Realtor Coaching & Training: Irvine
Foreclosure Firestorm Ahead.
Just in case any of you were actually believing the housing markets where anywhere near bottom……..
NEW YORK (Reuters) – U.S. foreclosure activity for May ebbed from April’s record, but mortgages still failed at a staggering pace as President Barack Obama’s rescue programs had not had time to fully take root, RealtyTrac said on Thursday.
Foreclosure filings dipped 6 percent in the month but increased 18 percent from May 2008, marking the third highest month on record.
“There were almost one million foreclosure filings in a three-month period, and that’s simply unprecedented,” Rick Sharga, senior vice president at RealtyTrac in Irvine, California, said in an interview.
Temporary freezes on foreclosure activity ended in March. Failures of many seriously delinquent loans that were put on hold during those moratoria have been thrust back into the foreclosure cycle.
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One in every 398 households with loans got a foreclosure filing in May. Filings, which include notices of default and auctions, were reported on 321,480 properties last month.
Stemming foreclosures is seen critical to bolstering home prices, consumer confidence and the recessionary U.S. economy.
Bank repossessions, known as real-estate owned or REOs, rose in May and should spike in coming months because the moratoria ended, RealtyTrac said.
OBAMA PLAN NEEDS TIME
The administration’s plans to ease loan modifications and refinancing were detailed in early March and haven’t been implemented long enough to derail foreclosures.
The hurdles are high. Unemployment reached a nearly 26-year peak in May and mortgage rates have leaped a percentage point from their spring lows to more than 5-1/2 percent.
“One of the cures to this problem is enough buying activity to eat up the inventory of distressed properties,” Sharga said. “If mortgage rates go up to where people decide to wait out the market again, that’s just going to add to the inventory numbers and put more downward pricing pressure on all homes.”
RealtyTrac forecasts about 4 million foreclosure filings will be made this year on about 3.1 million households with loans. Last year, there was a record 3.1 million filings on about 2.4 million households.
In a more typical year, Sharga said there would be around 800,000 filings on 550,000 households.
“When you have a glut of inventory and downward pricing pressure that does tend to push properties into foreclosure,” said Sharga.
States where sales and prices soared most in the five-year housing boom earlier this decade remained the hardest hit.
Nevada stayed at the top of the foreclosure rate rankings by state, with one in every 64 housing units getting a foreclosure filing. California, Florida and Arizona, Michigan, Georgia, Colorado, Idaho and Ohio were the other states with the highest foreclosure rates.
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Ten states, led by California, accounted for almost 77 percent of total number of foreclosure actions in May.
“We need to give the administration’s programs a little bit of time to gain traction,” Sharga said. “If unemployment continues to worsen, all bets are off on foreclosure rates.”
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Next Up: McMansion REOs!
HREU Students, many of you who sell in higher end areas are now experiencing the full blunt of the housing crash. Here is a great article from Bloomberg.com that describes what is going on in two of the countries most prestigious places to live…Newport Beach California and The Hamptons.
Chuck Dayton put down a quarter of the $950,000 purchase price when he bought his house in Newport Beach, California, in 2004. He was making $500,000 a year with his drywall company and he expected home values to keep rising.
Then the mortgage market collapsed, new construction stopped and builders no longer needed his services. Dayton, 43, went into default four months ago because he couldn’t afford payments on the three-bedroom home, located within a block of the Pacific Ocean. He hopes his lender will agree to sell the seven-year-old house for less than he owes to avoid a foreclosure.
“It’s just wait and see right now,” Dayton said.
Borrowers such as Dayton, whose 2004 compensation was almost 10 times the median U.S. household income, are becoming trapped by the same issue facing the poorest subprime homeowners: falling home prices erase equity and make it impossible to sell or refinance without losing money.
The number of U.S. homes valued at more than $729,750, the jumbo-loan limit in the most affluent areas, entering the foreclosure process jumped 127 percent during the first 10 weeks of this year from the same period of 2008, data compiled by RealtyTrac Inc. of Irvine, California, show. The rate rose 72 percent for homes valued at less than $417,000 and 78 percent for all homes, RealtyTrac said.
