Story first appeared on USA Today -
Many states with faster foreclosure processes are seeing sharper increases in home prices than states where foreclosures take longer to get done.
There are exceptions, and other factors — such as job growth — are likely stronger drivers of home price trends, economists say.
But home price data generally show stronger price increases in states where courts don't have to approve foreclosures than in states where they do. Foreclosures are completed faster where court approval isn't necessary.
Last year, home values tracked by Zillow, a web-based real estate tracker, rose an average 5.4% in the 24 states where foreclosures don't go through the courts, according to Zillow. Where they do, the average increase was 3.2%.
Asking prices, a leading indicator of price trends, show a similar pattern.
In January, asking prices in non-judicial states were up an average of 7.3% year-over-year vs. 3.1% for judicial foreclosure states, show data from real estate website Trulia.
Non-judicial foreclosure states have tended to clear out distressed home inventory quicker, which is helping prices, says John Burns, CEO of John Burns Real Estate Consulting. Its home price analysis shows that the 10 major metropolitan areas that have seen the most rapid appreciation in the past year are in non-judicial foreclosure states.
Job growth and how far prices dropped during the housing bust are probably stronger drivers of home price trends, says Trulia economist Jed Kolko. But foreclosure speeds are a contributing factor, he and others say.
In Florida, New York and New Jersey — all judicial foreclosure states — the average loan in foreclosure was past due for more than 31 months before the process was completed, according to December data from Lender Processing Services.
In California, Arizona and Nevada — all non-judicial foreclosure states — that average was fewer than 22 months, LPS data show.
Those three states were among the top seven in terms of home value gains last year, Zillow's data show.
Homes lingering in foreclosure "creates real uncertainty," which hurts prices, and inhibits investor buyers, says Stan Humphries, Zillow's chief economist.
Investors have played a big role in driving prices higher in Arizona, Nevada and California, he adds.
As of December, 10% of Florida's home loans were still in some stage of foreclosure, the highest percentage in the nation. Behind it were New Jersey, at 7%, and New York, at 5%, according to CoreLogic.
The overhang of distressed homes in the market "is absolutely contributing" to smaller price gains in judicial foreclosure states, says Mike Fratantoni, economist with the Mortgage Bankers Association.
Florida home values, up 6.4% last year, bested the national rise of 5.9%, Zillow's data show. But values rose less than 1% last year in New York and New Jersey, Zillow says.
Florida values would probably have risen more last year if more of its foreclosures were behind it, says Kolko.
That's because Florida, like Arizona, California and Nevada, saw home prices fall more than 40% from its peak before the housing bust. It's also a market that attracts investor and second-home buyers.
Exceptions to the trends in price gains between judicial and non-judicial foreclosure states underscore that many factors influence home values, Kolko says.
For instance, Zillow's data show strong price gains last year in Indiana, a judicial state. On the other hand, Rhode Island had the greatest price depreciation last year, the data show, and it's a non-judicial state.
Burns' data show that five of the top 20 housing markets for price gains were cities with full or partial court oversight of foreclosures, including Washington, D.C., New York and Miami.
Showing posts with label foreclosures. Show all posts
Showing posts with label foreclosures. Show all posts
20 February 2013
14 December 2012
Mortgage delinquencies to remain high
originally appeared in USA Today:
Here's some good news on home loan delinquencies.
If not for all the homeowners who haven't paid their mortgages in more than a year, the nation's home loan delinquency rate would be only slightly higher than normal, shows new research from credit monitor TransUnion.
The delinquency rate would fall to about 2.5%, down from more than 5%, if those borrowers were excluded, says a TransUnion vice president.
Before the foreclosure crisis and housing bust, the normal mortgage delinquency rate was about 1.5% to 2%, TransUnion says.
The company expects the mortgage delinquency rate -- which looks at borrowers 60 or more days past due -- to finish this year at 5.32% and to drop only slightly to 5.06% by the end of next year.
The nation's higher-than-normal mortgage loan delinquency rate is not driven by new loans. It's a lot of folks ... who have been delinquent for a really long time, their vice president says.
Before the recession, it was unusual for a borrower to go more than 180 days without either being able to fix their situation or go through the foreclosure process, TransUnion says.
At the end of October, homes that went through a foreclosure sale were delinquent an average of 728 days, mortgage tracker Lender Processing Services says. That was up from 497 days two years earlier.
If the pace of improvement in curing delinquent loans doesn't pick up, national home loan delinquency rates will take another four years to get back to normal, TransUnion says.
More than 80% of the nation's currently delinquent home loans were originated before 2008, TransUnion's data show. The pre-2008 loans make up 54% of all mortgages, it says.
TransUnion predicts the biggest declines in mortgage delinquency rates next year will occur in several states that were hit hardest by foreclosures. Nevada will see a 19% drop. California and Arizona will post 12% declines.
In all of those states, foreclosures don't go through the courts so they can occur more rapidly than they typically do in states where foreclosures do go through the courts.
Thirteen states will see mortgage delinquency rates rise next year, TransUnion says.
They are largely states that have lower delinquency rates now compared with the national average, TransUnion says, and include North Dakota, South Dakota and Nebraska.
Despite likely increases next year, those three states will end 2013 with the lowest mortgage delinquency rates in the nation, TransUnion predicts.
North Dakota, which is experiencing an energy boom, will be at 1.5% of home loans being 60 or more days late. Nebraska and South Dakota will come in at about 2.3%.
Florida will have the highest delinquency rate at almost 12%, followed by Nevada at just over 8%.
The national mortgage delinquency rate peaked in the fourth quarter of 2009 at 6.89% after rising 12 consecutive quarters from its 1.9% mark in the fourth quarter of 2006, TransUnion says.
