NAR CEO says sales could pick up in autumn months

NAR CEO says sales could pick up in autumn months

By Mary Umberger, Thursday, July 15, 2010.

Inman News

SAN FRANCISCO -- It may be the traditionally slow spot on the real estate calendar, but National Association of Realtors CEO Dale Stinton says he's looking forward to fall.

Stinton, appearing on a panel Thursday at the Real Estate Connect conference, said he agrees with NAR economist Lawrence Yun that the sales drop-off after the expiration of the homebuyer tax credit will endure for a couple more months, then purchases will regain some traction in autumn.

"He thinks the job market is going to pick up and we'll finish the year in an 'average' state, with 5.5 million sales," he said.

Stinton said the job growth will come as a "deferred effect" of federal economic stimulus actions; in addition, he said he believes the down-cycle has run its course.

Regional rebound reported

If there's one regional market that's looking up, it may be San Diego-La Jolla, Calif., said Bud Clark, executive vice president and Managing Broker at Willis Allen Real Estate in La Jolla, who attended the conference.

"We're in a rarified part of the market, of course," he said. "The rest of the country seems to hurting."

Nonetheless, he said, the pricy and even the ultra-pricey properties typical of the area -- up to $15 million -- are selling, often with all-cash deals, he said.

"Year over year, we're up very dramatically," he said. "We're in the black."

sellers -- those who aren't feeling intense pressure to sell, anyway -- have finally embraced the local sales data that agents are presenting them and pricing rationally, he said.

Counting the tech pennies

The economy is forcing more deliberative, studied purchases of real estate technology, and it's about time, said Frederic Guitton, whose Orlando-based company, ActivSalesAgent, provides concierge-type services to brokerages to handle their sales-lead calls.

"People are questioning their business models and stopping stupid purchases that don't make them money," he said.

Guitton, an engineer by training, said he's relieved to note that whim is out and empirical study is in.

"Companies are now making fact-based decisions," he said. "Five or six years ago, they would say, 'Let's try it out and see what happens.' "

Bringing back private lending

For years, private lending has had a slightly unsavory reputation, but the climate is right for it now, according to Eric Wohl, who attended the Real Estate Connect conference representing NoteFlo, a two-week old startup that he described as a "Lending Tree for private lending." The company seeks to match consumers with nontraditional, private sources of funding.

"Money is so hard to get from banks, and I don't see it getting better," he said.

There's a price for access to that capital, though: Wohl said interest rates for the private mortgages it facilitates currently start at 7 percent, depending on risk factors, and can go up as high as 12 percent.

Mary Umberger is a freelance writer in Chicago

However, 28% of those elite scorers' defaults were calculated and strategic, compared with 18% for the overall population in the statistical sample. This pattern is forcing lenders and the credit industry to seek new ways to evaluate risk beyond traditional credit scores.

The June study, which follows up on earlier research involving credit files where consumers' personal identifiers had been removed, tracked strategic defaulters in 2009. By examining payment patterns in individual credit files, Experian and Oliver Wyman estimate that about 19% of all mortgage defaults last year involved strategic walkaways.

Though there was some evidence that total defaults may have peaked at the end of 2008, the walkaway issue remains a costly and controversial one for the mortgage industry. Fannie Mae announced in late June that strategic defaults have become such a problem that it was toughening its policy and would pursue walkaways for unpaid balances and penalties where permitted by state law.

The Experian-Oliver Wyman study confirmed that geography played a significant role in the strategic default phenomenon. Homeowners in volatile boom-and-bust states such as California and Florida have been especially prone to walk away from deeply negative equity situations.

A separate study by three researchers at the Federal Reserve found that not only is geography crucial, but state law treatment of unpaid mortgage debt balances after a walkaway may play a major role as well. The Fed study examined 133,281 loan histories from Arizona, California, Florida and Nevada where borrowers were underwater on their loans.

According to the researchers, in California and Arizona, where state law limits lenders' ability to collect post-foreclosure deficiencies on principal residence mortgages, borrowers were more likely to walk away from their houses at lower levels of negative equity compared with borrowers in states such as Florida and Nevada, where lenders face fewer restrictions.

