July sales of single family homes and condominiums in the nine sample Seacoast towns fell from June totals as the Federal Tax Credit under agreement June 30 deadline expired.
Despite the closing news, pending sales, spurred by low home mortgage interest rates, actually improved 10 percent for single family homes and a very healthy 44 percent on the condo side.
According to the Seacoast Board of Realtors, the tax credit expiration, combined with a normal July slowdown, led to a 40 percent drop in single family closings and a 48 percent drop in condominium sales. The totals were behind last year's figures, single family sales falling 21 percent from June 2009 and condos by 46 percent.
Single family inventory also reached its highest total in at least three years with 583 units available for purchase.
The month also produced the most $1 million-plus sales since June 2008 — five, including the $3 million sale of 58 Ocean Boulevard in Rye. That was the largest transaction since the $4.1 million sale of 7 Heather Drive, Rye, in October.
"We are still moving at a steady pace over years past despite the tax credit offered by the federal government expiring," said Joanna Rousseau, president of the Seacoast Board of Realtors. "Buyers are looking at great competitive rates from lenders and with interest rates being so low, many homeowners are finding relief by refinancing."
Source
August 25, 2010
Connecticut Home Sales Surge, Prices Rise
Single-family house sales in Connecticut surged 33 percent in June, boosted by the federal home buyer tax credit, and the median sale price rose for the seventh month in a row, according to a new report Thursday.
The median sale price in June — meaning half the sales are above, half below — rose about 3 percent to $264,900, compared with $257,000 for the same month a year ago, according to The Warren Group, which tracks real estate trends in New England and issues monthly reports.
June single-family house sales statewide increased to 3,477, compared with 2,612 a year ago. It was the first time sales exceeded 3,000 since August 2007.
In Hartford County, sales rose 16.4 percent to 882, compared with 758 a year ago. The median sale price slipped 3.8 percent to $232,750 from $242,000 in June 2009.
It remains unclear if the signs of recovery in the state's housing market will continue now that the tax credit has expired. To qualify for the credit, purchase contracts had to be signed by April 30 and closed by the end of June.
Economists are concerned that Connecticut employers remain tentative about adding to their payrolls and unemployment remains high. Home buyers need to feel secure in their jobs or confident they can find another if they lose theirs to make a major purchase such as a home.
Mortgage rates, however, remain at historic lows — an enticing carrot for buyers.
"The home buyer tax credit served its purpose and pushed buyers into the market," said Timothy M. Warren Jr., chief executive of Warren, publisher of The Commercial Record. "Low mortgage rates may help to continue the trend for the second half of the year."
Sales rose in all of eight of the state's eight counties, with Fairfield County leading the way with a 62 percent increase. The median sales price, however, slid in all but Fairfield and Tolland counties. The deepest decline was in Windham County, down 11.2 percent.
Source
The median sale price in June — meaning half the sales are above, half below — rose about 3 percent to $264,900, compared with $257,000 for the same month a year ago, according to The Warren Group, which tracks real estate trends in New England and issues monthly reports.
June single-family house sales statewide increased to 3,477, compared with 2,612 a year ago. It was the first time sales exceeded 3,000 since August 2007.
In Hartford County, sales rose 16.4 percent to 882, compared with 758 a year ago. The median sale price slipped 3.8 percent to $232,750 from $242,000 in June 2009.
It remains unclear if the signs of recovery in the state's housing market will continue now that the tax credit has expired. To qualify for the credit, purchase contracts had to be signed by April 30 and closed by the end of June.
Economists are concerned that Connecticut employers remain tentative about adding to their payrolls and unemployment remains high. Home buyers need to feel secure in their jobs or confident they can find another if they lose theirs to make a major purchase such as a home.
Mortgage rates, however, remain at historic lows — an enticing carrot for buyers.
"The home buyer tax credit served its purpose and pushed buyers into the market," said Timothy M. Warren Jr., chief executive of Warren, publisher of The Commercial Record. "Low mortgage rates may help to continue the trend for the second half of the year."
Sales rose in all of eight of the state's eight counties, with Fairfield County leading the way with a 62 percent increase. The median sales price, however, slid in all but Fairfield and Tolland counties. The deepest decline was in Windham County, down 11.2 percent.
Source
Foreclosure Report for June & July
Homeownership Education Learning Program, H.E.L.P. June/July foreclosure report.
In Riverside County
Notice of Defaults-Over the last 120 days=8,245 was 10,122 in May
Notice of Trustee Sales, last 120 days, Currently Scheduled=11,727 was 12,976 in May
Actual Trustee Sale-Over the last 120 days= 5,779 was 6,275 in May, Now bank owned
Trustee Sales cancelled over last 120 days and still need to be dealt with=7,002 (This number must be added to the number of defaults above for accurate totals)
In San Bernardino County:
Notice of Defaults-Over the last 120 days= 6,983 was 7,903 in May
Notice of Trustee Sales Currently Scheduled=9,605 was 10,427 in May
Actual Trustee Sale-Over the last 120 days=4,712 was 5,224 in May
Trustee Sales cancelled over last 120 days and still need to be dealt with=5,660
In Sacramento County
Notice of Defaults-Over the last 120 days=4,870 was 5,406 in May
Notice of Trustee Sales Currently Scheduled=5,335 was 5,520 in May
Actual Trustee Sale-Over the last 120 days=3,136 was 3,485 in May
Trustee Sales cancelled over last 120 days and still need to be dealt with=2,761
In Orange County
Notice of Defaults-Over the last 120 days=4,855
Notice of Trustee Sales Currently Scheduled=8,031
Actual Trustee Sale-Over the last 120 days=1,818
Trustee Sales cancelled over last 120 days and still need to be dealt with=5,527
In San Diego County
Notice of Defaults-Over the last 120 days=5,975
Notice of Trustee Sales Currently Scheduled=8,466
Actual Trustee Sale-Over the last 120 days=2,770
Trustee Sales cancelled over last 120 days and still need to be dealt with=5,502
“Economist are currently giving Astrology a good name.” Source, unknown
Many of us are feeling this way as we have attended workshops and private events from some of the highest profile lectures and economist. Many of them have been reporting since 2008, that the next quarter or two will be a bumpy ride and then things will stabilize and from there we will see slow growth for a few years before things begin to heat up. Eventually they will be correct.
Whether one is a bull or a bear on the market can be predicated on who is paying them to do the research and report on it. Banks and industry economist can, at times, seem to paint a nice picture of what is just around the corner. Any and all positive news, even if it is only for one to two months, is now considered a trend and reported as proof that things have turned around.
As the largest holders of mortgage backed securities that are at risk continue to unload their portfolios to vulture funds of one sort or another, the free market system will begin to do its job. Some will receive principle reductions that will be earned over a three year period of on time performance of their modified terms and others will simply find themselves having to rent for a period of three to five years before entering the home buying market once again.
According to the reports on the HAMP program, the average “back end” ratio of a borrower who has received assistance is over 63%. This number is a combination of one’s total housing expense plus all other installment and revolving debt divided by their gross monthly earnings. Historically, the number that was tolerated by the industry and allowed the US to have some of the best performing mortgage backed securities in the World was 36% to 38%. FHA allowed one to go as high as 41%. 63% is typically viewed as not sustainable.
If a family of two wage earners receives a modification with a 63% back end ratio this means they are unable to afford virtually anything else other than their home and serving their current debt. Most modifications are temporary and will have graduating payments in the future. If this families earning are not going to go up commiserate with their increase in housing expense the fear is that they postponed the inevitable. In addition, as they continue to meet new neighbor after new neighbor who purchased their model for 30% to 50% less than what their modification balance is, they’ll begin the process of asking themselves; “What are we doing?”
