Here is your CNBC Real Estate News update….

Worth pointing out…Bank Shadow inventory now at nearly 4,000,000 homes!

Its clear that the national real estate markets will be dominated by bank owned homes…REO listings…(and short sales) for at least the next 3-5 years. Its not too late for you to become a REO listing agent. Learn how to make money from BPOs and list bank foreclosures now. Watch the Agent REO Secrets video and grab your free book.

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Watch this CNBC Video…..July home sales, worse that you thought. Nearly 30% drop in home sales….so, is this the start of a downward trend or just a blip as a result of the ending of the buyer tax credit…what do YOU think?

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Agents, get ready.

The real estate crash is no longer a ‘sub-prime’ only story. Now, its gone prime time…as in prime mortgages….specifically, Jumbo Prime. Thats right, Jumbo Mortgage Homes are now in the cross hairs of the foreclosure free for all.

This report shouldn’t surprise any Harris Real Estate University student…we have been reporting that there would be a  surge in Jumbo defaults since 2008.

The banks have been extending and pretending for as long as they can and now they have to foreclose. Its been our theory that that the banks have been holding off foreclosing (and listing as REOs/ Bank Foreclosures ) higher end homes because of the inevitable domino effect. Think about this, a luxury home/ expensive home is listed as a REO. That home is priced to sell. So, in most markets that means 30-50% less than the peak of the bubble. When that upper end home sells that new sales price ( ‘comp’ in real estate speak ) is the new benchmark for pricing.

NOTE: Agents, stop trying to argue that foreclosure/ REO and Short Sale comps are not true comps. OF COURSE THEY ARE. A sale is a sale.

So, that formally expensive home is now priced down market…thus, downward pricing pressure is forced upon the lesser expensive homes. The next domino falls.

A record number of borrowers once judged the most creditworthy are heading into foreclosure as the job market leaves more homeowners unable to keep up with mortgage payments.
Foreclosures among borrowers with prime conforming loans have shot up 425% since January 2008, according to Lender Processing Services, which compiles mortgage data. Conforming loans are those eligible for purchase by Fannie Mae and Freddie Mac, the federal agencies that buy mortgages from lenders.

Jumbo prime loans not eligible for purchase by Fannie or Freddie have done even worse — foreclosures on those have increased nearly 600%.

Jumbo loans are typically mortgages worth more than $729,750.

“Jobs is a major impact. It’s a huge factor,” says Ken Shuman, a spokesman with Trulia.com, a real estate search engine. “A lot of homeowners on the higher end are also savvy investors. They’re seeing their home has lost 30% of their value, we’re seeing a lot of strategic defaults.”

FULL STOP. OK, lets take a little break here. A strategic default is a walk-away. As in, a foreclosure. Foreclosures simply tear down the neighborhood, the community. If housing is to ever recover..foreclosures must be abated. Agents, its YOUR JOB to reach out to homeowners who are considering a strategic foreclosure and explain to them why they should do a short sale. Short Sales are the solution for homeowners who are on the foreclosure path. We created the Luxury Distressed Property Designation (LDPD) so agents would have the tools to work with the upper end, luxury home distressed seller.

There IS a difference between working with a normal short sale seller vs a luxury distressed seller.

Do this…Watch the FREE Agent Short Sale Secrets video and download the FREE Short Sale Secrets book.

A strategic default occurs when a borrower stops paying a mortgage they can afford to pay, often because the house’s value has fallen below the loan balance.

While the U.S. may be seeing signs of a peak in foreclosures in some of the hardest-hit markets, foreclosure activity continued to rise in many of the nation’s metropolitan areas in the first half of the year.

RealtyTrac reports today that 154 of 206 U.S. metropolitan areas with populations of 200,000 or more posted year-over-year increases in foreclosure filings, covering properties in various stages of the foreclosure process.

The top 20 metro areas with the highest foreclosure rates were in four states — Florida, California, Nevada and Arizona, according to the report.

Other RealtyTrac findings:

•94,466 properties received a foreclosure filing in the Miami-Fort Lauderdale-Pompano Beach metro area during the first half of 2010, more than any other metro area.

•The metro area with the second-highest total filings was Los Angeles-Long Beach-Santa Ana, which had 93,263.

•Las Vegas continued to post the nation’s highest metro foreclosure rate in the first half. One in 15 of its housing units received a foreclosure filing — more than five times the U.S. average.

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Agents, when Proven banking and housing expert Meredith Whitney speaks…..you must listen.

Watch the video, read the report.

Bottom Line: Housing Double Dip.

NEW YORK (CNNMoney.com) — Foreclosure filings climbed in 75% of the nation’s metro areas during the first half of 2010, according to a report issued Thursday.