‘Trickle Up’
“It’s the trickle-up effect,” said David Adamo, chief executive officer of Luxury Mortgage Corp., a home-loan bank in Stamford, Connecticut. “Just like homeowners in smaller homes, these homeowners anticipated being able to refinance mortgages to continue making payments and at a future date sell for a gain and put it toward their next home. That strategy backfired when the market for jumbo mortgages dried up.”
Jumbo loans are larger than what government-controlled Fannie Mae and Freddie Mac will buy or guarantee, currently $417,000 in most areas. Jumbo lending slowed in the fourth quarter to $11 billion, or 4 percent of the mortgage market, the lowest quarterly figure since Inside Mortgage Finance, a Bethesda, Maryland-based trade publication, started tracking the data in 1990.
Subprime loans were made available to borrowers who never proved they could make monthly payments on time. The loans accounted for more than 20 percent of the U.S. mortgage market in 2005, up from less than 8 percent in 2003, according to Inside Mortgage Finance.
Subprime Implosion
Defaults by subprime borrowers began rising in 2007. Since then, financial institutions that had bet on earning cash flow from home loans packaged into securities have announced credit- market losses and writedowns of almost $1.4 trillion, data compiled by Bloomberg show.
Among all homeowners, 21.8 percent were underwater in the first quarter, Seattle-based real estate data service Zillow.com said in a report today. At the end of the fourth quarter, 17.6 percent of homeowners owed more than their original mortgage, while 14.3 percent had negative equity three months earlier.
Property values dropped 14 percent from a year earlier in the first quarter, reducing the median value of all U.S. single- family homes, condominiums and cooperatives to $182,378, Zillow said. The gain in underwater homeowners will lead to more bank repossessions, the company said.
The U.S. government has lent banks $392 billion to stem the losses through its Troubled Asset Relief Program. Another $12.4 trillion was spent, lent or guaranteed by the government and the Federal Reserve to stop the longest recession since the 1930s.
Loan Losses
About $500 billion of prime-jumbo mortgages are bundled into bonds, according to Memphis, Tennessee-based FTN Financial. In February, JPMorgan Chase & Co. analysts John Sim and Abhishek Mistry in New York almost doubled their projections for losses on those mortgages to as much as 10 percent because of increasing defaults.
Foreclosures have come to the Hamptons, the beach towns about 100 miles east of New York City on Long Island, where homeowners have included Blackstone Group LP Chief Executive Officer Stephen Schwarzman, hedge fund manager John Paulson and Goldman Sachs Group Inc. CEO Lloyd Blankfein.
Almost 90 borrowers entered the foreclosure process in the towns of East Hampton and Southampton in the first 10 weeks of 2009. That compared with 109 in the same period last year and 73 in the first 10 weeks of 2007, according to the Real Estate Report in West Islip, New York.
Hamptons Sales Fall
Home sales in the Hamptons fell 67 percent in the first quarter from a year earlier, the most since records were first kept in 1982, according to Town & Country Real Estate of the East End LLC. The median sale price slid 28 percent from a year earlier.
Rule changes spurred by rising defaults now require lenders to work with delinquent New York homeowners before beginning the foreclosure process, said Pat Ammirati, president of the Real Estate Report.
“There was this unrealistic view that the crazy financing was limited to subprime when of course it was across the board,” said Andrew Laperriere, Washington-based managing director at research firm International Strategy & Investment Group. “A lot of jumbo mortgages were nothing down with high debt-to-income ratios.”
Short Sale?
Dayton said he financed the purchase of his home, 40 miles south of Los Angeles in Orange County, with a payment-option adjustable-rate mortgage now serviced by JPMorgan’s Washington Mutual. The option allowed him to pay less each month than the interest on the loan, with any unpaid amount added to his debt.