Here's some good news on home loan delinquencies.
If not for all the homeowners who haven't paid their mortgages in more than a year, the nation's home loan delinquency rate would be only slightly higher than normal, shows new research from credit monitor TransUnion.
The delinquency rate would fall to about 2.5%, down from more than 5%, if those borrowers were excluded, says a TransUnion vice president.
Before the foreclosure crisis and housing bust, the normal mortgage delinquency rate was about 1.5% to 2%, TransUnion says.
The company expects the mortgage delinquency rate -- which looks at borrowers 60 or more days past due -- to finish this year at 5.32% and to drop only slightly to 5.06% by the end of next year.
The nation's higher-than-normal mortgage loan delinquency rate is not driven by new loans. It's a lot of folks ... who have been delinquent for a really long time, their vice president says.
Before the recession, it was unusual for a borrower to go more than 180 days without either being able to fix their situation or go through the foreclosure process, TransUnion says.
At the end of October, homes that went through a foreclosure sale were delinquent an average of 728 days, mortgage tracker Lender Processing Services says. That was up from 497 days two years earlier.
If the pace of improvement in curing delinquent loans doesn't pick up, national home loan delinquency rates will take another four years to get back to normal, TransUnion says.
More than 80% of the nation's currently delinquent home loans were originated before 2008, TransUnion's data show. The pre-2008 loans make up 54% of all mortgages, it says.
TransUnion predicts the biggest declines in mortgage delinquency rates next year will occur in several states that were hit hardest by foreclosures. Nevada will see a 19% drop. California and Arizona will post 12% declines.
In all of those states, foreclosures don't go through the courts so they can occur more rapidly than they typically do in states where foreclosures do go through the courts.
Thirteen states will see mortgage delinquency rates rise next year, TransUnion says.
They are largely states that have lower delinquency rates now compared with the national average, TransUnion says, and include North Dakota, South Dakota and Nebraska.
Despite likely increases next year, those three states will end 2013 with the lowest mortgage delinquency rates in the nation, TransUnion predicts.
North Dakota, which is experiencing an energy boom, will be at 1.5% of home loans being 60 or more days late. Nebraska and South Dakota will come in at about 2.3%.
Florida will have the highest delinquency rate at almost 12%, followed by Nevada at just over 8%.
The national mortgage delinquency rate peaked in the fourth quarter of 2009 at 6.89% after rising 12 consecutive quarters from its 1.9% mark in the fourth quarter of 2006, TransUnion says.
02 August 2012
Third California City Files for Bankruptcy
Story first reported from CNN.com
A California city filed for bankruptcy Wednesday, the third in the Golden State to do so in recent weeks, stoking experts' concerns that other cities could follow suit.
The city of San Bernardino, with more than 200,000 residents on the eastern tip of greater Los Angeles, "filed an emergency petition for Chapter 9 Bankruptcy" with a regional U.S. bankruptcy court, according to a news release from the city's interim manager.
The other two to file recently were Stockton, with around 300,000 residents, according to 2010 U.S. census data, and Mammoth Lakes, a resort town, where visitors and seasonal residents outnumber the just over 8,000 permanent inhabitants.
Many municipalities in the Golden State and around the nation are struggling to cover their costs as the economic malaise continues to hurt tax revenue streams, experts said. This will lead to more municipal bankruptcies, which have been rare until now.
"This is not the end. This is the beginning," Peter Navarro, business professor at University of California, Irvine, told CNN recently. "As cities see it can be done and is being done, it will give them the idea to do it."
Eric Hoffman, an analyst at Moody's Investor Service agreed, saying more city bankruptcies are likely in California and throughout the nation.
Cities have also struggled from budget changes made on the state level. Because of massive budget shortfalls, Gov. Jerry Brown and the state legislature made changes to vehicle tax money and redevelopment agencies that stripped locales of hundreds of millions in state funding.
San Bernardino said it will continue to provide services during the bankruptcy phase.
"There will be no immediate service reductions or changes in service to the community as a result of the filing," interim city manager Andrea Travis-Miller said Wednesday. But "reductions may occur" in the future.
In a prior statement Travis-Miller hinted the city may continue to "negotiate in good faith with its creditors."
In early July, Miller and finance director Jason Simpson issued a report stating that the city was facing insolvency and its expenditures were projected to exceed revenues by $45 million. The city's general fund reserves had been as high as $19 million in 2001 but are now depleted, the report said.
"The city has reached a breaking point," the report said.
Some $10 million to $16 million in annual revenue has evaporated in recent years as taxable sales dried up and property values plummeted in the city, the report said.
Mammoth Lakes sought protection July 2 after a property developer won a $43 million court judgment against the resort town. Experts say this filing should not be lumped in with the other two California municipal bankruptcies since it was an unusual circumstance.
Stockton, however, filed for bankruptcy in late June after three months of mediation when creditors failed to close a $26 million budget shortfall. The city had already addressed $90 million in deficits over the past three years, mainly through reducing services and employee compensation.
Both Stockton's and San Bernardino's fiscal troubles are due in large part to the massive housing downturn and recession that swept across California. Both towns were hit particularly hard by the foreclosure crisis, which left numerous abandoned homes and reduced property values in its wake. That led to lower property tax revenues, critical to supporting public services.
While some areas of the Golden State are starting to recover, the regions containing those two towns are not, said Chris McKenna, executive director of the League of California Cities.
By filing for bankruptcy, cities will be able to keep police and firefighters on the street and possibly keep some parks and libraries open while they work out their finances, he said.
A California city filed for bankruptcy Wednesday, the third in the Golden State to do so in recent weeks, stoking experts' concerns that other cities could follow suit.
