Realtor Coaching & Training: President
The US housing market will face another retreat while mortgage-backed securities and Treasurys are likely to go through a “material” correction, Meredith Whitney, CEO of Meredith Whitney Advisory Group, told CNBC Tuesday.
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Are you an agent in California?
Have you been avoiding learning how to do short sales and become a REO Listing Agent? WHY? Are you still believing that you can somehow survive in real estate without having these skills?
A simple suggestion for you…don’t wait another moment. Its not too late for you if you take action NOW to learn what this market..what we call, ‘The New Normal’ demands…
Great article from our friends at DNSNews:
Foreclosed homes taken back by lenders and distressed short sales accounted for nearly half of all residential home sales in California in 2009, according to a market report released this week by the California Association of Realtors (C.A.R.). In 2008, such sales made up 38 percent of annual transactions.
WOW! What else can you say? Agents, the question that I have for you is…how many of those short sales did you list and sell? How many home homeowners could you have helped had you known how to easily list and sell short sales? Watch the FREE HREU CDPD Short Sale Secrets video NOW. Learn the new 2010 ways to easily list and sell short sales.
As one of the hardest-hit states by the housing downturn, the Golden State is littered with bank-owned properties and homes facing foreclosure, but the lower prices and increasing buyer appetite for these deals are helping to reduce some of California’s distressed inventory.
The median price of distressed properties declined nearly one quarter to $250,000 in 2009, compared with $330,000 in 2008, C.A.R. reported. Meanwhile, the median price of non-distressed properties decreased only 10.4 percent to $485,000 compared with $541,000 in 2008.
Although one-third of sellers sold their homes for a loss last year – the highest level on record since C.A.R. started tracking net cash losses in 1989 – the lower home prices lured investors. According to the state Realtors association, more than 70 percent of properties purchased by investors were either short sales or REO/foreclosures. The typical investment property had a median price of $232,750.
Lower home prices and a large supply of distressed properties, coupled with federal tax breaks, also encouraged first-time buyers to take the plunge into
homeownership. The percent of first-time buyers increased dramatically to 47 percent in 2009, up from 35.9 percent in 2008, according to the report.
“It is clear that the federal tax credit for homebuyers worked well in 2009 and is continuing to drive home sales,” said C.A.R. President Steve Goddard. “The homebuyers’ tax credit is arguably the most successful strategy employed by the government’s efforts to stimulate the economy.”
…really? More so than the Fed buying MBS to artificially lower the interest rates….?
According to a survey conducted by C.A.R. on the effectiveness of the federal tax credit, nearly 40 percent of homebuyers in the state said they would not have purchased a home if the tax credit was not offered.
C.A.R. also noted that the large number of distressed properties led to more than half of all first-time buyers purchasing an REO/foreclosure or short sale property.
According to C.A.R.’s analysis, California’s median home price hit bottom in February 2009 at $245,170. Since then, the median home price has increased steadily in month-to-month comparisons, but remained below 2008 levels throughout 2009. The annual median price is projected to increase to $280,000 in 2010 from $271,000 in 2009, the association said.
Homes priced $500,000 or less dominated the sales mix throughout 2008 and 2009, but C.A.R. says sales of high-end homes started picking up in late 2009, with the number of closings for homes priced $500,000 or higher rising 3 percent, and sales of homes priced $1 million or more experiencing their first year-to-year increase since July 2007.
A separate study by a local newspaper shows that a growing number of Californians are turning to the courts to fight the foreclosure process and prevent their homes from becoming REOs. According to numbers complied by the San Jose Mercury News, the number of foreclosure lawsuits filed in federal court in California has ballooned from just 29 cases statewide in 2005 to nearly 1,400 in 2009
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What is the #1 Question Julie and I receive from current and future Harris Real Estate University students alike?
“Coach Tim and Julie…when will the housing market be finally done depreciating…when can we expect the markets to return to normal?”
We always answer the same way:
1) Know Thy Market: Even in the worst hit housing markets there are pockets of housing that are doing great. From a historical perspective, even during the Great Depression there were areas of the US that seemed to be almost immune. Get into your MLS and learn the housing market. Know what is selling and what isn’t.