Currently, counselors are to sit with borrowers, take in their financial information send it into the lender/servicer who will get the documentation to one who understands the GSE and HUD underwriting criteria. Next, the servicer will then underwrite the borrowers qualifications and enter this data, along with valuation information, as well as projected valuation data and run the Net Present Value calculation. This process helps to determine if it is in the lender/servicers best interest to modify, short sale, or foreclose.
If all of the industry can agree that this is what is occurring, why not allow the industry retail arms to join the fight and get paid for doing this? The money is already being spent and the results are not currently impressive. The Director of HAMP, the Office of the Comptroller and the Office of Thrift Supervision, have all lamented that the efforts to date have not been what was originally hoped for.
If too many obtained loans they could not afford through poor underwriting standards and then you offer loan modifications by simply asking people what they make and what their expenses are over the telephone then is it any surprise most modifications failed or are failing? In fairness, this practice has stopped as of June 2010 and the most recent numbers are getting better.
Telephone any loan underwriter in America and they will tell you that even seasoned loan officers and loan processors often fail to provide the necessary paperwork in order for them to make a decision on the first submission. If professionals can have trouble and this is what they do for a living, imagine how difficult this process must be for consumers who go it alone or even counselors who may not have the same background as the private sector professionals.
Cynics believe temporary cash flow to all parties involved in this daisy chain is the current goal and seen by the financial industry as the best way to manage their portfolios that will take years to resolve. This is being done knowing full well that many of those who may have received a modification will ultimately lose their home. Fitch (The ratings agency) reported on this explaining that upwards of 60% to 65% of those who receive a modification will eventually fail.
The current system is causing a back log and is causing those who would normally self cure, or not go into default in the first place to give up and become part of the delinquent statistics. The greatest challenge we have is the lack of speed in this overall process. American homeowners are not feeling like they are being treated fair and equal. They believe more and more that the system is rigged against them and the longer this process of helping homeowners in trouble takes, the more people will feel this way and stop making their payments in order to get the help that more and more are beginning to feel entitled to.
Speed, that is what is needed. Pain will occur, but it can be tolerated as the private sector will finally feel comfortable jumping in with both feet and their massive investment dollars will stimulate our economy and offer hope for many consumers who are lacking the all important confidence to spend money.
The work force is already in place. The remaining loan officers in the business are pretty good. They could do a great job collecting the proper paperwork, putting a great package together and submitting it electronically (It’s what they do!) so the underwriters can make a decision. Then, if the decision is not favorable, the borrower has a choice; self cure, short sale, or participates in a deed in lieu agreement. Foreclosure is the last option.
Here are some headlines and news you should know:
Prime Foreclosures Are On The Rise
Despite efforts to assist distressed homeowners, the number of foreclosure actions completed by mortgage servicers has steadily risen over the past four quarters, according to a new report from the Comptroller of the Currency and the Office of Thrift Supervision. “Completed foreclosures increased across all risk categories, with the highest percentage increase among prime mortgages,” the OCC/OTS Mortgage Metrics report says.
New home sales plunged 33% in May…
…after the expiring homebuyer tax credit pushed sales in April to the highest level since August 2008. Most housing analysts expected a decline but not one this significant. According to the U.S. Census Bureau, sales of newly constructed single-family homes dropped to a seasonally adjusted annual rate of 300,000 in May from a 446,000 rate in April.
California Fared Better
The California Association of Realtors reported that sales increased 1.2% compared to May a year ago. The median price statewide jumped 23.2%, to $324,430.
Short sales continue to grow…
In Q1 as an alternative to foreclosure, increasing 9.2 percent to 41,033 – more than doubling from a year ago.
Our Country’s Debt Is Growing and is a Growing Concern
Debt Interest Payments (No principle, just interest) will be 28% of ALL Federal Tax Revenue by 2014. Source: Niall Ferguson, Harvard Professor and author. The States will continue to have crisis after crisis over the next two to four years that will catch up to our Bond market causing the rate we pay as a Country to go up on our National debt and forcing us into a national crisis that will all but force massive cuts in what we have grown accustomed to and expect.
Report by Lender Processing Services Inc. (LPS)
Shows a 2.3% month-over-month increase in the nation’s home-loan delinquency rate to 9.2% in May.
The percentage of mortgage loans in default beyond 90 days increased slightly, while both delinquency and foreclosure rates continue to remain relatively stable at historically high levels. There are currently more than 7.3 million loans currently in some stage of delinquency.
The report also shows that the average number of days for a loan to move from 30-days delinquent to foreclosure sale continues to increase, and is now at an all-time high of 449 days, resulting in an increase in “shadow” foreclosure inventory.
Commercial Delinquencies
The delinquent unpaid principal balance (UPB) for commercial mortgage-backed securities (CMBS) grew by $2.9 billion last month, according to Realpoint’s monthly delinquency report. The total delinquent UPB at the end of May was $57.34 billion – a 205% increase from a year ago, when the reported delinquent UPB was $18.78 billion.
Delinquencies on loans in commercial mortgage-backed securities rose by the smallest amount in 11 months in June but could accelerate again, according to a new report from Fitch. Fitch said its CMBS delinquency index rose to 8.14% in June from 7.97% in May. The hotel sector continued to have the highest delinquencies, although the rate was flat at 18.6%.
Good News
The IMF raised its global growth forecast, and expects the world economy to expand 4.6% this year vs. an April projection of 4.2%. The revision reflects stronger-than-expected growth in the first half of the year, with Canada and the U.S. leading advanced economies. The growth forecast for 2011 is unchanged at 4.3%, making the IMF the most recent agency, but certainly not the first, to foresee slowing growth next year as the recovery loses some steam.
Multiple Credit Relationships Lead To Fewer Delinquencies
A new study developed by TransUnion finds that consumers with multiple account relationships with the same lender outperform consumers who maintain only one relationship with that lender, with the biggest improvements in delinquencies seen among mortgages.
Now I suppose we will see legislation sponsored that offers tax breaks to those who will do all of their business from mortgage, to credit card, to life and homeowners insurance with just one company. My Dad said not to put all my eggs in one basket. I think I’ll follow his advice.
Congressional Budget Office
The government’s bailout of Fannie Mae and Freddie Mac, placing the companies in conservatorship in September 2008, has been costly. The two GSEs, so far, have been given over $150 billion to stay afloat. And recent estimates from the Congressional Budget Office put the tab for subsidizing Fannie and Freddie at $389 billion, when all is said and done.
Orange County CA.
The inventory of homes in foreclosure and short sales that are on the market in Orange County, Calif., has grown by 29% so far this year, according to Altera Real Estate. The company notes, “The active distressed inventory has increased from 2,555 homes at the beginning of the year to 3,307, levels not seen since May of 2009.” In Orange County, the distressed homes inventory represents 31% of the current active inventory.
HAMP Numbers
Servicers completed 51,200 permanent modifications in June, a 7% improvement from May, but also dropped a record 91,100 borrowers in payment trials from the program.
Overall, the Home Affordable Modification Program has helped nearly 400,000 struggling borrowers reduce their mortgage payments to 31% of monthly income as part of permanent modifications to their residential loans.
But 520,800 mortgagors that attempted to qualify by completing the three-month payment trials fell short and their trials were cancelled by servicers.
Refinance Applications Account for 80% of the Market
Refinancing applications are now at their highest level since last spring and are driving the increase in this week’s Mortgage Bankers Association Market Composite Index.
Bernanke called the economic outlook; “unusually uncertain”!
Bernanke said the Fed is prepared to take more policy actions as needed, but isn’t ready “to take any specific steps in the near term.” He also noted that current policy is “already quite stimulative” and available options “are not going to be conventional options.” Bernanke sees “moderate” economic growth despite a “somewhat weaker outlook” and low inflation with significant time needed to restore jobs.