The city of San Bernardino, with more than 200,000 residents on the eastern tip of greater Los Angeles, "filed an emergency petition for Chapter 9 Bankruptcy" with a regional U.S. bankruptcy court, according to a news release from the city's interim manager.
The other two to file recently were Stockton, with around 300,000 residents, according to 2010 U.S. census data, and Mammoth Lakes, a resort town, where visitors and seasonal residents outnumber the just over 8,000 permanent inhabitants.
Many municipalities in the Golden State and around the nation are struggling to cover their costs as the economic malaise continues to hurt tax revenue streams, experts said. This will lead to more municipal bankruptcies, which have been rare until now.
"This is not the end. This is the beginning," Peter Navarro, business professor at University of California, Irvine, told CNN recently. "As cities see it can be done and is being done, it will give them the idea to do it."
Eric Hoffman, an analyst at Moody's Investor Service agreed, saying more city bankruptcies are likely in California and throughout the nation.
Cities have also struggled from budget changes made on the state level. Because of massive budget shortfalls, Gov. Jerry Brown and the state legislature made changes to vehicle tax money and redevelopment agencies that stripped locales of hundreds of millions in state funding.
San Bernardino said it will continue to provide services during the bankruptcy phase.
"There will be no immediate service reductions or changes in service to the community as a result of the filing," interim city manager Andrea Travis-Miller said Wednesday. But "reductions may occur" in the future.
In a prior statement Travis-Miller hinted the city may continue to "negotiate in good faith with its creditors."
In early July, Miller and finance director Jason Simpson issued a report stating that the city was facing insolvency and its expenditures were projected to exceed revenues by $45 million. The city's general fund reserves had been as high as $19 million in 2001 but are now depleted, the report said.
"The city has reached a breaking point," the report said.
Some $10 million to $16 million in annual revenue has evaporated in recent years as taxable sales dried up and property values plummeted in the city, the report said.
Mammoth Lakes sought protection July 2 after a property developer won a $43 million court judgment against the resort town. Experts say this filing should not be lumped in with the other two California municipal bankruptcies since it was an unusual circumstance.
Stockton, however, filed for bankruptcy in late June after three months of mediation when creditors failed to close a $26 million budget shortfall. The city had already addressed $90 million in deficits over the past three years, mainly through reducing services and employee compensation.
Both Stockton's and San Bernardino's fiscal troubles are due in large part to the massive housing downturn and recession that swept across California. Both towns were hit particularly hard by the foreclosure crisis, which left numerous abandoned homes and reduced property values in its wake. That led to lower property tax revenues, critical to supporting public services.
While some areas of the Golden State are starting to recover, the regions containing those two towns are not, said Chris McKenna, executive director of the League of California Cities.
By filing for bankruptcy, cities will be able to keep police and firefighters on the street and possibly keep some parks and libraries open while they work out their finances, he said.
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30 April 2012
Housing Market Still in Limbo
Story first appeared in The Wall Street Journal.
Nearly six years after home prices started falling, more U.S. housing markets appear to be nearing a new phase: a prolonged bottom.
Hitting a bottom, of course, isn't the same as a full-fledged recovery, which is still years off for many housing markets—as well as for millions of people who purchased homes or took cash out during the bubble.
The good news is that housing construction and home sales appear to have hit a floor. Home builders cut back heavily in the past four years and began construction on just 434,000 single-family homes last year, the lowest level on record. Research firm Zelman & Associates estimates builders will start construction on 540,000 homes this year, a 24% increase.
New-home sales during the first quarter posted double-digit gains from the previous-year period. A rebound here is likely simply because the market for new-home construction has been starved.
Sales of previously owned homes, meanwhile, are up 32% from their low point of mid-2010, when sales plunged following the expiration of home-buyer tax credits.
That leaves prices as the last measure that hasn't yet stopped falling. But there are signs of progress on that front, too, as the pace of declines is slowing.
In February, home prices fell by 2% from their level of a year earlier, according to CoreLogic Inc., a real-estate-data firm. But after excluding foreclosures and other distressed sales, prices were down by just 0.8%, the smallest year-over-year decline since May 2010.
The problem, of course, is that foreclosures are still a very high share of sales in many of the hardest-hit markets.
One of the biggest headwinds today is the "shadow inventory" of potential foreclosures. Banks owned about 450,000 properties at the end of March, but there were an additional two million loans in some stage of foreclosure and around 1.7 million more where mortgage payments hadn't been made in more than 90 days.
Housing economists are debating whether that shadow inventory will spoil any housing recovery. It won't prevent a recovery, but it could drag it out over several years.
Housing is getting a lift from reduced supply and stronger demand. Mortgage-interest rates at near-record lows and prices at their 2002 levels have made homes more affordable than at any point in the past decade. The number of homes for sale has fallen over the past year. A top complaint of some real-estate agents today is that there aren't enough homes to show potential buyers.
The shadow inventory is not going to result in the double dip that people always talk about. There is still evidence of a burgeoning appetite for housing from investors, who are scooping up homes that can be converted to rentals, and six years of pent-up demand from traditional buyers who feel better about their financial prospects.
While the foreclosure overhang is serious, some economists say there is a less-noticed tailwind that could balance things out: the sharp decline in new construction over the past four years. A lot of the people who talk about 'shadow inventory' don't talk about how slow the overall housing stock has been growing.
There's more that will keep home prices from rising, once they do hit bottom. First, many Americans don't have the required down payment or can't qualify for a mortgage. Banks are making borrowers jump through more hoops in order to produce loans that can't be subjected to a costly "buy-back" demand from Fannie Mae, Freddie Mac or other investors if the loan defaults. That is keeping credit very tight.