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Dayton refinanced in February 2007 with a $1 million loan from Washington Mutual, and used some of the proceeds for business expenses, said Robin Milonakis, his agent at Altera Real Estate in Dana Point, California. He also took out two private mortgages and now has a balance of $106,000 on those loans, she said.
Dayton went into default on Jan. 29 and owes $46,584 in delinquent payments and penalties, according to First American CoreLogic, a Santa Ana, California-based mortgage data firm. Dayton said he’s found a buyer willing to pay $950,000.
The foreclosure process typically takes about a year. That means jumbo-loan defaults, which are climbing at the fastest pace in at least 15 years, will increase over the next year, according to LPS Applied Analytics in Jacksonville, Florida.
Goodbye Jumbo
President Barack Obama’s Homeowner Affordability and Stability Plan has no provision to help jumbo mortgage borrowers. The plan focuses on shoring up home loans eligible to be bought by Fannie Mae and Freddie Mac, also called conforming loans.
“The government has thumbed their noses at people who have jumbo mortgages,” said Steve Habetz, president of Threshold Mortgage Co. in Westport, Connecticut.
The share of U.S. homes in the foreclosure process that are valued at more than $729,750 increased to 2.83 percent this year through March 10 from 2.21 percent in the same 10 weeks of 2008, according to RealtyTrac. In the same 10-week period, the share of homes valued at $417,000 or less in foreclosure fell to 87 percent from 89.7 percent in 2008, RealtyTrac said.
Price Slump
California is hardest hit by luxury-home foreclosures. More than 1,500 borrowers with properties in the state that once sold for more than $1 million defaulted on their mortgages in February, said Mark Hanson, managing director of the Field Check Group, a real estate company in Palo Alto, California.
About 3 percent, or 254,745, of the state’s 8.5 million houses are assessed for more than $1 million by county assessors, according to San Diego-based MDA DataQuick, a real estate monitoring company.
While sales for all homes in the state increased 2.5 percent last year from 2007, sales of homes valued at more than $1 million declined 43 percent to the lowest since 2003, MDA DataQuick reported. Part of the reason is falling prices as California’s median home price dropped 41 percent in February to $247,590, according to the state’s Association of Realtors.
Another explanation may be stricter lending guidelines, Hanson said.
“You have to have income of $250,000, a 20 percent down payment and near perfect credit to buy a $1 million home now, so the number of buyers isn’t what it was,” Hanson said. “There just aren’t enough buyers to sop up supply. We’re seeing the collapse of the high-end market.”
‘What to Do’
Values have taken longer to decline in more affluent areas, taking some homeowners by surprise, said Philip Tirone, president of Los Angeles-based Mortgage Equity Group Inc.
“People are coming to me to do a refinance or buy another property, and what they thought they had in the equity of the home they don’t have and they don’t know what to do,” Tirone said.
Delinquencies are caused by people who owe more on their mortgages than their houses are worth, said James McLauchlen, a broker and appraiser in Southampton, New York, for James R. McLauchlen Real Estate Inc. and Hamptons Appraisal Service Corp.
“They throw their hands up and say I’m not going to kill myself trying to take care of this debt,” McLauchlen said. “Some folks work hard to make payments. Others just can’t pay. They offer a deed in lieu of foreclosure and off they go.”
Dayton said he doesn’t know when he’ll restart his drywall business, which he shut down in November for lack of work.
“This market is not even close to bottoming out, in my opinion,” Dayton said. “It continues to drop.”
Source: Bloomberg
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Lower Price = Faster Sale!
HREU Students, great common sense article to share with your Sellers about the importance of pricing their homes to SELL vs to SIT.
One of the hardest things a home seller has to do is lower the asking price. Not only does it mean making less money on the sale, but it also shows weakness in an increasingly competitive market. A price reduction is often a red flag to home buyers that the seller is in no position to negotiate and that further reductions are possible.
Its been proven countless times that the longer a house sits on the market the less percent of the original asking price it will eventually sell for. Unlike fine wine, a home for sale does NOT get better with time.
