Be persistent during ordeal of short sale
Approximately one in five homeowners is “underwater” – meaning they owe more on their mortgage than their home is currently worth. For borrowers in default or at risk of defaulting, selling their house for less than is owed, often termed a short sale, may be the only option. However, short sale offers must be accepted by the bank that owns the mortgage, and can take as long as a few months before an offer is accepted.
MAKING SENSE OF THE STORY FOR CONSUMERS
• Some home buyers are submitting unrealistically low offers on bank-owned properties, hoping to purchase a home at a bargain price. Low offers often use valuable time and resources that could be dedicated toward more favorable offers more likely to garner bank approval. It is vital that home buyers work closely with their REALTORS® to submit appropriate offers, especially when dealing with a short sale property.
• Theoretically, short sales should be a win-win for the bank and the homeowner. Although the bank does not receive the full payment on the mortgage, it also does not incur the costs of foreclosure and/or eviction, if necessary. Many homeowners also prefer short sales because it does less damage to their credit score than a foreclosure. However, many real estate experts say that the majority of banks are reluctant to approve short sales, and often let properties go into foreclosure, even when there are reasonable offers on the property. In addition to considering the price, most lenders also take into consideration whether the homeowner can demonstrate financial hardship. If the homeowner is capable of making payments, many lenders will try to work out a loan modification, rather than a short sale.
• Short sales often are more time intensive than traditional transactions and often require additional paperwork. Due to the large number of short sale offers, many take as long as a few months to receive approval. If information or required forms are missing or incomplete, the bank may set the offer aside, which could delay the process and cause the property to go into foreclosure. To expedite the process, it is important that sellers work closely with their REALTOR® to provide all of the necessary paperwork.
To read the full story, please click here:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/30/BUIQ14C4F5.DTL
Finding an area with appreciation potential
Some real estate experts believe that home buyers who purchase a house during the current market will gain equity if they stay in the house for at least five years and purchase in a desirable neighborhood.
MAKING SENSE OF THE STORY FOR CONSUMERS
• Neighborhoods with strong employment bases, such as hospitals, universities, and government, tend to be recession-proof. People desire to live near their jobs, so housing that is in close proximity to these types of industries are generally in higher demand than those in other areas.
• High gas prices and roadway congestion have led many people to seek “walkable” communities – neighborhoods that offer both daily needs such as grocery stores and coffee shops to more specialty items like hair salons, all within walking distance. Walkable communities also provide public transportation, which is becoming more desirable to many home buyers and is increasing demand for housing in these areas. One Web site, walkscore.com, calculates the walkability of a community by locating stores, restaurants, schools, parks, and other attractions that are within walking distance. The scores are based on a 100-point scale with 100 points being a “walker’s paradise.”
• Home buyers who seek a new or nearly-new home should search in areas where the homebuilder is known for honoring warranties and building high-quality homes that are structurally sound. Homes in these areas are more likely to weather well and gain value in the future than homes in areas where the homebuilder is unknown.
• Homes in neighborhoods with sales momentum generally appreciate at a faster pace than areas where sales are flat. Some real estate industry consultants advise clients to pay close attention to the “list to sale” numbers, which reflect the difference between the asking price and the final closing price. Usually, if the gap in list-to-sale numbers is narrow, then the real estate market in that area is improving.
To read the full story, please click here:
http://www.chicagotribune.com/classified/realestate/advice/chi-select-neighborhood_chomes_1oct31,0,5272949.story
Housing Prices INCREASING despite reduced demand
By Tim & Julie Harris – REO Specialists and owners of www.agentreosecrets.com
Interest rates are INCREASING for the best borrowers….
Rates on average 30-year fixed mortgages rose to 6.37 percent this week, about the highest in six years. More than 70 percent of new home loans are bought or guaranteed by the government-chartered companies, known as “prime” mortgages.
Higher rates for the safest borrowers may exacerbate the worst housing market since the Great Depression and thwart efforts by Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson to bring mortgage rates down. The slowest-growing economy since 2001 is already shutting out some buyers and increasing costs for those seeking to borrow with smaller down payments or below-average credit scores.
As rates rise, sellers are forced to lower prices for buyers seeking to make the same monthly payments. A rate of 6.37 percent equates to a monthly payment of $1,871 on a $300,000 mortgage, up from $1,739 when rates were as low as 5.69 percent in May, according to data from Bankrate.com in North Palm Beach, Florida.