More than one-third of all homeowners have less than 25% equity, including 15% that are underwater, meaning their homes are worth less than what they owe.
Second, inventory declines may be less of a sign of health than they would suggest and instead reflect one of the structural problems holding back housing: Sellers are frozen, either unwilling or unable to sell at current values. Markets above the entry level, where demand from investors and first-time buyers isn't as strong, face a particularly steep climb because of that equity hole.
For-sale inventories may also be lean because banks sharply decelerated the foreclosure process over the past 18 months after courts found that they were routinely passing off forged paperwork to take back homes. If prices are stabilizing because of that temporary drop in foreclosures, some recent gains will prove artificial. Ultimately, because that shadow inventory is concentrated in certain markets, price drops also will be concentrated there.
Markets that are more quickly absorbing the stock of foreclosures amid an improving economy, such as Phoenix, and in those where the overhang wasn't as severe, such as Denver and Washington, D.C., have probably hit bottom. Others face a longer haul, particularly in overbuilt cities such as Atlanta and Las Vegas.
Many cities in Florida and the Northeast, where banks have been unable to satisfy court-administered foreclosure processes, have a glut of foreclosures that has yet to be digested.
A housing "recovery" has already had false starts. Two years ago, government stimulus gave a short-lived boost, and today, cheap mortgages and foreclosure delays could be doing the same.
There is plenty that can still go wrong—especially a sudden rise in mortgages rates or slowdown in job growth—and a lot that needs to go right for housing to recover. But there are more signs than there were a year ago that housing isn't getting worse, and that it may slowly be getting better.
For more real estate and home related news, visit the Commercial and Residential Real Estate blog.
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Nearly six years after home prices started falling, more U.S. housing markets appear to be nearing a new phase: a prolonged bottom.
Hitting a bottom, of course, isn't the same as a full-fledged recovery, which is still years off for many housing markets—as well as for millions of people who purchased homes or took cash out during the bubble.
The good news is that housing construction and home sales appear to have hit a floor. Home builders cut back heavily in the past four years and began construction on just 434,000 single-family homes last year, the lowest level on record. Research firm Zelman & Associates estimates builders will start construction on 540,000 homes this year, a 24% increase.
New-home sales during the first quarter posted double-digit gains from the previous-year period. A rebound here is likely simply because the market for new-home construction has been starved.
Sales of previously owned homes, meanwhile, are up 32% from their low point of mid-2010, when sales plunged following the expiration of home-buyer tax credits.
That leaves prices as the last measure that hasn't yet stopped falling. But there are signs of progress on that front, too, as the pace of declines is slowing.
In February, home prices fell by 2% from their level of a year earlier, according to CoreLogic Inc., a real-estate-data firm. But after excluding foreclosures and other distressed sales, prices were down by just 0.8%, the smallest year-over-year decline since May 2010.
The problem, of course, is that foreclosures are still a very high share of sales in many of the hardest-hit markets.
One of the biggest headwinds today is the "shadow inventory" of potential foreclosures. Banks owned about 450,000 properties at the end of March, but there were an additional two million loans in some stage of foreclosure and around 1.7 million more where mortgage payments hadn't been made in more than 90 days.
Housing economists are debating whether that shadow inventory will spoil any housing recovery. It won't prevent a recovery, but it could drag it out over several years.
Housing is getting a lift from reduced supply and stronger demand. Mortgage-interest rates at near-record lows and prices at their 2002 levels have made homes more affordable than at any point in the past decade. The number of homes for sale has fallen over the past year. A top complaint of some real-estate agents today is that there aren't enough homes to show potential buyers.
The shadow inventory is not going to result in the double dip that people always talk about. There is still evidence of a burgeoning appetite for housing from investors, who are scooping up homes that can be converted to rentals, and six years of pent-up demand from traditional buyers who feel better about their financial prospects.
While the foreclosure overhang is serious, some economists say there is a less-noticed tailwind that could balance things out: the sharp decline in new construction over the past four years. A lot of the people who talk about 'shadow inventory' don't talk about how slow the overall housing stock has been growing.
There's more that will keep home prices from rising, once they do hit bottom. First, many Americans don't have the required down payment or can't qualify for a mortgage. Banks are making borrowers jump through more hoops in order to produce loans that can't be subjected to a costly "buy-back" demand from Fannie Mae, Freddie Mac or other investors if the loan defaults. That is keeping credit very tight.
More than one-third of all homeowners have less than 25% equity, including 15% that are underwater, meaning their homes are worth less than what they owe.
Second, inventory declines may be less of a sign of health than they would suggest and instead reflect one of the structural problems holding back housing: Sellers are frozen, either unwilling or unable to sell at current values. Markets above the entry level, where demand from investors and first-time buyers isn't as strong, face a particularly steep climb because of that equity hole.
For-sale inventories may also be lean because banks sharply decelerated the foreclosure process over the past 18 months after courts found that they were routinely passing off forged paperwork to take back homes. If prices are stabilizing because of that temporary drop in foreclosures, some recent gains will prove artificial. Ultimately, because that shadow inventory is concentrated in certain markets, price drops also will be concentrated there.
Markets that are more quickly absorbing the stock of foreclosures amid an improving economy, such as Phoenix, and in those where the overhang wasn't as severe, such as Denver and Washington, D.C., have probably hit bottom. Others face a longer haul, particularly in overbuilt cities such as Atlanta and Las Vegas.
Many cities in Florida and the Northeast, where banks have been unable to satisfy court-administered foreclosure processes, have a glut of foreclosures that has yet to be digested.
A housing "recovery" has already had false starts. Two years ago, government stimulus gave a short-lived boost, and today, cheap mortgages and foreclosure delays could be doing the same.