"This result suggests," the Fed study said, "that borrowers may factor into the costs of default the potential legal liabilities resulting from a foreclosure."

The Fed researchers concluded that the depth of borrowers' negative equity positions is an important tripwire to their decision to send back the keys. Borrowers whose negative equity is relatively modest appear to be much less willing to strategically default, probably because they hold out HOPE that market conditions will improve enough to restore them to positive equity one day.

But as negative equity approaches 50% — and borrowers see no prospects for higher real estate values — roughly half of all mortgage defaults are strategic.

The Fed researchers cited a hypothetical case from Palmdale to illustrate the economic logic of strategic defaulters: Purchasers there in 2006 paid $375,000 for a median-priced single-family home. By 2009, the same house was worth less than $200,000. Meanwhile, a three- to four-bedroom house in Palmdale rented for $1,300 a month at the end of 2009 — far less than what the deeply underwater borrowers were paying for their homes.

Why stay in a seemingly hopeless situation, bleeding money indefinitely? Both studies document that many borrowers asked themselves that very question — and decided to just stop paying.

kenharney@earthlink.net

Distributed by Washington Post Writers Group.

Copyright © 2010, The Los Angeles Times

This chart was just published in the LA Times, Los Angeles Edition today. 

This article was posted in 2008, but the rules are still basically the same.  Every day I receive calls from potential home buyers that want to buy a foreclosure. Today, compared to 2008 there are even more home buyer opportunites to explore.  short sales, foreclosures and also motivated sellers are all opportunites for todays home buyers.  

Choose your Agent carefully as experience matters even more in the current real estate market.  I, Teri Pacitto, am a Broker Associate with over 23 years of full time experience in the Ventura County and Los Angeles County real estate market.   I represent short sales, bank owned properties and equity properties in the local market.  Make sure to follow my Blog as well as view my web site to keep current with the local real estate market statistics. 

Teri Pacitto, Broker Associate, SFR, CDPE, CHS

___________________________________________________________________

By Tara-Nicholle Nelson, Esq., FrontDoor.com | Published: 2/01/2008

Many buyers associate buying a foreclosure with getting a steal of a deal. This can be true, but there are also potential pitfalls. The pros and cons of buying a home involved in foreclosure vary with the phase of foreclosure the property is in when purchased. Use this handy guide to figure out what sort of property is best for you! Also see The Stages and Phases of the Foreclosure Process.

Missed Payments/Motivated Seller

Advantages:

• Seller will be motivated to achieve a fast sale, may create opportunity for below market purchase price.
• Seller may be more likely to do repairs.
• Seller might be amenable to providing major closing cost credits and other concessions.
• Buyer can use regular mortgage financing.
• Buyer can obtain desired inspections within standard due diligence/contingency period.
• Seller must legally provide complete history of property's condition, problems, repairs, etc.

Disadvantages:

• Seller may not be able to negotiate price below outstanding balance of seller's mortgage(s).
• sellers still have to move out.

Pre-Foreclosure/Notice of Default (NOD) or Lis Pendens Filed by Lender/Short Sale

Advantages:

• Seller will be motivated for fast sale, increasing buyer's bargaining power.
• Buyer can do all standard inspections, including researching title during due diligence/contingency period.

Disadvantages:

• Unless purchase price will pay mortgage(s) and closing costs in full, lender's approval of price and terms of sale will be required (i.e. short sale).
• Lender may not approve price, seller concessions or closing cost credits.
• Short sale may take 45-90 days to close.
• sellers still have to move out.

Foreclosure Auction

Advantages:

• Property will be sold for outstanding mortgage balance owed to foreclosing mortgage holder -- this can be a low price for the property.
• Cash payment requirements reduce competition.

Disadvantages:

• Auction purchase price must be paid in cash on the same day as the auction -- no mortgage is usually allowed.
• No inspections allowed; as-is sale.
• Buyer may take property and owe other liens, back taxes and mortgages. Buyer must research state of title prior to auction.
• Bank cannot provide disclosures as to property history/condition issues.
• If bank believes auction will not recover a good price, bank may buy the property at auction.
• Property condition might be suspect due to damage done by upset homeowners.
• No commissions or attorney's fees will be paid; buyer must pay for their own representation.