Unemployment for IE and Other Areas
http://www.bls.gov/web/metro/laulrgma.htm This link will take you to the US labor statistics. Please pay attention to the U-6 figures as they reflect a more accurate picture.
Protecting Tennant At Foreclosure Act
Renters who find themselves indirect victims of foreclosure were not forgotten in the financial reform legislation. The Dodd-Frank bill will extend the Protecting Tenants at Foreclosure Act (PTFA) through the end of 2014.
Freddie Mac Report Their Delinquencies Are Down
The number of past due home loans guaranteed by Freddie Mac has fallen below the 4 percent threshold. The company’s latest report shows that the number of single-family mortgages at least three months past due or in foreclosure stood at 3.96 percent at the end of June. That’s down from a high of 4.20 percent as recently as February
China’s Massive Spending May Be Coming to an End?
Chinese manufacturing slowed in July, with the official purchasing managers’ index sinking to its lowest level since February 2009. Chinese growth is being restrained partly by government curbs on lending and property speculation but, taken together with disappointing growth in the U.S. and elsewhere, the slowdown in Chinese manufacturing will likely add to global recovery fears.
Great News on HSBC
HSBC’s net income doubled as the bank’s North American unit returned to profitability for the first time in three years and loan loss provisions dropped 46%.
HAMP, Fannie, Freddie and FHA
They’re all reporting better numbers based on new originations. HAMP can now report that while very selective on who ultimately gets a modification; those that do are performing much better. Fannie, Freddie and FHA are all reporting that the current group of borrowers applying for loans is some of the best quality of borrowers they have seen in recent memory.
If you are in the business you know this to be true as many in the business are afraid to fund a loan since “buy backs” are now a daily topic around the office.
A Double Dip Will Be Historically Unusual
So say the experts and I sure hope they are correct. Overall the economy is doing better and the recovery is personal and the timing of the recovery depends on when you get a job that allows you to pay your bills.Buyers, Hear Me On This. The Time Is Now!
Yes, values are predicted to go lower, but the cost of money is expected to go up the minute employment figures stabilize as the Feds head of inflation. Just a 2% jump in interests will erode a huge amount of purchasing power for you. Rates are artificially being held down to get you to take action. Do it now.
$250,000 loan amount at today’s 5% is $1,342.05, principle and interest. At 7% the payment is $1,663.26. The difference is $321.21. At 7% over a 30 year term this predicted jump will erode, $48,280.29 of your buying power.
If the homes are predicted to go down another 7 to 10%, that’s between $17,000 and $25,000 in temporary losses of value on a home that you bought at historic low interest rates fixed for thirty years. If you wait, you may have to pay much more in interest and possibly eroding any perceived gains due to temporary price. My advice, feel free to jump. If you wait, you may be paying more in interest. This could cost you more in the long run.
Source
In Riverside County
Notice of Defaults-Over the last 120 days=8,245 was 10,122 in May
Notice of Trustee Sales, last 120 days, Currently Scheduled=11,727 was 12,976 in May
Actual Trustee Sale-Over the last 120 days= 5,779 was 6,275 in May, Now bank owned
Trustee Sales cancelled over last 120 days and still need to be dealt with=7,002 (This number must be added to the number of defaults above for accurate totals)
In San Bernardino County:
Notice of Defaults-Over the last 120 days= 6,983 was 7,903 in May
Notice of Trustee Sales Currently Scheduled=9,605 was 10,427 in May
Actual Trustee Sale-Over the last 120 days=4,712 was 5,224 in May
Trustee Sales cancelled over last 120 days and still need to be dealt with=5,660
In Sacramento County
Notice of Defaults-Over the last 120 days=4,870 was 5,406 in May
Notice of Trustee Sales Currently Scheduled=5,335 was 5,520 in May
Actual Trustee Sale-Over the last 120 days=3,136 was 3,485 in May
Trustee Sales cancelled over last 120 days and still need to be dealt with=2,761
In Orange County
Notice of Defaults-Over the last 120 days=4,855
Notice of Trustee Sales Currently Scheduled=8,031
Actual Trustee Sale-Over the last 120 days=1,818
Trustee Sales cancelled over last 120 days and still need to be dealt with=5,527
In San Diego County
Notice of Defaults-Over the last 120 days=5,975
Notice of Trustee Sales Currently Scheduled=8,466
Actual Trustee Sale-Over the last 120 days=2,770
Trustee Sales cancelled over last 120 days and still need to be dealt with=5,502
“Economist are currently giving Astrology a good name.” Source, unknown
Many of us are feeling this way as we have attended workshops and private events from some of the highest profile lectures and economist. Many of them have been reporting since 2008, that the next quarter or two will be a bumpy ride and then things will stabilize and from there we will see slow growth for a few years before things begin to heat up. Eventually they will be correct.
Whether one is a bull or a bear on the market can be predicated on who is paying them to do the research and report on it. Banks and industry economist can, at times, seem to paint a nice picture of what is just around the corner. Any and all positive news, even if it is only for one to two months, is now considered a trend and reported as proof that things have turned around.
As the largest holders of mortgage backed securities that are at risk continue to unload their portfolios to vulture funds of one sort or another, the free market system will begin to do its job. Some will receive principle reductions that will be earned over a three year period of on time performance of their modified terms and others will simply find themselves having to rent for a period of three to five years before entering the home buying market once again.
According to the reports on the HAMP program, the average “back end” ratio of a borrower who has received assistance is over 63%. This number is a combination of one’s total housing expense plus all other installment and revolving debt divided by their gross monthly earnings. Historically, the number that was tolerated by the industry and allowed the US to have some of the best performing mortgage backed securities in the World was 36% to 38%. FHA allowed one to go as high as 41%. 63% is typically viewed as not sustainable.
If a family of two wage earners receives a modification with a 63% back end ratio this means they are unable to afford virtually anything else other than their home and serving their current debt. Most modifications are temporary and will have graduating payments in the future. If this families earning are not going to go up commiserate with their increase in housing expense the fear is that they postponed the inevitable. In addition, as they continue to meet new neighbor after new neighbor who purchased their model for 30% to 50% less than what their modification balance is, they’ll begin the process of asking themselves; “What are we doing?”
Currently, counselors are to sit with borrowers, take in their financial information send it into the lender/servicer who will get the documentation to one who understands the GSE and HUD underwriting criteria. Next, the servicer will then underwrite the borrowers qualifications and enter this data, along with valuation information, as well as projected valuation data and run the Net Present Value calculation. This process helps to determine if it is in the lender/servicers best interest to modify, short sale, or foreclose.
If all of the industry can agree that this is what is occurring, why not allow the industry retail arms to join the fight and get paid for doing this? The money is already being spent and the results are not currently impressive. The Director of HAMP, the Office of the Comptroller and the Office of Thrift Supervision, have all lamented that the efforts to date have not been what was originally hoped for.
If too many obtained loans they could not afford through poor underwriting standards and then you offer loan modifications by simply asking people what they make and what their expenses are over the telephone then is it any surprise most modifications failed or are failing? In fairness, this practice has stopped as of June 2010 and the most recent numbers are getting better.
Telephone any loan underwriter in America and they will tell you that even seasoned loan officers and loan processors often fail to provide the necessary paperwork in order for them to make a decision on the first submission. If professionals can have trouble and this is what they do for a living, imagine how difficult this process must be for consumers who go it alone or even counselors who may not have the same background as the private sector professionals.
