crisis - Blog - REO Pro Network

Survey: Is the Country Still in a Housing Crisis?

Posted by Michael Humphries on June 5, 2014 at 4:22am

DSNews ran an article this morning with results from a recent survey revealing over half of the country still believes we are in a housing crisis.

Although it is true that some areas in the country are still struggling to put the crisis behind them, markets from Florida to California and everywhere in between are experiencing a robust recovery and many submarkets have been realizing year-over-year double digit appreciation since 2012.

So why do some people still think the housing market is underperforming?
3 Reasons—Uninformed. Underinformed. Misinformed.

The reality is, real estate data is at least 3-6 months old by the time the mainstream media gets their hands on it before reporting it back to the public. Keep in mind, the sale of a home and it's selling price is recorded after the transaction closes. The time lapse between contract and closing averages 90-120 days.

Also real estate statistics are released on a month-end/end-of-quarter and year-end basis. If you're not paying close attention you could be a year behind on your outlook of the housing market. I suspect this is why more than two and five adults believe the housing market today continues to be a serious problem.

Example: A house that sells on Jan 1 and closes on April 1 doesn't show up in the data mix until the end of May when the month end reports are released. Worse yet, it won't count as a statistic in the quarterly analysis until the end of July. This is especially problematic in a fast moving market.

By the time the general public get's in the loop it's old news. Armed with old information when selling your home or buying a new one can be dangerous and could cost you thousands of dollars.

How can you get reliable and up-to-date information?

To start you can visit the County Records/Tax Assessor website in the area to search sale prices, closing dates and property details. You can also check out Trulia, Zillow and Realtor.com to browse through homes for sale and obtain information on closed homes. These sources will give you a general idea of what homes have been selling for and the current asking prices in a given market.

Your best source for real estate trends has always been a good local agent. Most real estate agents are more than willing to share their knowledge. They are the experts and can easily provide you with a current market analysis summarizing for sale, sold and pending activity in the area.

Everything about the real estate industry is time sensitive, the old saying "no news is good news" doesn't apply.

Keeping your ion REAL ESTATE.
Michael Humphries, designated broker for Compass Roads Realty, Inc. and real estate author covers local and national real estate news, industry trends and market analytics. Read more of his work here.

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Financial Crisis Inquiry Commission

Posted by Billie Dalessio on January 13, 2010 at 5:50pm

All REO Brokers, for that matter all Real Estate Professionals should watch the panel questions to learn about the financial crisis. It is available for viewing at www.c-span.org In the on-going blame game that has been in effect since the beginning of the crisis, this is the most fair and balanced of each parties viewpoint, without media bias one would find on politically motivated networks. Most people have an opinion on the root cause of the meltdown. Some think it rests on a residential real estate housing bubble. I have never been in agreement with that viewpoint. Real Estate is unlike a dot com, it cannot truly be a complete bubble. By definition when a bubble bursts, nothing is left, in real estate, the underlying asset remains, although at a reduced value, it still retains some value.Others believe that the cause is Wall Street greed. Many others believe it was the push for increased homeownership rates.These thoughts are over-simplication, although there is plenty of blame to go around, it is a combination of many factors that created the perfect storm. The purpose of learning where the system went wrong is to prevent repeating the behaviors that brought us here.It's my opinion that there was a whole circle of responsibilty. An environment of appreciating real estate values, and low interest rates had Main St wanting to invest in stocks & real estate rather than put their cash in safe low return savings accounts, or T bills & the like. Wall St under pressure to out perform year over year, as the bar is set higher and compensation tied to investment returns to the firm looked for new investment vehicles to sell. Mortgage loan brokers. some of which didn't even need a license depending on which state they did business in were looking for new loans. Institutional investors looked to maximize returns on their portfolios and pension funds. Enter new products; mortgage backed securities and credit default swaps. CDS were basically a bet that a package of loans would fail, sort of like shorting a stock. In order to sell these new products they needed to be rated, so Credit Rating Agencies such as Moody's & Standard & Poors evaluated these new products. They developed sophisticated models based on extrapolating real estate appreciation. Real estate purchasers counted on rising values and incomes to sustain their mortgages. Relaxed qualifying opened the market to more borrowers, it was now possible to purchase with no money down, lower credit scores and low documentation of income.There were some mortgage fraud where borrowers or originators lied on applications. Some borrowers decided to cash in on their equity to purchase home improvements, vacations, toys or anything else they wanted now. Homeownership rates went up and helped to fuel the economy, So the circle went- until it broke down.Here's why I think it broke-1. Real Estate values are not constant, they fluctuate up and down.2. New sub-prime loans were more profitable than conforming loans, so too many were written.3. MBS & Credit Default Swaps needed an increased amount of loans to package, Wall St wanted more.4. Mortgage applications were taken by inexperienced unlicensed people, including some real estate agents.5. The riskier the loan, the higher the profit to the mortgage broker, and demand for the loans increased.6. Mortgage Companies solicited home owners to refinance, and spend their equity now, rather than build it up.7. Credit Rating Agencies formulas of taking B & C paper, repackaging and rating AAA, (which I liken to taking B & C student and puting them on the Honor Roll) led to global institutional investors purchasing the MBS & CDO's, thinking they were safe.8. Government watch dogs that started to raise red flags were squashed.9. Banking regulations did not apply to Investment Companies.10. The Fed kept long term interest rates low.11. The new finacial products were complex, and some buyers did not understand them, and relied on their ratings.12. No transparency in capital reserves and product mix at major lenders.13. Consumers take loans which they don't understand have pre-payment penalties, balloon payments, negative amortization etc. This one gets alot of bad press, as in "they should have know better" but I know that I have signed documents to purchase a car without reading it, and have many times checked the box on a website that states I have read & understand the terms & conditions without reading them.- and I deal with legally binding contracts everyday.14. Economic conditions weaken, Real Estate values decline,Foreclosure rates increase placing downward pressure on values, Market liquidity tightens, Panic starts. I am not sure which fueled which, but the combination led us here.

