt you to commit to a home purchase. But does it make practical and financial sense? Here’s what to weigh.
Costs before receiving keys If you buy: First comes a deposit, home inspection, and appraisal. Then, at closing, it can feel as if you’re forking over all your savings: There’s the down payment, first mortgage payment, and fees for the attorney, title search, and document preparation.
If you rent: Landlords typically ask for a $25 to $100 application and credit check fee, as well as a security deposit. If you use a broker, add her fee. But Hammond Real Estate rental broker Deb Cantrell says, “Every fee is negotiated right now, or the cost of the apartment is.”
Financial risks If you buy: The term “underwater” strikes fear in anyone contemplating a purchase. The problem of owing more than your property is worth can be minimized if you work with a reputable real estate agent, lender, and appraiser who really know the area and make a sizable down payment, says Coldwell Banker realtor Kendall Luce.
If you rent: No tenant likes the words “rent increase.” Even worse is the phrase “This property is being sold.” Either situation may force you to move. Searching for a new place on shorter-than-normal notice usually costs extra. And finding a new place year after year is also tough on the wallet.
Location If you buy: Sometimes buyers must choose a less desirable location to meet their budget. “If location is your primary goal, then you’ll have to compromise on some of your wish list,” says Hammond Real Estate vice president Carol Kelly. “You might end up with a smaller place than you originally wanted.” Or a home that needs work.
If you rent: With less cash demanded upfront, you often can afford to rent in a pricier neighborhood than where you can buy. And you might be able to rent a larger property in that pricier neighborhood.
Customization If you buy: You can always change decor, build additions, upgrade appliances -- as much as your pocketbook allows.
If you rent: What you see is what you rent. Sometimes you need permission for every nail hammered into a wall, never mind installing a window air conditioner.
Ongoing expenses If you buy: Remember the movie The Money Pit, in which a mansion crumbles as repair costs mount? From the cataclysmic (an unstable foundation) to the merely annoying (clogged drains), you shoulder the unpredictable costs of upkeep. Add regular bills for utilities, insurance, property taxes, and, if applicable, condo dues.
If you rent: Many leases cover heat and hot water; some might cover other expenses, especially if the landlord is eager to find tenants. But a tough economy doesn’t mean anything goes, so expect landlords to inspect closely the property condition on move-out day and charge for the smallest repairs.
Mobility If you buy: If a divorce, job transfer, or other life change necessitates a move, it can be difficult to unload your property quickly, especially if you can’t afford to price your home competitively.
If you rent: Just pack up and leave when your lease expires. But beware that moving out early can be costly. However, Cantrell says you may be surprised to find flexible landlords during these tough times.
Return on investment If you buy: There are no guarantees, but lower home prices increase your odds of building equity. The longer you stay, the better the odds. Tax deductions are another bonus. But realtors caution that, despite the soft market, deals on quality properties in good locations are scarce.
If you rent: Rental payments are often lower than monthly homeownership costs, and if you wisely invest the difference, as well as invest the down-payment money you aren’t using, you can make a good return.
After 13 tortured years, Boston’s massive Columbus Center development is officially dead.
The project’s main backer, the California State Pension Fund, known as Calpers, said yesterday construction of the $800 million mega-complex is no longer economically feasible and that it was unwinding its involvement.
The decision, coming one month after the state told the developers they were in default of their lease, ends one of the most ambitious and controversial developments in Boston’s history. Columbus Center was to be a towering five-building complex of condominiums, hotel rooms, and stores that would have straddled the Massachusetts Turnpike and united the city’s Back Bay and South End neighborhoods.
But with neighbors and local politicians aligned against it, the project eventually collapsed under its own ambition. By the time Calpers and its local partner, the WinnCompanies, had navigated an exhaustive public review that included more than 130 community meetings, the project had become so expensive and the economy so weak, that the developers could not borrow the necessary funds to build it.
“The project is not viable today nor is it likely to be viable in the near future,’’ Calpers real estate manager, Stockbridge Capital Group of San Francisco, said in a statement yesterday, adding that it will work with the state and city “towards an amicable resolution.’’
While the site has been moribund for nearly two years, yesterday’s an nouncement by the pension fund amounted to an official death notice, prompting a collective exhale from neighbors and local leaders whose lives have been dominated by the saga.
“It’s great news,’’ said Boston state Senator Sonia Chang-Diaz. “I’m glad we’re finally getting to the end game.’’
