Realtor Coaching & Training: washington post
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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Check the blog frequently this week….lots on new housing information…
Fannie Mae plans to raise minimum credit score requirements next month and limit the amount of overall debt that borrowers can carry relative to their incomes, The Washington Post reported on Thursday.
Starting Dec. 12, the automated system that the government-controlled mortgage finance company uses to approve loans will reject borrowers who have at least a 20 percent down payment but whose credit scores fall below 620 out of 850, the newspaper reported. Previously, the cut-off was 580.
Also, for borrowers with a 20 percent down payment, no more than 45 percent of their gross monthly income can go toward paying debts, the newspaper said.
Loans to people with credit scores below 620 fell seriously behind at a rate approximately nine times higher than other loans purchased in the same period, Fannie Mae spokesman Brian Faith said.
Loans taken out by borrowers with lots of debt also suffer higher levels of serious delinquency, he said.
“It’s not enough to help borrowers buy a home — we must also ensure that they can stay in the home over the long term,” Faith said in a statement to The Washington Post.
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Home Values Going Down The Drain.
For those of you who think the markets have in any way reached bottom please read this article from the Washington Post:
A growing number of American homeowners are falling into financial limbo: They’re badly behind on payments, but their banks have not yet foreclosed.
The backlog of seriously delinquent mortgages, which so far affects about 1 million borrowers, is a shadow over hopes for a rebound in the nation’s housing markets. It masks the full extent of the foreclosure crisis and threatens to depress prices even further just as some parts of the country are hinting at recovery. For lenders, it could portend even more financial losses tied to the mortgage meltdown.
“It just means foreclosure rates are going to keep rising,” said Patrick Newport, an economist for IHS Global Insight.
Rising mortgage delinquencies were at the root of the recession, and many economists say an economic recovery will be difficult until the housing market recovers and home prices stabilize.
And how bad is the problem….
During the first quarter of this year, the share of all homeowners seriously delinquent on their mortgage but not yet facing foreclosure more than doubled to 3.04 percent, or about $227 billion in loans. There was a total of $97 billion in such loans during the same period in 2008, according to Inside Mortgage Finance. In more prosperous times, the rate is much lower — it was less than 1 percent in the first quarter of 2007, according to the industry publication.
We are hearing that in areas like Las Vegas there are 30,000 REOs coming on the market….in the next 3-6 months!
Some of the backlog reflects the inability of lenders to keep up with the swelling rolls of delinquent properties.
And the question that everyone wants to know….how long will this foreclosure (REO Listing and Short Sale Listing) dominated market last….
The glut of foreclosed homes on the market has already pushed down prices across the country. Existing-home prices fell another 16.8 percent in May compared with a year ago, according to industry data released yesterday. The overhang of homes in limbo means that foreclosure rates are likely to increase dramatically during the second half of this year and into 2010 as lenders work through the backlog, said Bob Bellack, chairman of Zetabid, which auctions foreclosed properties.
Why is the foreclosure process taking soooooo long?
In better times, lenders tended to begin the foreclosure process after three months, said Guy Cecala, publisher of Inside Mortgage Finance. Now it is not unusual for it to take nine months for the process to begin, he said.
“No one is in a rush, lender-wise, to deal with the property,” he said. “If you have to sell at a loss, why rush?”
Lenders traditionally write down the value of the home six months after an owner stops making payments, but the total loss is not recorded until the property is sold in foreclosure, said Mark Zandi, chief economist of Moody’s Economy.com.
Agents, remember you CAN help someone even when they are missing payments. Lenders WANT TO avoid foreclosure. The last thing the lenders want in this housing market is another REO. Learn how to do short sales. Expect the new ’solutions to the housing crisis’ coming out of Washington to focus on Mortgage Loan Mods and Short Sales.
Even seriously delinquent borrowers can restart negotiations with lenders to stay in their homes with a modified mortgage or persuade them to accept a short sale, which involves a homeowner selling the property for less than the outstanding mortgage balance and then turning the proceeds over to the lender to satisfy the loan.
Jay Brinkmann, chief economist for the Mortgage Bankers Association, said his industry is doing its best to work through the backlog while carrying out federal foreclosure prevention programs. “If a lender has a house that they know they will have to sell eventually,” he said, “they almost always want to sell it as quickly as possible because of the interest cost of holding the loan on the books, in addition to costs like taxes, keeping the grass cut and other maintenance.”
