Realtor Coaching & Training: Michigan
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.
Realtors, there are 2 kinds of agents…those who know how to easily list and sell short sales (and are making a fortune) and those who refuse to learn anything new…struggle to stay afloat…and will probably not be in real estate for much longer. What kind of agent are YOU? Watch the FREE Agent Short Sale Secrets video then download the FREE Agent Short Sale Secrets book. Don’t wait, don’t procrastinate….FINALLY take action and learn how to become one of the agents who is THRIVING in this market.
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.
Realtors, learn the skills that this market requires and you will have nothing to fear. Learn how to easily list and sell short sales. Watch the FREE Agent Short Sale Secrets video now…next, download the FREE Agent Short Sale Secrets book.
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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Harris Real Estate University Students…and future students….read this breaking news now:
Diana Olick, CNBC just posted this on her blog….
I got a call yesterday from Scott Scredon at the Consumer Credit Counseling Services in Atlanta. He says they’ve seen a distinct change in callers. “We’re getting calls from engineers and attorneys and post graduate students,” he says. “Many of these people run through their 401Ks and their savings and start living off credit cards and then they call a counseling agency for help. So it’s a new kind of person we’re seeing today, but it’s a sign of the times.”
Realtors, the CEO of RE/MAX said that every agent must know how to do short sales. Learn now how to easily list and sell short sales. Watch the FREE Agent Short Sale Secrets video and then download the FREE Agent Short Sale Secrets book!
It’s not like we didn’t know it was coming, but apparently it’s coming with a vengeance.
Prime fixed-rate loans have finally leapfrogged those nasty subprimes to take the lead in the race to foreclosure. The foreclosure rate on primes has in fact doubled in the last year, and almost half of the overall increase in foreclosure starts in the first quarter of this year was due to the increase in primes.
So I asked Jay Brinkmann, chief economist over at the Mortgage Bankers Association, why all these aggressive industry and government modification programs aren’t helping, especially if the troubled borrowers are not in those nasty, exotic subprime loans.
“We have seen already in April a step up in some of the actions filed on people who don’t qualify. But when we look at vacant homes, when we look at cases where people are simply out of work, there’s simply nothing there that can be modified or worked out if they don’t have a job,” notes Brinkmann. On top of that, more and more borrowers are redefaulting and ending up in the mod system again. “Unfortunately, people that can’t live up to the promises they made originally when they were in a loan workout situation or simply that they were hoping things were going to get better and they did not. They then get back into the process and end up going to foreclosure. I think those factors will continue to drive the numbers up,” adds Brinkmann.
And one more thing: Freddie Mac estimates that 40% of the loans they have in foreclosure are on vacant homes. The borrowers don’t want a modification. Home prices have fallen so far that they will not see any equity for decades. So why pay?
Realtors, Its not too late for you to learn how to easily list and sell short sales. Watch the FREE Agent Short Sale Secrets video now and then download the FREE Agent Short Sale Secrets book.
On the bright side, if you can find it, the bulk of the trouble is still centered in four states: California, Nevada, Arizona and Florida, with Michigan, Ohio and Illinois close runners up. Brinkmann was surprised to see less of a national rise in foreclosures, but he is expecting it in the coming months.
Questions? Comments? RealtyCheck@cnbc.com
Foreclosure Firestorm Ahead.
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Too Soon To Call Housing Bottom?
Too soon to call a housing bottom?….Time Magazine seems to think so…
Warren Buffett said that the real estate business his company Berkshire Hathaway owns is seeing a small improvement in housing demand. The National Association of Realtors seemed to confirm his observations when it announced that the index for pending home sales went up in March. This data helped send the stock market higher as it stays true to form by rising on the most modest news.
Except for low home prices and very low mortgage rates, all of the elements for a recover in housing are missing. Those two things should be enough, but balanced against them are shrinking access to credit, an inability of Americans to get higher wages, and crippling unemployment.
The April unemployment figures will be out later this week. Six hundred thousand people lost jobs last month, according to most estimates. Two and a half million people have lost work since the beginning of the year. A housing recovery cannot occur in the presence of the massive collapse in unemployment. The devastation of the potential home buying base is too great. Many of the people who lose jobs will also lose their houses and that increases the inventory of unsold homes.
