Home from a reP artport2 taken titled, “Social
Benefits of Homeownership and Stable Housing” written by The Research Division of the National Association of Realtors. The report highlights the strong correlation between homeownership and income, education, age, marital status and several other factors. Homeownership and Stable Housing Homeownership and stable housing go hand-inhand. Homeowners move far less frequently than renters, and hence are embedded into the same neighborhood and community for a longer period. While 5.2 percent of owner-occupied residents moved from 2008 to 2009, nearly 30 percent of renters changed residential location. The key reason for the higher “mover rate” among renters is the fact that renters are younger – that is, changing and searching for ideal jobs, not yet married, and hence, literally, less committed. The mover rate or percentage of people changing residence, among 20-to-24 year-olds was 27 percent, and for 25 -to-29 year-olds it was 26 percent, as shown in Exhibit 5. The mover rate then declines rapidly from 14 percent for those in their early 30s to less than 5 percent for those 65 years or older. As to why people move,
MLS Search the predominant reason given by Current Population Survey respondents in 2009 was housing-related. Almost one-third said they moved to a better home, a better neighborhood, or into cheaper housing. The second most popular reason cited was familyrelated at 26.3 percent. Work-related reasons (new job, lost job, easier commute, retired, etc.) were reported by only 17.9 percent of respondents. Very few indicated change of climate and health reasons for moving. Poverty status and marital status also have strong relationships with mobility. The mover rate among those living below the poverty level was almost twice as high as those living above the poverty line. By contrast, the mover rate for married-couple family households was only half the rate compared with households living in other arrangements. To determine the impact of homeownership on mobility, it is necessary to employ a mathematical regression model to isolate the impact of individual variables. Just because renters are five times more likely than homeowners to move, does not mean that the renters are moving because of their tenure status. High renter mobility could be a result of renters being young and not married. The Census report, after employing such a
technique, found that homeownership does have a statistically significant impact of lowering the mover rate. That is, among people of the same age, same income, and same marital status, a person was significantly more likely to change residence in a given year if he or she was a renter rather than a homeowner. Homeowners bring stability to neighborhoods. Many sociology studies have found that residential stability strengthens social ties with neighbors. Other research has focused on how mobility diminishes the depth of social ties because there is less time to build long-term relationships. Sampson and his colleagues argue that social cohesion and strong ties are paths through which resources for social control are made. As we shall see, the purported benefits of homeownership may partly arise not directly from ownership, but from greater housing stability and social ties associated with less frequent movements among homeowners. Therefore, policies to boost homeownership can raise positive social outcomes, but only to the extent that homeownership brings housing stability. Homeownership and Educational Achievement In this section several
Contact November 2010 Inside this issue: Social Benefits of Home Own
Reasons Why Short Sales Fail
FHA Mortgage Insurance
Phoenix Market Update
Live Life Now
Who I Am Makes a Difference
studies on the relationship between homeownership and educational achievement are discussed. Consistent findings show that homeownership does make a significant positive impact on educational achievement. Less clear, however, is whether homeownership in itself, stable housing (i.e., less frequent residential change), or favorable neighborhood characteristics are the main underlying factors contributing to better educational outcomes. Green and White found that homeowners have a significant effect on their children’s success. The decision to stay in school by teenage students is higher for those raised by home-owning parents compared to those in renter households. Furthermore, daughters of homeowners have a much lower incidence of teenage (Continued on page 2)
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pregnancy. The authors point to certain behavioral characteristics required of homeowners that get passed onto their children. First, a home purchase naturally involves one of the largest financial commitments most households will undertake. Homeowners, therefore, tend to minimize bad behavior by their children and those of their neighbors that can negatively impact the value of homes in their neighborhood. Second, homeowners are required to take on a greater responsibility such as home maintenance and acquiring the financial skills to handle mortgage payments. These life management skills may get transferred to their children. However, the
