Its clear that housing has hit bottom for most of the country. (Yes, in some markets there will be an additional 3-5% loss in value over the next 12 months.) All the ‘bubble appreciation’ has now evaporated and home values stand where they were back in 1999-2002..or in many areas the market has over corrected and its now possible to buy homes at 1998-1999 values. The only question now is how long will it take for the housing market to fully recover? A complete housing recovery will mean there is a 4 month supply of homes for sale. Before there is any sort of sustained recovery the 6,000,000 homes already foreclosed upon (or in some state of foreclosure) will have to be sold. Facts to remember, 30% of all homeowners (with a mortgage) are now underwater. If you were to factor in the owners that would be underwater if they had to sell (selling fees etc) the actual percent of underwater owners is actually 50%. Bottom line, 50% of ALL owners with a mortgage are underwater.

Despite record low interest rates and increasing affordability in most markets, the new reality for many is renting. For some, it is the stress of having already gone through some type of pain related to the housing market and for others it’s the reality of being unable to qualify for a loan to purchase a home. In either case, the rental market continues to be on a rampage with many opportunities for ready investors. The vacancy rate for rentals has dropped to the lowest level since 2001.

This surge in occupancy has also pushed up rental rates only slightly due to other negative factors such as high unemployment. Higher quality properties in the most desirable locations had higher rental increases as compared to properties that cater to lower income tenants where landlords found it more difficult to raise rents.

The shift to a “renter nation” has lots of support to last for several years to come creating very good long term prospects for investors seeking to maximize the opportunities that exist with today’s high inventory and low price levels.

If you’ve been impacted by the decline in the real estate market and are considering a short sale, make a call to a team that has hundreds of closed transaction behind us. If you’re an investor ready to take advantage of the historically unprecedented buying opportunities that exist today, call us and we’ll help you find a great investment or project for you.

Realty Trac previously had projected close to 1.2 million homes would be foreclosed in 2011. However, through November, 2011 the pace was on track for the actual number to be closer to 800,000. The additional 400,000 units will be pushed into 2012 evidenced by a surge in pre foreclosure notices. Sheriff’s sales and other foreclosure auctions reached a 9 month high in November indicating the wave is beginning to make its way through the foreclosure process.

On top of the 400,000 deferred foreclosure filings will be an estimated 600,000 units on which the foreclosure process began in 2011. The double whammy of high unemployment coupled with the large number of homeowners that are under water continues to create excessive pressure on delinquent mortgages. The foreclosures are expected to come more in small waves rather so the downward pressure on pricing may not be as significant as in the past. However, due to the ongoing foreclosure processes, the pressure will continue to hold the market down without any recognizable price increases nationwide.

The plus side of this process is that many, many lenders are now totally encouraging homeowners to aggressively pursue short sales. Lenders are contacting defaulting sellers and are working with them to try to make sure the owner is aware of options other than a foreclosure. Opportunities exist for sellers to get a short sale done now and this creates tremendous opportunities for investors that are looking for value in today’s market.

HUD has extended their temporary anti-flipping rule that was put in place in 2010. The original rule was through January 31, 2011 then extended through the remainder of 2011. It is now extended through December 31, 2012 unless otherwise extended or withdrawn.

There are additional requirements in place for a buyer using an FHA loan to purchase a property that is being resold within 90 days of a previous sale. Such sales and circumstances are common with physically distressed properties where investors, contractors or other buyers have purchased properties, rehabbed them and placed the property back on the market for sale as a “move in ready” home.

The extension of the waiver should provide significant help in moving physically distressed properties to owner occupied homes helping with the inventory stress that is a large part of why the real estate market continues to languish in the doldrums.

Recently, President Obama proclaimed his new slogan of “we can’t wait” as he described new action that he claims will help the ailing housing market and save homeowners from foreclosure.  The action consists of re-working an already in place government refinance program through FHA, Fannie Mae and Freddie Mac. The primary change pertains to refinancing homeowners that are under water, or that owe more than their homes are worth. In the past, there was a restriction that the borrower couldn’t be more than 25% under water and that restriction has been removed.