Consumers have lost access to credit. The fact that mortgage rates have dropped does not even begin to offset that. Qualifying for a mortgage is harder than ever. Banks have reason to be cautious. One of the large credit bureaus just released a report that says 4.7% of payments for bank-issued credit cards were late sixty days or more in March, an increase of 38% over the same month last year. According to Reuters, “In March, lenders closed 20 million card accounts, sending the total down by 58 million since the peak in July 2008 to 380 million.” Banks will not be lending to consumers as long as there are no solid and sustained signs of an economic recovery. They cannot afford the risk after all of the write-offs they have already taken.
Realtors. Its NOT too late to become a REO Listing Agent. Learn now how to be the agent with the best-priced, buyer-baited REO Listings. Watch the FREE Agent REO Secrets video and download the FREE Agent REO Secrets book. Do this NOW.
The single biggest enemy to a housing recovery may be the fact that there is no increase in real wages. The failing economy has ruined any chance that the average worker will make more this year than he did last. Many people will probably make less this year than they did in 2008, although the government figures are not precise enough to show that. Anecdotally it is almost certainly true. Earning a higher wage with unemployment more than 10% has to be nearly impossible in some of the largest states including Florida, Michigan, and California.The recession has gone on so long and has been so crippling that the eyes of the wishful begin to play tricks. A small piece of economic information, like one month of very modestly improved housing numbers or one week of a slight decrease in jobless claims, sets off a chain reaction. If one set of numbers is OK, the next set will be better. Real estate prices will stop falling everywhere, if they stop falling in hard hit Nevada.
Home prices will not get better until the elements that made housing prices perform so well for almost ten years return. Those elements may not come back with the force that they had in 2003, 2004, and 2005, but they must make a modest recovery for housing to recover. People have to be able to believe that they have some meager job security. A bank has to tell them that it wants their business. And, they have to feel that they can, if only rarely, get a raise.
Source: Time Magazine.
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Property Tax Revolt.
Here is a great people helping…and money making tip for you….
When Julie and I sold real estate in Ohio, every spring we would send a letter to all of the homeowners in our community offering guidance how to have their property tax bill reassessed. It seemed to be common practice for the homes in our community to be over-taxed.
Its a fairly simple process. There is a form that the homeowner needs to complete (You can usually find this form online…go to your local tax auditors web site). Next, they will need a CMA. Thats it! You provide all of this to your community, your friends, family and past clients. In virtually every real estate market homes have depreciated creating a situation where homeowners are overpaying for their property tax.
Imagine the gratitude that homeowners will have when you help them save money!
Obviously, this is a fantastic way for you to provide a much needed financial boost to your real estate clients….and a powerful method to expand your real estate business.
Homeowners watching the value of their houses slowly ebb are storming tax offices from Ann Arbor, Mich., to Atlanta, demanding that county officials reassess their homes and lower their property taxes.
It is a question of fairness, says Gene Burleson of Atlanta, who stood in line April 1 to appeal his assessment. His house has lost 25 percent of its value since it was last assessed, he adds: “I’m just trying to insulate myself from coming tax increases.”
Property taxes have become a rallying point for disgruntled Americans because, unlike sales or income taxes, they can be challenged directly by individual citizens: Some 40 percent of assessment appeals are successful. Yet the movement threatens already stressed counties, putting the tax receipts that pays for schools and police at risk.
“The property tax is the only tax where [a citizen] can go in and eyeball the guy,” says Billy Cook, executive director of the Institute for Professionals in Taxation in Atlanta, noting that appeals often lead to small-claims-style hearings to press one’s case against the county’s tax valuation.
“Think of all the taxes in the U.S.: The taxpayer renders their returns and the government audits to make sure you do it right,” adds Cook. “The only tax where the taxpayer audits the government is the property tax.”
In many areas across the U.S., home values have dropped so rapidly that assessors have not been able to keep up. Even as their home values depreciate, homeowners are likely to see increases in their tax rates, because appraisals sometimes have been done years earlier.
“You have a lot of things coming together right now” resulting in the rush on tax assessors’ offices, says Joan Youngman of the Lincoln Institute of Land Policy in Cambridge, Mass. “You have homeowners knowing that the value has dropped. You have rapid shifts in the market. And on top of that, it’s harder for assessors. … It’s more likely that there’ll be inaccuracies now than when everything is stable.”
Tax Appeals From Georgia to Nevada
Assessment appeals are up in cities nationwide:
In metro Atlanta, more than 50,000 people — a 10-fold increase over last year — filed appeals ahead of the April 1 tax deadline. The result was long lines of grumbling taxpayers. Little wonder: A survey released Tuesday said average home prices in Atlanta are down to 1996 levels.