Added state Representative Aaron Michlewitz: “At least now we know we can start looking toward what the future of the site could hold. This has been a long, drawn-out process that left the surrounding community in limbo for years.’’
The legislators and others said there is still some unfinished business with the current development team: getting Calpers to fund a $4 million to $5 million cleanup of the site, which was cleared and partially excavated before construction was halted two years ago due to financial troubles.
Here's an adorable, tricky and clever video on the future of publishing, courtesy of the Penguin folks, who produced it for an internal presentation and then released it into the wild after everyone loved it. Be sure to watch to at least halfway, when the clever gets visible.
Massachusetts could face a second wave of foreclosures as tens of thousands of distressed and bank-owned properties hit the market, slowing the state’s nascent housing recovery, officials from the Massachusetts Housing Partnership said yesterday.
Clark Ziegler, executive director of the state’s quasi-public, affordable housing agency, said there are about 64,000 distressed properties in so-called shadow inventory poised to go on the market because they have delinquent mortgages, are in foreclosure, or already are owned by a lender.
He said the number — about equal to all the single-family homes and condominiums sold last year in Massachusetts — could dampen the recent trends toward increases in prices and sales. The report is not warning of the “next big crisis,’’ Ziegler said, but is a reminder that the housing market still a long way from recovery. Not all shadow inventory homes will be put up for sale, he said, and those that are will gradually stream into the market, partially muting their impact.
“The reality is that there are more [foreclosed properties] to come, and it will stretch out how long it takes the recovery to play out,’’ Ziegler said. “It is a cautionary tale.’’
A housing agency study, released this month, was intended to address concerns among real estate specialists that a shadow inventory nationwide could derail a housing rebound. In December, mortgage researcher First American CoreLogic reported that the inventory of homes for sale in the United States rose to 1.7 million units as of September 2009, up from 1.1 million in the same month the year before. The Massachusetts Housing Partnership study focused solely on the state, which has fared better than many regions during the housing decline that started locally in 2005.
The study found there were at least 33,322 Massachusetts homes with mortgages 90 days or more overdue, 4,077 properties already owned by lenders, and 26,545 in foreclosure. Not all of the delinquent homes will be foreclosed upon, as homeowners’ finances improve or they receive loan modifications. Still, many will go into foreclosure and then gradually come back on to the market, said Tim Davis, the research consultant who carried out the study.
Many mortgage borrowers with adjustable-rate mortgages (ARMs) on which the rate has adjusted within recent years are currently enjoying extremely low interest rates. This reflects the unusually low levels of the rate indexes used by most ARMs. But these low rates are accompanied by high anxiety, because of widespread expectations that rates will rise.
For example, the Treasury one-year constant maturity series, which is a widely used index, averaged 0.35 percent in January. This means that the rate on an ARM with a 2.25 percent margin that uses this index and adjusted in January is now 2.6 percent.
Switching to a fixed-rate mortgage (FRM) in today's market, even if the borrower commands the best terms, will about double the rate. ARM borrowers don't want to double their rate before they have to, but neither do they want to be caught flat-footed by a rate increase that materializes before they can make a move.
The stakes are high. The borrower with the 2.6 percent ARM, who was paying 4 percent initially, probably has a maximum rate of about 10 percent and a rate adjustment cap of 2 percent.
That means that if the one-year Treasury rate jumped overnight to 10 percent and stayed there, the ARM rate would adjust to 4.6 percent at the next adjustment, 6.6 percent one year later, 8.6 percent the year after that, and it would top out at 10 percent one year later. Since the FRM rate would escalate with the Treasury rate, the opportunity for a profitable refinance would be lost.
Of course, rates never jump 10 percent overnight -- the process occurs over a period of time, which creates a temptation for ARM borrowers to wait until the rate-increase process starts before making a move. That is easier said than done because the market can move very fast.
In January 1977, for example, the one-year Treasury rate was 5.29 percent. One year later, it hit 7.28 percent; one year after that it was 10.41 percent; and in March 1980 it reached 15.82 percent. That was an unusual episode, but we are now living in unusual times. Indeed, the rise in rates this time could be even faster.
There is no one best way for ARM borrowers to deal with this problem, as it depends on their individual circumstances:
Early movers: ARM borrowers who intend to sell their house within, say, the next 18 months, have little to gain by refinancing, because portable mortgages that can be transferred to the next house are no longer available. Such borrowers have a lot to lose if rates escalate before they buy their next house, but refinancing their current mortgage will not help with that problem. Moving the sale/purchase dates up could be a prudent move.