Despite the economic and psychological pain, accepting a price reduction—even a sizable one—may be the only way to sell a house in this market. For sellers who can afford to ride out the downturn, the smart move is to take your property off the market. For everyone else, it’s time to get real.
Of course, that’s great news for potential home buyers who are benefiting from more affordable prices. “There’s so much inventory that sellers need to market their listings effectively. The best way to market is to lower the price to make it attractive,” says Pete Flint, chief executive officer and co-founder of San Francisco-based real estate Web site Trulia.com.
Where the Bargains Are
BusinessWeek.com teamed up with Trulia.com to rank the nation’s largest cities with the most discounted homes. Topping the list was affluent Scottsdale, Ariz., where 37% of listings have had at least one reduction and the average discount is 12.9% off the original asking price. Other cities in the top 30 include Tampa, Saint Paul, Los Angeles, Honolulu, Columbus, San Francisco, and New York City.
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Of course, a reduced price isn’t always a bargain. The owner might not have dropped the price enough or might be lowering it because of some other reason (maybe the house is just plain ugly). But markets with large numbers of listing-price drops are also places where properties are lingering on the market and where sales prices are falling fast.
That’s certainly the case in Scottsdale. Dave Messner, founder of RE/MAX Fine Properties in North Scottsdale, said homes on the lower end are selling but sellers of new luxury homes are having to discount heavily. The problem is that sellers are competing with banks that are putting foreclosed homes on the market for bargain-basement prices.
“Buyers are looking for absolute steals and that’s what’s selling,” Messner said.
Heidi Majidi, a Realtor with RE/MAX, said that one seller cut the price of a $2 million Scottsdale listing in half only two months after putting it on the market. “It’s pretty scary stuff,” she said.
Even New York Prices Are Dropping
Homeowners in New York City are facing a more sudden change in the market, which was in pretty good shape until the Wall Street meltdown about six months ago. In New York City, which ranked No. 25 on our list, 29% of listings are now below their original asking price, according to Trulia.com. The average asking-price discount: 13.7%.
Home prices in New York dropped 21% in the first quarter compared with a year ago and sales have dropped off almost 57%, according to Jonathan Miller, chief executive of real estate appraisal firm Miller Samuel. Home sales picked up in March, but they are concentrated in the lower end of the market. High-end homes, as in much of the country, are taking a long time to sell because wealthy buyers have lost jobs, bonuses, and investment income, and jumbo loans are difficult to get.
“In Manhattan, specifically in the last two quarters, we’ve seen a big jump in listing-price discounts,” Miller said, adding that sellers had to adjust quickly to the sudden drop-off in demand.
Gauging the Market
Sellers are sometimes behind the market because the home price reports they consult lag behind the market. The reason is that these reports are based on property closings, which happen months (and for new construction, even a year) after buyers sign contracts, said Gary Malin, president of Citi Habitats, a Manhattan residential real estate broker. To properly gauge the market, it’s important to look at what’s currently on the market rather than what has closed and consider how long those listings have lingered there, he said.
Buyers tend to think that properties that have been on the market too long are undesirable, but a significant price reduction can help to spur activity, Malin said.
“It does get a second wind when it’s priced appropriately,” he said.
But Mollie Carmichael, senior vice-president of John Burns Real Estate Consulting in Irvine, Calif., said it’s better to start out with a competitive asking price than to make adjustments later. In a market where prices are falling, an asking price that is 5% above other listings at the beginning could be 20% too high a few months later. The longer it takes to sell a home, the more prices would have fallen, Carmichael said.
A lower price will generate more interest and could even trigger a bidding war, she said.
“If you close fast and sell fast, you have a better opportunity to retain value,” Carmichael said. “I know you might love this or that about your home, but price it to the market. Premiums are very, very difficult to achieve in a market like the one we have today.”
Source: BusinessWeek.
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HREU Students…we have been preparing you for this for over a year now……get ready. The largest wave of foreclosures is just getting started:
Foreclosures have surged as the nation’s largest banks have lifted moratoriums put in place while the Obama administration hashed out its housing plan.