So, what do you do with all of this information? (Warning, shameless pitch coming)…Learn how to do Easily List Short Sales and Become a REO Listing Agent. Really, what choice do you have in this market?
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HREU Students, here is a snap shot of what is happening across the US.
Never mind a profit. Breaking even would have been nice.
But Tammy and Charles Bloomer are losing more than $100,000 on their Silver Spring home, which they bought for $525,000 four years ago. The house, now under contract to be sold, lost value even though the couple had remodeled the kitchen and replaced the roof, furnace and windows.
“Unfortunately, we bought at the peak of the market,” said Tammy Bloomer, a federal worker who is moving to take a job in Chicago. “The market is terrible now.”
In the past six months, most Washington area sellers have lost money on houses they purchased since prices started climbing in 2000, according to a Washington Post analysis of residential sales. In the first three months of this year, 62 percent of local home sellers accepted less than they paid for their homes, in part because aggressively priced foreclosures have dragged down prices around the region.
ad_iconWhile the drop is painful for sellers, experts say it is a necessary part of getting past the excesses of the boom years. This region experienced one of the sharpest run-ups in home prices in the nation. Those prices must be brought down in order for buyers and sellers to deal with each other on more equal footing, as they had for decades before the boom.
Predictions vary about when the region’s prices will hit bottom. They may keep tumbling until late 2009 for close-in communities and until 2011 in outlying suburbs, according to a study by real estate research firm Delta Associates and the local Multiple Listing Service. But so much depends on whether the economy suffers some unforeseen blow and on how many more foreclosures the banks add to an already-bloated housing supply.
Realtors, millions of homeowners are upside down and will need to list with agents who know how to list and sell short sales. Its time for you to finally learn how to become a true short sale specialists. Watch the FREE Agent Short Sale Secrets video now…and then download the FREE Agent Short Sale Secrets crash course.
Of course, these falling prices are reason to celebrate for would-be home buyers, especially coupled with low mortgage interest rates and the $8,000 federal tax credit for first-time buyers.But as long as distress sales continue to dominate, the market will not bounce back to normal, said Nicolas P. Retsinas, director of Harvard University’s center for housing studies. “The norm requires that a preponderance of transactions take place between willing buyers and sellers, not sellers who would take any price to unload a property.”
By that measure, Kimberly Thompson’s Upper Marlboro community has not hit bottom.
In Thompson’s Zip code, the proportion of homes in some stage of foreclosure is twice the national rate, according to RealtyTrac, a private company that follows those statistics. Many more homes, including her own, are listed as short sales. Those are arrangements that allow homeowners to sell for less than they owe on their mortgages.
Thompson and her husband bought their house for $564,000 in late 2007. He lost his job six months later. By then, the home’s value had dropped by $100,000. This week, it is under contract for $372,000.
“We were down to one income, one kid and one on the way,” said Thompson, a computer programmer. “We realized we did not have money to cover the mortgage and our other expenses.”
Never mind a profit. Breaking even would have been nice.Not everyone selling a home is doing so under duress. Many long-time homeowners with plenty of equity are making money when they sell, though not as much as they would have a few years back. Others may be losing money, but that does not mean they are on the brink of foreclosure.
This StoryEmily Lenzner, for instance, has plenty of equity in her Adams Morgan condominium. She bought the condo in 2005 for $715,000. Two years later, she moved to a house with her new husband and their four kids. She rented out her place for a while, then listed it for $849,000. No takers. It’s back on the market for $674,000.
“I’m going to take a loss, but I can really use the cash,” Lenzner said.
As the region’s foreclosure crisis has deepened, outlying suburbs have taken a bigger hit than more established areas. That’s because there was a higher proportion of recent sales in those fast-growing suburbs, leaving them more exposed to the subprime mortgages that were popular at the time.
Subprime loans catered to people with blemished credit, often allowing them to buy homes they otherwise could not afford. That helped inflate prices. But these borrowers began defaulting in record numbers in 2007. Foreclosures followed. The markets that crashed the hardest were the ones where prices had climbed the fastest.
Realtors, REO Listings are the listings to have! Learn NOW how to become a REO Listing Agent. Watch the FREE Agent REO Secrets video now…then download the FREE Agent REO Secrets book
Home prices have held steady in the District, according to The Post analysis. In the Virginia and Maryland suburbs, prices for single-family homes are down to where they were five years ago. In Prince William and Loudoun counties, a flood of foreclosures has pushed prices so low that bargain hunters have flocked there in recent months, helping to boost sales.