So, it’s a plan that rewards good behavior with a lower payment but the plan does nothing to help the borrowers that have already lost their homes, nothing for the borrowers that are delinquent and nothing for borrowers that are already in foreclosure. Possibly more important in terms of the overall housing market, it does nothing for the huge inventory levels of foreclosed properties sitting on the books of Fannie, Freddie and FHA.  While it’s great that some homeowners will be able to stay in their homes longer, I’m convinced this is not the help the market is needing. What we’ve done is allow these borrowers to stay longer, only to come to the conclusion at some point a few months down the road that they still owe tens of thousands or even hundreds of thousands of dollars more than their homes are worth and we may see increased defaults on these same loans in the future. Unless the negative equity problem is fixed, this isn’t going to bring the real estate market any headway in the need to stop the erosion in valuations.

At best, this is merely another stimulus plan and possibly nothing more than a political play. If this is the best the administration can do, then we’ll continue to see a housing market that struggles for a very long time. Possibly the best course of action to address the housing market would be an appropriate environment to increase employment and improve consumer sentiment. Unfortunately, with the petty partisian politics likely to play out until next November, the prospects of that kind of help seem far more distant than a year away.

According to Ron Peltier, chairman andchief executive officer of Home Services of America, Inc the second largest U.S. residential brokerage, there has been a ”dramatic shift” in banks willingness to complete short sales vs a foreclosure. Distressed sales brokered by Home Services used to be made up of 60% bank owned properties and 40% short sales, but that ratio has now flipped according to Peltier in an interview with Bloomberg. Reece & Nichols is a wholly owned subsidiary of Home Services of America, Inc.

Typically, short sales are completed at an average discounted price of around 20% vs a non-distressed sale vs a bank owned property with an average discount of about 40%, according to Realty Trac, Inc.  Short sales increased 19% in the 2nd quarter vs the previous quarter while foreclosure sales were flat. That’s better for banks who lose less money and better for sellers as the stress level from completing a short sale vs having a foreclosure action completed against them is generally less. 

This is also good for the overall economy and health of the real estate market as the downward pressure on home prices is somewhat abated by the higher prices realized from home sales completed in a short sale. It’s further good news as there remains over 6 million homes delinquent or in default, many of which will need to be sold.

According to the National Association of Realtors, almost a third of all transactions in August were either bank owned properties or short sales.

Home values have declined 31 percent in the last five years, according to the S&P/Case-Shiller index of values in 20 U.S. cities, as competition from foreclosures pressures sellers to lower their asking prices. The resulting crash was worse than the 27 percent plunge in values during the Depression, according to Stan Humphries, chief economist of Zillow Inc., a Seattle-based real estate information company.

The drop in home values has pushed almost a quarter of U.S. mortgage borrowers underwater, meaning their debt is more than their homes are worth, according to a report by CoreLogic Inc. (CLGX), a real estate data company in Santa Ana, California. That so- called negative equity prevents owners from conducting traditional deals because they would have to pay the difference between their loan balance and the sale price.

The drop in home values has pushed almost a quarter of U.S. mortgage borrowers underwater, meaning their debt is more than their homes are worth, according to a report by CoreLogic Inc. (CLGX), a real estate data company in Santa Ana, California. That so- called negative equity prevents owners from conducting traditional deals because they would have to pay the difference between their loan balance and the sale price.

If you believe you may benefit from a short sale, call an experienced and knowledgeable agent to help you review your options. We’ve closed hundreds of short sale transactions with every major lender and many small to mid sized lenders across the country. Give us a call today and set up a no-cost, no-obligation meeting.

September 2011 Housing Statistics

While every lender today speaks encouragingly of “wanting” to do more short sales vs foreclosures and deeds in lieu, nearly all are overwhelmed with the volume of requests they’re receiving. We are seeing processing times in some cases more similar to that which were experienced several years ago before short sales were the big trend as today.

In addition to long processing times, it’s still not uncommon for some lenders to claim to have not received paperwork when the agent has sent it in via fax, the only accepted method with some lenders. Rarely was the fax truly not received but rather it simply wasn’t processed correctly so the docs didn’t make it to the correct file. Admittedly, at times, it is likely possible that the agent didn’t include the borrowers loan number on all the docs so the processor simply didn’t make any effort to determine where the docs should go. However it happens, it is not uncommon for paperwork to be sent multiple times in order to get a bank moving on a review.