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a study by Hanushek, Kain, and Rivkin showed that changing schools negatively impacts children’s educational outcomes particularly for minorities and low income families. Aaronson found that parental homeownership in low-income neighborhoods has a positive impact on high school graduation.10 But he cautioned that some of the positive effects may arise due to the greater neighborhood stability (less residential movement) and not necessarily to homeownership alone. In another study by Harkness and Newman, the authors examined whether children from lower-income and higher-income families benefit equally from homeownership and found that for children growing up in families with incomes less than 150 percent of the federal poverty line, homeownership raises educational attainment, earnings, and welfare independence in young adulthood. These positive results do not extend to the long-term outcomes of children in families with incomes more than 150 percent of the poverty line, however. These findings suggest that homeownership effects are not only attributable to unobserved (Continued on page 3)
causation link between homeownership and improved schooling performance is not completely clear. It could very well be that homeownership brings residential stability, and it is the stability that raises educational attainment. Such an interpretation would be consistent with a study by the New York Federal Reserve Bank which found that, though homeownership raises educational outcomes for children, neighborhood stability further enhanced the positive outcome.8 In addition,
Reasons Why Short Sales Fail Short sales often remind me of Elizabeth Barret Browning. How can a short sale fail? Let me count the ways. A short sale can fail to the depth and breadth and height the soul of a nervous buyer can reach. It's normal to be fearful that a short sale will fail, because you hear more about the short sales that don't close. But many short sales also close. I'd venture to guess that 2 out of every 3 attempted short sales do not fail; they close. The success rate can be that high. Your odds of closing a short sale greatly increase in direct proportion to the number of successful closings handled by the listing agent. That's not to say that a novice agent can't handle a short sale, but experienced short sale agents often learn from their mistakes. An inexperienced short sale agent might not have faced some of the problems inherent in short sales nor have access to a quick solution, which could cause your short sale to fail. So what can go wrong? What can make a short sale
fail? Assuming you have offered a reasonable price for that short sale and the sellers qualify for a short sale, many of the problems in a short sale occur near the approval stage. After you've waited months for short sale approval, weathered torrential rain storms and crossed sun-parched deserts. Following are 10 of the top reasons a short sale will fail: #1) Short Sales Fail Due to Unreasonable Second Lenders An agent friend of mine in Virginia who negotiates a lot of short sales compares herself to a ping pong ball, the way she is often bounced between first and second lenders. First lender might not agree to meet the second lender's demand. A third lender might refuse to play ball at all. Some second lenders push sellers to commit short (Continued on page 3)
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sale mortgage fraud, which could happen if the lender demands a payment outside of the HUD-1. #2) Short Sales Fail Because the Home is Vacant Many servicing guidelines require that the home be occupied. They may go so far as to insist that the seller move back in, and many sellers cannot afford to do so. You will have a better chance of closing your short sale if the seller lives in the property. #3) Short Sales Fail Due to Demands for Seller Contributions Banks demand seller contributions all the time, even if the seller has no money and no assets. The bank might insist that the seller kick in cash or sign an interest-free, long-term promissory note. #4) Short Sales Fail Because of Deficiency Verbiage Many states allow deficiency judgments when lenders take a short payoff, regardless of whether the financing is purchase money or a hard money loan. Not every lender will agree to remove deficiency verbiage from a short sale approval letter. Even in situations that are exempt from deficiencies, doing a short sale might change or alter the sellers' exemption. #5) Short Sales Fail Because PSAs Prefer Foreclosure It's possible that the servicing guidelines might not contain any provisions for a short sale. In that event, the short sale will not be granted, even though it may have appeared all along that the bank would approve the short sale. In addition, some PSAs make more money if the home goes to foreclosure due to incentives in the guidelines. #6) Short Sales Fail Due to Tax Liens, UCC Filings and Judgments A quick check of the public records would disclose liens filed against the home or the seller, but few buyers order a title check until they get short sale approval. Some (Continued from page 2)
characteristics of homeowners, but also indicate causal effects. In another study, jointly authored by a sociologist and an economist, a higher overall quality of life among homeowners is believed to contribute to the well-being of both homeowners and their children in a number of ways. For example, young children of homeowners tend to have higher levels of achievement in math and reading and fewer behavioral problems (which often carry over into reduced deviant behavior in later years). Better social outcomes arise as parents provide a more supportive environment for their children. These factors, as well as many others, help explain increased educational attainment and higher lifetime annual incomes of homeownersâ€™ children.12 Research has also confirmed that access to economic and educational opportunities are more prevalent in neighborhoods with high rates of homeown-
