June 17, 2011

Do You Owe More Than Your Home is Worth? You’re Not Alone!

Posted by martikilby under foreclosure, loan modification, San Diego Home Values, Short Sale | Tags: , , , , , , , , |
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A recent study by analytics company CoreLogic reported that nearly 25% of all mortgage borrowers owe more than their home is worth.  The aggregate amount of negative equity in the U.S. was a whopping $750 billion at the end of last year.   This lost equity prevents homeowners from refinancing or moving, and according to the report, is the “dominant factor” driving the real estate market.

If you’re among the millions who are paying each month for negative equity, you probably have some questions about your options.  To help address this issue, I’m offering a FREE workshop here in San Diego covering the following:

  • Should I wait for home values to increase?  What is the future of San Diego real estate?
  • What about a loan modification?  What programs are available, how do I qualify, and how many loan modifications are actually approved?
  • If I can’t afford my payments, what are my options?
  • What is involved in the foreclosure process?  How long can I stay in my home? How will it affect my credit?
  • Will filing Bankruptcy save my home?
  • What is a strategic default?  What are the risks?
  • What is a Deed in Lieu of Foreclosure?
  • Is a short sale better than foreclosure?  What is the process? What is a HAFA short sale?
  • What about deficiency judgments and 1099s?  When can I qualify to buy again?

Saturday, June 25th  10:00 – 11:30 a.m. 

San Diego County Library, 4S Ranch

10433 Reserve Dr, San Diego, CA 92127

There is no fee or obligation for attendance, but space is limited.  Advance registration is required.  Homeowners will receive comprehensive workshop materials.

Call 1-888-464-1820 x104 to Register Today

As mentioned previously, I’m not an accountant or lawyer and you should always consult the appropriate professional before making any major decision about your home.

 

 

March 29, 2011

Good News for San Diego’s Housing Market

Posted by martikilby under Real Estate Values, San Diego Home Values | Tags: , , , |
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Back in November, and then again in December, I predicted that San Diego had seen the bottom and we would continue to see small gains in home values in 2011.  Over the first quarter however, there has been a lot of talk and statistics about home prices falling nationwide and some folks seemed anxious to prove me wrong. 

Well this morning, I can happily say I was right.  The just-released Standard and Poors/Case-Schiller Home Price Index for January reveals a 1.00% decrease in home values over the previous month…….except for two cities, Washington, D.C. and San Diego!  The index tracks values in 20 cities and overall, values were down 3.10% over January 2010 – only Washington, D.C., and San Diego showed a year-to-year gain.

So, to all of you who are waiting to buy in San Diego, fearful that values will continue to drop, pay attention.  Now is the time to buy….unless of course you want to pay 2.00-4.00% more at a higher interest rate a year from now.  Just a thought.

 

December 29, 2010

Taking a Bet on Real Estate in 2011? Here’s My Predictions

Posted by martikilby under foreclosure, Home Ownership, Interest rates, loan modification, Real Estate Sales Statistics, Real Estate Values, REO, Short Sale | Tags: , , , , , , , , , , , |
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Once again, Santa forgot to bring me a crystal ball.  So this look into the future of the housing market is based on trends from the past year, projections from those that crunch the numbers, and my gut feelings based on life in the real estate trenches.

Foreclosures continued to be the top story in 2010 with robo-signing and questionable practices making headlines.  In 2011 so-called shadow inventory will be making news as it grows and clogs the pipeline.  This includes borrowers that are 90 days or more delinquent, homes in foreclosure, and bank-owned properties not yet on the market.  S & P estimates that it will take 41 months to clear the backlog, continuing to slow the recovery.

Short sales will increase as the government and lenders try to stem the deluge of foreclosures that add to the shadow inventory.   Right now about 35% of defaults end in a cure or short sale.  I see that number growing as banks and the government iron out the problems with HAFA (Home Affordable Foreclosure Alternatives), and the processing of short sales is streamlined.

Loan modifications will continue to be largely unsuccessful.   There is some hope for small improvement in the numbers if the FHA principal reduction program can be expanded.

Mortgage interest rates jumped this last month, but are gradually heading down.   Frank Nothaft, chief economist for Freddie Mac foresees rates staying below 5.00% throughout the year.  Let’s hope he’s right.

Home sales will increase, especially for first-time buyers, provided interest rates remain low and the economy continues to improve.  If unemployment continues to decrease and incomes increase we should see an increase in home sales over 2010 by the 2nd half of the New Year.

Home values throughout most of the country will reach the bottom by mid-year and many areas, such as San Diego County will see modest gains of 2.00 – 4.00%.  The exception continues to be the luxury home market where home prices in locations such as La Jolla and Rancho Santa Fe will continue to decline.

My advice?  If you own a home and are not terribly upside-down, hang tight.  Looking to buy?  Do it now!  This is a great time to purchase your first home or pick-up an investment property.  Struggling with your payments?  Let’s explore your options, before it’s too late.  Overall, I’m cautiously optimistic.

Best wishes for a happy, healthy and prosperous New Year!

 

December 10, 2010

Staggering Stats: Trillions in Equity Lost

Posted by martikilby under Home Ownership, Real Estate Sales Statistics, Real Estate Values | Tags: , , , , |
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This year alone U.S. homes are projected to lose $1.7 trillion in value.  Since the market peaked in 2006 there has been over $9 trillion in lost equity, according to Zillow.  But let’s put that in perspective.