Due to the extended delays many lenders are creating, it is back to common place to have to sell a short sale property multiple times as buyers simply get tired of waiting and walk. Too often, this is due to unreasonable expectations of a buyer that hasn’t been properly counseled by their agent. When a buyer goes into contract on a property being sold as a short sale, they need to be aware that in many instances the wait time can be long. If a particular buyer needs to be able to close by a specific date that isn’t too distant in the future, a typical short sale may not be the best option for them to go into contract. Often times, a transaction can be completed within reasonable times but most experienced short sale agents can tell you that months in the trenches to get a deal approved isn’t uncommon.

Further complicating the issue with many lenders is a HAFA review. While the program was designed to help struggling homeowners complete a short sale in a reduced amount of time, nearly every lender takes an extended period of time to review a seller for acceptance to a HAFA short sale.  In addition, many borrowers for multiple reasons are deemed unqualified and the HAFA program has been called a massive failure by many in the industry. The number of sellers approved to participate in the HAFA short sale program are grossly below expectations.

With the backlog of foreclosures in the pipeline as well as the still heavy delinquency rate on other homes, some of which will eventually go into foreclosure, the review delay may not end soon. Most lenders are miserably understaffed and remain unprepared to handle the volume of short sale requests.

We hit the bottom this year and the market will remain flat until 2014 when it will start a slow recovery, according to Rich Sharga, an executive vice president with Carrington Mortgage. More than a million foreclosure filings that should have started this year have not moved forward yet. That delay further exacerabates an anemic market and continues to push out a resolution of the housing market for years.

Banks hold about 800,000 REO’s ( real estate owned) and nearly 75% of those homes are not listed for sale, according to Sharga. Even more troublesome, another 800,000 homes are in foreclosure and another 1.5 million are delinquent. This shadow inventory will continue to put pressure on any housing recovery as monthly foreclosures will remain elevated through 2012 and inventories high until at least through 2013. “We can’t expect to see home price appreciation until we work through these distressed assets” he said.

Since 2005, there has only been one quarter where banks have sold more homes than they’ve taken back through foreclosure, creating a huge inventory of bank owned properties that need to be cleared out.

Bank of America is offering Florida homeowners up to $20,000 to complete a short sale rather than go through the time consuming process of a foreclosure. Many of the homeowners to be offered the option have already entered the foreclosure process, a miserable abyss in Florida as the current timeline to foreclose is Florida is 676 days, nearly two years. The limited time offer has been sent to select Florida real estate agents but has received very little attention and promotion by Bank of America.

The plan, which has a minimm payout of $5,000, is being well received by some agents that claim it is an incentive for struggling homeowners. Sometimes, homeowners that feel they have been wronged or cheated by the bank leave a home in poor condition, tearing out appliances, electricaland plumbing fixtures, even entire kitchens, as a way of recouping some of their lost dollars as well as “getting back” at the bank. This is an attempt to convince homeowners to complete a short sale vs a foreclosure and to save the bank thousands of dollars in repairs necessary in order to market a house after they’ve foreclosed. If the repairs arent’ made, the foreclosing bank must suffer the further loss of selling the property in substandard as-is condition. By working with the homeowners in this way, the bank hopes to reduce overall losses in the process.

A spokesman for Bank of America says the program is being tested in Florida, and if successful, it may be expanded to other states. Wells Fargo has a similar program also offering up to $20,000 for eligible short sales that are left in broom clean condition and for properties which it owns the first lien, which is about 20% of it’s portfolio. JP Morgan Chase also has a program of their own. These programs are similar to HAFA which offers homeowners $3,000 in relocation assistance. While the HAFA program requires the bank to waive any deficieny, the BOA program “may” waive the deficiency.  The deficiency is, basically, the difference between what the house sells for and what was owed on the loan. HAFA, which began in April 2010, has seen some success but has been derided as mostly a failed program having completed just 15,531 short sales through August nationwide.

If you believe that a short sale is something you need to consider as an option to your own situation, give us a call today. We’re have an experienced and knowledgable team having completed hundreds of short sales. We can help you determine if a short sale is right for your situation and help you bring about a sale that will put the worry and stress behind you.