Post-Foreclosure Bank-Owned Property REO (Real Estate Owned by Lender)

Advantages:

• Bank is motivated to get property sold and will negotiate price, down payment, closing costs, escrow length, etc.
• Title will be clear; buyer will not take on any liens, mortgage or back taxes of prior owners.
• Inspections and mortgage financing are allowed within normal due diligence/contingency period.
• House will be vacant.
• Property will usually be listed on MLS; bank will pay real estate Agent's commission.
• REO sales close within a normal escrow period of time.

Disadvantages:

• Bank will not agree to do any repairs; as-is sale.
• Bank will usually require additional paperwork.
• Bank cannot provide disclosures as to property history/condition issues.

Avoiding foreclosure now could make or break your attempts to get a loan in the near future and determine whether you can get affordable interest rates.

That's why I've made this site available for anyone in our community struggling with mortgage payments. Foreclosure alternatives like short sales and deeds-in-lieu allow homeowners to avoid many of the damaging effects of foreclosure. In addition, short sales may have less of an impact on credit scores than foreclosure.

To get all the information on how these options affect your credit score, fill out the form below and click "Send". If you need immediate assistance, Contact me right away. 

With mortgage rates at record lows and housing markets stuffed to the gills with cheap distressed properties that's led to declining home prices, the cost to own a home is sometimes cheaper than renting an apartment in many markets, according to analysts at Credit Suisse.

While a segment of the renting population continues to rent, many are looking to dip their toes in the homeownership waters. Credit Suisse said the percentage of median household income needed to pay the mortgage on a median priced home is at a 30-year low, as seen in the below chart.

Low mortgage rates and property values makes homeownership more attractive than renting for many. In many markets — including Washington DC, California's Inland Empire, Las Vegas and Phoenix — paying for a mortgage is less expensive than renting.

In a report on the future growth of real estate investment trusts (REITs) that own and manage apartments, Credit Suisse cited this shifting trend as a concern for the apartment REIT sector's future growth, among other remaining questions on the sector.

To test the theory that owning is cheaper than renting, Credit Suisse compared the cost of owning a condo and renting an apartment located close to each other in two markets — downtown Stamford, Conn. on the East Coast and the Mission Bay neighborhood in San Francisco on the West Coast. The comparisons went beyond just the difference between making a monthly mortgage payment versus monthly rent. Credit Suisse compared tax implications, condo homeowners association fees, and provided comparisons based on both a 30-year fixed-rate mortgage (FRM) and a 5/1 adjustable rate mortgage, each with a 20% down payment.

The results were mixed. In Stamford, Credit Suisse compared an apartment complex and condo building 0.5 miles apart that are close in age and offer similar resident amenities. The cost to rent the apartment was $2.30 per square foot, while the cost to own the condo with a 30-year FRM was $2.68 (16% higher than renting) and the ARM was $2.56 (12% higher than renting).

In calculating the cost to own the condo, Credit Suisse said it did not factor in a number of variables, including if the borrower used a smaller down payment of 10%, or used a Federal Housing Administration (FHA)-backed loan, which requires as little as 3.5% down. In addition, the condo building in Stamford offers seller financing options with rates below prevailing market conditions. Another variable not taken into consideration was the cost to pay parking fees at the condo.

Despite the higher cost to own, the difference in 2010 was far closer than when the condo building in question opened in 2008. Then, the cost to own with a 30-year mortgage was $3.54 per square foot, 43% higher than the cost to rent at the same apartment building in 2008, $2.48 per square foot.

"Assumptions of renting versus owning vary considerably by individual," Credit Suisse said. "However, one thing is clear- the spread has contracted considerably for any participant."