Zillow cites a report by the Congressional Research Service, which says that from 2001 to the end of September of this year, the war in Iraq has cost the U.S. $750.8 billion.  This means that since 2006, the dollar value of home equity lost by U.S. homeowners is greater than the cost of 12 Iraq wars!

Now some might argue that home equity in 2006 wasn’t “real” money, and that inflated prices only created the illusion of equity.  Well, most of the country based many financial decisions on that illusion and by the end of the 3rd quarter 2010; more than 23.2% of homeowners owe more than their house is worth.

Looking forward into 2011, Dr. Stan Humphries, Zillow’s chief economist, doesn’t see the market settling into a natural equilibrium of supply and demand any time soon.  “Unfortunately, with foreclosures near an all time high in late 2010, and negative equity persisting, it does not appear that the first part of 2011 will bring much relief,” he said.

One bright spot for San Diego emerged however.  Out of the 129 market areas tracked by Zillow, only one-quarter showed any increase in value in 2010, led by Boston with a spike in residential home values of $10.8 billion and San Diego metro with an increase of $10.2 billion.

The message for San Diego homeowners:  Hang-on if you can and you’re not too far underwater.  For would-be buyers:  Don’t wait!  Prices and interest rates are on the rise.

 

November 15, 2010

Home Improvements That Add Value: The Winners and Losers

Posted by martikilby under Home Improvement, Real Estate Values | Tags: , , |
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Considering a major home improvement?   Updating a kitchen, replacing windows or adding living space are just some of the expensive renovations that homeowners tackle to add functionality or enjoyment to the use of their home. But which projects are the big winners and losers when it comes to adding value?

Winners

Kitchens are at the top of the list in terms of adding value to your home.  Renovating an outdated kitchen can add thousands to your bottom line when reselling your home.  Because remodeling a kitchen is a big, disruptive project it is something most buyers want to avoid.  An updated kitchen requiring no work is definitely an added value.

Bathrooms are another winner.  Just like kitchens, an outdated bathroom represents a major project and expense to most buyers.

A master bedroom suite can also be a big plus.  An added walk-in closet and larger private bathroom are very appealing selling points to most buyers.

Popcorn ceiling removal is a relatively inexpensive project that definitely adds value.  Again, this is a messy, disruptive project that buyers want to avoid.

Replacing windows and or the roof are projects that are marginal winners.  Most buyers expect these items to be in good condition.  So while replacing them may not add tremendous value, not replacing them if old or worn could significantly detract from resale value.

Losers

Swimming pools lead the list of projects that don’t add significant value to your home.  Because they can be viewed as dangerous, and are expensive to maintain, swimming pools can actually be seen as a negative to many buyers.

Room additions that don’t conform to the original design or floor plan also detract from value.  While enclosing a back patio or converting a garage to living space, may add to usable square footage, most buyers don’t want a dining room that has a window into another room and probably do want a garage.

Overbuilding or high-end upgrades are big losers.  Improvements should be comparable to other homes in the neighborhood.  Increasing a home to 5000 square feet in a neighborhood of 2000 square foot homes is money that will never be recouped.  Likewise, using the most expensive fixtures, appliances or flooring will generally not add more value than using a slightly less expensive selection.

Extensive landscape and professional hardscape features may be very enjoyable and add to overall appeal of your home, but will most likely not significantly add to resale value.

Invisible improvements such as replacing plumbing, electrical or HVAC systems are not big winners.  Again, buyers expect these items to be in good condition and it is seldom that you’ll recoup your investment here.  Consider these a part of general home maintenance.

When planning a major home improvement project, keep in mind that even if your project is a winner, you’ll probably not recoup more than 75-80% of your investment when reselling your home.  Especially in today’s market with home values remaining flat, the primary reason for undertaking any home improvement project should be for your own enjoyment of the home, not adding to your bottom line at resale.

 

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 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 13, 2010

San Diego Home Prices Have Already Hit Bottom

Posted by martikilby under Real Estate Values | Tags: , |
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There is a slight glimmer of hope that we are gradually pulling out of the Great Recession.  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.

The panel predicts modest gains of approximately 1.2% over 2011, but warns that the record unemployment will continue to be a factor in triggering defaults.  According to the panel, getting more people back to work will be key to slowing foreclosures and the recovery of the housing market.

Single family home values are fairing better in San Diego County where we saw price increases above the national average, but values for condo sales dropped.  Comparing home sales in August of 2009 to sales in August 2010, we saw a 5.5% increase in average sale price for single family homes and a -2.2% decline in sale price for condos during the same period.  The median home price in August 2010 was $375,000 for a single family home and $220,000 for a condo.

Some areas of the county that had been hit hard by foreclosures after the boom period, such as newer areas of Chula Vista, saw an increase by as much at 15.9%, while more pricey areas such as La Jolla and Rancho Santa Fe saw a decline in prices anywhere from -5.0% to -26.5%.  Please contact me if you’d like to know the specifics for your area.

The national numbers were presented in the NABE October 2010 Outlook.  The panel was comprised of 46 professional analysts from such firms as Goldman Sachs, Fannie Mae, Moody’s Analytics and the PMI Group.  The local sales statistics are courtesy of Fidelity National Title Company.

 

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