Cynics believe temporary cash flow to all parties involved in this daisy chain is the current goal and seen by the financial industry as the best way to manage their portfolios that will take years to resolve. This is being done knowing full well that many of those who may have received a modification will ultimately lose their home. Fitch (The ratings agency) reported on this explaining that upwards of 60% to 65% of those who receive a modification will eventually fail.
The current system is causing a back log and is causing those who would normally self cure, or not go into default in the first place to give up and become part of the delinquent statistics. The greatest challenge we have is the lack of speed in this overall process. American homeowners are not feeling like they are being treated fair and equal. They believe more and more that the system is rigged against them and the longer this process of helping homeowners in trouble takes, the more people will feel this way and stop making their payments in order to get the help that more and more are beginning to feel entitled to.
Speed, that is what is needed. Pain will occur, but it can be tolerated as the private sector will finally feel comfortable jumping in with both feet and their massive investment dollars will stimulate our economy and offer hope for many consumers who are lacking the all important confidence to spend money.
The work force is already in place. The remaining loan officers in the business are pretty good. They could do a great job collecting the proper paperwork, putting a great package together and submitting it electronically (It’s what they do!) so the underwriters can make a decision. Then, if the decision is not favorable, the borrower has a choice; self cure, short sale, or participates in a deed in lieu agreement. Foreclosure is the last option.
Here are some headlines and news you should know:
Prime Foreclosures Are On The Rise
Despite efforts to assist distressed homeowners, the number of foreclosure actions completed by mortgage servicers has steadily risen over the past four quarters, according to a new report from the Comptroller of the Currency and the Office of Thrift Supervision. “Completed foreclosures increased across all risk categories, with the highest percentage increase among prime mortgages,” the OCC/OTS Mortgage Metrics report says.
New home sales plunged 33% in May…
…after the expiring homebuyer tax credit pushed sales in April to the highest level since August 2008. Most housing analysts expected a decline but not one this significant. According to the U.S. Census Bureau, sales of newly constructed single-family homes dropped to a seasonally adjusted annual rate of 300,000 in May from a 446,000 rate in April.
California Fared Better
The California Association of Realtors reported that sales increased 1.2% compared to May a year ago. The median price statewide jumped 23.2%, to $324,430.
Short sales continue to grow…
In Q1 as an alternative to foreclosure, increasing 9.2 percent to 41,033 – more than doubling from a year ago.
Our Country’s Debt Is Growing and is a Growing Concern
Debt Interest Payments (No principle, just interest) will be 28% of ALL Federal Tax Revenue by 2014. Source: Niall Ferguson, Harvard Professor and author. The States will continue to have crisis after crisis over the next two to four years that will catch up to our Bond market causing the rate we pay as a Country to go up on our National debt and forcing us into a national crisis that will all but force massive cuts in what we have grown accustomed to and expect.
Report by Lender Processing Services Inc. (LPS)
Shows a 2.3% month-over-month increase in the nation’s home-loan delinquency rate to 9.2% in May.
The percentage of mortgage loans in default beyond 90 days increased slightly, while both delinquency and foreclosure rates continue to remain relatively stable at historically high levels. There are currently more than 7.3 million loans currently in some stage of delinquency.
The report also shows that the average number of days for a loan to move from 30-days delinquent to foreclosure sale continues to increase, and is now at an all-time high of 449 days, resulting in an increase in “shadow” foreclosure inventory.
Commercial Delinquencies
The delinquent unpaid principal balance (UPB) for commercial mortgage-backed securities (CMBS) grew by $2.9 billion last month, according to Realpoint’s monthly delinquency report. The total delinquent UPB at the end of May was $57.34 billion – a 205% increase from a year ago, when the reported delinquent UPB was $18.78 billion.
Delinquencies on loans in commercial mortgage-backed securities rose by the smallest amount in 11 months in June but could accelerate again, according to a new report from Fitch. Fitch said its CMBS delinquency index rose to 8.14% in June from 7.97% in May. The hotel sector continued to have the highest delinquencies, although the rate was flat at 18.6%.
Good News
The IMF raised its global growth forecast, and expects the world economy to expand 4.6% this year vs. an April projection of 4.2%. The revision reflects stronger-than-expected growth in the first half of the year, with Canada and the U.S. leading advanced economies. The growth forecast for 2011 is unchanged at 4.3%, making the IMF the most recent agency, but certainly not the first, to foresee slowing growth next year as the recovery loses some steam.
Multiple Credit Relationships Lead To Fewer Delinquencies
A new study developed by TransUnion finds that consumers with multiple account relationships with the same lender outperform consumers who maintain only one relationship with that lender, with the biggest improvements in delinquencies seen among mortgages.
Now I suppose we will see legislation sponsored that offers tax breaks to those who will do all of their business from mortgage, to credit card, to life and homeowners insurance with just one company. My Dad said not to put all my eggs in one basket. I think I’ll follow his advice.
Congressional Budget Office
The government’s bailout of Fannie Mae and Freddie Mac, placing the companies in conservatorship in September 2008, has been costly. The two GSEs, so far, have been given over $150 billion to stay afloat. And recent estimates from the Congressional Budget Office put the tab for subsidizing Fannie and Freddie at $389 billion, when all is said and done.
Orange County CA.
The inventory of homes in foreclosure and short sales that are on the market in Orange County, Calif., has grown by 29% so far this year, according to Altera Real Estate. The company notes, “The active distressed inventory has increased from 2,555 homes at the beginning of the year to 3,307, levels not seen since May of 2009.” In Orange County, the distressed homes inventory represents 31% of the current active inventory.
HAMP Numbers
Servicers completed 51,200 permanent modifications in June, a 7% improvement from May, but also dropped a record 91,100 borrowers in payment trials from the program.
Overall, the Home Affordable Modification Program has helped nearly 400,000 struggling borrowers reduce their mortgage payments to 31% of monthly income as part of permanent modifications to their residential loans.
But 520,800 mortgagors that attempted to qualify by completing the three-month payment trials fell short and their trials were cancelled by servicers.
Refinance Applications Account for 80% of the Market
Refinancing applications are now at their highest level since last spring and are driving the increase in this week’s Mortgage Bankers Association Market Composite Index.
Bernanke called the economic outlook; “unusually uncertain”!
Bernanke said the Fed is prepared to take more policy actions as needed, but isn’t ready “to take any specific steps in the near term.” He also noted that current policy is “already quite stimulative” and available options “are not going to be conventional options.” Bernanke sees “moderate” economic growth despite a “somewhat weaker outlook” and low inflation with significant time needed to restore jobs.
Unemployment for IE and Other Areas
http://www.bls.gov/web/metro/laulrgma.htm This link will take you to the US labor statistics. Please pay attention to the U-6 figures as they reflect a more accurate picture.
Protecting Tennant At Foreclosure Act
Renters who find themselves indirect victims of foreclosure were not forgotten in the financial reform legislation. The Dodd-Frank bill will extend the Protecting Tenants at Foreclosure Act (PTFA) through the end of 2014.
Freddie Mac Report Their Delinquencies Are Down
The number of past due home loans guaranteed by Freddie Mac has fallen below the 4 percent threshold. The company’s latest report shows that the number of single-family mortgages at least three months past due or in foreclosure stood at 3.96 percent at the end of June. That’s down from a high of 4.20 percent as recently as February
China’s Massive Spending May Be Coming to an End?
Chinese manufacturing slowed in July, with the official purchasing managers’ index sinking to its lowest level since February 2009. Chinese growth is being restrained partly by government curbs on lending and property speculation but, taken together with disappointing growth in the U.S. and elsewhere, the slowdown in Chinese manufacturing will likely add to global recovery fears.
Great News on HSBC
HSBC’s net income doubled as the bank’s North American unit returned to profitability for the first time in three years and loan loss provisions dropped 46%.