Realtors, you need to seriously consider that number. 75%. 3/4s of ALL major metro areas are experiencing an INCREASE in foreclosures. There are no reasons to believe that this trend won’t continue to increase.

The question you are asking yourself is…’Is it too late for me to become a REO listing agent?’

The answer is absolutely positively…. NO its not too late for YOU to become a REO listing agent and learn how to make money from BPOs.

We have made it easy for you…Watch the FREE Agent REO Secrets video and download the FREE Agent REO Secrets book.

RealtyTrac, an online marketer of foreclosed homes, said that California, Florida, Arizona and Nevada continue to lead the nation in the rate of foreclosures. Las Vegas was the worst-hit city.

But now unemployment has replaced toxic mortgages as the leading cause of foreclosures throughout the country, according to spokesman Rick Sharga.

“Las Vegas has seamlessly shifted from having a high level of foreclosures due to bad loans,” said Sharga, “to defaults caused by a high level of unemployment.” Some 14.5% of its work force was idle in June, up 2.1 points from last June.

Las Vegas had one filing for every 15 households in the metro area. The second highest rate was in Cape Coral/Fort Myers, Fla., with one for every 20 households. Two California cities, Modesto and Merced, tied for third with one filing for every 22 households.

The good news is that most of the worst-hit cities have actually seen their foreclosures rates decline, as the subprime crisis fades.

But while those cities have seen slight improvement, other areas are getting hit harder by the economy.

“Look at a place like Salt Lake City,” said Sharga. “The foreclosure rise there appears to be entirely related to the economy,” not because people can’t afford their subprime loans.

Salt Lake’s unemployment is up this year, rising 0.2% to 7.1% in June, even as the national unemployment rate dropped 0.2% to 9.5%.

Lenders filed foreclosure notices for one in every 48 Salt Lake City households during the first six months of 2010, a 55% increase over the same period in 2009.

Besides Salt Lake City, other metro areas where foreclosures have soared primarily due to the economy include Chicago, which saw filings climb 23% year-over-year to one in every 48 households. Charleston, S.C.’s, rate climbed 17% to one in every 68 homes, while Albuquerque saw a 157% jump in filings to one in 80 households.

Each of these cities has rising unemployment. Chicago’s unemployment stood at 10.6% in June, more than a point above the national rate, while Albuquerque’s unemployment jumped to 8.9% from 7.9% in the last 12 months and Charleston’s rate stands at 9.5%.

Still, the report found that there are some remarkably untroubled markets, many of them in the Northeast, Midwest and Texas, where home prices never really bubbled during the boom and have not fallen very far during the bust.

Utica, N.Y., had the lowest filing rate of any of the 206 cities in the report, just one in 4,859 households. Burlington, Vt., recorded one foreclosure for every 3,305 homes, while Charleston, W.Va., had a rate of one in 2,799 households.

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Remember these numbers: 4 Million, 4 Trillion and 50%…..you will understand why those numbers are important when you read this article:

Can the US economy really return to “business as usual” when it has 4 million houses surplus to requirement, when 1 out of 4 mortgages are in negative equity, and when by our calculation, it is burdened with $4 trillion of excess mortgage debt, equivalent to 30% of GDP?

Remember, roughly 50% of the homes in the US are owned…no mortgages. So, if 25% are currently upside down that means 50% of all homeowners with a mortgage are now upside down!

For many years, total mortgage debt consistently and reliably equalled 0.4 times the value of the US housing stock. Intuitively, this average of 0.4 makes perfect sense as every property usually has a mortgage ranging from 0 to 0.9 times its value. So in 1990, $6 trillion of housing collateral could support $2.5 trillion of mortgages, and by 2006, $23 trillion of housing collateral could support $10 trillion of mortgages. But since then, the US housing stock’s value has slumped to $16 trillion which means the amount of mortgage lending supportable by the collateral has plunged to $6 trillion. However, actual mortgage debt has remained at $10 trillion – $4 trillion too high.

The fact that mortgage debt has barely declined suggests that relatively few homeowners have defaulted on their mortgages or paid off debt yet. Instead, a quarter of all borrowers are sitting on negative equity. That’s just as well – because were mortgage debt to shrink by even half of $4 trillion, the US economy would slump.

Operative word….YET. Strategic defaults are going from rare..to becoming common. Prediction: Strategic Short Sales will be seen as the best solution for homeowners who choose not to keep their under water homes. I know that many in the real estate industry are critical of our reporting on Strategic Defaults and Short Sales. They argue that we are not being responsible. They perceive that HREU is acting as proponents of something that is  ‘anti-housing’. On the surface, I see their point.