The president’s Making Home Affordable program requires banks to review all mortgages that are 60 days past due and, if it’s cheaper for the bank, to modify the loan rather than foreclose on the property.
But while those banks are now deciding which mortgages are worth modifying, a glut of homes are being moved to foreclosure.
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In March, the month in which most lenders lifted the moratorium, foreclosure filings were the highest on record – 341,180 foreclosures nationwide, according to Irvine, Calif.-based RealtyTrac, which tracks foreclosure filings.
“Since much of this activity was in new foreclosure actions, it suggests that many lenders were holding off on executing foreclosures due to industry moratoria and legislative delays,” James Saccacio, chief executive of Realty Trac, said in a statement.
On Long Island, foreclosures in the first quarter spiked 77 percent over the same period last year, with 943 foreclosures in Nassau and Suffolk counties, according to PropertyShark.com. Foreclosures on the Island had dropped at the end of last year, when several banks put the moratoriums in place.
Bill Staniford, chief executive of PropertyShark, said he expects foreclosures to continue to rise now that the moratoriums are gone.
“But we’re in a new political era and I am going to assume that the government will try to convince or coerce the banks to work out whatever possible to avoid that.”
The government has already said it will give cash incentives to lenders that participate in President Barack Obama’s program. On Tuesday, the government said it will also offer incentives to those that try to modify second mortgages.
Big banks such as Citigroup, Bank of America and JPMorgan Chase have all said they’ll participate in the housing program. Chase spokesperson Mike Fusco said since 2007 the bank has already modified 330,000 mortgages by dropping the interest rate, extending the duration of the loan or deferring some of the principal. Fusco added his bank expects to help at least 650,000 mortgages through its own initiative combined with the government program.
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But Sal Pane Jr., chief executive of Amerimod Modification Agency in Uniondale, called the government’s housing plan a flop and said he’s getting a slew of new customers who’ve tried the program with no results.
“Right when the stimulus came out our business dropped off the board, but the influx of people now far surpasses if we would have just kept up at the pace we were at,” he said.
That’s because, Pane said, the government’s plan requires individual homeowners to reach out to their lender.
Amerimod takes pools of mortgages in trouble that are able to be modified and uses the volume to entice the lender to take swift action, he said.
“There’s no way average homeowners can do modifications on their own,” he added.
Experts said it remains to be seen if foreclosures will continue to set records now that moratoriums are over.
Staniford said after the initial spike, he expects a steady rise through the end of the year.
The problem locally, however, will be the significant drop in demand for the vacant foreclosure properties caused by the recession and crash of Wall Street, he said.
“There is certainly some percentage of the financial industry in New York City that lived on Long Island and is now being forced to move out of the area,” Staniford said. “It’s going to dry up a lot of demand for housing on Long Island.”
Couple that with the glut of foreclosed properties and Staniford said home prices will drop another 20 percent locally before the housing market turns around.
“I think New York is in a uniquely bad position right now,” he said. “This recovery is going to be very, very slow.”
Source:Libn.com
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Surviving The Real Estate Depression
Realtor James Joseph remembers the good old days.
That’s when his team of agents would walk into their Whittier office excited about getting a new listing. The phones rang, a lot. Commissions were huge. They were in line with the bloated price of homes, which often sold within a few days – or hours – after being listed.
Unfortunately for the U.S. economy, with the help of easy-money banks those buyers all too easily fudged their way into the American dream.
“They knew they would sell right away, regardless of price,” said Joseph, owner of Century 21 Ambassador in Whittier, referring to the excitement of his agents.
That was only about a year and half ago.
Oh, how things have changed.
Scores of for sale signs – or worse, foreclosure signs – now stand in weed-ridden front yards in the San Gabriel Valley. Realtors are leaving the business, and the housing industry that supported them – the contractors, the lenders, the builders – have gone down with them. Even Joseph, a veteran of the business, had to lay off staff.
But those left, like Joseph, are picking up the pieces in a housing market that looks quite different, at least until the next boom and bust.