2) Do No Harm: “Its a great time to buy”….isn’t that what we agents are told to say? Well, is it true? Nope and…depends. Know your client. If they want to keep the home for 10+ years then…yes…in certain markets and price ranges this is indeed a great time to buy. FHA fiance-able price ranges that are in sync with rental rates are probably safe. For example, if you can rent a home for a similar price as it would take to buy the home using FHA financing…them, jump in.
3) Rates Are Going Up…and Loans Will Be Harder To Secure: If you have been reading this blog for any amount of time you know that the fed has backed off buying mortgage backed securities. Mortgage interest rates no longer have the artificial support of the government. That will almost certainly mean…higher rates. If someone is trying to time the market you need to make them fully aware of the ramifications of rising interest rates. Sure, a homes value may fall another x% but, what difference will it make if they can’t qualify for the loan?
Here is an article from Washington Post.
The housing market is facing swelling ranks of homeowners who are seriously delinquent but have yet to lose their homes, and this is threatening a new wave of foreclosures that could hit just as the real estate market has begun to stabilize.
About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some economists project it could take nearly three years before all these homes have been put on the market and purchased by new owners. And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can’t obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete.
Translation: Agents, we are in THIS market..for a long time. What can you do now? Learn how to make money from listing and selling Short Sales. As we have been sharing with you since 2007…Short Sales are the best solution to avoid foreclosures. Starting NEXT MONTH the new treasury departments Short Sale Guidelines kick in. Learn the new ways to easily list and sell short sales. Watch the Free HREU CDPD Short Sale Secrets video and download the FREE Short Sale Book NOW.
As these foreclosed properties add to the supply of homes for sale, they could undercut housing prices, which have increased modestly through December, according to the most recent figures in the S&P/Case-Shiller home prices index. That rise partly reflected a slowdown in the flow of foreclosed homes onto the market.
The rate at which J.P. Morgan Chase seized properties, for example, peaked in the middle of 2008 and fell steadily last year, according to a February investor report. But the bank expects repossessions to increase this year, nearly doubling to 45,000 by the fourth quarter.
“Some of the positive housing data may not be signaling a true turning point, as many servicers are holding back on foreclosures and the related houses are not yet being offered for sale,” said Diane Westerback, a managing director at Standard & Poor’s. Westerback said it could take 33 months to clear the backlog.
Data released Thursday by RealtyTrac illustrate the dynamic. While banks repossessed fewer homes in February than a month earlier, borrowers continued to fall behind on their payments, adding to the inventory of properties headed toward foreclosure that have yet to be put on the market, said Daren Blomquist, RealtyTrac’s spokesman.
“Just looking at the numbers, we would expect there to be a bigger percentage of properties” repossessed by banks by now, he said.
This “shadow market” reflects the increasing lag between defaults and foreclosures. Many lenders are struggling to keep up with the overwhelming number of borrowers who can’t make their payments, and they’re reluctant to rush repossessed homes onto the market when prices are depressed.
Note: the total number of so-called bank shadow inventory homes? Low end, 8,000,000…..high end…15,000,000. Bottom line: millions of homes will come on the market over the next 3-5 years as REOs. Is it too late for YOU to become a REO Listing Agent? No. Watch the FREE Agent REO Secrets video and download the FREE How-To List REOs book now.
Delinquent borrowers
Today’s delinquent borrowers, for the most part, differ in a key regard from those who were caught up in the surge of defaults in 2008. That earlier wave, which precipitated the financial crisis, consisted largely of subprime borrowers who defaulted when their risky loans became unaffordable.
The borrowers in trouble now are, for the most part, people who have better credit and safer loans and have become delinquent because they’ve lost their jobs or are dealing with other economic setbacks, economists said. More than 75 percent of the borrowers who are now seriously delinquent — meaning they have missed at least three monthly payments — have traditional prime loans, according to First American CoreLogic. Most of these borrowers have not made a mortgage payment in six months.
Strategic Foreclosures are the reason….literally millions of homeowners choosing to do a short sale (the smart ones) or let the home go back to their lender and suffer the negative ramifications of a foreclosure. A recent study demonstrated that homeowners with the BEST credit will walk away (short sale or a foreclosure) when their home is 1) $70,000 upside down or..25%.