HAMP, Fannie, Freddie and FHA
They’re all reporting better numbers based on new originations. HAMP can now report that while very selective on who ultimately gets a modification; those that do are performing much better. Fannie, Freddie and FHA are all reporting that the current group of borrowers applying for loans is some of the best quality of borrowers they have seen in recent memory.
If you are in the business you know this to be true as many in the business are afraid to fund a loan since “buy backs” are now a daily topic around the office.
A Double Dip Will Be Historically Unusual
So say the experts and I sure hope they are correct. Overall the economy is doing better and the recovery is personal and the timing of the recovery depends on when you get a job that allows you to pay your bills.Buyers, Hear Me On This. The Time Is Now!
Yes, values are predicted to go lower, but the cost of money is expected to go up the minute employment figures stabilize as the Feds head of inflation. Just a 2% jump in interests will erode a huge amount of purchasing power for you. Rates are artificially being held down to get you to take action. Do it now.
$250,000 loan amount at today’s 5% is $1,342.05, principle and interest. At 7% the payment is $1,663.26. The difference is $321.21. At 7% over a 30 year term this predicted jump will erode, $48,280.29 of your buying power.
If the homes are predicted to go down another 7 to 10%, that’s between $17,000 and $25,000 in temporary losses of value on a home that you bought at historic low interest rates fixed for thirty years. If you wait, you may have to pay much more in interest and possibly eroding any perceived gains due to temporary price. My advice, feel free to jump. If you wait, you may be paying more in interest. This could cost you more in the long run.
Source
Miami Home Sales Up Significantly From Last Year
Miami area home sales rose sharply in June, the result of low prices, low mortgage rates and what was likely the final big boost from the federal home buyer tax credits. Sales of existing condos rose to a five-year high, while the region's overall median sale price inched up from May but remained 6 percent lower than a year ago, a real estate information service reported.
In June 9,296 new and resale houses and condos closed escrow in the metro area encompassing Miami-Dade, Palm Beach and Broward counties. That was up 18.3 percent from May and up 20.4 percent from June 2009, according to MDA DataQuick of San Diego, Calif. The firm tracks real estate trends nationally via public property records.
On average, sales have increased 7.1 percent between May and June since 1997.
Total escrow closings were the highest for any June since 2007, but they fell 26.3 percent short of the average for that month since 1997, when DataQuick's complete Miami-area stats begin. Sales have increased on a year-over-year basis for 16 consecutive months.
Last month's resales (excludes new homes) of single-family detached houses and condos combined were the highest for the month of June since 2006. Resales have risen year-over-year for 19 consecutive months. New-home sales in June rose 21.2 percent above the May tally but were 1.4 percent lower than a year ago and the lowest for the month of June since at least 1997.
New-home sales have suffered as builders struggle to compete with distressed sales. New homes made up 6.2 percent of total June sales, far below the decade average of 20 percent of monthly sales.
The 4,355 condos that resold in June marked a 15.2 percent gain from May and a 33.0 percent increase from June 2009. It was the highest number of condo resales for that month since June 2005, when 6,070 condos resold. Condo resales made up 46.8 percent of total Miami-area home sales in June, compared with 48.1 percent a year earlier and a monthly average of 32.8 percent over the past decade.
In the Miami market's high end, the number of houses and condos that sold for $1 million or more rose to 262 in June, up 13.4 percent from 231 in May and up 21.9 percent from 215 in June 2009. During the first six months of this year, 1,230 houses and condos sold for $1 million or more, up 32.5 percent from the same period last year. The figures are based on an analysis of public property records, where there was a purchase price or loan of $1 million or more. The peak month for $1 million-plus home sales was in June 2005, when 583 sold in the Miami area.
The median price paid for all new and resale houses and condos sold in the Miami region during June was $150,000, up 1.4 percent from $148,000 in May but down 6.3 percent from $160,000 in June 2009.
June's overall median sale price stood 48.3 percent below the peak $290,000 median in June 2007. The Miami area's median price has fallen on a year-over-year basis for 33 consecutive months.
The median price paid for resale condos in June was $100,000, nearly unchanged from $100,150 in May and down 4.8 percent from $105,000 in June 2009. Last month the resale condo median stood 54.3 percent below its $219,000 peak in July 2006.
The median paid for resale single-family detached houses held at $185,000, the same as in May but down 1.5 percent from $187,750 a year ago, and down 45.6 percent from a June 2007 peak of $340,000.
Another price gauge analysts watch, the median paid per square foot for resale single-family detached houses, rose slightly on a year-over-year basis for the first time since September 2006. Last month the figure inched up to $108, up from $106 per square foot in May and up 0.9 percent from $107 in June 2009. Last month's figure was still 48.8 percent below the region's $211 peak in summer 2006.
A popular form of financing used by first-time home buyers government-insured FHA loans accounted for 43.5 percent of all home purchase loans in June, down from 45.6 percent in May but up from 43.1 percent a year ago. Two years ago it was 19.1 percent.
Absentee buyers purchased 31.8 percent of all homes sold in the Miami area in June, down from 33.2 percent in May but up from 31.0 percent a year ago, according to public property records. In June absentee buyers paid a median $105,000, down from $110,300 in May and down from $113,000 a year earlier. Absentee buyers are often investors, but could include second-home buyers and others who indicated at the time of sale that their property tax bill would be sent to a different address.
About 3.1 percent of the homes sold in June had been flipped within a six-month period, meaning they had been bought on the open market and then re-sold within that six-month window. That was up slightly from a flipping rate of 3.0 percent of all sales in May and up from 2.2 percent a year earlier. Flipping rates were higher before the housing market correction: In July 2005, for example, the Miami-area flipping rate was 5.6 percent.
Source
August 9, 2010
How to buy a foreclosed home
With the downturn in the economy over the past two years, hundreds of thousands of homes have gone into foreclosure, offering a unique, once-in-a-lifetime opportunity for many Americans to buy a home at an unheard of price, sometimes 30 percent or more off the most recent sale price.
Buying a home is always a challenge. Buying a foreclosed home presents unique challenges, however. You need to be willing to hunt, put up with lenders who offer surprisingly little information about the properties they've taken back, real estate agents who have little experience or incentive in selling foreclosed homes, and loan officers who demand nearly perfect credit ratings to obtain a loan in today's tight-fisted market.
Foreclosed properties are typically referred to as REOs (real estate owned by the lender), according to FindLaw.com, a leading online resource for legal information, and are owned by the lending institution or government agency that backed the mortgage. For one reason or another, the owner failed to make payments on the loan and the lender foreclosed on the property (repossessed it).
Banks and other home-lending institutions are not in the business of owning property. They're in the business of making money on the money they lend. So it's in their best interest to sell a foreclosed property, and they are often anxious to do so. Properties of all types, including single-family homes and condominiums, can be foreclosed. Depending upon local regulations and traditions, some lending institutions will sell their properties through real estate agents who specialize in REO properties, while other institutions will sell foreclosed properties through auctions conducted by a county sheriff.
Because of the volume of foreclosed homes currently on the market, a growing number of lenders have turned to selling properties through heavily advertised public auctions in which dozens or sometimes hundreds of properties are sold in one or two days. The Federal Housing Administration (FHA) has sold foreclosed properties through local auctions for many years, typically announced in the classified sections of local newspapers. Potential buyers submit bids on the day of the auction, accompanied by a certified check for a percentage of the bid price. The highest bidder usually gets the home.
Buying a foreclosed property can be risky if you are not familiar with the procedures involved. Such a sale may not include the safeguards that are present in a traditional sale, such as a lender and a title insurance company. Therefore, if you plan to buy foreclosed properties, says FindLaw.com, it is important to familiarize yourself with the process and consult with a lawyer who specializes in this area.