We report on these controversial trends because we are agent advocates first…industry advocates second. Meaning, we are focused on coaching and training agents. We know that agents need a resource that will give them clear and unbiased information so that they can prepare themselves for the massive changes looming ahead for real estate.

Strategic defaults will happen with or without agents…and certainly without HREU. Our position is that agents need to understand that homeowners need to do what we are calling Strategic Short Sales vs simply walking away. Every study points to the fact that a short sale is less damaging to all parties concerned.

Bottom line, Agents learn how to do short sales. Thanks to the NAR and HAFA Short Sales are becoming the solution to avoid foreclosure.

Its time for you to go beyond your ‘short sale designation’ and learn the new advanced short sale business building systems. Watch the FREE Agent Short Sale Secrets video and grab your FREE Short Sale book.

Perhaps homeowners are patiently expecting house prices to rise again. But if so, they may be in for a long wait. Prices are likely to be weighed down by a massive oversupply of homes relative to underlying demographic demand. Whether you look at the houses to population ratio, the houses to household ratio or vacant houses ratio, the conclusion is the same – there is a 3% surplus of properties, equivalent to 4 million homes. And with household formation running at just 0.9 million while the US is still building 0.6 million new homes annually, only 0.3 million of the oversupply will be absorbed per year (see page 5).

WOW! 4 million MORE homes than needed. Nationally, there have been between 4-5 million home sales per year. So, if this report is right there is currently an oversupply of at least 12 months of supply.

Ultra low rates to stay

A recent study by the Federal Reserve (The Depth of Negative Equity and Mortgage Default Decisions by Bhutta, Dokko and Shan) investigated the question: at what point do underwater homeowners “strategically default” on their mortgages? Surprisingly, it found that the average borrower doesn’t walk away from his home until negative equity reaches a very high level, -62%. But the fascinating thing was that there was something that could trigger underwater borrowers to default much, much earlier – and that something was an interest rate rise.

Not surprising actually..why? Because if someones payment stays low they will stay in their home. Rationale being that regardless of where you live you still have to pay for your housing. So, what difference does it make if your home is massively and hopelessly underwater provided your house payment is in line with local rents. In essence homeowners keeping their underwater homes actually extends the housing ‘correction’. Think of it this way, assuming home values don’t re-appreciate at least cover the underwater mortgage balances. Assuming that eventually all homes will need to be sold (for all the normal reasons, relocation, downsizing etc) and when they are put for sale and are underwater…the cycle of short sales and REOs continuing for years (and years).

There must be a deliberate clearing of underwater mortgages. A nationwide ‘loan mod’….a mortgage forgiveness program. Its too late for a natural clearing to happen and at this point with so much damage done its past time for our leadership to simply call for a nationwide program to reset all mortgages to their current market values. Remember, 90% of all outstanding mortgages are owned by Fannie and Freddie so, this could be done.

1) Reappraise all existing homes with mortgages.

2) New mortgage at current market value.

3) Negative equity forgiven.

Yes, doing a nationwide ‘loan mod’ would be an epic mess. But, what is the alternative? Honestly, what else will bring this deadly deflation spiral to an end?

With a quarter of US mortgages underwater, and likely to stay that way for some time, the Fed must follow its own research if it wants to prevent a cascade of defaults. Hence, expect US interest rates to stay ultra low for an ultra long time.

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For many years, total mortgage debt consistently and reliably equalled 0.4 times the value of the US housing stock. Intuitively, this average of 0.4 makes perfect sense as every property usually has a mortgage ranging from 0 to 0.9 times its value. So in 1990, $6 trillion of housing collateral could support $2.5 trillion of mortgages, and by 2006, $23 trillion of housing collateral could support $10 trillion of mortgages. But since then, the US housing stock’s value has slumped to $16 trillion which means the amount of mortgage lending supportable by the collateral has plunged to $6 trillion. However, actual mortgage debt has remained at $10 trillion – $4 trillion too high.

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Loan to value ratio is 1.5 times too high

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To put it another way, the loan to value ratio of total mortgages outstanding to housing stock value is currently 1.5 times too high.

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24% of US mortgages are underwater

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The fact that mortgage debt has barely declined suggests that relatively few homeowners have defaulted on their mortgages or paid off debt yet. Instead, a quarter of all borrowers are sitting on negative equity.

Again…50% of all homes are owned….so when you read that 25% are upside down that means 50% of all homeowners with a mortgage are upside down…and only increasing!

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Higher interest rates may trigger cascade of defaults

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A recent study by the Federal Reserve investigated the central question: at what point do underwater homeowners “strategically default” on their mortgages? Surprisingly, it found that when the decision is based on negative equity alone, the average borrower doesn’t walk away from his home until it is very underwater (negative equity of 62%). But the fascinating thing was that there was something that could trigger underwater borrowers to default much, much earlier – and that something was an interest rate rise. In fact, higher interest rates were even more significant in triggering defaults than higher unemployment.

