Drop in mortgage rates trigger race to buy and refinance
2009/03/26, 2:22 pm
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Tumbling interest rates are setting off a mortgage-refinancing scramble among homeowners and pulling undecided buyers into the market.

Loan terms for 30-year fixed-rate mortgages fell to 4.63% from 4.89% for the week ending March 20, the Mortgage Bankers Association (MBA) reported Wednesday. That’s the lowest in the history of the survey, which began in 1990.

Refinancing accounted for 78.5% of all mortgage applications last week.

Applications are up in part because of a federal refinancing program through Freddie Mac and Fannie Mae that is part of the Obama administration’s housing rescue plan.

Rates have been driven down by the Federal Reserve’s decision last week to buy up to $300 billion of long-term government bonds and $750 billion in mortgage-backed securities held by Fannie and Freddie.

The falling rates are jolting homeowners and buyers:

•Homeowners who had been waiting to refinance say they’re now getting great deals. Nancy Hemenway, 58, of Arlington, Va., is closing on a refinance in a couple of weeks.

“We were watching the rates and didn’t see how they could go much lower,” says Hemenway, executive director of a non-profit. “We thought there might be a problem because banks weren’t lending, but that didn’t happen at all. We just filled out some paperwork and faxed it.”

•Low prices on foreclosed homes are luring buyers into the market. Up to 45% of existing home sales in February were distressed properties, according to a report this week by National Association of Realtors.

Michael McCullough, a public relations specialist in Atlanta, is closing today on a 3,000-square-foot home with a large yard and four bedrooms.

“My wife and I have no business buying this large a home, but we can afford it because it was a foreclosure, and we secured a 4.6%, 30-year fixed” loan, says McCullough. “There are tons of deals out there.”

•Realtors such as Leslie McDonnell at Re/Max Suburban in Libertyville, Ill., are seeing sudden pickups in business. Enticed by low prices and rates, McDonnell has bought several properties herself this year. “We’ve definitely seen an impact. Things have gotten busier for sure,” McDonnell says. Low rates “are compelling people into action. I do feel like we’ve hit bottom.”

Overall mortgage applications last week were 20% above their year-ago level, according to the MBA.


Better security lifts housing market in Iraq
2009/02/25, 4:39 pm
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BAGHDAD — Mohammed Aziz remembers back when he would come to his office and spend days without a single customer opening the door.

The real estate broker would sit in the office with colleagues and relatives, wondering when the raging violence outside would ease up enough so people would get back to buying and selling homes.

“In 2005 and 2006, it looked like a ghost city,” said Aziz, pointing out toward the street bustling with reopened shops and heavy traffic. “Nobody came. We would come and sit and read newspapers.

“Now,” he says, smiling, “it’s very good.”

In contrast with the rest of the world, parts of Iraq are experiencing a rare real estate boom thanks to the dramatic improvement in security here during the past 18 months, Aziz and others say. Home sales and prices have shot up in the past two years as wealthy Iraqis who fled the country during the worst years return, and those who stayed behind feel comfortable enough to open their wallets again.

For example, Aziz said a 4,300-square-foot home in Baghdad’s Mansour neighborhood — an upscale area that is home to Sunni and Shiite Muslims and saw some of the worst violence between the two sects — has doubled in price from about $170,000 in 2005 to $340,000 in 2008.

There are no reliable nationwide data in Iraq for housing prices, and officials at Iraq’s finance ministry declined requests for comment. Yet many neighborhoods of Baghdad are lined with “For Sale” signs, and real estate broker Saab Abdul Razak says they’re finding an audience: “People are buying,” he said with a grin.

Despite the progress, the threat of violence still affects business.

Three months ago, members of the Abdul Khadr family finally felt that the price offered on their home in the upper-class, Baghdad neighborhood of Yarmouk was high enough. After years of depressed prices, they sold the house in the religiously mixed area for $280,000.

The three siblings — Hussein, Mohammed and Lamia — said they took their share of the profit to move to Tikrit because it was a predominantly Sunni city and they would feel safer there.

Other obstacles are just now being removed. In Iraq, it is customary for people to purchase homes with cash. Buyer and seller usually meet at a real estate broker’s office to sign some documents, and money changes hands.

Razak, who works with properties in Yarmouk, said people were scared to even enter his office because insurgents would follow people out, knowing a large sum of money was there for the taking.

“They were afraid to bring the money here,” Razak said.

Many Iraqis were forced to sell their homes or risk losing them to squatters or insurgents. During the height of the sectarian violence, Sunnis fled Shiite neighborhoods, Shiites fled Sunni neighborhoods and some left the country altogether.

The fleeing homeowners, combined with low home prices due to the raging violence, actually created a unique business opportunity for Iraqis who were out of the country, Razak said. They bought up the homes to either flip when the market improved or to rent out as an investment property.

Unis Mohammed Emin, a civil engineer who has worked outside of Iraq for several years, snatched up a 5,800-square-foot house in the western neighborhood of Ghazaliya in 2005 for $220,000. Emin bought the house from a Christian family who fled to Stockholm to avoid being targeted. He rents it out.

“It was like gambling,” said Razak, the broker. “You were standing on the edge of a mountain.”

On a recent day, Razak showed off a home he was selling. The refurbished home has four bedrooms, three bathrooms, a balcony and garden, sits across the street from a mosque and is in walking distance of a good private school, markets and restaurants.

Razak received an offer of $350,000 for the house last month, but the family unflinchingly turned it down, wanting at least $380,000. Razak said he was certain there would be a higher offer.

For those with less money, the story is less rosy.

Nowzad Mohialdin, a retired Baghdad banker, said most homes for sale are far out of reach for regular workers, whose salaries remain low. Iraq’s unemployment rate is at 18% and an additional 10% of the labor force works part-time but is looking for full-time work, according to a United Nations report released last month.

“Two or three families will rent one house and share it,” Mohialdin said. “The only people who can buy their own homes are army officers or business owners. Not workers.”

The only long-term answer will come in the form of large-scale housing projects funded by foreign companies, Aziz said. Iraq is struggling just to get its basic infrastructure online after decades of wars and sanctions, he said, so it will be a long time before the housing market is open to all Iraqis.

“We need about 3 million homes for the Iraqis right now,” he said. “We need big housing projects and big companies. We need foreign companies to invest in this country.”

Contributing: Khalid D. Ali