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types of liens will follow the seller even after a foreclosure and will require payment before the short sale can close. Generally, banks will not pay those liens. #7) Short Sales Fail Because Bank Offers Loan Modification I've had sellers call me up in the middle of a short sale to say the bank, which had previously refused to offer them a loan modification, now wants to give the sellers an incredible repayment plan that the sellers can afford to pay. #8) Short Sales Fail Because Home is Vandalized Vacant homes can be sitting ducks for thieves. Water pipes can break and flood the home. Lightning can strike it and burn the home to the ground. But more often than not, thieves break in, steal the appliances and rip out copper. Banks often will not pay for repairs. #9) Short Sales Fail Because Sellers Get a Job Some short sales can take so long to get approved that eventually the seller will find a job. Once employed and earning a good income, the seller may no longer qualify for the short sale. #10) Short Sales Fail Because Not Every Fee is Approved for Payment The buyer might need a credit toward closing costs and the bank might refuse to pay it. Buyer's closing costs can amount to 3% of the sales price, almost as much as the minimum down payment for an FHA loan. If the homeowner's association dues are in arrears, a bank might refuse to pay those fees, among other charges. By Elizabeth Weintraub, About.com Guide
ership and community involvement.13 Boehm and Schlottmann show that the average child of homeowners is significantly more likely to achieve a higher level of education and, thereby, a higher level of earnings. The authors further find the housing tenure of parents plays a primary role in determining whether or not the child becomes a homeowner.14 Finally, a recent study examining whether homeownership has positive effects on the academic achievement of children finds significant effects of home environment, neighborhood quality, and residential stability on the reading and math performance of children between the ages of three and twelve.15 Because it appears that educational outcomes were strongly influenced by homeownership and residential stability, the authors suggest that government policies that promote homeownership or residential stability should be considered as part of any strategy to improve education. (more in the December edition)
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Mortgage News It looks like a sturdy crunch is available once again for mortgage rates. This crunch (aimed at supporting long term/low rates) will come in the form of multi-billion dollar security purchases from the government. Medley Advisors announced today that the FED will buy as much as $500 Billion in gov’t backed securities over the next 6 months. If you recall, the original run to our current mortgage rate environment was initiated by this same fundamental almost two years ago (to the tune of $1.25 trillion). Now that rates are at historical lows, the idea is the same however the impact should be a bit different. This new round of government purchases will likely support current historically low rate levels for an extended period however it most likely will not drive rates dramatically lowe as the 2009 version did. In other news – The New York Fed announced that they are determined to arm wrestle B of A into paying for $47 billion in nonperforming (“bad loans”) from their Countrywide friends. B of A has said they are up for the challenge and will be drawing inspiration from of the guy that drank oil before his match in “Over The Top” (sorry, couldn’t resist the arm wrestling reference!). In short, B of A isn’t taking a hit without a fight.
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Dreaming of Home
A teacher in New York decided to honor each of her seniors in high school by telling them the difference they each made. She called each student to the front of the class, one at a time. First she told each of them how they made made a difference to her and the class. Then she presented each of them with a blue ribbon imprinted with gold letters which read, "Who I Am Makes a Difference." Afterwards the teacher decided to do a class project to see what kind of impact recognition would have on a community. She gave each of the students three more ribbons and instructed them to go out and spread this acknowledgment ceremony. Then they were to follow up on the results, see who honored whom and report back to the class in about a week. One of the boys in the class went to a junior executive in a nearby company and honored him for helping him with his career planning. He gave him a blue ribbon and put it on his shirt. Then he gave him two extra ribbons and said, "We're doing a class project on recognition and we'd like you to go out, find somebody to honor, give them a blue ribbon, then give them the extra blue ribbon so they can acknowledge a third person to keep this acknowledgment ceremony going. Then please report back to me and tell me what happened. Later that day the junior executive went in to see his boss, who had been noted, by the way, as being kind of a grouchy fellow. He sat his boss down and he told him that he deeply admired him for being a creative genius. The boss seemed very surprised. The junior executive asked him if he would accept the gift of a blue ribbon and would he give him permission to put it on him. His surprised boss said, "Well, sure." The junior executive took the blue