Welcome to ECBOR - CHIPS June/July 2004

It has to do more with just a roof over our heads. Home is a place that holds our true spirit in the memories, heirlooms and collections; the colors, sights and sounds that are all around us.

Successful REALTORS® consider all of these things in the course of daily business, when working with clients and when celebrating National Homeownership Month, June 2004!

REALTORS® Make a Difference in Their Communities During National Homeownership Month

President Bush will designate June "National Homeownership Month" for the third year in a row, as a way to strengthen his challenge to public and private entities to work together to boost minority homeownership. In support of this important White House initiative, REALTORS® and REALTOR® Associations across America are spearheading community service projects, housing initiatives and celebrations in honor of National Homeownership Month.

"If there is something to be done to strengthen the community, from promoting legislation to pushing a broom, you can be sure a REALTOR® is right there," said Walt McDonald, President of the NATIONAL ASSOCIATION OF REALTORS®. "We plan to use the month of June to spark projects that will yield results all year long," he added.

Since 1952, REALTORS® have led communities, townships and neighborhoods in a celebration of homeownership and private property rights. Its vision to be the leading advocate of the right to own, use and transfer real property remains clear to this day. "You'll find REALTORS® gathering canned goods for the elderly, setting up grants for down payment assistance, and providing free homeownership counseling workshops," said McDonald.

"REALTORS® are especially adept at bringing homeownership to minority families, women-headed households, new American families and other communities where homeownership rates are below 50 percent," he said. "It helps that the White House supports our efforts."

The strength of the housing market increases REALTORS®' responsibility in making our communities better places in which to live," said McDonald. To inspire its state and local REALTOR® Associations, NAR provided each Association with a National Homeownership Month kit entitled "It's Good to Get Home." It includes ideas to help Associations and its members explore the concept of "home" and discover how REALTORS® continue making their community a safe, happy and healthy place to live and work in.

"I encourage everyone to get involved in National Homeowners Month," said McDonald. "When people work together to strengthen the community, everybody wins."

This week the House of Representatives is expected to vote on H.R. 4520, the American Jobs Creation Act of 2004. The bill addresses many business taxation issues, including three that are of direct benefit to real estate: 1) much more favorable depreciation rules for leasehold/tenant improvements, 2) tax deductions for brownfields cleanup expenditures, and 3) important technical modifications to the Real Estate Investment Trust rules. While these changes may appear to affect only commercial and investment real estate, they in fact benefit all real estate practitioners because they enhance real estate development and investment opportunities and help create jobs. Make your voice heard on Capitol Hill by urging your congressional representative to support for H.R. 4520. Take action at the NAR Action Center, http://www.naractioncenter.com

A new HUD notice requires that all sales contracts for FHA single-family repossessed properties include an informational release form about the potential health problems associated with radon gas and some molds. The Radon Gas and Mold Notice Release Agreement mitigates potential liability by ensuring that purchasers have received cautionary information. NAR has been working with HUD on the rule for more than a year. Effective date: June 28. Access a PDF of the agreement form at: http://www.hudclips.org/sub_nonhud/cgi/pdfforms/9548-e.doc. For more info, CONTACT: Peter Morgan, pmorgan@realtors.org, 202/383-1233.

Since the American Land Title Association has suggested that its member title companies implement a Customer Identification Program and compare home purchasers' personal information against the Department of Treasury's Specially Designated Nationals and Blocked Persons List, the practice has grown and typically includes new fees. Although persons involved in real estate settlements and closings are not considered financial institutions for Patriot Act purposes and are not required to implement a CIP, title companies generally err on the side of caution and run the ID checks. Financial institutions such as banks, however, must implement a CIP. For more info on how Patriot Act regulations affect real estate transactions, access NAR's guide at:
http://www.realtors.org/fedistrk.nsf/pages/patactfactsh or CONTACT: Tom Heinemann, theinemann@realtors.org, 202/383-1090.

Congress should raise the limits on Federal Housing Administration loans in high-cost areas, said Walt McDonald, president of the National Association of Realtors®, in a letter to members of the Housing and Community Opportunity Subcommittee of the U.S. House Financial Services Committee that met today.

