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Tag Archives: financial crisis

Foreclosure Settlement Coming…

Thursday, 24 January 2013 12:00
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Mortgage Loan Fraud Assessment based upon Susp...

Mortgage Loan Fraud Assessment based upon Suspicious Activity Report Analysis (Photo credit: Wikipedia)

It has been a long time in the making, and whether you agree with it or disagree, it has happened.

 

The 5 largest mortgage servicers, 49 states and the federal government have reached a $25B settlement in their lawsuit.  Details aren’t very detailed… but:

  • $17B in loan mods and principle reduction for distressed borrowers
  • $3B for underwater homeowners that are still current on their mortgages
  • $1.5B for borrowers that lost homes to foreclosure between 1/1/08 and 12/31/11… there is an assumption that those foreclosures contained some impropriety
  • $the other $3.5B isn’t specified, but I would guess that the states are getting that money for “consumer protection” and “Foreclosure prevention” programs

In the case of foreclosed borrowers, checks are supposed to be coming out at the end of the 1st quarter or beginning of the 2nd quarter this year…

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Don’t Lose Your Shorts (Sale)…

Wednesday, 11 July 2012 08:00
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They are all of the rage.  Sellers don’t want to be forced to do them, and buyers are scared to death of having to deal with them.  At the same time, it is often the best option for a seller to avoid foreclosure and get back on the path to rebuilding their lives.  They can also be a great deal for buyers.

English: Buyers and sellers in the Plazuela de...

English: Buyers and sellers in the Plazuela de los Sapos, Puebla, Mexico (Photo credit: Wikipedia)

As a buyer, there are some big differences between buying foreclosures and buying short sales.  To begin with, often, short sales are still occupied.  I have been in a LOT of houses… foreclosures, vacant homes that weren’t foreclosed, abandoned homes and non-distressed tradition sales.  Homes without people in them tend to degrade.  Short sales tend to be in better condition and have fewer maintenance issues that need to be dealt with right away.

However, all is not wonderful in the world of Short Sale properties.  They have a huge problem.  Short sales are risky.  The risk is financial, but rather it is time.

  • The average Short Sale takes over 9 months to close after going under contract.
  • Only 25% of Short Sales actually make it from contract to closing.

So that means that a buyer could go through the better part of a year, only to have the sale fall through because of a lender-based wrinkle.  And when 3 out of 4 of them fall out in the process, it equals a MASSIVE waste of time.

The risk is the same for a seller.  Months and months of uncertainty followed by disappointment.  The desire to get on with financial life gets delayed.  It’s no wonder that so many sellers end up giving up and letting the house go to foreclosure.

But, there IS a way out…

Along with the brokerage change a few months ago, I also partnered up with a couple of other agents… one of which is a short sale specialist.  As part of the partnering, we have contracted a firm that handles Short Sale Process from contract to close.  The firm’s batting average is quite a bit better than the national averages…

  • Their average Short Sale takes less than 4 months from contract to close, with most happening anywhere from 2-5 months.
  • They are at 82% making it through the process to closing.

This is a huge reduction of risks for both the buyer and the seller… financial, time and emotional.  It still isn’t perfect, but 4 out of 5 beats the heck out of 1 in 4.  And getting the average time down by half is pretty big, too.  That gets Short Sale buyers out of the realm of almost exclusively investors and back into a range that is workable by people that plan to live in the house.  That opens up the market considerably.  And that means that more of the sales are likely to make it to close.

BTW, Sarah’s close rate is even higher than the 82%.

If you are wondering whether a Short Sale is appropriate for you, please feel free to give me a call, or send a text to my cell or email.

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How Does the Market Look?

Monday, 09 July 2012 08:00
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The regular market reports will resume on Friday, but for today I just wanted to expound on the general market a little.

Things have really changed in the last few months.  Just 4 or 5 months ago, I was constantly looking for “follow through” on strong numbers for almost every market segment.  There would be a good month or two, but then there would be a lousy one to cast doubt into the recovery process.

There were programs designed to “bring back the housing segment”, and while some of them did manage to move the market for a short time, for the most part, they only seemed to steal from future sales.  Sales that would have happened regardless were moved up in order to qualify for government subsidies or more favorable tax treatment.  But over the long run, they didn’t create many sales that wouldn’t have happened over the follow couple of months.

After all of that worked through the system, and consumers were more certain that there wouldn’t be future inducements, sales started picking up again… but the real boost to the sales numbers has been inventory reductions.  And while there are still rumors of a “tidal wave of foreclosed properties”, those same rumors have been around for 3+ years, always with the tidal wave 4-6 months away.  There could indeed be a wave of foreclosed properties poised to hit the market, I wouldn’t bank on it.  And the market does seem ready to absorb some more inventory, especially on the entry level end of the spectrum.