These borrowers are among the most difficult to help. Homeowners with economic troubles such as extended unemployment often cannot make even reduced mortgage payments. And the longer borrowers stay delinquent, the more difficult it is to fashion a mortgage relief plan for them.
Some lenders are giving distressed borrowers more time to see whether they can modify the terms of their loans.
It can take a borrower six to seven months to find out whether he or she qualifies for a permanent loan modification under the federal foreclosure relief program, Making Home Affordable, according to Barclays Capital.
In Maryland, for example, lawmakers extended the foreclosure process from 15 days to 135 days in 2008 and are considering emergency legislation to force lenders into mediation with a borrower before foreclosing on a property. But other states and jurisdictions have even more drastic measures to slow down the foreclosure process. “There were cases where sheriffs were refusing to file foreclosure notices,” said Jay Brinkmann, chief economist for the Mortgage Bankers Association.
After a temporary foreclosure moratorium in 2008, the backlog of homeowners facing foreclosure in Maryland has surged. The number of Maryland homeowners who are seriously delinquent or in the midst of the foreclosure process nearly doubled during the fourth quarter of 2009 compared with the same period a year earlier, according to data from the Mortgage Bankers Association.
“Lenders are deluged by late-stage delinquencies. The pent-up foreclosure inventory is there,” said Massoud Ahmadi, director of research for the Maryland Department of Housing and Community Development.
Housing prices
The uptick in foreclosure sales is helping depress Maryland home prices, he said. “We have seen that home sales are on an upswing, but prices are on a downswing. That is the impact of the shadow inventory. It is keeping prices down,” Ahmadi said.
In addition to those already in default are 11 million more U.S. borrowers who owe more on their mortgage than their home is worth — known as being underwater — and are in danger of becoming delinquent, said Sam Khater, chief economist for First American CoreLogic.
Agents…did you catch that…11 MILLION!
Over the past year, the number of foreclosed homes going up for sale has declined. Distressed properties made up just 38 percent of purchases in January, compared with the 49 percent peak in March 2009, according to the National Association of Realtors. That helped the inventory of homes on the market fall to a 7.8-month supply, close to the figure during normal times and down from more than 11 months in July 2008. But as prices continue to stabilize, lenders are likely to take advantage of the situation by putting more of these distressed properties on the market, economists said.
“Banks have remained in foreclosure paralysis, allowing that backlog to get larger and larger. You can’t do that indefinitely,” said Sandeep Bordia, head of U.S. residential credit strategy at Barclays Capital.
That impact could be muted if enough buyers emerge to snap up properties or efforts to enroll borrowers in mortgage relief programs improve. Some lenders are looking for ways to ease delinquent borrowers out of their homes without a foreclosure. For example, lenders are allowing more short sales, in which the home is sold for less than the outstanding loan balance. Citigroup is testing a program that allows delinquent borrowers to stay in their home for six months free if they leave the property in good condition, making it easier to sell afterward.
“We are anticipating a foreclosure glut that is likely to come up in next 16 to 18 months. We are trying to stay ahead of this,” said Sanjiv Das, chief executive of CitiMortgage. These types of programs are “protecting house prices and consumer sentiment from going down further,” he said.
What does this mean to you…HREU Student (or future student)? Please understand that the housing markets will not significantly improve for years. Short Sales and REOs are the market and will only be more so over the next 24-36 months.
Regional impact
The impact of the coming foreclosure wave will vary by region. The Washington area has a “shadow inventory” of about 67,000 properties that could go into foreclosure this year, an 11-month supply at the current sales rates, according to research by John Burns Real Estate Consulting in Irvine, Calif. That is slightly higher than the national average but far less than the hardest-hit communities, such as Orlando and Miami, where there is two-year backlog.
And the backlog will hang over some communities for years. By the end of 2012, 39 percent to 50 percent of home purchases in Phoenix will still be foreclosed properties, J.P. Morgan Chase has estimated. In Los Angeles, they’ll account for 28 percent of home sales.
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Interesting perspective on housing from a true real estate billionaire Mort Zuckerman.