Is FHA The New Subprime?

Posted by Marcelo Da Silva on November 5, 2009 at 9:30am

In the past two years we have gone from the wild west where everything is allowed to gradual government intervention to stop the bleeding that Wall Street has caused to our economy and more specifically to the housing market. The American dream of homeownership has become a nightmare that is causing everyone insomnia. With the liquidity drought of the private market, everyone has turned to Uncle Sam for a rescue. FHA loans now are becoming part of our day to day purchases as it used to be back then.... Evidently this exposure may have some consequences later if we are not careful in managing these funds. And in the end can cause more harm than good and we taxpayers will be once again the ones with pockets hanging. Do you think FHA is the new subprime?

What Caused the Economic Crisis?

Posted by Carlos H. Silva Sr. on April 30, 2009 at 7:50pm

Warren Buffett called them “weapons of mass destruction” in 2003.President Bush said they had to be regulated.So did the chairman of the Securities and Exchange Commission, and the current head of the Federal reserve.As did the G-20 group of the world's 20 richest nations.Former Federal Reserve Chairman Alan Greenspan - after being one of their biggest cheerleaders - now says they are dangerous.And a Nobel prize-winning economist said they should be “blown up or burned”, and we should start fresh.What Are They Talking About?What are the above-listed folks talking about?A financial instrument called “credit default swaps” (CDS for short).CDS are like an insurance contract, where the purchaser buys "insurance" that a company won't go out of business from a seller. If the company stays in business, the purchaser pays premiums to the seller, but if the company goes belly up, the seller has to pay the face value of the CDS "policy".Why are CDS so dangerous?For the rest of the article go to: Cause Of Economic Crisis

Real Estate & REO Outlook for 2009

Posted by Seb Frey on March 14, 2009 at 5:47am

It's been a while since my last blog post - too long! It's not because I'm lazy, it's because of my crushing workload. My team has been expanding to keep up with it all, but even so, I find myself at least as busy as ever, and possibly even more so.I wanted to share with you all my view of where we are headed for the rest of the year. There's a lot of talk about bail-outs and hitting the bottom and market rebounds, and there's also a lot of talk about falling off the economic cliff, outright economic depression, etc. I want to chime in with my own $0.02 - and that's probably about all its worth, but this community is about sharing, so here goes.I do think that the bail-outs are going to help stabilize the credit markets. To be honest, I have not seen a lot of qualified buyers having problems with their loans. People who have good credit scores, good incomes, and good debt-to-income ratios have been getting loans this whole time. People with dicey credit and iffy income have had a much harder time of it - which actually makes sense. A lot of these people maybe should not be buying real estate - unfortunately, that's a big chunk of the adult population, and there's a lot of real estate that needs to get bought, so it's understandable that the powers that be would want to put the credit into their hands to buy these properties.As for Obama's Homeowner Rescue Plan - in my market (northern California), there are precious few people who are going to qualify for this plan. Even nationally, where many more people will be able to take advantage of it, many people simply won't - I believe this epidemic of rational default (or ruthless default as some would say) will continue un-abated. I do think that the Homeowner Rescue Plan will in fact save some homes - and in large part, probably only those of the "most worthy" - that is, the people who are least likely to be back in default shortly after rescue.I think it's a good thing that the government get actively involved in trying to put Humpty Dumpty back together again. I am sure they're bungling the job and that somehow, it could be done much better and cheaper - but I think a large part of the problem is lack of confidence in the system - and if the government shows confidence that it can take steps to fix the system, that will go a long way towards restoring stability and calm.Having said that, I'll say this: I think the bottom is a ways off yet. For my business, 2008 was an extremely busy year - and I expect that 2009 will be busier. I expect there will be more foreclosures in 2009 than there were in 2008, despite the government's valiant efforts. And that is as it should be. There are simply too many homes in the houses of people who cannot afford them. Much better in the long run to move these properties from weak ownership to strong ownership.I also foresee the foreclosures moving up the economic ladder - increasingly, more and more middle, upper-middle, and executive/luxury homes are going to be foreclosed on. You see, in a normal economic cycle, first you have a recession, then you have increasing mortgage delinquencies, defaults, and foreclosures, accompanied by a drop in real estate values.This time around, we had a drop in real estate values, brought on by a "credit crisis" (or, the end of ultra-lax lending practices), followed by an increase in delinquencies - and then, recession. In a normal cycle, we would just now be at the beginning of a surge in foreclosures, not nearing the end of of one. Think we've hit the bottom? Think again.You do see, hear, and read news stories about positive signs that we may be approaching a bottom. I'm pretty sure, though, that I've been hearing those stories for quite some time now, at least a year - and the bottom seems no closer today than it was a year ago. And let's not forget the shadow inventory - it's real, it's big, and it's out there, waiting. I am getting listings that have been secured and vacant for months, never listed, never assigned to an agent - they've been sitting, for months, just rotting and dropping in value with the market around them.In short, I expect it will be another banner year for those of us in the REO Brokerage business. I'd be curious to hear how 2009 is shaping up in your market.

crisis (5)

Survey: Is the Country Still in a Housing Crisis?

Financial Crisis Inquiry Commission

Is FHA The New Subprime?

What Caused the Economic Crisis?

Real Estate & REO Outlook for 2009

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