The bottom line is that the real estate market is getting back to normal.  In fact, under $200k in most of Gwinnett, it is well into Seller’s Market territory.  From $200k-$400k, it is mixed.  Above that, it is still pretty much a Buyer’s Market, but not to the extent it has been for the last few years.

It will be interesting to see what happens with the market when the general economic recovery starts in earnest.  I am still of the opinion that the best stimulus for the housing market is a recovery in the jobs market.  While the unemployment rate has gotten better, the labor force participation percentage rate hasn’t budged much.  The unemployment rate discounts workers that give up or time out on unemployment, while the labor force participation rate includes everyone that could be in the labor force.

I’m firmly of the belief that many buyers are reluctant to make a 30 year plan (buy a house and get a mortgage) when they are worried about the security of their job over the next year.

Stay tuned to see how it all shakes out…

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USA Today thinks prices are heading up…

Wednesday, 09 May 2012 09:21
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And they very may.

map for us unemployment numbers

map for us unemployment numbers (Photo credit: Wikipedia)

According to the article I ran across this morning, house prices should go up about 4% each year for the next year.  I can see that… especially on the entry level of the market.  On the upper end of the market, though, it isn’t looking like we’ll see recovery for a little while. Between taxes and other policies that aren’t that friendly towards small business, there isn’t a lot of short term optimism with many of the folks that buy more luxurious homes.

So… my take is this.  I see the lower end of the market performing well over the next few years.  The higher end of the market more tricky.  The middle of the market, as well.

On the entry level, investors are scooping up properties.  Prices have stabilized and we will likely see increases regardless of the political or business climate, unless there is a MAJOR reversal.  Many of the investors are buying and holding properties as rentals, and there are simply a lot of people out there that have good income but cannot buy because of foreclosures and short sales.  That will drive the entry level pricing picture.

selfmade image of U.S. Unemployment rate from ...

selfmade image of U.S. Unemployment rate from 1890-2009 (Photo credit: Wikipedia)

At the middle of the market, there are a few competing stories.  Many of the move-up buyers are stuck in their current homes or have been through foreclosures and short sales.  But, there are some that will look at snapping up a deal when they feel comfortable about their employment prospects.  Right now, that simply isn’t the case.  We all hear that the Unemployment Rate is dropping, but what we are NOT seeing is the Employment Rate moving up.  The drop in “unemployment” is mostly tied to people giving up looking for work.  In fact, the Workforce Participation Rate is at a low point.  So, if people in the middle start to feel that the economy is stable, they will buy homes.

On the upper reaches of the market, there are a few different stories as well.  Foreclosures and Short Sales are a factor, but not as often as on the lower segments.  But, comfort is a major factor.  Most of these folks are business owners or senior employees.  Taxes and regulations are playing a major role in their decisions.  Talk from Washington of major tax increases and more difficult regulation are making them hold off… even when they see a bargain.  A more business friendly tone in DC could turn the tide for these buyers.

The big question… Where do YOU think the market is going, and why?

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Prices Up? Prices Down? WTH??

Wednesday, 25 April 2012 08:00
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Case-Shiller Home Price Index

Case-Shiller Home Price Index (Photo credit: planspark)

Just in the last two days I have heard reported on the national news that prices have stabilized (link to the NAR release here) and that prices were declining in 16 of the 20 top metro areas (Case-Shiller link here).

How can these two stories be squared?

Honestly, I don’t think that they can be…  and given experience with past “interpretations” by the NAR, I’m inclined to not believe the NAR numbers.  Actually… I believe the numbers, but not the interpretation.

Case-Shiller looks at actual properties in some of their surveys.  Rather than looking at averages or medians, they sample properties.  By looking at repeat sales of the same address, they can better determine what prices are doing.

Pretty much every other study looks at all of the sales and then breaks it down to average or median prices.  The problem then is that if more expensive homes are selling, it looks like values are going up.  If less expensive homes are selling, it looks like prices are going down.

Of course, nothing is perfect.

The problem is that there are a LOT of ways that data can be sliced and diced.  And EVERYONE that looks at the data has an agenda.  Some may be better at ignoring their personal bias, but it is still there.

My take?  I don’t think we are quite ready to recover.  Yet.  I think that the bottom line is that until there is a recovery in jobs (not the unemployment rate, but the employment rate), there will be no recovery in the hosing market.  And that shakes out to local areas…

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