Lots of people, especially those trying to battle high utility bills, believe in energy-efficient homebuilding. But there's something holding green technology back: It simply costs more to include it than it adds to resale value Appraisals for newly built green homes do not fully reflect the cost of green technology, and the lower appraisal values mean buyers often cannot get the full financing they need from banks.
That discourages developers from using green technology, in turn diminishing the market for more green products.
"We can't get lenders to appreciate the value, and if we can't get the values recognized, manufacturers can't justify moving these products forward," said Bill Nolan, a Florida home building consultant.
How that works is illustrated in the case of clients of Michael Chandler, a North Carolina-based green building adviser, who wanted to build a $400,000 home incorporating many green features.
The house was designed to include passive solar heat, solar hot water, radiant floor, high-performance windows and insulation. But the bank's appraiser told them that the appraisal would come in for less than the cost to construct.
In that case, the buyers would need to come up with a bigger down payment.
"Our best guess is that it will appraise at $380,000," said Chandler. At 90% financing, the bank would put up $342,000, leaving the would-be buyers with a down payment of $58,000, instead of the $40,000 needed if the house was assessed at the full price.
"With 10% down, the clients would have to come up with (an extra) $18,000," Chandler said. "They can't do that." "It doesn't do a lot of good to simply add value based on cost," said David Snook, a California-based appraiser who serves on the real property committee on education for the American Society of Appraisers. "The question is 'How much will the market pay on resale?'"
The appraiser's job is to accurately assess the value of the home. If a feature costs $50,000 to install but only adds $25,000 to the price when the home is resold, the appraisal cannot reflect the full $50,000 spent.
"Appraisers don't make the market, they reflect it," said Jim Amorin, spokesman for the Appraisal Institute. "Cost does not necessarily equal value. It depends on how the market reacts to the feature."
Removal regulations a big step for safety, but at a high cost
Homeowners, landlords, schools, and child-care centers could pay significantly more for repairs and renovations of buildings once strict federal regulations aimed at reducing the risk of lead poisoning in children take effect next month.
The Environmental Protection Agency’s rules, which apply to buildings built before 1978, are intended to reduce the amount of lead paint dust created by projects even as modest as a window replacement or a paint job that covers as little as 6 square feet in a room. Although there are no definitive projections on how much the requirements will add to the price of renovation work, members of the National Association of Homebuilders estimate it at between $500 and $1,500 for projects costing more than $5,000, according to an official of the Wash ington, D.C., trade group. The EPA says the additional expense may be as low as $35 a job.
Environmentalists and health advocates called the new regulations long overdue, saying they reinforce decades-old laws that protect children from living in homes known to have lead paint. In Massachusetts, homeowners and landlords are required to remove or cover lead paint hazards in homes built before 1978 and whose occupants include children under 6 years old. But remodeling and repair work had not been similarly regulated. The new regulation applies to all homes, even those without children living in them.
Lead dust is considered a major cause of childhood lead poisoning, which even at low levels can cause learning disabilities and behavioral problems.
About 30 percent of childhood lead poisoning cases in Massachusetts involve dust stirred up by renovation work, according to the state Childhood Lead Poisoning Prevention Program. That means about 245 of 816 children who tested for elevated lead levels last year were poisoned at least partly because of building projects, according to state data. Lead poisoning is often called a “silent epidemic’’ because children may show no obvious symptoms, although the toxins diminish their ability to think and sit still. Higher levels of lead can cause stomachaches, cramping, and even death. Poisoning may also come from other sources, including lead in toys, imported candies, or water.
“There’s been some fairly horrible incidents of kids who have been poisoned because of remodeling in their houses,’’ said Caroline Cox, research director for the Center for Environmental Health, a nonprofit in California that focuses on reducing chemical poisoning. “These regulations are way overdue.’’
The rules that go into effect April 22 require contractors to be EPA-certified and follow specific work practices to prevent contamination, including covering floors with plastic sheeting, dressing workers in protective clothing, and carefully disposing of tainted debris. They must also test for surface contaminants when the work is finished and keep records that document their efforts and confirm the absence of lead-based paint. Violators could be fined as much as $37,500 per day per incident.
In general, tradesmen - including painters, plumbers, and carpenters - who are paid to perform work that disturbs paint in housing and child-occupied buildings are subject to the rules. Homeowners who do their own work are exempt.