Some assessors say the trend is being driven more by dramatic headlines than by real shifts in property values.
“I think there’s a genuine concern for what property values have done, but I think there’s also a reaction to national headlines that are reflective of markets in far worse condition than ours,” says Phil Hogsed, chief assessor of Georgia’s Cobb County, north of Atlanta.
Still, the onslaught highlights the delicate balance of property-tax assessments. While the tax assessor’s job is technically nonpolitical — they assess value, while politicians set the tax rate based on that value for their revenue needs — there’s constant pressure to keep valuations high to maximize revenue.
Assessments can be political, as a recent Supreme Court case in Nevada showed. The court ruled that dramatic differences in assessments in different counties bordering Lake Tahoe suggested that more than just the real value of the homes and properties was taken into account.
“Politicians … put pressure on the local assessor to keep that value as high as possible so they don’t have to raise the tax rate,” says Cook of the Institute for Professionals in Taxation.
Given what’s happening now, however, elected officials will be under increasing pressure to debate publicly the prospect of higher taxes to fund government, Cook says. Many states’ expenditures were growing by 10 percent a year before the recession began.
“If house prices are down 30 percent in any given market, then the property tax rate has got to go up … or the government’s got to shrink by 30 percent something’s got to give,” says John Baen, a real estate expert at the University of North Texas in Denton. “Any taxing authority taxing real estate is always [eager] to increase values based on a few select sales of some cherry-picked, high-priced properties … yet on the way down they’re slow to react.”
Why Appeal Taxes? ‘I Just Don’t Believe the Assessment’
Atlanta IT specialist Jacquay Waller stood in line this week at the Fulton County government complex. He bought his house in the Sandtown neighborhood for $350,000 two years ago. The county assessed it at $380,000. If he were to sell it today, Waller doesn’t think he’d get more than $250,000, based on comparable sales in the neighborhood.
“I just don’t believe the assessment,” says Waller. “I just don’t want to pay more in taxes on an amount that I could never sell it for.”
In good times, few people worried about their assessments and even saw high valuations as a good omen for their properties. Now, especially for those homeowners who bought at the height of the market, those values are a burden.
“People who bought in recent times at the highest prices are the ones whose values have fallen tremendously,” says Tom Richardson, a tax attorney in Ann Arbor, Mich., which has seen a record number of tax appeals this year. “It’s the people who have taken the worst hit who are now at risk.
Along with looming tax increases, those shaky valuations are forcing a secondary standoff between government and the people, says Sharron Angle, a former Nevada assemblywoman: “When people don’t feel like they can spend money because the government is going to tax them, and [homeowners] need money to forestall whatever attack the government is going to make on their pocketbook, it pits the government against the people and stagnates the economy.”
The National Taxpayer Union, an antitax lobbying group in Washington, claims that as many as 60 percent of homes in the U.S. are overassessed. For the 722,000 homes in New Jersey that are potentially overassessed, average savings on the tax bill could equal nearly $2,000, according to the website EasyTaxFix.com.
“It’s a muddled situation out there with what is a house’s true value right now,” says Verenda Smith, a spokeswoman for the Federation of Tax Administrators in Washington. “Everything is just an educated guess.”
“The standard wisdom is that homeowners win on the upside and lose on the downside and over time that evens out,” she says. “But they don’t want to hear that it evens out when they’re worried about their job and their house value.” Source: ABC News.
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Home Value Losses Increasing
Interesting Analysis of Case-Shiller Home Price Index Data
(This post is from The Affordable Mortgage. Read it and share your comments)
An analysis of the publicly available data which constitutes the S&P/Case-Shiller Home Price Index produces some interesting conclusions.
Introduction
During the mid-1990s the Government proactively pursued the goal of increased homeownership for the poor, the credit-challenged, minorities and inner-cities.
Many tools were employed but the primary incremental policies used to achieve this goal were:
- Revisions to the Community Reinvestment Act which directed lenders to make loans to people who could not otherwise qualify for them based on merit
- The reallocation of Fannie Mae’s/Freddie Mac’s expenditures towards subprime loans which constituted a large and recurring supply of capital to fund subprime loans and a huge potential profit opportunity for the fee-based mortgage industry
- Pressure brought to bear on lenders by the GSEs to meet subprime lending goals
- Regulatory influence over the lending industry
Increased access to credit with generous terms caused demand for houses to expand, transaction volumes to rise and inventories of for-sale properties to tighten. As a result, home prices began to rise nationally at an unsustainable pace in 1997.