But while in past slumps a surge in sales has signaled the start of a rebound, this downturn is unlike any in recent times and it’s premature to call a recovery, said Barry Merchant, senior housing policy analyst at the Virginia Housing Development Authority.
The encouraging signs have been offset by more troublesome ones, he said. After tapering off for a few months, foreclosures in Northern Virginia are starting to creep up again and may keep climbing now that several lenders have lifted foreclosure moratoriums.
Meanwhile, the year-over-year sales increases of the past few months are petering out in some Virginia suburbs, suggesting that interest in the fire-sale prices may have peaked, Merchant said. In April, Loudoun sales declined 12.5 percent from a year earlier.
“If sales are not increasing and foreclosures are on the uptick, then the question is: ‘Is there another shoe to fall?’ ” Merchant said. “Maybe what we were hoping was the bottom was just a bump on the way down.”
The shrinking supply of homes for sale may not be a sign of much, either. As of April, if sales continued at the same pace, the Washington region would have had a 7.7-month supply of homes. That’s down from 10.9 months at the same time last year but still worse than the five- to six-month supply found in a healthy market, the Delta report said. This region had But it may be that individual sellers are pulling their homes off the market, refusing to compete with foreclosure prices.
“I can’t tell you how many listing appointments my team scheduled only to have the client say: ‘You know what, we’re just going to just stay put and hold out on selling for a while,” said Melissa Stewart, a Century 21 real estate agent who works in Fredericksburg. “We’ve had probably eight of those in the past month and a half.”
The Bloomers did not have that luxury. When they bought their Silver Spring house, they thought they would make enough money when they sold it to buy another home and to help pay off their son’s college loans. Now, they are hunting for a rental in Chicago.
Source: The Washington Post.
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www.AgentLoanModSecrets.com
Realtors, Mortgage Loan Officers…….everyone who needs to mod their own loan….Great news. The Obama Administration is making Mortgage Loan Modification the corner stone to their efforts to reduce foreclosures. NOW is the time to start your own Mortgage Loan Modification business.
Here is an article from Washington Post:
LAS VEGAS, Feb. 9 — The Obama administration has developed the broad outlines of a plan to stem the soaring rate of foreclosures by adding incentives for borrowers and lenders to agree to modify home loans that have fallen behind, perhaps by as little as a single month.
The plan is a “more aggressive” version of an initiative launched by mortgage financiers Fannie Mae and Freddie Mac late last year, James Lockhart, director of the Federal Housing Finance Agency, said in an interview here. The administration has said it will spend between $50 billion and $100 billion from the financial bailout package to help struggling homeowners.
Senior officials are still hammering out the initiative and are not expected to provide the details tomorrow when they unveil their rescue plan for the financial system, two sources familiar with the matter said. The foreclosure strategy could be announced at the end of this week or next week, they said.
Lockhart said both lenders and borrowers have been frozen by the perception that the government may continue to unveil new and better modification programs.
ad_icon“The early returns show that we may need to be more aggressive” than plans already announced, he said. But the government also needs to send a message to lenders that its new approach would represent the “best and final” offer.
The Fannie and Freddie program allowed borrowers who were 90 days delinquent on a loan to have their payments lowered to 38 percent of their income. The loan could also be extended from 30 years to 40 years, and if that was not enough, the interest rate could be reduced to as low as 3 percent to make the payments more affordable.
Consumer advocates say the program was a good start in tackling the foreclosure problem but did not go far enough to help homeowners. For example, the effort did not include measures to cut the principal owed by borrowers who have seen the value of their home fall below their mortgage loan. Another requirement — that borrowers miss three payments before qualifying for help — has been a troublesome issue identified by some consumer groups.
Make Money Now. Start A Mortgage Loan Modification Business. Watch FREE How-To Make Money From Loan Mods. Help People Save Money And Keep Their Homes. Make Great Money Helping Homeowners. Watch FREE Loan Mod Video Now.
The government’s new approach would make the terms more generous for both the borrowers and lenders. For instance, borrowers who missed only one payment might be able to qualify, Lockhart said. Lenders may be able to lower payments to a lower percentage of a homeowner’s income.Officials are also planning to set national standards for when banks opt to participate in the government plan — an important concern for loan servicers who can now only perform modifications that improve the value of the mortgage under the terms of their contracts with investors.
Lockhart said he hoped the new program would be attractive to loan holders, but he added that they had an obligation to increase their modification efforts.
“It is taking too long,” he told an industry group during a speech in Las Vegas. “It is time to act.”
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