But less than two months before the regulations go into effect, many questions remain about enforcement, public awareness, and the rules themselves. While the EPA estimates that 236,000 renovators nationwide need to be trained in new practices, only 431 in Massachusetts and 14,000 across the country have taken the required one-day certification course offered by EPA-accredited trainers.
First-time homebuyers largely have been credited for the glimpses of optimism appearing in the nation’s housing market. But there’s another demographic group flexing its muscle: single buyers and, more specifically, single women.
Unmarried, solo buyers have been growing in number since the residential market heated up seven years ago, and there’ve been twice as many female buyers as male for at least a decade. In the past two years though, married couples have tempered their enthusiasm for home purchases, but singles with steady jobs and good credit are still closing on homes. They’re either entering the market for the first time or are existing homeowners capitalizing on market dynamics to trade up.
For the year ended in June, 38 percent of all home purchases in the Chicago area were made by singles, according to data recently compiled by the National Association of Realtors®. Single women accounted for 26 percent of all purchases. Nationally, single women accounted for 21 percent of all home purchases, with single men responsible for 10 percent.
At 32, Jenna Crowther is looking to rejoin the local ranks of single women with mortgages. Five years ago Crowther bought a town house in Joliet, a decision she looks back on as an experience that forced her to grow up more quickly. “You couldn’t just go out to dinner or go shopping, you had bills to be paid,” she recalled.
In December, she sold that home to be closer to her job. Now she’s renting in Western Springs while she shops for a home, but she doesn’t like that arrangement. “Starting to rent again, I felt like I was taking a step back,” she said.
Home purchases today appeal to people secure in their jobs who qualify for a mortgage, plan to stay in a home for several years and love a good deal. Home prices continue to fall, tax credits have been extended for first-time and repeat buyers, and interest rates remain low, trending near 5 percent for a 30-year, fixed-rate mortgage.
That confluence of factors “was like the planets were aligned. It was like the decision was made for me,” said Daphne Zimmerman, who until late October had been a renter since her divorce a decade ago. Now she owns a single-family home in Joliet that’s near her job at a dental office and has a fenced-in yard for her large dog.
Concerned that this year’s record snowfall will harm the plants in your garden? Fret not, says botanist Karen Snetselaar, Ph.D., chair and professor of biology at Saint Joseph’s University in Philadelphia, Pa. It’s actually good for them.
“Snow cover is actually beneficial for many plants, especially perennial herbs and shrubs, because it provides insulation from freezing temperatures,” notes Snetselaar. “Plants under snow will be exposed to fewer drastic temperature changes, which is often more damaging than continued cold.”
Though we may pine for them in the depths of February, uncharacteristic warm days that offer a break in the weather are bad for gardens, according to Snetselaar. “Early-blooming forsythia bushes, magnolia trees, daffodils, and tulips may look pretty, but when cold weather inevitably returns, they may be damaged.”
Snetselaar adds that, in recent years, even some cherry trees and other plants that normally do not break dormancy early have started flowering long before they should because of extended periods of warm weather early in the season. “This year the deep snow cover has kept it cool around the plants on warm, sunny days, so I would expect that we’ll see less of this potentially damaging early bloom.”
While foreclosures and loan modifications have made it tough for overwhelmed banks to go after walkaway borrowers, there’s evidence they are starting to crack down.
Lenders are hiring collection agencies. They also are getting deficiency judgments—court orders that allow banks to collect on mortgage balances. Once an order is in place, lenders can garnish wages, tap bank accounts, seize tax refunds and put liens on other assets to satisfy the debt. These judgments also show up on credit reports.
If the lender sells the home after a foreclosure for less than what is owed on the loan, the bank can come after the borrower for the deficiency balance.
Many states give mortgage holders as long as five years to seek a deficiency judgment. If a judgment is granted, the bank gets up to 20 years to collect and the option to renew for another 20 years if the debt isn’t paid. In Michigan, lenders have six years from the date the last payment was due—or 36 years on a 30-year mortgage, said Southfield real estate attorney John E. Jacobs.
In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.
This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.
More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.
For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.
Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.
“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.
The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.
To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.
Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”
Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.
For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.
Lowe’s Cos., the home improvement chain, last night presented a revised proposal for a store in Brighton that would feature a single-story building with 145,000 square feet, solar panels, and traffic-mitigation measures at 33 intersections.
The plan, to be filed next week with the city, comes several years after Lowe’s first proposal was stalled because of traffic concerns. The original project called for a 195,000-square-foot, two-story building with a garden center on top, a truck route on Western Avenue, and traffic mitigation measures at 13 intersections, a Lowe’s spokeswoman said.