In San Francisco, the condo and apartment buildings are located on the same street, just .3 miles apart. The cost to rent the apartment was $3.40, while the cost to own the condo was $3.34 square feet with a 30-year FRM (1.7% less than renting) and $3.18 with an ARM (6.5% less than renting). Previous years' data was unavailable because both buildings are too new. But compared to prevailing mortgage rates in May 2010, which were, on average, 50 basis points (bps) higher, the after tax monthly cost of owning the condo was $100, about 3%, less in July 2010.

In the West Coast example, Credit Suisse said if the owner used a FHA-backed mortgage with a 3.5% down payment, instead of a conventional 30-year FRM with a 20% down payment, the cost to own would rise to $3.74, 10% higher than the cost to rent the apartment. In addition, another variable to consider is the equity the condo owner builds that the renter does not.

"If we excluded principal repayment from cost, the monthly payment for Stamford and Mission Bay would drop to $2.18 and $2.61 per foot from $2.68 and $3.34, respectively," Credit Suisse said. "On this basis, in both markets, owning would screen cheaper than renting."

Despite individual variables, Credit Suisse said its analysis illustrates that the relative cost of owning versus renting has contracted considerably in the recent credit crunch.

Write to Austin Kilgore.

Lenders are canceling more foreclosure sales in California than ever before, and new financial and political demand for short sales could be the culprit.

Lenders canceled nearly 22,000 California foreclosure sales in June, driven mostly by JPMorgan Chase (JPM: 40.00 -1.19%). It’s a 27% increase from May, a 153% growth from a year ago, and an all-time high, according to ForeclosureRadar, which tracks foreclosures in the state.

Foreclosure sales can be canceled for successful loan modifications, short sales, a legal requirement, or even a filing error. In terms of strategy, a spokesperson for JPMorgan Chase said the bank has not made any policy shifts to cancel more foreclosure sales.

According to ForeclosureRadar, a certain number of the cancellations can be attributed to pending modifications and short sales, but homeowners and real estate agents have complained to the company of sales that were canceled without either.

“We have seen a shift over the last couple of months where homeowners want this process to be over and they want to start to rebuild,” said a spokesperson for ForeclosureRadar.

Researchers at the company received varying answers as to why the cancellations are up. The best answer came from one unnamed REO professional. According to the source, the Home Affordable Foreclosure Alternatives (Certified HAFA Specialist) program had the most to do with the cancellations. The Treasury Department launched Certified HAFA Specialist in April to provide incentives to servicers for conducting short sales and deeds-in-lieu of foreclosure to homeowners who fail the Treasury’s Home Affordable Modification Program (HAMP).

“Now that servicers have systems in place to administer the program they are removing delinquent loans from the foreclosure pipeline to allow a reasonable short sale time period,” the source told ForeclosureRadar. “Predictably (also my opinion) the period would be expiring just after the November elections so there would be less political blowback as those properties that don’t conclude with a successful short sale are taken to foreclosure and ultimately, REO.”

After foreclosure activity dropped across the board in May, new foreclosure notices increased 6.7% in June, and notices of trustee sale jumped 21%. In fact, notices of trustee sales have outnumbered preliminary notices of default for the past four months. The gap really widened in June, when there were almost 9,000 more notices of trustee sale.

But this trend could become the norm as banks have to restart more foreclosures than they initiate.

“Historically it is very unusual to have more Notice of Trustee Sale filings than Notices of Default” says Sean O’Toole, founder and CEO of ForeclosureRadar. “But with skyrocketing cancellations and the possibility of failing loan modifications, this will be increasingly common, as lenders are only required to file a Notice of Trustee Sale to restart the foreclosure process.”

Lenders pushed 23% fewer properties into REO status in June and 46% less than a year ago. The amount of properties that have received a notice of default but have not yet been scheduled for sale increased 8.8% in June, but further along the foreclosure pipline, inventory remains constricted. The amount properties scheduled for sale dropped 1%, and REO inventory declined 4.8% in June.

Teri Pacitto is a Certified Certified HAFA Specialist Specialist

By Tara-Nicholle Nelson, Esq., FrontDoor.com | Published: 2/01/2008

By Tara-Nicholle Nelson, Esq., FrontDoor.com | Published: 2/01/2008