Tag Archive: housing market


David Reilly, Wall Street Journal

The government’s latest move to bolster housing marks yet another transfer from savers to borrowers.

Such transfers have been the norm since the Federal Reserve instituted its zero-interest-rate policy in late 2008—shifting funds away from the likes of depositors, bondholders and pension funds to debtors. The latest iteration came Monday, when the Federal Housing Finance Agency unveiled changes to a program meant to make it easier for underwater homeowners who are current on payments to refinance into a lower-rate mortgage.

The thinking is that this will reduce defaults. Or as FHFA said, "Such refinances bring benefits to borrowers, to housing markets, and to [Fannie Maeand Freddie Mac] and taxpayers."

Missing from that winners’ list: investors who finance housing markets by purchasing mortgage-backed bonds. They will fund this new effort. Here is how: As homeowners refinance, investors who bought mortgage bonds will be given back their money and will have little option but to reinvest at far lower yields. The transfer is the difference in yield.

Just how big that will be isn’t clear as it is tough to tell how effective the program will be. The original Home Affordable Refinance Program, or HARP, led to refinancings by 894,000 homeowners in about two years. Estimates for how many borrowers could now take part range from 500,000 to three million, while FHFA said it is "very difficult to project the number of mortgages that may be refinanced." Some mortgage bonds traded lower Monday on news of the plan.

Granted, prepayment risk is inherent to mortgage bonds. There is also likely to be little sympathy for bondholders having to give up money to shore up housing. But that ignores that the government is picking winners and losers. Effectively, it is deciding some losses on some things are acceptable, say on 401(k) retirement plans, yet aren’t on others, namely housing.

The government also potentially undermines its own effort to create a housing-finance market independent of Fannie and Freddie. Many mortgage investors may choose to reinvest elsewhere, ultimately shrinking the pool of lenders available to fund that market. In the short term, the Fed may well take their place. That isn’t the basis, though, for a functioning mortgage market underpinned by private capital.

Another unsettling wrinkle: The FHFA is adding an incentive for borrowers to refinance into shorter-maturity mortgages. But in many cases, this will mean a borrower’s monthly payment, including principal repayment, won’t decline. It may actually rise. That undermines the notion that these borrowers are unable to meet monthly payments and need government assistance.

Banks may also benefit depending on how FHFA decides to limit the risk that they could be forced under some circumstances to repurchase shoddily underwritten mortgages.

The biggest issue, though, isn’t necessarily with HARP or similar programs. It is that both parties in Washington are studiously avoiding any real effort to overhaul housing finance and decide what to do about Fannie and Freddie.

 

 

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Laura Vecsey, Zillow

Dobermans released every two hours to patrol the property. Underground streets lined with a restaurant, bars and a barber shop. A private beach and marina sculpted into the shores of Lake Erie. Helicopter pad. Rotating garage floor made of marble so no one had to back out that rare Ducati.

These are just a few of the unique features found in the Waterwood Estate, a fascinating Ohio property owned by the late Don Brown, an inventor who gave the world the drop ceiling.

“It takes four-and-a-half hours to show this property,” said Scott Street of Sotheby’s, the listing agent for the Waterwood Estate, which is now listed on the Vermilion real estate market for $19.5 million.

The property sits on 160 acres, boasts three-quarter miles of frontage on Lake Erie and contains a series of “pods” connected by glass corridors that were navigated by scooters and golf carts.

When Brown and his wife, Shirley, were killed in a plane crash in 2010, their two living sons (their third son, Kevin, died in a speed boat race in 1989) decided to sell the sensationally unique property. But to who?

So far, Street said the listing has attracted a ministry group and a group of Colorado helicopter pilots have expressed interest in turning the property into a fly-in, fly-out resort (Waterwood comes with an FAA-approved helicopter pad). Then there’s a couple who, perhaps like the octogenarian Browns, wants to grow old in an amenity-laden house.

“This was a very forward-thinking house when it was built in 1990 in terms of systems and functionality,” said Randal Darwin, vice president of CB Richard Ellis, the firm brought in to help market Waterwood.

“It was 20 years ahead of its time because of its features and unique characteristics. Mr. Brown literally broke the mold on this house. I know he had the white brick specially fabricated for this project and when it was done, he had the molds destroyed so no one else would ever use them,” Darwin said.

These few details only begin to tell the story of Brown’s Waterwood Estate. One other important fact? The listed size of Brown’s dream house is off — by about 30,000 square feet.

The Inventor and the Architect

“They’ve got the square-footage listed wrong,” said architect Hugh Newell Jacobsen. “It’s not 38,000 square feet. It’s 60,000 square feet. The underground floor is the same size as the main floor. They forgot to count that.”

Jacobsen would know about the true size and intricacy of the Brown estate. The world-acclaimed architect was hired by Brown to deliver the visionary design, just as Jacobsen has done for more than 400 private homes for clients that included Jackie Onassis, Meryl Streep and members of the Mellon family. But the collaboration ended when the secretive Brown fired Jacobsen.

“We were a year-and-a-half into the project and he sacked me. I’ve never been fired before,” Jacobsen said from his Washington D.C. office, still bemused about the turn of events.

“He kept a secret of his life. He thought everyone wanted him. He’d say, ‘Hugh, jealousy is a terrible thing.’ I asked him, ‘Don, do you think I’m jealous of you?’ I think he was offended,” Jacobsen said.