Force of foreclosing
Foreclosures have reshaped that market. In Los Angeles County alone, one in every 209 homes is in default, at auction or repossessed, according to Irvine-based Realty Trac. California ranks third only to Nevada and Arizona in distressed properties, with 80,775
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That’s against a nationwide backdrop of 290,631 properties in foreclosure in February, an increase of nearly six percent from the previous month and nearly 30 percent from February 2008.
The report also shows one in every 440 housing units in the country received a foreclosure filing last month.
“The increase in foreclosure activity from January to February is somewhat surprising, given that many of the foreclosure prevention efforts and moratoria in place in January were extended through most of February as well,” said Realty Trac CEO James J. Saccacio.
In other words, even a moratorium on foreclosures couldn’t stop the uptick of foreclosures, which made up 56.4 percent of resales in February and was 36.2 percent higher than February 2008.
Surprising or not, the dramatic shift from boom to bust has the market’s survivors adjusting to a new housing landscape.
Dennis Aceves, a general contractor based in San Bernardino, has been in the construction trade for 25 years, including a stint as a custom home builder.
He opened his business about a year ago with an eye toward fixing up foreclosed homes on the market, and remodeling houses for homeowners who choose not to trade up.
“I figured there’s going to be a lot of people staying where they’re at (rather) than trying to buy now,” he said.
But it’s not just for those who are staying where they’re at.
Aceves is banking on the fact that real estate agents will be looking for licensed contractors who can quickly turn a quality job for potential homebuyers.
And those real estate agents are banking on those homebuyers hunting for a good deal.
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Indeed. Commissions paid to real estate agents and brokers totaled $46.6 billion in 2008, a $12 billion dropoff from 2007, according to ForSaleByOwner.com.
The savvy agents survive. But other aren’t so lucky, Joseph said. Joseph has survived three boom-and-bust cycles since he got into the business in the late 1970s.
“No question, the sunshine soldiers are gone,” he said. “The people who thought they could do this part-time are gone.”
Now, you’ve got to have experience, said Wil Herring, president of the Inland Empire chapter of the California Association of Mortgage Brokers.
It’s experience that has agents working 60-hour weeks, scratching out livings as they face multiple offers on repossessed homes – the bulk of their business, along with short sells, these days – because banks have priced them low in order to move inventory.
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In the new housing market, the seller gets to pick and choose the buyer, leaving buyers frustrated because theirs is only one of maybe 15 or 20 offers on a house, Herring said.
Part of the problem is fueled by buyers who think they can undercut the price.
According to RealtyTrac, more than 75 percent of consumers think they should pay at least 25 percent less for a foreclosed home, and three in 10 consumers think they should get at least 50 percent discount.
The plunge in price is spurring sales.
Sparked by bargain hunting, a total of 15,231 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month, according to San Diego-based DataQuick. That’s a 41.3 percent increase from February 2008.
And in that uptick in sales, a normal cycle of supply and demand may be picking up.
The median price of a home in the region in February was $250,000. And though it was 38.7 percent less than the year before, it was the same as in January.
Government-insured FHA mortgages for first-time home buyers are also nudging buyers into the market. And investors and speculators are jumping back in with hopes of parking their money in something else other than money market accounts, Joseph said.
And like it or not, investors coming back “is a sign that there are some green buds out here and there,” Joseph said. “They are betting with their own money that that market has bottomed out.”
But the market could remain sour, based on at least three factors, some observers said.
First is the so-called “cram down law” which, if passed, would allow bankruptcy judges to modify home loans in an effort to prevent foreclosures. Some in the mortgage industry say that if the law passes, lenders will raise mortgage rates on loans to hedge against possible modifications down the road.
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The other factor is the lingering lack of new home construction, Herring said.
And then there’s the banks.
Economists point to banks as the key to unlocking the economy’s woes. When they loosed up credit, not only housing, but other sectors such as small business will be reborn.
But that rebirth will occur under a watchful eye.