Framework for Analyzing Case-Shiller Data
Since home prices began to decouple from the fundamentals of value in 1997 it makes sense to analyze current home values relative to the sustainable levels which existed before the Housing Bubble distortion. Analyzing what these values would be today adjusted for inflation provides an interesting perspective on where home prices should be and potentially allows us to project where they are heading.
Realtors, clearly to survive…and thrive in this market you must know how to easily list and sell short sales. Watch the FREE Agent Short Sale Secrets video now.
Housing prices are expected to generally track inflation because it is logical that they should do so (as the cost of inputs including materials, labor and land rise with inflation and excess price appreciation will lead profit-seeking builders to increase supply) and because several hundred years of housing price data clearly establishes this trend.
Analyzing the Data
Looking at the Case-Shiller figures since January 1997 proves interesting.
While the 10 City Price Index has fallen 30.2% from its peak value in June 2006, the index needs to fall an additional 34.4% from current values to reach inflation equilibrium with January 1997.
Eight of the 19 markets analyzed need to fall by in excess of 25% to reach inflation-adjusted, pre-bubble valuations and 10 markets need to decline by more than 20%.
The most overvalued markets continue to be New York and Los Angeles which need to fall an additional 41% from current levels.
Some may draw comfort from the observation that many markets analyzed are approaching inflation-adjusted equilibrium, but this perspective may prove to be optimistic. Most of the factors which determine market prices are far less favorable today than they were in 1997. The supply of houses is excessive, inventories are higher, credit is tighter, expectations for current/future price performance is negative, subprime loans no longer exist, and the primary mechanism which propelled prices to unsustainable heights (affordable mortgages) are no longer available.
Clearly one of the best opportunities to make money now is being a REO Listing Agent. Watch the FREE Agent REO Secrets video now and download your FREE Agent REO Secrets book.
Potentially of even greater concern though are those markets which are not currently overvalued relative to 1997.
Detroit and Cleveland are actually trading in real terms at less than prices twelve years ago. These cities have been impacted by rust-belt and auto industry issues and are unique cases. But they may provide insight into what happens to housing prices in economic downturns. Slumping economic activity and high unemployment have depressed housing values. But which one of the remaining 17 markets analyzed isn’t experiencing an economic slowdown and rising unemployment?
Even more shocking are the markets of Las Vegas and Phoenix. Each has effectively reached equilibrium but both are experiencing rapid price declines which are accelerating. In fact these two were the worst performing markets year-over-year for January with Phoenix down 35.0% and Las Vegas down 32.5%. It seems likely that both markets will trade at substantial discounts to real 1997 prices in the near future. This is amazing as each was a recent boom town, in states with growing populations and without the macro-economic challenges of Ohio and Michigan.
This should scare anyone who hopes that price declines will cease once we return to pre-bubble prices. It appears that the fundamentals which influence value, not the protestations of Washington DC, determine asset prices.
Based on my understanding of the primary causes of the Housing Bubble, my expectations for the Affordable Mortgage Depression and my interpretation of the Case-Shiller data, I expect every market analyzed to see home price index values fall below inflation-adjusted, January 1997 levels.
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Mortgage Late Payments Rise
Realtors, pay attention to this story….we have been telling HREU Students for months to pay attention to the default rate for FHA loans. Being that FHA Loans would be an indicator as to the overall health of the real estate markets. This story is from WSJ.com.
Defaults on home mortgages insured by the Federal Housing Administration in February increased from a year earlier.
A spokesman for the FHA said 7.5% of FHA loans were “seriously delinquent” at the end of February, up from 6.2% a year earlier. Seriously delinquent includes loans that are 90 days or more overdue, in the foreclosure process or in bankruptcy.
Since the collapse of the subprime mortgage market in 2007, most home loans for people who can’t afford a sizable down payment are flowing to the FHA. The agency, which is part of the U.S. Department of Housing and Urban Development, insures mortgage lenders against the risk of defaults on home mortgages that meet its standards. FHA-insured loans are available on loans with down payments as small as 3.5% of the home’s value.