California’s Discount Foreclosure Sales Point to Housing Bottom
Thursday, August 07, 2008
Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®
Recent economic developments indicate that California may be the first state to find the bottom, based on the increase in sales volume in the previous three months. In June, home sales rose for the third consecutive month, following a 30-month decline. Although approximately 40 percent of the transactions were foreclosure sales, the increase is allowing the market to stabilize by depleting some of the excess inventory. Some experts believe that once a neighborhood’s median home price declines to 50 percent from the peak value that the homes in that neighborhood will no longer depreciate.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Although California leads the nation in foreclosures, the state’s foreclosure process is more efficient than other states, which likely will lead to a quicker rebound. Foreclosed properties are receiving multiple bids and financial institutions are selling these homes quicker than the market would typically allow.
· The Unsold Inventory Index in June decreased to 7.7 months from 10.2 months a year earlier, demonstrating that the market is improving.
U.S. economy: Consumer confidence, house prices slide
Thursday, June 26, 2008
Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®
The Conference Board reported that its confidence index fell from 57.2 in May to 50.4 in June thanks to the housing downturn, higher unemployment and the rising cost of food and fuel. The last time the index was this low was in February 1992, when the economy was beginning to recover from the 1990-91 economic downturn.
The S&P/Case-Shiller index fell by 15.3 percent in April from the previous April, continuing March’s 14.4 percent year-over-year decline. However, eight of the 20 cities included in the index experienced month-over-month increases in prices. That shows cities “are beginning to sort themselves into the bad and not-so-bad,” said economics professor and index co-founder Karl Case. “It’s not like the whole market is collapsing.”
California cities included in the index continued to experience price declines: In Los Angeles, the index fell 2.2 percent from March to April and 32.1 percent year over year. San Diego was down 2.6 percent for the month and 22.4 percent compared with April 2007, and San Francisco declined 2.2 percent in April and was 22.1 percent below last April’s index.
To read the full story, please click here:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aX6aDvhPpltY&refer=home
U.S. home slump harder to reverse than usual – Harvard
- Homebuyers remain on the sidelines as they face the highest mortgage rates in nine months and stricter lending criteria. The Federal Reserve?s efforts to keep interest rates low with the hope of stimulating buyer activity has largely fallen on deaf ears as potential homebuyers watch prices continue to slide in many areas of the nation courtesy of a large inventory of foreclosed properties for sale.
- Director Nicolas Retsinas observed that housing markets “historically recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability. It will take longer to rebound given the unusually high levels of foreclosures and constrained credit markets. The slump in housing markets has not yet run its full course.”
- The report concludes: “…if the economy slips into a recession or job losses keep racking up, household growth and homeownership demand could fall even more.”
To read the full story, please click here:
http://www.reuters.com/article/marketsNews/idUSN2347133320080623?sp=true
California unemployment hits 6.8%
- California’s unemployment rate trails four other states: Michigan, Rhode Island, Alaska and Mississippi. Some 1.26 million Californians were unemployed in May, up 115,000 from April and 300,000 higher than in May 2007. The state posted a net loss of 10,900 jobs in May, primarily in construction. However, there were net gains in jobs in education and health services, natural resources and mining, information, leisure, and hospitality.
- The state’s employment situation could worsen later this year under the weight of state and local government budget cuts and a threatened actor’s strike.
- Economists say an employment recovery may be as long as a year off. That’s when the construction sector is expected to benefit from billions of dollars in public infrastructure projects approved by California voters.
To read the full story, please click here:
http://www.latimes.com/news/printedition/front/la-fi-caljobs21-2008jun21,0,5760427.story
Fannie, Freddie Fail to Relieve Housing by Shunning Jumbo Loans
- Jumbo loans of more than $417,000 accounted for about one-third of the mortgage market last year and represented a fifth of all mortgage applications in May, sources say. Since March, however, Fannie Mae has packaged only $24 million in jumbo loans into securities while Freddie Mac has packaged about $220 million. Meanwhile, the two companies invested more than $32.4 billion to buy their own securities, according to regulatory filings.
- The NATIONAL ASSOCIATION of REALTORS® (NAR) had projected the two companies would buy $150 billion in jumbo loans this year. UBS AG now predicts that total may be less than $74 billion. Freddie Mac has said it would buy between $10 billion and $15 billion in jumbo loans this year.
- The two companies own or guarantee almost half of the $12 trillion in U.S. residential mortgage debt. They experienced record losses totaling $11.8 billion over the last three quarters as mortgage defaults climbed to 30-year highs.