Here are some other tips from FindLaw.com about buying a foreclosed home:
* Not all foreclosed properties are good deals. It seems like foreclosed properties are everywhere these days; however, not every property is a smart purchase. Search for a foreclosed property as if you were buying a home in a hot market. Start by researching neighborhoods that you really want to live in, then get in your car and drive through the neighborhood looking for properties that aren't kept up as well as neighboring properties.
* Find an experienced real estate agent. Some sellers of foreclosed properties, including lenders that have repossessed a property, may refuse to work directly with the buyer. Find a real estate agency that has experience in dealing with foreclosures and is willing to represent you.
* Hire a real estate attorney. All states have different laws and regulations involving foreclosed properties. You may need to consult with a real estate attorney specializing in foreclosed properties to assist you. Buying a foreclosed home can be a very complex and time-consuming process in some states; the right attorney may be able to help you cut through the red tape.
* Check the assessor's office. Many counties now include vital ownership and tax information on their Web sites about residential property, including the identity of the owner, the previous price paid for the home, and how much the property is being taxed. Knowing what the previous owner paid for the property will help you gauge its potential worth now.
* Tour and inspect the property. It's vital to inspect any property before buying it, but it's absolutely critical when buying a foreclosed property. Many foreclosed homes are not kept up or have been abused by their former owner and may require thousands of dollars in repairs and maintenance. If the property is located in a neighborhood with a lot of potential, investing to rehab a property may be worth the money.
* Have your financing lined up. Over the past two years, many lenders have tightened their lending standards and are only offering loans to those who have solid credit ratings and the long-term means to pay for a home. Sellers of foreclosed properties are leery of buyers who don't have their financing together. Like buying a home at the top of the market, it's in your best interest to offer the most solid financial package in order to win the home you want.
Source
Buying a home is always a challenge. Buying a foreclosed home presents unique challenges, however. You need to be willing to hunt, put up with lenders who offer surprisingly little information about the properties they've taken back, real estate agents who have little experience or incentive in selling foreclosed homes, and loan officers who demand nearly perfect credit ratings to obtain a loan in today's tight-fisted market.
Foreclosed properties are typically referred to as REOs (real estate owned by the lender), according to FindLaw.com, a leading online resource for legal information, and are owned by the lending institution or government agency that backed the mortgage. For one reason or another, the owner failed to make payments on the loan and the lender foreclosed on the property (repossessed it).
Banks and other home-lending institutions are not in the business of owning property. They're in the business of making money on the money they lend. So it's in their best interest to sell a foreclosed property, and they are often anxious to do so. Properties of all types, including single-family homes and condominiums, can be foreclosed. Depending upon local regulations and traditions, some lending institutions will sell their properties through real estate agents who specialize in REO properties, while other institutions will sell foreclosed properties through auctions conducted by a county sheriff.
Because of the volume of foreclosed homes currently on the market, a growing number of lenders have turned to selling properties through heavily advertised public auctions in which dozens or sometimes hundreds of properties are sold in one or two days. The Federal Housing Administration (FHA) has sold foreclosed properties through local auctions for many years, typically announced in the classified sections of local newspapers. Potential buyers submit bids on the day of the auction, accompanied by a certified check for a percentage of the bid price. The highest bidder usually gets the home.
Buying a foreclosed property can be risky if you are not familiar with the procedures involved. Such a sale may not include the safeguards that are present in a traditional sale, such as a lender and a title insurance company. Therefore, if you plan to buy foreclosed properties, says FindLaw.com, it is important to familiarize yourself with the process and consult with a lawyer who specializes in this area.
Here are some other tips from FindLaw.com about buying a foreclosed home:
* Not all foreclosed properties are good deals. It seems like foreclosed properties are everywhere these days; however, not every property is a smart purchase. Search for a foreclosed property as if you were buying a home in a hot market. Start by researching neighborhoods that you really want to live in, then get in your car and drive through the neighborhood looking for properties that aren't kept up as well as neighboring properties.
* Find an experienced real estate agent. Some sellers of foreclosed properties, including lenders that have repossessed a property, may refuse to work directly with the buyer. Find a real estate agency that has experience in dealing with foreclosures and is willing to represent you.
* Hire a real estate attorney. All states have different laws and regulations involving foreclosed properties. You may need to consult with a real estate attorney specializing in foreclosed properties to assist you. Buying a foreclosed home can be a very complex and time-consuming process in some states; the right attorney may be able to help you cut through the red tape.
* Check the assessor's office. Many counties now include vital ownership and tax information on their Web sites about residential property, including the identity of the owner, the previous price paid for the home, and how much the property is being taxed. Knowing what the previous owner paid for the property will help you gauge its potential worth now.
* Tour and inspect the property. It's vital to inspect any property before buying it, but it's absolutely critical when buying a foreclosed property. Many foreclosed homes are not kept up or have been abused by their former owner and may require thousands of dollars in repairs and maintenance. If the property is located in a neighborhood with a lot of potential, investing to rehab a property may be worth the money.
* Have your financing lined up. Over the past two years, many lenders have tightened their lending standards and are only offering loans to those who have solid credit ratings and the long-term means to pay for a home. Sellers of foreclosed properties are leery of buyers who don't have their financing together. Like buying a home at the top of the market, it's in your best interest to offer the most solid financial package in order to win the home you want.
Source
August 7, 2010
Mortgage rates still trending low, refinance applications surging
Interest rates were down and mortgage activity was up last week, according to the latest data from the Mortgage Bankers Association.
And this week, even lower rates are possible for people who qualify.
This entry at Total Mortgage notes that Freddie Mac today is reporting the current average rate on a 30-year, fixed-rate mortgage is 4.57 percent, for the lowest rate since Freddie Mac started keeping track in 1971.
Meanwhile, the bankers association survey for actual transactions last week showed that the average rate for a 30-year, fixed-rate mortgage dropped to 4.59 percent, from 4.69 percent the week before. This was the lowest 30-year contract rate ever recorded in that survey as well, the bankers association said.
The average interest rate for a 15-year, fixed-rate mortgage decreased to 4.05 percent, from 4.12 percent previously.
The data from last week also showed many more people were refinancing mortgages than taking out new ones. The survey found refinance activity made up nearly 80 percent of all mortgage applications last week, an increase of 8.6 percent in refinances from the previous week.
But purchase activity, for the first time in many weeks, also was up, showing a 3.4 percent increase in applications. That's some good news for the housing industry, at least for existing homes for sale. Demand for new home construction is still low.
The banker association survey covers more than 50 percent of all U.S. retail residential mortgage applications, and it has been done weekly since 1990. Mortgage bankers, commercial banks and thrifts respond to the survey.
Source
And this week, even lower rates are possible for people who qualify.
This entry at Total Mortgage notes that Freddie Mac today is reporting the current average rate on a 30-year, fixed-rate mortgage is 4.57 percent, for the lowest rate since Freddie Mac started keeping track in 1971.
Meanwhile, the bankers association survey for actual transactions last week showed that the average rate for a 30-year, fixed-rate mortgage dropped to 4.59 percent, from 4.69 percent the week before. This was the lowest 30-year contract rate ever recorded in that survey as well, the bankers association said.
The average interest rate for a 15-year, fixed-rate mortgage decreased to 4.05 percent, from 4.12 percent previously.
The data from last week also showed many more people were refinancing mortgages than taking out new ones. The survey found refinance activity made up nearly 80 percent of all mortgage applications last week, an increase of 8.6 percent in refinances from the previous week.
But purchase activity, for the first time in many weeks, also was up, showing a 3.4 percent increase in applications. That's some good news for the housing industry, at least for existing homes for sale. Demand for new home construction is still low.