With a quarter of US mortgages underwater, the Fed must heed the advice of its own research if it wants to prevent a cascade of defaults and the consequent repercussions on the financial system and the economy. Hence, expect US interest rates to stay ultra low until millions of mortgages escape out of negative equity.

How long with this take given the fact that we are not in a inflationary stage in the economy…in other words actual prices are still depreciating….years..decades. That is how long it will take for millions of homeowners to be ‘even’ in their homes. How many underwater homeowners can or will wait that long? Not many.

Where does all of this inevitably lead?

The homeowners who don’t do a ‘Strategic Short Sale’ (HREU term) will eventually lose the home to foreclosure. Its clear that the banks are no longer sitting on the shadow inventory. Expect that over the next 12-18 months most major markets will be dominated by REOs (and Short Sales). Dominated meaning, 50-70% of ALL sales will be Short Sales and REOs. The true equity seller has become a rarity in most of the US. Realtors, its NOT too late for you to become a REO Listing Agent….and…learn how to make money doing BPOs. Watch the FREE Agent REO and Training Video now and then download your FREE Training Guide.

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The US has built far too many houses

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Perhaps homeowners suffering negative equity are patiently expecting house prices to rise again. But they may be in for a long wait. Prices are likely to be weighed down by a massive oversupply of homes relative to underlying demographic demand.

Between 2002 and 2006, US homebuilders went on a construction binge, building 12 million new homes while the number of households went up by just 7 million. The painful legacy is a massive oversupply of houses relative to the number of households.

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The oversupply will take years to clear

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With household formation running at just 0.9 million while the US is still building 0.6 million new homes annually, only 0.3 million of the oversupply will be absorbed per year. As there are currently 4 million too many homes, it may take years to mop up the huge oversupply of houses.

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Fun times in Nevada…..70% of all homeowners are upside down!

If you are an agent in Nevada and you are not listing and selling short sales…exactly, what are you doing? Be sure to check out the free short sale training video and download the free short sale book.

Roughly 70% of mortgages on the LendingTree network in Nevada are worth less than what is owed on the loan.

LendingTree, a subsidiary of Tree.com, is an online lender exchange and personal finance resource for consumers. According to LendingTree, the average percentage of mortgages in negative equity for each state was 18.1%. The state with the lowest percentage was Oklahoma with 6%. New York was not far behind. There, 6.3% of all mortgages on the LendingTree network were underwater.

But Nevada holds the worst at 69.9%. The next closest is Arizona with a negative equity ratio of 51.3%, followed by Florida at 47.8%.

From April 2008 to April 2009, home prices in Nevada dropped more than 29%, according to the analytics firm CoreLogic. Nevada also holds the highest foreclosure rate. According to an online foreclosure marketplace, RealtyTrac, one in every 79 homes in Nevada received a foreclosure filing in April. In the first quarter of 2010, foreclosure sales in Las Vegas accounted for 68% of all transactions.

Prices in Vegas have fallen so far that regular retail agents have to mark prices down to the REO level.  RealtyTrac finds the average discount on property in some stage in foreclosure compared to a property not in foreclosure sold a 10.5% discount in Vegas through Q110, compared to Los Angeles at 26% and New York City at 28%.

Source: HousingWire

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This is one of those posts where very little added commentary is required….

NEW YORK (CNNMoney.com) — The experts expected home sales to drop once the homebuyer tax credit lapsed at the end of April, but the depth of the decrease was shocking.

According to the National Association of Realtors (NAR), pending home sales fell a whopping 30% in May. Their index, which measures signed sales contracts but not closed sales, plunged to 77.6 from 110.9 in April. It’s even off 15.9% from a year ago when the nation was barely emerging from the recession.

“The pending home sales report is a disaster,” said Mike Larson, a real estate analyst for Weiss Research. “Sales fell off a cliff after the tax credit expired. It’s the biggest monthly decline ever and the index is at its lowest level since NAR began tracking it in 2001.”

Lawrence Yun, NAR’s chief economist downplayed the damage a bit. According to him, customers rushed into deals to claim the credit, borrowing from May sales. Once the economic recovery comes into full swing, housing markets will heat up.

“If jobs come back as expected, the pace of home sales should pick up later this year,” said Yun, “and reach a sustainable level of activity given very favorable affordability conditions.”

Those conditions include much lower home prices and extremely favorable mortgage interest rates. The question is when — or if — the job market will ever bounce back.

“We’re not creating jobs,” said Larson. “The housing problems now are being driven by broad economic problems.” 

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