November 8, 2010

National Home Sales Drop in September – What about San Diego?

Posted by martikilby under foreclosure, real estate, Real Estate Sales Statistics, Real Estate Values | Tags: , , , |
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For the first time since June, pending home sales (number of contracts signed), dropped in September by 1.8% according to the National Association of Realtors. The report was unveiled on Friday as the Association began its annual convention in New Orleans.  This came as a surprise to many as a group of Reuter’s polled economists had recently anticipated an increase of 3%.  So why the drop?

Paul Dales, U.S. economist for Capital Economics surmised that the lower number was a result of the recent foreclosure mess; deals signed in September, might have fallen apart in October as banks pulled some foreclosures from the market and buyers got cold feet.  But that doesn’t really make sense as the September drop occurred before any of the problems with foreclosure affidavits came to light.

I think that one of the most obvious factors is the continued unemployment rate that has now been at 9.5% or higher for the past 15 months.  People who aren’t working, or fear that their employment is tenuous don’t buy houses.  Lawrence Yun, NAR’s chief economist also pointed out that “tight credit and appraisals coming in below the negotiated price continue to constrain the market.”

So as noted in my post on November 3, Capital Economics continues to predict a bit more of a gloomy future for the housing market.  Dales says that “existing sales may well fall back,” and described housing activity as “bouncing along the bottom.”  NAR on the other hand continues to be a bit more optimistic, forecasting an increase in existing home sales in 2011 to 5.1 million, up from 4.8 million this year.  I’ll keep you posted as soon as I have the San Diego numbers for September, but I’m siding with NAR and remain cautiously optimistic about sales in America’s Finest City, especially if lenders loosen their stranglehold on the market by approving more home loans.

 

November 3, 2010

Are We Headed for a Double-Dip in Home Prices?

Posted by martikilby under foreclosure, Interest rates, Real Estate Values, REO, Short Sale | Tags: , , , , |
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We all know that numbers and statistics can be interpreted in many different manners, depending on the desired outcome and the audience.  Case in point, within the last two weeks we have two separate reports on U.S. housing prices that range from cautiously optimistic to doom and gloom.   What’s real, and who do we believe?

Back on October 13, I happily reported in a post on this blog that according to an elite panel of economists surveyed by the National Association for Business Economics, home prices across the US saw their lowest point in the first part of the year and have been gradually trending upward.  In San Diego, the news was even more encouraging as our prices rose higher than the national average.

However, that trend over the past nine months might not hold true for the future.  On October 29th, Capital Economics, a leading international economics research firm, announced that a double-dip is already underway for both housing activity and residential prices.  Paul Dales, a U.S. economist for the firm, predicts that home prices will continue to decline over the next twelve months with a dip of over 5%.  Paul and his team add that if the economy continues to improve more quickly than analysts predict, home prices might hold steady.  On the other hand, if the economy worsens greater than predictions, prices could fall as much as 20%!

That’s huge!  Couple that with the firm’s forecast that housing demand for the next three years will remain “unusually weak”, while supply remains “unusually high”.  Right now the analysts say that there are about 1.5 million too many homes on the market given today’s demand, and that number will likely swell with additional foreclosures.  There are approximately 2.5 million homes in foreclosure and 2.4 million that are 90 days past due.  That is an addition of nearly 5 million homes that could flood the marketplace in the next year.

So what does all of this mean for San Diego real estate?  Well, I wish I had that crystal ball, but here’s my take.  To a certain degree, I believe that both reports are correct.  I certainly believe that we’ll see an increase in the supply of homes on the market due to foreclosures and short sales.  Banks can control the number of REO properties they bring to market, but I think that we’ll see a large increase in short sales as homeowners seek to avoid foreclosure. However, I don’t see a huge dip in home prices, at least here in San Diego.  I do believe that barring a total economic melt-down we’ll continue to see static prices with some modest increases in value, particularly in the $250,000 – $400,000 price range for single family homes.

Is this a good time to buy?  Absolutely!  With prices and interest rates at near record lows, what’s not to like?  Waiting to see if prices fall further is a gamble in my book as it is very likely that 6 or 9 months from now, interest rates could be as much as a full percentage point higher.

 

October 31, 2010

Improve your Odds for Short Sale Approval

Posted by martikilby under foreclosure, lenders, Short Sale | Tags: , , , , |
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As I mentioned in my last post, there are several reasons why a lender might choose to foreclose versus approving a short sale.   But there are a few things you and your Realtor can do to improve your chance of having your sale approved. 