There is plenty that can still go wrong—especially a sudden rise in mortgages rates or slowdown in job growth—and a lot that needs to go right for housing to recover. But there are more signs than there were a year ago that housing isn't getting worse, and that it may slowly be getting better.
For more real estate and home related news, visit the Commercial and Residential Real Estate blog.
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27 April 2012
Housing Bidding Wars Back
Story first appeared in The Wall Street Journal.
A new development is catching home buyers off guard as the spring sales season gets under way: Bidding wars are back.
From California to Florida, many buyers are increasingly competing for the same house. Unlike the bidding wars that typified the go-go years and largely reflected surging sales, today's are a result of supply shortages.
Competitive bidding in the current environment isn't producing huge price increases or leaving sellers with hefty profits, as occurred during the housing boom. Still, the bidding wars caused by tight inventory provide the latest evidence that housing demand is starting to pick up after a six-year-long slump.
An index that measures the number of contracts signed to purchase previously owned homes rose in March to its highest level in nearly two years, up 12.8% from a year ago and 4.1% from February, the National Association of Realtors reported on Thursday.
The Wall Street Journal's quarterly survey found that the inventory of homes listed for sale declined sharply in all 28 markets tracked. Real-estate agents consider a market balanced when there is a six-month supply of homes for sale. At the height of the housing crisis, in 2008, there was an 11.1-months' supply. In March, there was a 6.3-months' supply.
Inventory levels in many markets were at the lowest level in years. At the current pace of sales, it would take just 1.5 months to sell all the homes listed in Sacramento, Calif., and 2.4 months to sell all the homes listed in Phoenix. San Francisco and Washington, D.C., each have 3.4 months of supply, while Miami has 4.1 months of supply. Other markets have plenty of homes. Chicago, for example, has 9.4 months of supply, while New York's Long Island has 16.1 months of supply. Even in those markets, the number of houses for sale is edging down.
Nearly 83% of offers that agents have made on behalf of clients in the San Francisco Bay area this year and 71% in Southern California have had competing bids. Agents represented a buyer that made the winning bid on a Gaithersburg, Md., home earlier this month after agreeing to adopt the dog of the seller, who was relocating and looking to find a new home for "Buddy," a white toy poodle.
Inventories are declining for a number of reasons. Some sellers, unwilling to accept prices that are still down from their peak by one-third, are taking their homes off the market in anticipation of higher prices down the road. Meanwhile, investors have been outmaneuvering consumers for the best properties, often making cash offers that are quickly accepted by sellers.
In addition, some economists say that inventory levels are being held artificially low because Fannie Mae, Freddie Mac and the nation's biggest banks have been slow to list for sale hundreds of thousands of foreclosed homes they currently own. The lenders slowed down foreclosure sales and repossessions after record-keeping abuses surfaced 18 months ago. Banks and other mortgage investors owned nearly 450,000 foreclosed properties at the end of March, and another two million mortgages were in some stage of foreclosure.
Inventories could rise, putting more pressure on prices, if the banks and other lenders step up their efforts to sell their properties. Real-estate agents say they aren't concerned.
The declining inventory of older homes is spurring sales of new homes. New home sales are up 16% so far this year, compared with a year ago, while inventories of new homes fell in March to their lowest level since record keeping began in 1963.
Meritage Homes Corp., a builder based in Scottsdale, Ariz., reported Thursday a 36% increase in orders for the quarter ending in March versus the previous-year period.
Even though bidding wars are pushing prices higher, many homes are still selling for prices far lower than a few years ago. Increased demand is entirely affordability driven, which says that there will be strong resistance to price increases by buyers.
Rents are rising at a time when mortgage rates have fallen to very low levels. The result is that the monthly mortgage payment on a median-priced home is lower than any time since the 1990s. Freddie Mac reported on Thursday that mortgage rates fell to 3.88% for the average 30-year fixed rate mortgage, near its lowest recorded level.
Housing markets face other headwinds. More than 11 million homeowners owe more than their home is worth. It is a big reason that the "trade-up" market has been stalled. These homeowners can't sell their current homes, let alone come up with the down payment for their next home.
Mortgage-lending standards remain tough. Real-estate agents say an unusually high share of deals are falling apart because homes won't appraise at the price that buyers have agreed to pay sellers.
Still, borrowers with stable jobs are looking to make deals.
For more real estate and home related news, visit the Commercial and Residential Real Estate blog.
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A new development is catching home buyers off guard as the spring sales season gets under way: Bidding wars are back.
From California to Florida, many buyers are increasingly competing for the same house. Unlike the bidding wars that typified the go-go years and largely reflected surging sales, today's are a result of supply shortages.
Competitive bidding in the current environment isn't producing huge price increases or leaving sellers with hefty profits, as occurred during the housing boom. Still, the bidding wars caused by tight inventory provide the latest evidence that housing demand is starting to pick up after a six-year-long slump.
An index that measures the number of contracts signed to purchase previously owned homes rose in March to its highest level in nearly two years, up 12.8% from a year ago and 4.1% from February, the National Association of Realtors reported on Thursday.
The Wall Street Journal's quarterly survey found that the inventory of homes listed for sale declined sharply in all 28 markets tracked. Real-estate agents consider a market balanced when there is a six-month supply of homes for sale. At the height of the housing crisis, in 2008, there was an 11.1-months' supply. In March, there was a 6.3-months' supply.
Inventory levels in many markets were at the lowest level in years. At the current pace of sales, it would take just 1.5 months to sell all the homes listed in Sacramento, Calif., and 2.4 months to sell all the homes listed in Phoenix. San Francisco and Washington, D.C., each have 3.4 months of supply, while Miami has 4.1 months of supply. Other markets have plenty of homes. Chicago, for example, has 9.4 months of supply, while New York's Long Island has 16.1 months of supply. Even in those markets, the number of houses for sale is edging down.