At 81, Jacobsen has been at the forefront of American architecture for sixty years, ever since he attended Yale and apprenticed with Philip Johnson. The rich and famous are Jacobsen’s clients. He delivers uniquely landscaped structures that reference the Quaker-simple lines of the American barn, smokehouses and farmhouses. He has won many awards and published three books cataloging his work, but his first look at the Waterwood Estate came when he saw listing photos after the property was put up for sale.

“About two months before he died, after 20 years since I’d heard from him, he called and said,  ‘I guess you’d like to see the place.’ I said, yes, I’d like to see it. My homes are like my children. But then he died in the crash,” Jacobsen said.

Jacobsen used his trademark “pod” style design to give the design more flexibility and allow it to evolve as Brown wanted other things added. The entire home is a series of 20 castle-like concrete buildings connected by glass corridors and each structure is topped with a slate pyramid.

Marble, Glass, Polar Bears and Dobermans

On the lower level of the house, there are a series of streets built to scale and named after streets in cities like Georgetown, Paris and Savannah.

“There were five bars in the house, one with a full-mounted polar bear. There’s a barber shop with a pole where Don would go every morning for a shave. At one end of the house, he had cages that would open every hour on the hour and two Dobermans trained to run the perimeter of the property would run out. The next hour, another pair would take off,” Jacobsen said.

He also used tons of sand and dirt from the lake shoreline, where cliffs were graded to build a beach and the harbor, to shape hills into the flat, Midwestern terrain. From the road, the house is not visible behind those hills. But from the lake, boaters can see the modernist white castle.

If it sounds wild, Jacobsen disagrees.

“No, it’s not wild. It’s your dream. This house is the house of an inventor. It has a space where, inside eight white columns, there are chairs and a couch. This floor lifts up through the ceiling to a pergola so guests can look out over the lake. The floor also goes down to the ground floor, where there’s a piano so the family can sing Christmas carols,” Jacobsen said.

“Near the main entrance, there is a 10-by-10-foot room behind the closet. You slide the door, remove the clothes’ pole and there’s a fully decorated Christmas tree. The room had its own air filter and air conditioner to keep the dust off the ornaments. He was so embarrassed about having a fake tree he had it sprayed so that it smelled like pine needles,” he said.

What amuses Jacobsen is that despite being fired, his plans were fully executed. Brown brought in another renowned and innovative architect, the late Hideo Sasaki.

“Don told Sasaki, ‘Don’t change Jacobsen’s plan.’ And they didn’t change a thing. Sasaki would call and tell me,” Jacobsen said.

During his lifetime, Don Brown never allowed the property to be photographed. It was a sanctuary for his family, lacking for nothing. Now, with the house listed for sale and photographs to prove its splendid fruition, the architect who designed Don Brown’s house is curious.

“He was building his dream, he had money and he hired me. We bought the furniture, the art, we did the landscape, then I was fired. I’d like to see it, but I’ve  never paid my own airfare to see a home I built for a client,” Jacobsen said.

And if you’re wondering whether the home has a drop ceiling, it does — in a workshop.

 

 

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Quiz: Am I Ready to Buy?

Carla Hill, Yahoo Real Estate

There are lots of eager would-be buyers out there. It’s no wonder why! The market currently offers many ideal buying conditions. Interest rates are still at historic lows (for those with excellent credit). Home prices are extremely affordable when compared to area median incomes. There is a large supply of homes available in most markets (more homes to choose from and buyer advantage at negotiations).

Yet, the questions remains. Are you ready to buy? Take a moment to answer this ten question quiz: Am I Ready to Buy?

1. What is your credit score? (a) less than 620; (b) between 730 and 850; (c) between 620 and 730.

2. Do you have cash for a 20 percent down payment? (a) how much?; (b) yes; (c) not yet, but we’re working on it.

3. Do you have cash totaling an 8-month emergency fund? (a) I live month to month; (b) we have funds to cover 8 months of expenses; (c) we only have savings to cover a few months.

4. Have you been pre-approved for a mortgage? (a) I figured I’d find the house I like first; (b) Yes, and I have a copy of the letter; (c) I played around with forms online.

5. Is your job: (a) temporary, part-time; (b) full-time and secure; (c) full-time, but our company is experiencing lay-offs.

6. Do you plan on staying in your current city for the next 3 to 5 years? (a) I won’t be here for that long; (b) Yes, most definitely; (c) I’m not sure.

7. Have you worked on buyer budgets? (a) I don’t have time to do frivolous budgets; (b) I have a spreadsheet showing different scenarios; (c) I’ve worked up a few, but haven’t spent much time.

8. How much space do you need? (a) I want a mansion. I’ll take nothing less. (b) We know within about 500 square feet; (c) we’ve given it some thought, but aren’t sure.

9. Are you and your spouse or partner on the same page? (a) it’s my way or the highway; (b) we’ve had several lengthy discussions and agree on most points; (c) we’ve talked, but have very different ideas.

10. Why do you want to buy? (a) I want a place i can show off; (b) I want stability for my family; (c) I want to be able to decorate like I want!

If you answered mostly a’s, then our experts recommend you take some time to get your finances in squeaky clean order before proceeding. Homeownership is a big financial responsibility, and with an unemployment rate over 9.0 across much of the country, it’s important that you have funds in place to take care of yourself and your family before you you buy.

If you answered mostly b’c, congratulations! You sound like a prime candidate for homeownership. Be sure to contact your local Realtor for advice on the next step.

If you answered mostly c’s, you are very close to being ready to buy. Take the next few months to check over your credit report and fix any errors. Talk to banks and lenders and see what rates you qualify for. Start putting buying at the forefront of your mind and your future planning. Make it a priority and it’ll happen!

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