The FHA’s share of the U.S. mortgage market soared to nearly a third of loans originated in last year’s fourth quarter from about 2% in 2006 as a whole, according to Inside Mortgage Finance, a trade publication. That is increasing the risk to taxpayers if the FHA’s reserves prove inadequate to cover default losses.
As of January, the cities with the highest FHA default rates in December were Punta Gorda, Fla., at 18%; Detroit, 15.6%; Flint, Mich., 15.1%; Fort Myers-Cape Coral, Fla., 15%, and Elkhart-Goshen, Ind., 12.1%, according to a HUD report.
Foreclosed FHA homes owned by HUD totaled 39,687 in January, up 22% from a year earlier.
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So, we are coming out of a ‘Bubble Market’ when so called ‘Lair Loans’ were as common as people with real estate licenses in California. The Government, Lenders, Loan officers are now playing by new rules when it comes to writing mortgages……and what happens when the rules require more verifications? In other words, now that the ‘Liar Loans’ have gone the way of the SUV, guess what is happening….
Residential mortgage fraud soared to a record high in 2008, with incidents up 26 percent from the previous year, according to a report released Monday by the Mortgage Asset Research Institute.
The institute reported that mortgage fraud is more prevalent today than it was during the height of the housing boom that occurred during the first half of the decade.
Did you catch that….MORE prevalent now vs the boom when nearly anyone could get a mortgage loan….
It blamed the financial pressures of the ongoing recession for prompting many borrowers, lenders, brokers to make false statements on loan applications during 2008.
“As far as our calculations and research are concerned, this is an all-time high” since the institute began keeping records in 1990, said Jennifer Butts, one of the report’s authors.
Ah, no. Its because for the first time in years (and years) lenders are now actually forcing folks to prove their financial ability to pay their mortgage! Imagine that. So, for the first time in almost 10 years lenders have to collect full financial packages on their borrowers and the borrowers themselves must provide actual….proof!
Study results were presented during a telephone news conference from a Mortgage Bankers Association’s national meeting on loan fraud in Las Vegas. Officials stressed that mortgage scams are on the rise, “further draining lender, law enforcement, and consumer resources in the industry’s most challenging times.”
Among states, Rhode Island ranked first in the country for mortgage fraud last year, with more than three times the amount of fraud that had been expected, based on origination volume.
Despite the national surge in mortgage fraud, the rate for California in 2008 dropped to eighth place among the 50 states, from fourth place in 2007. The change was attributed to stricter law enforcement.
Florida, which ranked first among states in 2007, dropped to second place. Next in line for 2008 were Illinois, Georgia, Maryland, New York and Michigan.
The bankers association did not release a state-by-state breakdown of fraud incidents. Representatives said the totals were being withheld to protect the anonymity of lenders who participated in the study.
The ranking of the states was based on a fraud index created by comparing the number of loans issued and anticipated fraud cases to the actual number of incidents that were reported.
The top incident type nationally was application fraud, representing 61 percent of reported cases. It was the fifth year in a row that it topped the list.
Next came frauds related to tax returns and financial statements, which increased from 17 percent of reported frauds in 2007 to 28 percent in 2008.
In order of volume, other fraud types included appraisals or valuations, verifications of deposit, verifications of employment, escrow or closing costs and credit reports.
You know….all the stuff that they didn’t have to collect for loan approval only 18 months ago.
While home-loan standards have become tighter in recent months, in the years leading up to the mortgage market meltdown, underwriting was lax by historical standards.
Ya think!
Tens of thousands of adjustable-rate mortgages were issued without determining whether the borrowers had the savings or income to make their payments after their introductory “teaser” rates adjusted upward.
Edit: Millions vs tens of thousands.
Most analysts tie these weak standards to the current surge in foreclosures and the sharp decline of home prices in formerly hot real estate markets like San Diego County.
John Courson, chief executive officer of the bankers association, said loose underwriting didn’t make lenders responsible for the surge in fraud. Some people simply took the opportunity “to create fraud and take advantage of the system,” he said.
Courson acknowledged that lenders were not as careful as they should have been about screening loan applications, however.
Come on guys….lets stop this BS about how its the next guys fault. Borrowers, Loan Officers, Appraisers, Wall Street…..everyone was part of this real estate Ponzi Scheme.
“Clearly, some of the credit standards in the mortgage lending business and verification practices were not as robust as they should be,” he said.
Thanks to Emmet Pierce and SignonSandiego for this great article.
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