Nearly 83% of offers that agents have made on behalf of clients in the San Francisco Bay area this year and 71% in Southern California have had competing bids. Agents represented a buyer that made the winning bid on a Gaithersburg, Md., home earlier this month after agreeing to adopt the dog of the seller, who was relocating and looking to find a new home for "Buddy," a white toy poodle.
Inventories are declining for a number of reasons. Some sellers, unwilling to accept prices that are still down from their peak by one-third, are taking their homes off the market in anticipation of higher prices down the road. Meanwhile, investors have been outmaneuvering consumers for the best properties, often making cash offers that are quickly accepted by sellers.
In addition, some economists say that inventory levels are being held artificially low because Fannie Mae, Freddie Mac and the nation's biggest banks have been slow to list for sale hundreds of thousands of foreclosed homes they currently own. The lenders slowed down foreclosure sales and repossessions after record-keeping abuses surfaced 18 months ago. Banks and other mortgage investors owned nearly 450,000 foreclosed properties at the end of March, and another two million mortgages were in some stage of foreclosure.
Inventories could rise, putting more pressure on prices, if the banks and other lenders step up their efforts to sell their properties. Real-estate agents say they aren't concerned.
The declining inventory of older homes is spurring sales of new homes. New home sales are up 16% so far this year, compared with a year ago, while inventories of new homes fell in March to their lowest level since record keeping began in 1963.
Meritage Homes Corp., a builder based in Scottsdale, Ariz., reported Thursday a 36% increase in orders for the quarter ending in March versus the previous-year period.
Even though bidding wars are pushing prices higher, many homes are still selling for prices far lower than a few years ago. Increased demand is entirely affordability driven, which says that there will be strong resistance to price increases by buyers.
Rents are rising at a time when mortgage rates have fallen to very low levels. The result is that the monthly mortgage payment on a median-priced home is lower than any time since the 1990s. Freddie Mac reported on Thursday that mortgage rates fell to 3.88% for the average 30-year fixed rate mortgage, near its lowest recorded level.
Housing markets face other headwinds. More than 11 million homeowners owe more than their home is worth. It is a big reason that the "trade-up" market has been stalled. These homeowners can't sell their current homes, let alone come up with the down payment for their next home.
Mortgage-lending standards remain tough. Real-estate agents say an unusually high share of deals are falling apart because homes won't appraise at the price that buyers have agreed to pay sellers.
Still, borrowers with stable jobs are looking to make deals.
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28 June 2011
Foreclosures Slow
Millions of homeowners in distress are getting some unexpected breathing room — lots of it in some places according to a nc foreclosure lawyer.
In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations of a prominent real estate data firm.
Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.
In the 27 states where the courts play no role in foreclosures, the pace is much more brisk — three years in California, two years in Nevada and Colorado — but the dynamic is the same: the foreclosure system is bogged down by the volume of cases, borrowers are fighting to keep their houses and many lenders seem to be in no hurry to add repossessed houses to their books and a mers foreclosure lawyer fights on.
If you were in foreclosure four years ago, you were biting your nails, asking yourself, “When is the sheriff going to show up and put me on the street?” Now you’re probably not losing any sleep.
When major banks acknowledged last fall that they had been illegally processing foreclosures by filing false court documents, they said that any pause in repossessions and evictions would be brief. All of the major servicers agreed to institute reforms in their foreclosure procedures. In April, the Office of the Comptroller of the Currency and other regulators gave the banks 60 days to draw up a plan to do so.
But nothing is happening quickly. When the comptroller’s deadline was reached last week, it was extended another month.
New foreclosure cases and repossessions are down nationally by about a third since last fall. In New York, foreclosure filings are down 85 percent since September.
A St. Petersburg, Fla., specialist in foreclosure defense, has 1,275 clients, up from 350 a year ago. About 75 clients have won modifications, dismissals or sold their properties for less than they owed. All the other cases are pending. Banks aren’t even trying to win, he said.
The chief judge of Florida’s Sixth Circuit, which includes St. Petersburg, agreed. He said they’re here to do what they are asked to do. But you’ve got to ask, and the banks aren’t asking, he said.
A spokesman for Bank of America said, any suggestion that they have a strategy to delay foreclosures is baseless. A Wells Fargo spokeswoman blamed changes in state laws governing foreclosure for any slowdown. A GMAC spokeswoman said it was following regulatory and investor expectations. JPMorgan Chase declined to comment. Servicers said some of the decline in foreclosures could be traced to an improved economy.
According to a Detroit foreclosure lawyer, there are many reasons that foreclosure, which has been slowing ever since the housing bubble burst, has been further delayed in many states.
The large number of cases nationally — about two million, plus another two million waiting in the wings — have overwhelmed many lenders and the courts.
Lenders, who service loans they own as well as those owned by investors, tried to circumvent the time-intensive process by using “robo-signers” who mass-produced documents, many of which made inaccurate claims. When the bad practices were discovered last fall, the lenders were forced to revisit hundreds of thousands of cases.
Over the last two years, most defaulting homeowners were people who had lost their jobs. Housing analysts say these homeowners are more likely to hire a lawyer and fight repossession than borrowers who had subprime loans that swelled beyond their ability to pay.
Judges these days are also more inclined to scrutinize requests for eviction rather than automatically approve them. The so-called foreclosure mills — law firms that handled many of the suits for the banks — are in retreat under law enforcement pressure. And some analysts suggest that banks are reluctant to take too many houses onto their books at any one moment for fear of flooding a shaky market.