“My guess is you’re just going to go back to the way we were … back to the `80s and `90s,” said Babette E. Heimbuch, CEO of California Federal Bank. “You come in, and you need to have a down payment. You need to have good credit. It will go back to the days before Wall Street started buying (loans) up and selling them.”
Income will be documented and verified, and expectations about borrowers and property values will be much more realistic, said Leslie Appleton-Young, economist for the California Association of Realtors.
It’s all made Joseph more than a little philosophical.
It just goes to show: “the more things change, the more they stay the same,” Joseph said.
Thanks for this excellent story: Ryan Carter and Staff Writer Josh Dulaney contributed to this story. Source: www.whitterdailynews.com
Popularity: 1% [?]
The action this spring home-buying season isn’t unfolding in prestigious Manhattan or Beverly Hills, but in a middle-class neighborhood near you.
The global economic meltdown has put a freeze on sales of mansions and penthouse condos, which held strong through years of tight credit, foreclosures, and plummeting prices in lower-cost markets. These days, sales of lower-priced houses are accelerating as first-time home buyers and investors take advantage of bargain prices, low interest rates, and government incentives.
One thing hurting the luxury market is that jumbo mortgages—typically those larger than the conforming limit of $417,000—have higher interest rates and are tough to get, requiring pristine credit, six or more months of reserves, and full documentation. The deteriorating economy also makes it difficult to justify making a discretionary purchase of more than $1 million, especially with so much uncertainty in the job market.
Pulling Back and Being Careful
Rick Goodwin, publisher of Unique Homes magazine and uniquehomes.com, said even wealthy Americans who aren’t worried about paying the bills are feeling the “psychological effect” of the economic meltdown.
“Even if you can afford to buy certain things, you’re less inclined because you feel that you should pull back and be a little more careful,” Goodwin said. “Does it really look good, in this kind of market, to be spending this much money on a house, boat, or airplane?”
The luxury market hasn’t been infected by foreclosures the way other markets have. Wealthy people often have large savings accounts and other resources that allow them to continue make mortgage payments even when faced with a job loss or a sinking stock portfolio. Sellers in this market can hold on for a long time without a sale. And that’s what they’re doing.
In Orange County, Calif., for example, homes selling for less than $1 million were taking 3.58 months on average to sell as of February (above the healthy two-month level, but still good), said Mollie Carmichael, senior vice-president at John Burns Real Estate Consulting in Irvine, Calif. But homes above $1 million were taking 19.6 months, well above the six-month level once considered healthy for the luxury segment, she said.
High-End Sell-Off
“The days on the market has really increased across many markets on the higher end,” Carmichael said. “There’s just more competition, and assets are sitting longer.”
BusinessWeek.com asked Altos Research in Mountain View, Calif., to find the Zip Codes in large metro areas where listing prices were actually rising. We expected to find places where competition was pushing up asking prices as homes changed hands quickly. Instead, what we found was that the Zips showing the most listing-price appreciation were among the most expensive markets and the median listing price was rising, in many cases, because more luxury listings were entering the mix. In other words, wealthy homeowners were putting their expensive properties up for sale at the same time that the less expensive homes were being sold.
Take Winnetka, Ill., a wealthy suburb 16 miles north of Chicago. The median listing price is $1.5 million, up 12% from a year ago, according to Altos Research. But the mix of listings has shifted to the higher end, and properties are taking 245 days to sell.
“Even though the listing prices are up, this could be the net effect that the houses on the top of the market are coming onto the market because of the negative economic environment,” said Scott Sambucci, vice-president for data analytics at Altos Research. “Even though the list prices are higher, it doesn’t always mean that the market is strong.”
The sellers in the Zip Codes that made our list have plenty to be thankful for. The low-priced markets where sales are spiking and list prices are falling are often dominated by bank-owned listings and listings by desperate sellers facing foreclosure. Of course, it will only help those markets in the long run if inventories of unsold homes are cleared away to make way for a recovery.