1.  Submit a quality offer.  Here are a few things your Realtor should look for in any offer you receive: 

  • The offered price shouldn’t be significantly less than market value.  The lender is less likely to approve the sale if he feels that his loss is greater than necessary.
  • The buyer can show more than sufficient funds to close the deal.  The larger the down payment the better.  Banks will consider a contribution to closing costs, but remember, they are looking for the highest possible net return on the sale.
  • The buyer agrees to put his/her earnest money deposit into escrow before short sale approval.  This shows the lender that the buyer is committed and less likely to walk away from the deal.  If the sale is not approved, the deposit is of course returned to the buyer.
  • The buyer should plan on paying for any needed repairs, including termite.  Don’t submit an offer that asks for repairs or a home warranty.
  • The offer must not be contingent on the sale of the buyer’s current home.  Buyer should be flexible about when they need to move out of their current residence.
  • The offer should be well written and easy to understand.  (More on that subject in a future post), 

2.  Submit all required documents. 

  • Make sure your Realtor has confirmed with your lender regarding every required document.  They should all be submitted at one time to help prevent certain items from getting lost in the lenders system.
  • If additional (or yes, duplicate) documents are requested, submit them as quickly as possible and have your Realtor or negotiator confirm receipt. 

3.  Remember the squeaky wheel…. 

  • Whether it is your Realtor or a professional negotiator who is representing your short sale to the bank, they need to be in regular communication with the lender, inquiring about progress on your file.  1 phone call a week is not sufficient.  The negotiator on the bank’s side needs to understand that you are very serious about gaining their approval and selling your home.
  • Ask for updates from your Realtor and make sure that there is follow-up with the lender 2-3 times per week.  You should know at all times where you are on the foreclosure timeline.  Make sure you immediately provide your Realtor with any letters you receive from your lender or any legal notices.

There are many important details in a short sale that are very different from a standard equity sale.  When listing your home, make sure you select a Realtor who is experienced with short sales.  Saving your home from foreclosure is way too important a task to trust to an inexperienced agent.

 

October 21, 2010

Mortgage Interest Rates Up, Volume Down. Not Good.

Posted by martikilby under foreclosure, Interest rates, lenders, mortgage, Short Sale | Tags: , , , , |
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For the first time in over 6 weeks interest rates for 15 and 30-year fixed mortgages rose…not much mind you, but they did increase.  15 year rates rose from an average of 3.62 to 3.74 percent, and the 30 year rate increased from an average of 4.21 to 4.34 percent.

According to the Mortgage Bankers Association we also saw a sharp drop in the number of applications submitted for the week ending October 15th, down by 10.5 percent from the previous week.  Refinance applications were down 11.2 percent and applications for home purchases were down 6.7 percent.

Now I’m no economics wiz, but even I can tell you that this is not good.  The MBA attributed the drop in applications to the slightly higher rates, but more importantly to public apprehension and confusion surrounding the mismanagement of foreclosure paper work by some banks and servicers.  So at a time when we have an increased number of foreclosures and short sales hitting the market, we have potential buyers of distressed properties pushing back, fearful that there could be issues in the transaction that would give them less than clear title.  And, oh yeah, let’s throw in a rate increase.

So once again, it appears that the banks are doing nothing to get us out of the mess they created….but of course, it’s not all bad for most of them.  Wells Fargo turned a profit of $3.35 billion for Q3, up from $3.24 billion a year ago.  I’m sure that warms the hearts of everyone who lost their home last quarter.

 

October 19, 2010

Finally…a Solution to the Housing Mess?

Posted by martikilby under foreclosure, lenders, Real Estate Values, REO, Short Sale | Tags: , , , , , , , , |
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Numbers were released today for the month of September that show that foreclosures and inventories of bank-owned properties are on the rise in Washington, Oregon, Nevada, Arizona, and California.  The report was issued by ForeclosureRadar, a company that tracks every foreclosure in the five western states and provides auction updates.  Although several bank and loan servicers have announced that they are suspending foreclosures while investigating internal procedures, ForeclosureRadar analysts have yet to see any impact of this suspension on the numbers.

So the report is reminding us that nothing is getting any better, and in fact it’s getting worse.  Last month in California, the number of foreclosed properties that sold declined by 15.6% while inventories of bank-owned homes increased by 5.3%. And according to ForeclosureRadar’s CEO, Sean O’Toole, “…the reality is that far more homeowners are behind on their mortgage payments than are even in foreclosure.”  To me, this spells a further increase in the number of short sales and foreclosures, with no end in sight.

However, in the middle of this disheartening news, Mr. O’Toole voiced the only logical response to the real estate crisis that I’ve heard all year. “The clear problem in the housing market today is not foreclosures, but negative equity; and as long as the focus remains on the symptom rather than the disease we will see little progress towards real solutions and this crisis will drag on for years to come.”