In New York, lenders seeking to repossess face additional hurdles. The legislature has mandated that borrower and bank meet to discuss terms under the auspices of the court, but these conferences have turned out to be anything but brief or simple. Instead of one conference, 10 are often needed, and many foreclosure lawyers seem unable to meet a requirement, made last October by the New York Chief Judge, to affirm the accuracy of their documentation.
Last September, before the documentation crisis, nearly 1,500 New Yorkers lost their houses as a result of foreclosure. The average over the last six months: 286. That is far lower than at any point since the recession began.
Similar foreclosure cases can have different fates. To increase their odds of staying put, the foreclosed who can afford it are hiring lawyers, a move that can drastically slow down a case.
The Florida lawyer, said he divided his clients into three groups. Some are unemployed or disabled and just getting by. Others are able to save money and improve their financial situation as their case drags on. The third group are those who have strategically defaulted. They can afford to pay but are taking advantage of the banks’ plodding pace. Often the members of this group rent out the foreclosed home and keep the proceeds.
Though delays in foreclosure might seem like a gift to those behind on their mortgage, the foreclosed themselves do not necessarily feel that way.
One homeowner waited nervously in a Miami courtroom early this month. She and her husband, Roland, an architect, are among 97,000 households facing foreclosure in Dade County, where the average time to foreclose is 738 days and climbing.
The homeowner was on her third lawyer in a case that has stretched on many years. A friend of hers got her mortgage lowered through a modification and she would like to do that too. When her case came up, the judge told the lawyers they should try to work out a deal. They huddled outside the courtroom and agreed to meet again.
In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations of a prominent real estate data firm.
Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.
In the 27 states where the courts play no role in foreclosures, the pace is much more brisk — three years in California, two years in Nevada and Colorado — but the dynamic is the same: the foreclosure system is bogged down by the volume of cases, borrowers are fighting to keep their houses and many lenders seem to be in no hurry to add repossessed houses to their books and a mers foreclosure lawyer fights on.
If you were in foreclosure four years ago, you were biting your nails, asking yourself, “When is the sheriff going to show up and put me on the street?” Now you’re probably not losing any sleep.
When major banks acknowledged last fall that they had been illegally processing foreclosures by filing false court documents, they said that any pause in repossessions and evictions would be brief. All of the major servicers agreed to institute reforms in their foreclosure procedures. In April, the Office of the Comptroller of the Currency and other regulators gave the banks 60 days to draw up a plan to do so.
But nothing is happening quickly. When the comptroller’s deadline was reached last week, it was extended another month.
New foreclosure cases and repossessions are down nationally by about a third since last fall. In New York, foreclosure filings are down 85 percent since September.
A St. Petersburg, Fla., specialist in foreclosure defense, has 1,275 clients, up from 350 a year ago. About 75 clients have won modifications, dismissals or sold their properties for less than they owed. All the other cases are pending. Banks aren’t even trying to win, he said.
The chief judge of Florida’s Sixth Circuit, which includes St. Petersburg, agreed. He said they’re here to do what they are asked to do. But you’ve got to ask, and the banks aren’t asking, he said.
A spokesman for Bank of America said, any suggestion that they have a strategy to delay foreclosures is baseless. A Wells Fargo spokeswoman blamed changes in state laws governing foreclosure for any slowdown. A GMAC spokeswoman said it was following regulatory and investor expectations. JPMorgan Chase declined to comment. Servicers said some of the decline in foreclosures could be traced to an improved economy.
According to a Detroit foreclosure lawyer, there are many reasons that foreclosure, which has been slowing ever since the housing bubble burst, has been further delayed in many states.
The large number of cases nationally — about two million, plus another two million waiting in the wings — have overwhelmed many lenders and the courts.
Lenders, who service loans they own as well as those owned by investors, tried to circumvent the time-intensive process by using “robo-signers” who mass-produced documents, many of which made inaccurate claims. When the bad practices were discovered last fall, the lenders were forced to revisit hundreds of thousands of cases.
Over the last two years, most defaulting homeowners were people who had lost their jobs. Housing analysts say these homeowners are more likely to hire a lawyer and fight repossession than borrowers who had subprime loans that swelled beyond their ability to pay.
Judges these days are also more inclined to scrutinize requests for eviction rather than automatically approve them. The so-called foreclosure mills — law firms that handled many of the suits for the banks — are in retreat under law enforcement pressure. And some analysts suggest that banks are reluctant to take too many houses onto their books at any one moment for fear of flooding a shaky market.
In New York, lenders seeking to repossess face additional hurdles. The legislature has mandated that borrower and bank meet to discuss terms under the auspices of the court, but these conferences have turned out to be anything but brief or simple. Instead of one conference, 10 are often needed, and many foreclosure lawyers seem unable to meet a requirement, made last October by the New York Chief Judge, to affirm the accuracy of their documentation.
Last September, before the documentation crisis, nearly 1,500 New Yorkers lost their houses as a result of foreclosure. The average over the last six months: 286. That is far lower than at any point since the recession began.
Similar foreclosure cases can have different fates. To increase their odds of staying put, the foreclosed who can afford it are hiring lawyers, a move that can drastically slow down a case.
The Florida lawyer, said he divided his clients into three groups. Some are unemployed or disabled and just getting by. Others are able to save money and improve their financial situation as their case drags on. The third group are those who have strategically defaulted. They can afford to pay but are taking advantage of the banks’ plodding pace. Often the members of this group rent out the foreclosed home and keep the proceeds.
Though delays in foreclosure might seem like a gift to those behind on their mortgage, the foreclosed themselves do not necessarily feel that way.