To read the full story, please click here:http://www.bloomberg.com/apps/news?pid=20601103&sid=a57eFJtEHSHI&refer=us
Mortgage Review For the week of May 19, 2008 — Vol. 6, Issue 21
“It isn’t hard to be good from time to time… What’s tough is being good every day.” Willie Mays. This past week saw both good and bad economic reports being released, which in turn set the stage for another volatile week in the Bond market. And because good economic news is typically bad news for Bonds and home loan rates, a better than expected Retail Sales Report started a rough ride for Bonds early on. Adding further upward pressure on home loan rates were some inflationary concerns expressed by Richmond Fed President Jeffrey Lacker and Cleveland Fed President Sandra Pianalto…and inflation is the arch enemy of Bonds because it erodes the buying power of the Bond’s fixed payment returns to investors.
And speaking of inflation, the highly anticipated Consumer Price Index hit the wires on Wednesday. This read on consumer inflation was tamer than expected for April. Bond prices reversed course on the news and continued to improve amidst an extravaganza of economic reports, which were mostly all friendly to Bonds and home loan rates.
On Friday, the rally for Bonds continued, as Bond prices recovered all of their losses from earlier in the week. Helping fuel the rally was the worst University of Michigan’s Consumer Sentiment Index in 26 years. Remember that bad economic news is good news for Bonds. And the negative sentiment is certainly a reflection of the higher food prices, spike in fuel costs, soft housing market and tightening credit conditions that all are weighing on consumers.
When the volatile, crazy week was over, Bonds and home loan rates took in the good news with the bad news and ended the week unchanged from where they began.
BAD ECONOMIC NEWS CAN BE GOOD FOR BONDS, BUT BECOMING THE VICTIM OF IDENTITY THEFT IS JUST BAD NEWS. IN THIS WEEK’S MORTGAGE MARKET VIEW, WE EXPLORE SOME IMPORTANT TIPS ON KEEPING YOUR IDENTITY SAFE.
Forecast for the Week
Several reports are scheduled to hit the wires this week, with the potential to make for more good or bad days in the Bond Market. A big market mover may come Wednesday at 2:00pm ET, when Ben Bernanke and the Fed release the Minutes from their last meeting on April 30th. These minutes often give us greater insight as to what Bernanke and the Fed may be thinking about inflation and the state of the economy.
Remember when Bond prices move higher, home loan rates move lower…and vice versa. Despite some declines in the early part of the week, Bonds were able to rally back as you can see in the chart below. I’ll be watching closely to see if Bonds can remain above the layer of resistance at the 50 and 100-Day Moving Averages.
Don’t Become an Identity Theft Victim…
According to recent statistics released by the U.S. Department of Justice, about 1.6 million households experience theft of existing accounts other than a credit card (such as a banking account), and 1.1 million households discover misuse of personal information (such as their social security number) annually. In addition, a recent poll revealed that “sixteen percent of adults say they have had their credit or debit card used by someone they don’t know without their permission” and that “substantial numbers” of people have taken specific steps to help prevent identity theft from happening to them.
Here are some important tips for keeping your information safe and sound:
- Give it to me in writing. While many of us have limited our exposure to telemarketing calls by utilizing the Do-Not-Call registry, charities are exempt from the Do-Not-Call rules. If you receive a phone call from any charity, ask the caller to send you information in the mail instead of giving out your credit card information over the phone. If you get any resistance, just hang up. If someone isn’t willing to give you the chance to review some information, they could be interested in more than earning a commission.
- Just the facts. We often give unnecessary information like our date of birth and income level when we’re filling out things like warranty cards for new products we’ve bought or supermarket club cards. Share only what’s really necessary in every situation.
Navigating the Net. Never post your address or your full date of birth on any social networking sites because both are pieces of information needed to steal your identity. In addition, if you utilize internet job sites, never give a potential employer your Social Security number until they are ready to hire you. Also, thoroughly investigate companies before you submit your resume and check the privacy policies of any online job boards to make sure they won’t sell your information. - The world of paper. Even though the Internet has added a whole new dimension to identity theft, there are still important steps to take when it comes to paper items. First, never keep your Social Security number in your wallet, glove compartment, and other easy-to-access places. Also, never have it printed on your checks or use it as your password. Second, when you are ready to get rid of old documents that contain important information, shred them. And last, if you have to mail something that contains sensitive information, drop the letter in a secure mailbox instead of a mailbox that anyone can open (like the kind at the end of many people’s driveways).
The bottom line is this: When it comes to your personal information, share it on a need-to-know basis only!
Ernest Tepman President
The OCD Group Inc.
Los Angeles: 800-963-4623
E-Mail: marketupdate@theocdgroup.com
Mortgage Market Guide, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated. Mortgage Market Guide, LLC does not grant to you a license to any content, features or materials in this email. You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose.