Responding to community feedback, Lowe’s has adjusted its plan with a smaller footprint, an adjacent garden center, a truck route on Arsenal Street, and $1.65 million allocated for traffic mitigation, including light synchronization, improved striping and lane widening, and other measures.
Lowe’s plan comes about a week after New Balance unveiled its ideas for the Brighton neighborhood without the Lowe’s building, even though the Boston sneaker maker does not own any of the land.
WASHINGTON - Fewer Americans than expected signed contracts to purchase previously owned homes in January, indicating the extension of a tax credit is doing little to lure buyers.
The index of purchase agreements, or pending home sales, dropped 7.6 percent after a revised 0.8 percent increase in December, the National Association of Realtors said.
The drop in contract signings adds to evidence the housing market at the center of the worst recession since the 1930s is struggling to rebound after reports last week showed unexpected declines in purchases of new and existing homes. The market may get another blow this month when the Federal Reserve ends planned purchases of mortgage-backed securities.
Economists forecast a 1 percent gain in January pending home sales after a previously reported 1 percent rise a month earlier, according to a Bloomberg News survey.
In November, the number of signed contracts dropped a record 14 percent. The realtors group said February figures may be depressed, as well, following snowstorms in some areas.
The realtors’ report showed declines in January pending sales in all four regions, led by a 13 percent slump in the West. Contract signings fell 8.9 percent in the Midwest, 8.7 percent in the Northeast, and 2.1 percent in the South.
The bidding for a 5,700-square-foot single-family home on Brimmer Street in Beacon Hill opened at $4.975 million, went once, went twice, and - with no bids entered - went back to private sale about a minute after the auction began.
“It’s now 7:33 p.m., and the auction is now officially concluded,’’ auctioneer Bruce Sayre told the crowd of about three dozen gathered last night on the home’s kitchen level.
Jeremy Freid, managing principal with Great Rock Auctions, which staged the event, said his firm will now work to cut a deal with potential buyers who showed up at the auction.
“We’ll talk to them about a number they’re comfortable with,’’ Freid said.
He added that last night “the buyers said, ‘This isn’t the price we’re willing to pay right now. It may have been the price six months ago, it might be the price six months from now. But it’s not the price right now.’ ’’
The home is owned by developers Peter and Elizabeth Georgantas.
Jamie and Ashley Harmon of Boston attended the auction yesterday, but didn’t raise their bid card.
JPNC opposes closures A petition opposing the possible closure of the Jamaica Plain Branch Library or any other branches is being circulated by Friends of the Jamaica Plain Branch Library in advance of a March 9 meeting that should clarify the fate of the city’s 26 branch libraries.
The Jamaica Plain Neighborhood Council (JPNC) is also opposing any local branch library closures, and calling for community input on any plans to cut back library hours.
Boston City Council President Mike Ross, who represents part of Hyde Square, announced last week that he wants a total review of Boston Public Library (BPL) finances before discussing any closures. He called for City Council hearings on the issue.
As the Gazette previously reported, the BPL last week announced that it is considering two options for its 26 neighborhood branch libraries in response to state budget cutbacks: eliminating eight to 10 branches, or severely cutting staff and hours at 18 branches and “pairing” them together for consolidated services.
The BPL proposal did not identify any specific branches as closure or cutback targets. But the JP Branch at 12 Sedgwick St. has a long-stalled expansion and handicapped-accessibility project, and there are fears it could be targeted for closure. Also, JP is served by three branches: JP, Egleston Square and Hyde Square’s Connolly Branch. The JP Branch often has the highest circulation of the branches citywide, despite being one of the smallest.
The Connolly Branch has been renovated in recent years and just had an upgraded audio-visual system installed, according to Friends of the Connolly Branch Library.
The Mortgage Disclosure Information Act (MDIA), a government regulation introduced on July 30, 2009, requires all mortgage lenders to provide Truth in Lending (TIL) disclosures to borrowers according to a defined schedule. While the regulation gives borrowers additional time to review their mortgage documents prior to closing, buyers and sellers may have to push closing dates back to comply with the mandatory waiting periods imposed by this regulation.
Waiting Periods: Closing documents cannot be signed earlier than seven days after the initial TIL has been issued.
If the annual percentage rate on subsequent revised TIL changes more than the limits of the regulation, then there is an additional three day waiting period to close from when the borrower receives the revised TIL.