Finally!  Someone gets it!  Negative equity is the real problem that needs to be addressed.  As I mentioned in my earlier post about the FHA principal reduction program, reducing the principal owed to be more in line with current values is the best and quickest way to curtail the growing number of strategic defaults.  Most people who have bought a home, want to keep their home…..but it has to make financial sense, especially in today’s struggling economy.  Reducing the principal amount owed not only makes the mortgage payment more affordable, it provides an incentive to stay and pay.

So from my perspective, until the banks and investors decide that taking a loss through principal reduction is preferable to taking a loss through foreclosure, our housing market will continue to disintegrate.  How many more foreclosures and short sales will it take before the banks are ready to listen?

 

October 12, 2010

FHA Principal Reduction Program….Will it Work?

Posted by martikilby under Internet, lenders, loan modification, REO | Tags: , , , , , , , |
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Most loan modification programs are designed to simply lower a borrower’s mortgage interest rate, thus reduce their monthly payment.  However with home values so low, a loan mod that reduces the interest rate still means that most homeowners are paying on negative equity.  They owe more than the home is worth, so even if the payment is more affordable, it could be years before any part of their monthly payment is actually paying down principal on the current value of the home.

For many homeowners, this just doesn’t make financial sense and they are allowing their homes to go to foreclosure, a practice dubbed “strategic default”.  Experts predict that the number of strategic defaults will likely increase as home prices remain stagnant and homeowners become increasingly angry with banks. Everyone including the government, industry analysts, and the public would probably agree that an increase in strategic defaults and the subsequent foreclosures will only slow the housing market recovery.

So the FHA has introduced a new Short Refinance Program aimed at borrowers who are upside down.  The goal is to reduce the actual principal amount owed to a level more in line with current home values and thus encourage homeowners to stay in their homes and continue to make payments.

Sounds like a great idea at face value, but qualifying for the program does come with a list of conditions for the homeowner, including: 

  • Be current on their mortgage payments
  • Have a credit score of at least 500
  • Have negative equity
  • Not have a current FHA mortgage
  • Occupy the property
  • And…..have a bank willing to write off 10% of the loan principal

OK, I was thinking, “This might work….” until I read the last condition.  I don’t know about you, but I haven’t heard of many banks stepping up to the plate and offering principal reductions, (Wachovia being the only exception that comes to mind).  So I’m not sure how successful this will be.  And doing the math, will a 10% reduction really be enough to encourage people to stay and pay?  In some parts of the country where the housing boom had the most impact, such as locations in CA and FL, values have dropped by as much as 50% since 2006.  So if a $500,000 mortgage is reduced to a $450,000 mortgage but the property is only worth $250,000 or even $300,000, will that be sufficient incentive to keep a borrower from walking?

I applaud the concept but am very skeptical about outcomes.  Principal reduction is, I believe, the mechanism that has the best chance of slowing strategic defaults.  The banks certainly take a big financial hit when a home goes to foreclosure…..why can’t they take the hit up front and keep people in their homes?

 

October 11, 2010

Why a Short Sale Blog?

Posted by martikilby under foreclosure, lenders, loan modification, real estate, REO, Short Sale | Tags: , , , , , , , , |
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If anyone had told me four years ago that today over 90% of my business would be short sales and REOs, I would have said they were crazy.  The reality of course is that the boom of those days is the bust of today, and it doesn’t look much brighter on the immediate horizon.

According to California Association of Realtors Vice President and Chief Economist, Leslie Appleton-Young, “The wild cards for 2011 include federal housing policies, actions of underwater homeowners, and the strength of the economic recovery.  What is certain is that favorable home prices and historically low interest rates will continue to make owning a home in California attractive for those who are in a position to buy.”

 OK.  Sounds like a glimmer of hope….unless you’re one of the homeowners that is underwater with no life boat in sight.  Knowing that you can no longer afford your home is incredibly stressful, and for most home owners, their lenders offer little help, despite federal programs.

This blog is dedicated to every homeowner who can’t sleep at night and is asking themselves, “What do I do now?”  My goal is to provide information that will help homeowners understand their options for buying, keeping, or selling their homes in this troubled market. With the banks and the government changing the rules every day, I’ll help make sense of the news, share my experience and insider perspective,  and have some fun along the way.  Most fear is based on lack of knowledge.  By sharing what I know and being here for your questions, I hope to take the “stress” out of distressed property sales, whether considering a short sale, or an REO purchase. 

So let me know how I can help.  If I don’t know the answer, I’ll find a reliable source that does.  It’s that simple.  Over the next two weeks I’ll be adding some good resource information about short sales, so check back soon!  Looking forward to sharing and hearing from you!

 

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