One homeowner waited nervously in a Miami courtroom early this month. She and her husband, Roland, an architect, are among 97,000 households facing foreclosure in Dade County, where the average time to foreclose is 738 days and climbing.
The homeowner was on her third lawyer in a case that has stretched on many years. A friend of hers got her mortgage lowered through a modification and she would like to do that too. When her case came up, the judge told the lawyers they should try to work out a deal. They huddled outside the courtroom and agreed to meet again.
02 July 2010
Strategic Default Penalties Threaten Struggling Homeowners
Minnesota Independent
Last week, Fannie Mae, the government-sponsored enterprise that buys up mortgage contracts from loan originators to keep the housing market liquid, announced new penalties for homeowners who strategically default.
“Defaulting borrowers who walk away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure,” the company announced, adding that the policy goes into effect this Thursday, July 1. “Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments.”
The new provisions mean that if you strategically default, you likely cannot get a conforming mortgage for seven years. And if you strategically default in some areas, Fannie Mae will come after you in court.
But the Fannie Mae rule — one of several new provisions aimed at penalizing strategic defaulters — raises the possibility that the government and loan servicers might imminently begin targeting an economically vulnerable population, one characterized by housing insecurity and joblessness. It brings up the immediate concern — for both defaulting homeowners and the agencies trying to keep them paying — of how to distinguish “strategic” defaulters from those defaulting because they have no choice. And the data shows that those considering default are by most metrics in financial straits, whether solvent or not.
Consider, for instance, the situation of Charlene Mueller-Holden of Newark, Del. Mueller-Holden is a wife and the mother of two young boys, ages three and six. She lost her $60,000-a-year job as an instructional designer in January 2008. Two and a half years later she has not found a job, despite persistent searching.
“My family is slowly starting to lose the things that everyone takes for granted — a roof over our head and food on the table,” she says. “I was living the American dream. I did everything that everyone tells you to do. I had a great 401k, life insurance and five months’ [worth of] bills sitting in the bank in case of an emergency,” she notes.
The family lives in a modest three-bedroom. After Mueller-Holden exhausted her $1,200-a-month unemployment benefits and the family traded in for a cheaper car, exhausted its savings and tapped its retirement accounts, it has still had trouble keeping up on the mortgage. Her husband brings home around $1,800 a month — the family’s only source of income now. The $1,046.73 monthly mortgage payment started eating up 60 percent of the family’s income. Given food, gas and utilities — plus the cost of keeping the kids clothed and unexpected car repairs — the Mueller-Holdens became hard-up. They refinanced their mortgage under the Home Affordable Modification Plan, seeking to bring the payment down to a sustainable level. Their new payment? $1008.77 — 56 percent of their monthly income. And the balance on the mortgage increased.
“This year my husband’s overtime has been cut out and his hourly salary has been cut and now we are just grateful he has a job,” Mueller-Holden says. “We are beyond struggling. Each month I have to go through our bills to see which one might be able to wait, because we have to buy bread and peanut butter so the kids have something to eat. No more vegetables, no more fresh fruit. No new or used clothes for them this year.”
According to Mueller-Holden, it is not a question of whether the family will default on the mortgage if she does not find work, and fast. It is a question of when and how. The family’s credit score is already seriously tarnished. “I used to have an 820,” Mueller-Holden, says, referring to her FICO score. Imminent default and the six- or twelve-month period before actual foreclosure would provide some relief. No other federal program or bank refinancing initiative will. Indeed, the government itself is on the verge of penalizing strategic defaulters. The FHA Reform Act passed by the House but not yet taken up by the Senate excludes strategic defaulters from receiving Federal Housing Administration-backed loans — a provision included with bipartisan backing, including from most Republicans and Rep. Barney Frank (D-Mass.), the head of the House Financial Services Committee.
The question confronting Mueller-Holdens and the millions of other homeowners facing default is this: How will Fannie Mae and other entities going after defaulters decide what “strategic” default really is? Will they qualify? Will the government or their bank come after them, even when they are on the verge of poverty?
Certainly, over the course of the recession, strategic default has emerged as a phenomenon, with a few particularly famous cases of families pulling the plug on the mortgage and heading to Disney World. The most cited study of strategic default, from credit firm Experian and consulting firm Oliver Wyman, found that as many as 588,000 families strategically defaulted nationwide in 2008 — mostly prime and subprime borrowers in the “sand states” worst hit by declines in home values. Experian and Oliver Wyman deemed people defaulters strategic if they went from having “perfect payment histories” to stopping paying the mortgage entirely, intentionally and suddenly. (All in all, more than three million homeowners received foreclosure filings from banks that year, and banks repossessed 850,000 houses.) But a more recent study by the Federal Reserve showed that four in five strategic defaulters walked away only when deeply underwater, and generally after an “income shock,” such as job loss.
Fannie Mae did not respond to repeated requests for clarification about how hard-up homeowners will need to be before they can default without the new penalties. Thus far, none of the housing experts reached by TWI knew the definition either. The FHA Reform Act that might institute federal penalties for some defaulters instructs the Department of Housing and Urban Development to figure it out. But Mike Konczal of the Roosevelt Institute points to the strictures used by one subprime lender in the 1990s: post-mortgage income of less than $400 a month per family member.
By that standard, Fannie Mae would let homeowners like the Mueller-Holdens off of the hook. They live on just $790 a month after taxes and mortgage payments, but before utilities and all other expenses. (Additionally, they attempted to ameliorate their situation through a HAMP refinancing that ultimately proved useless, as Fannie requests hard-hit borrowers do.) But they exemplify the 5.5 million Americans currently in the foreclosure pipeline. A majority have suffered an “income shock,” like job loss. For many, their mortgage is eating up more than half of their post-tax income.
And now, they have Fannie to worry about.
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