The banker association survey covers more than 50 percent of all U.S. retail residential mortgage applications, and it has been done weekly since 1990. Mortgage bankers, commercial banks and thrifts respond to the survey.
Source
August 5, 2010
Pricing your home to sell in today's market
With no federal tax credit to entice buyers, today's home sellers have to get even more serious about making a deal.
That means pricing aggressively -- low enough to compete with foreclosures in some markets. It's a conversation that stings, said Summer Greene, a real-estate agent for a Better Homes and Gardens Real Estate brokerage office in Fort Lauderdale, Fla.
"It's like telling them that their children are ugly," she said.
Many people with homes on the market already are slashing prices to catch buyers' attention. Twenty-four percent of listings on the market as of July 1 had gone through at least one price reduction -- that's a 9% increase from the previous month, according to the most recent data from Trulia.com, a real-estate listings site.
Price cuts are more prevalent in some markets than others, and the average size of the cut varies, too. In Minneapolis, for example, 40% of the listings had at least one reduction and the average reduction was 9% of the listing price. In Las Vegas, 12% of the homes had price cuts, but the reductions averaged 15% off the listing price.
Reducing their price is one way sellers are trying to weather the "tax-credit hangover" that the country is currently in, said Tara Nelson, consumer educator for Trulia.com. Slashing the price is the one thing a seller can do these days to attract attention.
"There's just not a whole lot of incentive right now for buyers to urgently buy," Nelson said. Mortgage rates have been relatively low for a while so buyers aren't concerned they'll miss that window, and inventory has been creeping up since April, she said. To be eligible for the home-buyer tax credit, buyers needed to have a contract on a house by April 30.
The Mortgage Bankers Association said the volume of mortgage applications to purchase a home during the week ending July 9 was its lowest since December 1996 -- despite mortgage rates that are near record lows.
Wait it out
If clients don't "really, really have to sell," Greene said she often advises them to hold off. "If they can wait it out, we're counseling them to do so, unless they have a lot of equity in the house," she said.
"If it's worth 3% to 5% to wait and they don't have a compelling reason to move," the best choice could be to batten down the hatches until next year, she said.
For some sellers at or near a negative equity situation -- owing more on their home than it's currently worth -- it's possible that modest appreciation could mean the difference between a traditional sale and a short sale, which would do some damage to the seller's credit rating. In a short sale, the lender agrees to accept less for the property than the borrower owes on the mortgage.
But for any home seller, the decision of when to sell depends largely on the local market.
"There are markets still declining -- in Florida, for example -- and some that are already growing -- in California, for example," said Mark Fleming chief economist for CoreLogic, in an email.
Home-price appreciation stabilized while the tax credit was in effect, but tepid labor-market and income growth will cause prices to moderate and possibly decline for the rest of 2010, Fleming said in a recent press release.
Nationwide, prices should continue to fall until early next year, with a bottom expected in the spring, according to Moody's Analytics. From the first quarter of 2010 to the first quarter of 2011, prices are expected to drop 5%, said Celia Chen, senior director of housing economics for Moody's Analytics.
Weak price appreciation should follow, she said. From the end of 2010 to the end of 2011, homes are expected to appreciate at a level below 1%; from the end of 2011 to the end of 2012, they'll appreciate by about 4%, she said. Foreclosures and short sales are expected to put pressure on home prices for the next couple of years, keeping them from rising as quickly as they otherwise might, Chen said.
"It's not going to make that much difference if you wait a year to sell a house," at least from a price perspective, Chen said, since you might not be able to sell for that much more than in today's market.
But what could change in a year is demand for homes and your ability to find a buyer -- and to do so more quickly. There may be more house hunters then who will chip away at the large amount of inventory, she said.
"The main constraints are weakness in the job market and the demand for homes," Chen said. "We expect [the job market] to improve over the next year. As it gains traction, we will see more job growth and that will benefit housing demand."
Cutting your losses
If you're sick of the waiting game and wanted to move yesterday, price your home right from the beginning. If it's low enough, it should attract multiple bidders and you might even get more than you're asking for, Greene said.
"I do what the banks are doing with foreclosures right now: Price aggressively and get multiple offers," Greene said.
Don't be afraid to reduce the price if you're not getting any nibbles. If the home hasn't been shown a lot or is on the market longer than average -- or if you're getting feedback that your home is overpriced -- think about cutting the price. If and when you cut, make it count, Nelson said.
"Small, penny-ante, minimal reductions -- $1,000 here, $2,000 there -- unless that is a large percentage of your asking price, they almost signal unreasonableness," Nelson said. Unless it's a sizable drop, potential buyers might sit and wait for the next drop, she said.
Also, if a price reduction brings your asking price within a certain search parameter -- say, from above $250,000 to just below $250,000 -- that can help, she said. "That does actually open up new audiences for a home... if you can cut it below the next search parameter cutoff," Nelson said.
And remember: If you're selling a home to buy a new one, you'll likely get a good price on that new abode. Because the person you're buying that home from likely will be going through the same wrenching, price-dropping experience you are.
Source
That means pricing aggressively -- low enough to compete with foreclosures in some markets. It's a conversation that stings, said Summer Greene, a real-estate agent for a Better Homes and Gardens Real Estate brokerage office in Fort Lauderdale, Fla.
"It's like telling them that their children are ugly," she said.
Many people with homes on the market already are slashing prices to catch buyers' attention. Twenty-four percent of listings on the market as of July 1 had gone through at least one price reduction -- that's a 9% increase from the previous month, according to the most recent data from Trulia.com, a real-estate listings site.
Price cuts are more prevalent in some markets than others, and the average size of the cut varies, too. In Minneapolis, for example, 40% of the listings had at least one reduction and the average reduction was 9% of the listing price. In Las Vegas, 12% of the homes had price cuts, but the reductions averaged 15% off the listing price.
Reducing their price is one way sellers are trying to weather the "tax-credit hangover" that the country is currently in, said Tara Nelson, consumer educator for Trulia.com. Slashing the price is the one thing a seller can do these days to attract attention.
"There's just not a whole lot of incentive right now for buyers to urgently buy," Nelson said. Mortgage rates have been relatively low for a while so buyers aren't concerned they'll miss that window, and inventory has been creeping up since April, she said. To be eligible for the home-buyer tax credit, buyers needed to have a contract on a house by April 30.
The Mortgage Bankers Association said the volume of mortgage applications to purchase a home during the week ending July 9 was its lowest since December 1996 -- despite mortgage rates that are near record lows.
Wait it out
If clients don't "really, really have to sell," Greene said she often advises them to hold off. "If they can wait it out, we're counseling them to do so, unless they have a lot of equity in the house," she said.
"If it's worth 3% to 5% to wait and they don't have a compelling reason to move," the best choice could be to batten down the hatches until next year, she said.
For some sellers at or near a negative equity situation -- owing more on their home than it's currently worth -- it's possible that modest appreciation could mean the difference between a traditional sale and a short sale, which would do some damage to the seller's credit rating. In a short sale, the lender agrees to accept less for the property than the borrower owes on the mortgage.
But for any home seller, the decision of when to sell depends largely on the local market.
"There are markets still declining -- in Florida, for example -- and some that are already growing -- in California, for example," said Mark Fleming chief economist for CoreLogic, in an email.
Home-price appreciation stabilized while the tax credit was in effect, but tepid labor-market and income growth will cause prices to moderate and possibly decline for the rest of 2010, Fleming said in a recent press release.
Nationwide, prices should continue to fall until early next year, with a bottom expected in the spring, according to Moody's Analytics. From the first quarter of 2010 to the first quarter of 2011, prices are expected to drop 5%, said Celia Chen, senior director of housing economics for Moody's Analytics.