From an F to a D-
The housing market is in terrible shape, but several reports this week provide some reason for springtime optimism. The Commerce Dept. reported that new-home sales increased by 4.7% on a seasonally adjusted basis in February compared with January. Sales of used homes jumped 5.1% in February compared with the previous month’s seasonally adjusted rate, the National Association of Realtors reported. And the Mortgage Bankers Assn. said mortgage applications surged 32.2% for the week ended Mar. 20 over the previous week (though much of that activity was related to refinancing).
The news was encouraging. But rising unemployment could keep any sort of recovery in check.
“The market conditions have improved,” said Lisa Jackson, vice-president at John Burns Real Estate Consulting. But “conditions are still fairly horrible…. Maybe it has moved from an F grade to a D-, but it’s moving in the right direction.”
Christopher Hain, real estate agent for Ramsey-Shilling in Hollywood, said high-end buyers are starting to drop prices because very few big-ticket homes are selling.
“When things don’t sell, there is downward pressure on prices,” Hain said. “But at least you don’t have the added pressure that you have in the lower-end markets of a flood of foreclosures, which can become a double whammy…. A lot of these people can wait things out.”
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Thanks to Coach Jonathan for sending this to me to share with you…….
WASHINGTON – Despite halts on new foreclosures by several major lenders, the number of households threatened with losing their homes rose 30 percent in February from last year’s levels, RealtyTrac reported Thursday.
Nationwide, nearly 291,000 homes received at least one foreclosure-related notice last month, up 6 percent from January, according to the Irvine, Calif-based company. While foreclosures are highly concentrated in the Western states and Florida, the problem is spreading to states like Idaho, Illinois and Oregon as the U.S. economy worsens.
“It doesn’t bode well,” for the embattled U.S. housing market, said Rick Sharga, vice president for marketing at RealtyTrac, a foreclosure listing firm. “At least for the foreseeable future, it’s going to continue to be pretty ugly.”
The rise in foreclosure filings came despite temporary halts to foreclosures by Fannie Mae and Freddie Mac, and major banks JPMorgan Chase, Morgan Stanley, Citigroup and Bank of America. Those companies pledged to do so in advance of President Barack Obama’s plan to stem the foreclosure crisis, which was launched last week.
Two states that contributing to the increase were Florida and New York, where temporary bans on foreclosures ended.
But other states are moving to enact similar measures. On Wednesday the Michigan House approved legislation that would give homeowners facing foreclosure a 90-day reprieve. The legislation now goes to Michigan’s Republican-led Senate, where its future is unclear.
While the number of foreclosures continue to soar nationwide, banks have held off listing properties for sale, Sharga said. There were around 700,000 such properties nationwide at the end of last year, making up a “shadow inventory” of unsold homes that could drag the housing crisis out even longer.
“It’s going to take us longer than you might anticipate to burn through he inventory of distressed properties,” he said.
The results highlight the challenge ahead for Obama and his economic advisers. The Obama administration is aiming to help up to 9 million borrowers stay in their homes through refinanced mortgages or loans that are modified to lower monthly payments.
Still, the faltering economy, driven down by the collapse of the housing bubble, is causing the housing crisis to spread. Nearly 12 percent of all Americans with a mortgage — a record 5.4 million homeowners — were at least one month late or in foreclosure at the end of last year, according to the Mortgage Bankers Association. That’s up from 10 percent at the end of the third quarter, and up from 8 percent at the end of 2007.
The RealtyTrac report said more than 74,000 properties were repossessed by lenders in February as the worst recession in decades, falling home values and stricter lending standards continue to sap the U.S. real estate market.
Nevada, Arizona, California and Florida had the nation’s top foreclosure rates. In Nevada, one in every 70 homes received a foreclosure filing, while the number was one every 147 in Arizona. Rounding out the top 10 were Idaho, Michigan, Illinois, Georgia, Oregon and Ohio.
Among metro areas, Las Vegas was first, with one in every 60 housing units receiving a foreclosure filing. It was followed by the Cape Coral-Fort Myers area in Florida and five California metropolitan areas: Stockton, Modesto, Merced, Riverside-San Bernardino and Bakersfield.
Source: Associated Press.
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