Mr. Zuckerman made his money…in real estate. So,it would be safe to assume he would do his best to be a real estate cheerleader.. to talk up real estate…vs what he seems to do in this blog post.
Read what he has to say…and understand the ramifications of his comments…
America’s housing crisis has not gone away. If anything, it is getting more severe. Today, median single family house prices nationwide are down by slightly more than 30 per cent from their early 2006 peak. Fusion IQ, the research group, estimates that excess inventories will push prices down by a further 10 per cent. This is a critical issue because home equity was for years the largest asset on the balance sheet of the average American family.
The sheer number of empty homes overhanging the residential property market points to lower prices. There are an estimated 7m homes empty today, and an estimated 7.7m houses and condominiums behind on their mortgage payments. This is tantamount to a shadow inventory.
Agents, his estimates for potential upcoming foreclosures are the same as we have reported on this blog…15,000,000. Can there by any doubt that its NOT TOO late for you to become a REO Listing Agent? Take action now and watch the FREE Agent REO Secrets video and download the FREE Agent REO Secrets book. Learn how to become a HREU RSD and get the jump on the next wave of foreclosures!
More than 4m of those are now delinquent and going through some form of foreclosure or related procedures that will put them on the market in the next year or two. Fannie Mae’s 90-day delinquency rate is now roughly 5.5 per cent, double that of a year ago.
Home sales are depressed, too, by competition from some 6m rental vacancies, or 11 per cent of total rental supply. Median asking rents have been declining by an estimated 3.5 per cent over the past year – and that is accelerating.
There is no cheer in the new residential numbers either. January’s new home sales plunged by more than 11 per cent month-on-month to an annual rate of 309,000 units, the weakest on record. It now takes a record 14.2 months to sell a finished house. In the boom years, it took about three.
Even worse, the median price for new homes sold was $203,500, almost a seven-year low, and that for existing single-family homes fell 3.5 per cent month over month to $163,600, a new eight-year low. Inventories rose to a 9.1 month supply, which on top of the shadow inventory of unsold houses and those in the foreclosure pipeline does not bode well for homebuilders or housing. Neither does the sharp decline in mortgage applications to the lowest levels since May 2007 and the rise on the 30-year mortgage rates to more than 5 per cent.
Roughly one in four mortgages today exceeds the house’s value – approximately 10.7m homes. American Corelogic, the research provider, estimates an average deficiency per home of $70,700 or an aggregate of about $800bn.
OK, this is scary. If you will recall, last week in this blog post we shared with you the new research that proved that homeowners will do a strategic default at considerably higher rates when they are…$70,000 or 25% upside down. Using Corelogic’s numbers this would result in 10.7 million potential strategic defaults!
An additional 2.3m homes had less than 5 per cent equity. The remaining equity for many other homeowners is at historic lows. With declining prices beginning to hit the middle to higher ends of the housing market, we are looking at another foreclosure wave.
….and that is what we have been predicting for over a year….agents, if even half of what this blog post were to come true..what would that mean to your real estate market…and your real estate business? Are you ready…have you learned the new 2010 Short Sale Guidelines? Hopefully you know by now that the Obama administration is focusing on making short sales the solution to the inevitable massive increase in foreclosures. Watch the FREE Harris Real Estate University CDPD Short Sale Secrets video now…and grab your free short sale book.
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Watch out for this one…Principal Mortgage Balance Reductions.
We have watched this topic pop up now and then since 2007. Now, Barney Frank is seemingly championing the idea. In case you didn’t know it….Senator Frank doesn’t mess around. We suspect that Senator Frank is rolling this highly controversial topic out now to put the banks on notice that they sure as heck better abide by the new Treasury Departments HAFA Short Sale Program.
In case you have been living under a rock…2010 IS the Year of the Short Sale. Read this post now for more info on the simply stunning changes to short sales that are taking place 04/05/2010. YES…thats NEXT MONTH!
What does this mean to you?
Imagine a world where almost like magic…all the negative equity for every homeowner simply goes…’poof’. Gone, no more upside down homeowners. Does this sound like a great idea to you? Watch this video and share your comments.
Mor
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Harris Real Estate University.