Weak price appreciation should follow, she said. From the end of 2010 to the end of 2011, homes are expected to appreciate at a level below 1%; from the end of 2011 to the end of 2012, they'll appreciate by about 4%, she said. Foreclosures and short sales are expected to put pressure on home prices for the next couple of years, keeping them from rising as quickly as they otherwise might, Chen said.
"It's not going to make that much difference if you wait a year to sell a house," at least from a price perspective, Chen said, since you might not be able to sell for that much more than in today's market.
But what could change in a year is demand for homes and your ability to find a buyer -- and to do so more quickly. There may be more house hunters then who will chip away at the large amount of inventory, she said.
"The main constraints are weakness in the job market and the demand for homes," Chen said. "We expect [the job market] to improve over the next year. As it gains traction, we will see more job growth and that will benefit housing demand."
Cutting your losses
If you're sick of the waiting game and wanted to move yesterday, price your home right from the beginning. If it's low enough, it should attract multiple bidders and you might even get more than you're asking for, Greene said.
"I do what the banks are doing with foreclosures right now: Price aggressively and get multiple offers," Greene said.
Don't be afraid to reduce the price if you're not getting any nibbles. If the home hasn't been shown a lot or is on the market longer than average -- or if you're getting feedback that your home is overpriced -- think about cutting the price. If and when you cut, make it count, Nelson said.
"Small, penny-ante, minimal reductions -- $1,000 here, $2,000 there -- unless that is a large percentage of your asking price, they almost signal unreasonableness," Nelson said. Unless it's a sizable drop, potential buyers might sit and wait for the next drop, she said.
Also, if a price reduction brings your asking price within a certain search parameter -- say, from above $250,000 to just below $250,000 -- that can help, she said. "That does actually open up new audiences for a home... if you can cut it below the next search parameter cutoff," Nelson said.
And remember: If you're selling a home to buy a new one, you'll likely get a good price on that new abode. Because the person you're buying that home from likely will be going through the same wrenching, price-dropping experience you are.
Source
Opportunities And Pitfalls In The Current Real Estate Market
Your book has a section called "10 Things That Have Changed in Real Estate, 10 Things That Haven't." What are the key things that have changed?
The biggest change is that you need to have "skin in the game," a phrase coined by celebrated investor Warren Buffett. That means that if you want to buy real estate today, either to live in or to invest in, you'll need to put down cash, and sometimes a lot of it. The FHA minimum is now 3.5%; for conventional financing you'll need 5%. You'll need to have a 30%-plus down payment for investment property, and if you're buying anything expensive, you might have to put down even more than that.
Another big change in the world of mortgage finance is that we've gone backward in time, and lenders will now verify every piece of information you give them at least once. You'll also find lenders nixing deals for the oddest reasons. I just heard from someone who said the lender refused to fund the loan without a better explanation of an errant $300 check. On a $500,000 mortgage, it's tough to understand why that's important, but it's an example of how nitpicky lenders are and how they want to understand everything about the most minute detail of your finances.
So what's hot and what's not in the real estate market? Any tips for buyers in this market, especially those who might be looking to real estate for current income?
The very low end of the spectrum is hot with investors right now. You're seeing people get all excited about buying property for $15,000, $25,000, and even $50,000. And, those deals exist all over the country. I recently posted a couple of blogs on MoneyWatch.com about how much you can buy for $35,000, and they got thousands of views.
Low purchase prices may seem appealing, but you have to take the same precautionary steps to evaluate a value of property, whether it is listed for $35,000 or $350,000. The only difference is that if you buy something for $35,000, you can rent it out for very little money and still have positive cash flow. In the book, I talk in great detail about how to think about value, how to analyze cash flow, and how to think about the investment overall.
If you're buying a place for income, you need to understand the numbers in a deal. If you don't understand income and how income affects investment property value, then you shouldn't be investing in real estate. Savvy investors hire a team of professionals (realtor, lawyer, accountant, 1031 company, mortgage lender, inspector, and so on) to assist them in creating a proper valuation for a property. If you want to invest, you should build your team and get them to interact with each other. That's how they'll help you make smarter decisions.
For example, if you're buying a warehouse or a retail strip center, you probably aren't an expert in commercial building construction. You won't know if an interior wall is failing or if it's likely the roof will leak. You're far better off hiring a commercial property inspector to walk you through the property and help you figure out what it will take to keep it maintained and in good working order. If you buy the property and later decided to sell it and buy a different investment property, you'll need a top accountant and 1031 exchange specialist to help you complete the transaction and meet Internal Revenue Service rules.
It's really hard to do it on your own and be profitable. It's one of the biggest mistakes early investors make. At the very least, find an experienced agent who represents other investors to help you identify property and get yourself a great real estate attorney who can help draw up documents that will protect you and your other assets.
The trend in residential real estate is to build smaller, more energy-efficient houses that are cheaper to own and maintain. All of the McMansions built in the 1980s and 1990s could become white elephants that see their value erode, even as the larger market recovers.
Do you have any advice for those looking to remodel? What types of upgrades are prudent?
The remodeling industry was hit extremely hard last year, and while more people are planning to fix up their homes this year, the problem is one of financing. You either have to save up enough money to fix your house or you have to charge it on your credit card. You can no longer take out a home equity loan, use the proceeds to fix up your house, and then refinance the balance into a new mortgage. Home equity lines of credit are hard to come by these days because the federal government wants lenders to keep a percentage of every HELOC on their own books. As a result, they're few and far between.
This isn't the time to make big, flashy improvements to your home. The economy is still extremely fragile, and we may be heading for a double-dip recession. If you can live with your grungy carpet for another year, you should do it.
When it comes to fixing up your house, you want to spend as carefully as possible. Figure out what amenities are standard in your neighborhood, and then build to that level--not a penny more. If you have to sell for some reason, you don't want to take a bath financially.
What's your advice to people who are thinking it may be time to consider buying a second/vacation home? Key pointers?
I do think that now is a great time to buy. I've just blogged on the three reasons why people buy vacation homes: as a place to create family memories, as an eventual place to retire and rent out until retirement hits, and for pure investment reasons. Decide which kind of vacation home buyer you are and then reverse-engineer the process to figure out what kind of vacation home you should be buying. If you can't afford the cash down payment or have a lot of excess cash to keep the place running and in great shape, don't buy a vacation home. It's easy to think you're getting a great deal because of the purchase price, only to find yourself snowed under by management costs, cleaning expenses, and resort fees. If you're going to rent your vacation home, here are nine things you should know.
How about sellers--any advice for them? Is it a good time to trade up to a larger or better home if you can swing it?
Can you sell your home right now? Can you get enough cash out of your primary residence to be able to trade up to a larger home? What most buyers forget is that a larger home means larger utility bills, maintenance costs, and upgrading costs, as well as higher taxes and insurance premiums. There's more to maintain, cool, and decorate. Can you afford all that?
Right now, those homeowners who can sell their property, whatever size and wherever they live, control the market. The problem is that many of those sellers are so freaked out that they don't really want to buy anything right now. So, they're thinking about renting or are moving in with family or friends. We're seeing the housing market continue to shrink at the moment, but it won't always be that way.
Property values might not rebound until 2020--or later, depending on where you live. You can't make a decision about selling based on when you think the housing market will rebound. That's like saying, "Should I sell my stock today or wait for the company to rebound?" We don't know when that will happen, if ever.
If you want to sell, and have a compelling reason to move, you should figure out an exit strategy. If homes are selling in your area, then you should try to sell your house. If homes aren't selling, and you're 40% underwater with your mortgage, you'll have to either do a short sale, a deed-in-lieu of foreclosure, or a strategic default.
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