ribbon and placed it right on his boss's jacket above his heart. As he gave him the last extra ribbon, he said, "Would you do me a favor? Would you take this extra ribbon and pass it on by honoring somebody else? The young boy who first gave me the ribbons is doing a project in school and we want to keep this recognition ceremony going and find out how it affects people." That night the boss came home to his 14 year old son and sat him down. He said, "The most incredible thing happened to me today. I was in my office and one of the junior executives came in and told me he admired me and gave me a blue ribbon for being a creative genius. Then he put this blue ribbon that says 'Who I Am Makes A Difference' on my jacket above my heart. He gave me an extra ribbon and asked me to find someone else to honor. As I was driving home tonight, I started thinking about who I would honor with this ribbon and I thought about you. Sometimes I scream at you for not getting good enough grades in school and for your bedroom being a mess, but some-
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A boat docked in a tiny Mexican village. An American tourist complimented the Mexican fisherman on the quality of his fish and asked how long it took him to catch them. "Not very long," answered the Mexican. "But then, why didn't you stay out longer and catch more?" asked the American. The Mexican fisherman explained that his small catch was sufficient to meet his needs and those of his family. The American asked, "But what do you do with the rest of your time?" "I sleep late, fish a little, play with my children, and take a siesta with my wife. In the evenings, I go into the village to see my friends, have few drinks, play the guitar, and sing a few songs...I have a full life." The American interrupted, "I have an MBA from Harvard and I can help you! You should start by fishing longer every day. You can then sell the extra fish you catch. With the extra revenue, you can buy a bigger boat. With the extra money the larger boat will bring, you can buy a second one and a third one and so on until you have an entire fleet of trawlers. Instead of selling your fish to a middle man, you can negotiate directly with the processing plants and maybe even open your own plant. You can then leave this little village and move to Mexico City, Los Angeles, or even New York City! From there you can direct your huge enterprise." "How long would that take?" asked the Mexican. Twenty, perhaps twenty-five years," replied the American. "And after that?" "Afterwards? That's when it gets really interesting," answered the American, laughing. "When your business gets really big, you can start selling stocks and make millions!" "Millions? Really? And after that?" "After that you'll be able to retire, live in a tiny village near the coast, sleep late, play with your children, catch a few fish, take a siesta, and spend your evenings drinking and enjoying.
how tonight, I just wanted to sit here and , well, just let you know that you do make a difference to me. Besides your mother, you are the most important person in my life. You're a great kid and I love you!" The startled boy started to sob and sob, and he couldn't stop crying. His whole body shook. He looked up at his father and said through his tears, "I was planning on committing suicide tomorrow, Dad, because I didn't think you loved me. Now I know you care. This is the happiest day of my life." The boss went back to work a changed man. He was no longer grouchy but made sure to let all his employees know that they made a difference. The junior executive helped several other young people with career planning and never forgot to let them know that they made a difference in his life ... one being the bosses son. And the young boy and his classmates learned a valuable lesson. Who you are DOES make a difference. If you have anyone who means a lot to you, send them this story and let them know. You never know what kind of difference a little encouragement can make to a person. Or just smile and know that someone thinks that you are important. Remember ...
YOU make a difference...
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Aoccdrnig to a rscheearch at Cmabrigde Uinervtisy, it deosn't mttaer in waht oredr the ltteers in a wrod are, the olny iprmoetnt tihng is taht the frist and lsat ltteer be at the rghit pclae. The rset can be a total mses and you can sitll raed it wouthit porbelm. Tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the wrod as a wlohe.
Randy Hooker, M.Ed. Designated Broker Broker@DreamCatcherRealty.com Cindy Hooker, MBA Associate Broker/Editor Newsletter@DreamCatcherRealty.com
There was nothing that Randy did that was anything less then wonderful. This was our first time buying a house. He explained the process, gave us tips on how to make things go more smoothly. He kept us updated from the beginning to the end of the house buying process. The tools that he has allowed us to weed out the houses that didn’t fit us. I was a nervous wreck about going through with buying a house. Randy got us to the people who were just as committed to helping us get into a house as smoothly as possible. Randy was there for us as a Realtor and advisor. I love the house we’re in, but I can’t wait until we can use Randy and his people again. Thanks Randy!!! You truly are the best! Tina Shoemaker ~ May 4, 2010 Copyright 2010 ~ Dreamcatcher Realty, All Rights Reserved
Published on Oct 31, 2010
Monthly real estate newsletter published for the benefit of present and future clients of Dreamcatcher Realty and Randy Hooker.