New Obama Treasury Department program PAYS homeowners to avoid foreclosure..and do a short sale….lets call this one…’Cash For Walkers’
Why not?
We already have..’Cash For Clunkers’ and the proposed ‘Cash For Caulkers’….maybe this new program should be called…Cash For Walkers?
Afterall, this is what happens when someone decides to take the Treasury Department up on their offer to do a short sale vs allowing the home to go into foreclosure.
We first reported on this detail of the soon enacted HAFA Program clear back in November. Watch the videos we made for you about HAFA..and why 2010 IS the year of the Short Sale.
In case you missed it…here are the details:
In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.
This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.
More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.
Agents, are you now 100% convinced that 2010 IS the year of the Short Sale? If not, go back and read those last few sentences again. Next, learn NOW how to become a HREU CDPD (Certified Distressed Property Designation). Watch the FREE Agent Short Sale Secrets video and download the FREE Short Sale book!
For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.
Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.
Re-read that. Part of the new HAFA program is that the lenders CAN’T Go after deficiency judgments. And….they can NO LONGER request that the seller sign a promissory note…or cash at closing. Watch the videos that we created for you…you need to understand what a simply massive shift will take place April 5th once the new HAFA Guidelines are in place. Watch the videos NOW.
“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.
The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.
To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.
Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”
Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.
For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.
Agents, please understand…if the homeowner does NOT do a short sale…they are still on the hook for a possible judgment! Once homeowners learn about this….do you think they will want to do a short sale? Of course. Now the only question is…will you be the agent to list and sell that short sale? Learn the new proven ways to easily list and sell short sales. Become a HREU CDPD Now for only $97! Go here now to learn more.
For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.
Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.
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What is the state of the housing recovery?
A sharp drop in pending home sales for January is the latest in a string of reports calling into question the health of the housing recovery.
The housing recovery is “in a precarious state,” says Robert Shiller, Yale professor, author and co-creator of the S&P Case-Shiller Index, taking a much more pessimistic view vs. his comments here last July.
Shiller’s eponymous index, which has risen for seven straight months through December, “shows some weakening of the upward burst” from last year, but is still going up on a seasonally-adjusted basis, the professor says. “If I were to forecast based on my usual models of years ago I would think we’ve turned a corner, we’ve bottomed and we’re turning up.”
But that’s a very big “if” and Shiller says there are reasons to wonder whether this time is different, or certainly to be worried about the sustainability of housing’s recovery:
* — Only the Shadow Knows: Housing experts say there’s anywhere from 2 to 5 million homes ready to come on the market, due to pending foreclosure. How soon…this year and into next year. This DOES NOT include the up to 15,000,000 other homes that may go into foreclosure over the next few years.
Do YOU think its too late for you to become a REO Listing Agent…and make money from BPOs? Its not. The banks are boiling over with REOs. Watch the FREE Agent REO Secrets video now…and download the new 2010 REO Secrets book. Free List of Asset Managers and other info you need know to cash in on the explosion of REO Listings!
*– Strategic Default…”I think people will become less resistant to defaulting on their mortgage,” Shiller says. “That’s a real cloud on the horizon.”
* — What happens when the fed stops buying the MBS’s. What this will result in is that the artificially low mortgage rates will increase as the secondary market demands returns greater than what are currently being offered.
*–The home buyer tax credit ends this spring… “We can’t just slam on the brakes and withdraw that — we could but I’d hate to see what happens,” he says. “When [government programs] do end there’s going to be a psychological component of that ending as well, which is really hard to predict.”
For that reason, Shiller expects some or all of the government housing programs will be extended, raising the broader question of how the government removes all the liquidity that’s been provided.
“It’s very hard to get out of this mess,” he says. “We have to transition to a more [market-based] economy. It’s going to be a difficult transition. That’s why I have worries for years forward.”
Agents, as Dr. Shiller is making clear in this video….and as we have been telling you…THIS MARKET IS THE NEW NORMAL. What homes are selling now? Short Sales and REOs. Do whatever it takes to learn how to list and sell short sales. Watch the FREE HREU CDPD Agent Short Sale Secrets video now..and grab your FREE Short Sale Secrets book!
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