SoCal home sales jump in April but still lag year-ago period
Southern California homebuyers stepped off the sidelines in April, snatching up foreclosures and homes priced under $500,000 at a rate that was 22 percent higher than in March but down 19 percent from April 2007 and the lowest level since 1995, according to DataQuick Information Services.
MAKING SENSE OF THE STORY FOR CONSUMERS
The median home price for the six-county region was $385,000, unchanged from March but down 24 percent from an April 2007 peak of $505,000. April marked the first time in eight months that the median price did not decline.
Sales were strongest in areas hit hardest by foreclosures: Riverside County (where sales increased month to month for the first time in two years), Lancaster, Chula Vista, Anaheim, Lake Forest and Victorville experienced the strongest rebounds. Two-thirds of homes sold during the month in Los Angeles, Orange, Ventura, San Bernardino, Riverside and San Diego counties were priced under $500,000. About 38 percent of the homes sold were in foreclosure at some point during the previous year, up only 2 percent from March but sharply higher than the 5 percent reported a year ago. In Riverside County, 53 percent of sales involved troubled properties.
The credit crunch, potential for a recession, and uncertainty over when foreclosures will peak caused DataQuick analysts to remain cautious. Lack of financing for high-value homes continues to be an issue and could forestall a recovery if the trend persists. In April, only 15 percent of Southern California home loans were above $417,000, down sharply from the same period a year ago.
To read the full story, please click here:
http://ap.google.com/article/ALeqM5h_DkmV9N0qyf2vfd5bqwsVnBh0JgD90OUO9G0
The Housing Crisis Is Over
From The Wall Street Journal
By CYRIL MOULLE-BERTEAUX May 6, 2008; Page A23
The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.
How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won’t happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.
Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.
Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what’s going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.
The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.
Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.
Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.
The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.
In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.
The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in “months of supply” terms. That’s the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high – but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.
Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.
Inventories will drop even faster to 400,000 – or seven months of supply – by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won’t stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.
Many pundits claim that house prices need to fall another 30% to bring them back in line with where they’ve been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.
Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one’s income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today’s house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.
This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.
When the rate of house-price declines halves, there will be a wholesale shift in markets’ perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.
More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.
A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets’ perception of risk related to housing, the financial system, and the economy.
We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.
REAL ESTATE MARKET CONDITION & L.A. COUNTY LATEST REAL ESTATE STATISTICS
As you may already know the Los Angeles prices of single-family homes, condos, land and, in small amount also multi-family buildings, declined in most cases approximately 20%. Real estate gurus as well as the California Association of Realtors are predicting that prices will decline a maximum of 5 more percent in the next few months. The declining real estate is/was caused by an enormous increase of foreclosures. Most of the homeowners that got into financial difficulties and fell behind with their mortgage payments have already sold or lost their properties. I started observing multiple offers on the remaining short sales, foreclosures and bank owned properties. The mortgage loan limits were increased to almost $730,000, but this is just temporary relief at this point of time. Along with other realtors, I am involved in writing letters to US Senator Dianne Feinstein. You may view her recent response that I received from her at http://www.movingtohollywoodhills.com
For your information I would also like to mention that if a home price declines 10%, it is equal to 0.5-1% mortgage interest increase. Therefore, it is my opinion that if you need/want to buy within the next few months, please start searching now. And if you are intending to sell your current home, I’d encourage you to wait if you can, until the market starts going up again.
Based on several inquiries & offers that I have been dealing with lately I am encouraging all my clients to get pre-approved, get at least the first page of the FICO score from the lender, make sure that you have enough money for down-payment on your bank account, plus a reserve for 3 months of mortgage payments, taxes and insurance. All this is a must in almost 90% of pre-foreclosures and foreclosures. Further on, it is also very helpful if I have on my hands a Buyer-Broker Agreement. If you have misplaced or never received that agreement from me, please contact me and I will re-send it. This agreement helps if I need to negotiate for example with the bank that owns the property, before we make an offer.
FREE & FREE & FREE – updated monthly
Click here for LOS ANGELES COUNTY LATEST REAL ESTATE STATISTICS
Best Hollywood Homes Team in assoc. with CLAW released another complimentary feature for our clients, associates & friends.
The Latest Pending Sales Index and Forecast Release
Little change is expected in existing-home sales over the next few months, before improving notably during the second half of the year, according to the latest forecast. Lawrence Yun, NAR chief economist, said the market will come into clearer focus this summer. “Existing home sales could start to show a sustained increase within a few months, unless there are some additional economic problems or excessive inflationary pressure,” he said. “We’re looking for essentially stable sales in the near term, before higher mortgage loan limits translate into more sales in high-cost markets. The wider access to affordable credit should increase sales activity notably this summer as pent-up demand begins to be met.”