Work with settlement providers who are familiar with each other to streamline your home buying process.
Choose a closing date that allows sufficient time for waiting periods.
Contact a William Raveis Executive Mortgage Banker to understand how you can avoid some common pitfalls and
Housing prices are rising, and bargains are getting tougher to find, but they’re still out there if you know where to look
Looking for value in the Massachusetts housing market? Bargain hunting for homes in the Bay State has never been easy. Even though home prices fell about 20 percent from the market peak in 2005 to the bottom last year, that’s still far less than what many other regions experienced. The median prices for a single-family home in Massachusetts was $285,000 in January, and the state continues to have some of the highest prices in the country.
To find bargains now, look in towns and neighborhoods where prices dropped the most during the downturn, either because they are far from Boston or had a high concentration of foreclosures that dragged down home values.
“Sellers are more realistic now,’’ said Phyllis Sagan, owner of Sagan Realties in Swampscott, a North Shore beach town where the median price dropped 23.5 percent between 2005 and 2009, and is now under $400,000. “You can really get in now at a reasonable price.’’
Communities with above-average price drops include oceanside Hyannis, where the median price of $190,000 is nearly 42 percent from the 2005 high; urban Roxbury, which at $195,000 is down 42.7 percent; and rural Harvard, which experienced a price decline of 26.3 percent over the five-year period, to a current median price of $457,000, according to Warren Group, a Boston company that tracks real estate prices.Town-by-town Home Values in Massachusetts
“We certainly have got some very, very good buys,’’ said Nancy Hazel, president of TP Hazel Sotheby’s International Realty in Harvard, a community about 32 miles from Boston where median home prices peaked at $620,000 in 2005.
In Harvard, prices dropped as a consequence of the ripple effect of a slow market, as many buyers found they could finally afford properties closer to Boston.
“People were able to choose other towns they didn’t use to be able to afford,’’ said Rhonda Sprague, owner of Harvard Realty Sprague. “We are lovely scenic town, but we are just out a ways.’’
More buyers are being lured to the simplicity and affordability that small homes bring. Plus, these smaller homes are often situated within walking distance to restaurants, stores, and shops.
After Sarah Susanka published The Not So Big House (The Taunton Press) 11 years ago, a groundswell of interest emerged about small home living. Tiny prefab homes began popping up on urban lots and prairie pastures alike. There was also renewed interest in downsizing the size of one's home for the sake of simplicity. Now, with an economic slowdown and a desire to live very close to jobs and other services, the trend is just as hot now as it was then. "I call it the cappuccino factor. They want the cappuccino to be within walking distance," says BJ Droubi, a Coldwell Banker broker in San Francisco. Homes in Noe Valley—an area she specializes in—are between 900 and 1,100 square feet. For buyers trying to play it safe in the softening housing market, a smaller home may be the way to go. Smaller homes tend to not only be more affordable but more energy efficient. "'Not so big' has almost become chic. Conspicuous consumption is no longer cool," says Susanka, who defines a small home as a third less space than the buyer needs. "It doesn't mean 'less than.'" Maximizing Square Footage in a Smaller Home As an architect, Susanka became frustrated when discussions with clients always began with square footage. "I really tried to change the discussions away from size into the things that really matter," she says. Genevieve Ferraro shares a 1,800-square-foot house in Evanston, Ill., with her husband, two children, and a dog. "Long story short, my husband refused to move to a larger house and I couldn't find a professional decorator who could help me design the house," she says. Ferraro launched a business, The Jewel Box Home, two years ago where she helps owners of small homes address storage, child-rearing, landscaping, and color choices. She works with various budgets and sometimes all it takes is just a simple rearranging of furniture to make a small space appear bigger and more cozy. "A smaller space needs a certain type of flow," Ferraro says. "There's this conventional wisdom that bigger is always better and we have all sort of bought into that. There's a stigma that small homes are second-rate." With a small home, you don't have to sacrifice design or functionality. For example, Ferraro offers some of the following tips for making a small home feel not so small: Decide on the room's primary function and let that guide your decorating. Keep color, furniture, lighting, and accessories in proportion. In other words, no large-scale pieces should be in a small room. Keep all the furnishings small and it will enlarge the space. Rearrange furniture so that the legs show on all of your upholstered pieces. This creates a feeling of space and light and allows the eye to travel across the room and see "through" furnishings. Keep tabletop accessories to a minimum. Have no more than three coffee tables and side tables. If you have a large collection of accessories, display them in rotating groups.