McDonald, broker-owner of Walt McDonald Real Estate in Riverside, Calif., wrote in support of the FHA Single Family Loan Limit Adjustment Act of 2004, H.R. 4110, which was introduced earlier this year by U.S. Reps. Gary Miller (R-Calif.) and Barney Frank (D-Mass.) and is strongly backed by NAR. The bill would increase FHA loan limits for single-family homes in high-cost areas like California, Connecticut, New Jersey, New York and Massachusetts, and would allow FHA loan limits to rise to the local area median-home price, providing more housing opportunities for families living in high-cost areas.

"Working families who need and qualify for FHA loans should not be penalized because of their geographic location. This legislation will correct this disparity and make FHA mortgages available to more prospective homebuyers nationwide regardless of where they live," McDonald said in the letter.

The FHA's single-family mortgage insurance program is a financially sound, national mortgage insurance program that plays a major role in making available homeownership opportunities in all markets at all times. However, it is not a useful product in high-cost areas of the country because its maximum loan limits are too restrictive. As a result, working families such as teachers, police officers and firefighters are unable to find and purchase housing in the communities where they work, McDonald said in the statement submitted for the record.

FHA's maximum loan limit is capped at 87 percent of Freddie Mac's conforming loan limit, which results in an FHA ceiling of $290,319 this year. However, the 2003 median home price was $364,040 in California and $353,000 across the New York-New Jersey-Connecticut-Massachusetts area, with much higher costs in specific cities.

Several years ago, Congress authorized FHA mortgages to increase up to 150 percent of the ceiling in Alaska, Hawaii, Guam and the U.S. Virgin Islands, for a 2004 loan limit of $435,479. Other high-cost states should be afforded the same consideration. This bill would eliminate the current loan ceiling and allow FHA limits to rise to the median home price in each locality.

Glenn Hellyer, a Realtor® from Yorba Linda, Calif., and a member of the Pacific West Association of Realtors®, told the committee that the current loan limits force prospective buyers to look for housing further away from employment centers. "Those workers who may only qualify under FHA guidelines, and are restricted by the current loan limits, we find on our already over-burdened roads, commuting long distance every morning and evening," Hellyer said.

David Lereah, NAR's chief economist, said job growth could reach 3 million this year. "The economy is moving quickly now and the Fed is likely to raise short-term interest rates on June 30," he said. "The market appears to have anticipated the move and has priced it into 30-year mortgage rates, but the cost of financing remains historically low and strong demand will push home sales to a record this year."

The 30-year fixed-rate mortgage is expected to reach 6.9 percent by the fourth quarter. "At the same time, unemployment should drop to 5.3 percent, so we continue to have a very favorable backdrop for housing," Lereah said.

NAR projects existing-home sales to hit a record 6.17 million in 2004, which would be 1.2 percent higher than last year's 6.10 million record. New-home sales should be essentially stable, slipping 0.4 percent to 1.08 million this year, just shy of the record 1.09 million in 2003, while housing starts are seen to be fairly even, down 0.3 percent to 1.84 million.

The median existing-home price is forecast to rise 5.4 percent in 2004 to $179,200, while the median new-home price should grow by 7.9 percent to $210,400.

Lereah said the U.S. gross domestic product is forecast to grow 4.7 percent this year, with inflation remaining under control. The Consumer Price Index is projected to rise 2.4 percent in 2004. "Energy prices could retreat, but more importantly, productivity gains mean labor costs should stay down. This means there is no cost-push inflation in the pipeline where rising costs would push up prices, and long-term interest rates will not be moving up significantly this year or next," he said.

Inflation-adjusted disposable personal income should grow by 3.9 percent in 2004, while the consumer confidence index is expected to rise to 96 in the fourth quarter.

More detailed information about the association's economic outlook, as well as other analysis of real estate industry statistics, can be found in the June issue of NAR's Real Estate Outlook: Market Trends and Insights. The publication may be purchased by calling 800/874-6500.

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