housing (77)

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 7.6 percent to a seasonally adjusted annual rate of 5.77 million units in April from an upwardly revised 5.36 million in March, and are 22.8 percent higher than the 4.70 million-unit pace in April 2009. Monthly sales rose 7.0 percent in March.

The upswing in April existing-home sales was expected because of the tax credit inducement, and no doubt there will be some temporary fallback in the months immediately after it expires, but other factors also are supporting the market,” the chief economist for NAR, Lawrence Yun said. “For people who were on the sidelines, there’s been a return of buyer confidence with stabilizing home prices, an improving economy and mortgage interest rates that remain historically low.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 5.10 percent in April from 4.97 percent in March; the rate was 4.91 percent in April 2009.

Total housing inventory at the end of April rose 11.5 percent to 4.04 million existing homes available for sale, which represents an 8.4-month supply2 at the current sales pace, up from an 8.1-month supply in March. Raw unsold inventory is 2.7 percent above a year ago, but remains 11.6 percent below the record of 4.58 million in July 2008. see chart

Regions

1. Northeast: Existing-home sales surged 21.1% and are 41.6% higher than a year ago.
2. Midwest: Existing-home sales rose 9.9% and are 29.1% above a year ago
3. The South: Existing-home sales increased 8.6%
4. The West: Existing-home sales fell 6.2% are 5.2 percent above a year ago.

In Stock Markets
Volume Precedes Price
This simply means that volume will indicate the end of an uptrend or a downtrend before the price changes indicate it. In the real estate markets price will not begin to firm until volume begins to decline. If this holds true the NAR study indicating increasing sales volume and continued price drops may be the early beginnings of a market bottom. The change in trend will begin in earnest when volume shrinks, until then we can expect prices to decline

Bouncing Along The Bottom
Whats it feel like

Well a lot like this. Its a place where asset price action is no longer declining as a long term trend. Price seems to go up and then back down. It simply means that not all the bad news is out of the markets and that healthier signs appear and are then clouded by another set of negative circumstances.

For example the EU crises precipitated by Greece caused money to flow out of the EU. This caused rates to drop in the US. It also raised the value of the dollar, making our exports more expensive to Europeans. Since four of our top ten trading partners are in Europe this is likely to impact job growth. So, cheaper mortgages might incentivize some people, but job uncertainty might disincentivize other people....not all the bad news has washed out.

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Case Shiller Price Observations


The recent Case Shiller report shows price declines in front of the tax credit completion...The index gives us a slight 0.38% decline in the top ten market composite. Year over year the index is up 3.15% when compared to March 09. Recent strong price moves will come to a serious halt because the tax stimulus is behind us. The silver lining in this is that it proves demand is there, just waiting for the right price and for some of this historic uncertainty to settle. This chart Via Redfin shows the 2009 price spike . Price momentum is quite impressive and the recent downturn looks reasonable for at least San Francisco, San Diego LA, Washington and Boston.

These low rates will help to elevate home-buyer affordability and soften the effects of the sunset of the home-buyer tax credit,” said Frank Nothaft, Freddie Mac vice president and chief economist.

Beware the inventory surge
In our immediate future is a large wave of potential foreclosures as banks begin to off load inventory they have been holding back. Home owners also are placing their homes for sale at hefty pace. Many waiting for better times before listing are now beginning to do so. The supply surge increase the likelihood that will continue to see price declines as sales volume continues to increase. Most experts still agree that we are bouncing along the bottom, meaning we are no longer in a steep decline and that will have to do as the definition of price stabilization.

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Housing: Where Are We Now

With house prices expected to slid and unemployment to rise substantially further, this third foreclosure wave will grow larger. If house prices fallanother 10% over the coming year,as Moody’s Economy.com currently forecasts, an estimated 18.6 million homeowners could be underwater.

More to Come
Even if the economy stabilizes in 2010 as expected, defaults will remain elevated long afterward. More large payment resets are due to hit so-called option ARMs. Most of these mortgages were designed on the 5-25 plan: five years of fixed payments and rates pegged to Libor after that. All the option ARMs issued at the peak of the housing bubble in 2005 and 2006 will thus reset for the first time in 2010 and 2011.

Case Shiller
Prices of single-family homes fell 0.5 percent from February, which is the sixth month-on-month drop, seems prices should have spiked from record low mortgage rates. Unless the crises in Europe remains huge, mortgage rates which are benefiting from a flight from the Euro, will rise sooner trather than later. This is a window of low cost money for buyers and refiers. Its a sale! And if this isnt causing a spike in prices then inventory and psychology and persistently the villains. Now that the tax incentives have ended, there seems to be no reason to expect prices to rise in 2010.

Moodys
Foreclosures are going to have a fairly negative impact on the housing market through the beginning of next year," she predicts, adding that housing prices could drop another 5 percent between now and the end of the year.

NAR
NAR says that total housing inventory soared 11.5 percent at the end of April from a month earlier. This means that it would take 8.4 months to sell all the properties, if sales continue at the current pace. High inventories are likely to prevent big price gains over the next year or two.

Long Term
the upside is in view.
The long-term recovery seems to be in place. see Moodys chart National prices were up 2.3 percent from last year. Some cities are sloging through their foreclosure mess, San Diego and San Francisco, up 1.5 percent each reduced their share of foreclosure inventory.

U.S. sales of new homes jumped nearly 15% in April to the highest level since May 2008 as homebuyers rushed to meet the deadline to qualify for tax credits. Sales jumped 14.8% in April to a seasonally adjusted annual rate of 504,000, the Commerce Department reported Wednesday. This follows an almost 30% gain in March. Everyone expects these numbers to crash next month, the tax incentives are gone. Mortgage Bankers Association already reports that reported that purchase applications plummeted. But it does point to a lot of buyer appetite out there.

Mark Zandi, Chief Economist for moodyseconomy.com says that this is the time to buy, even though prices may continue to drop. Now, Zandi says, is best time to buy in a quarter-century, thanks to low mortgage rates, low prices and a recovery in place.

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The Case for Recovery

We Have One, But It Wont Feel Like it


Case-Shiller released their index of home prices in 20 cities and it rose 0.6 percent in February over last year. Existing home prices advanced 0.4%, as sales climbed for the first time in four months.

We’ve turned a corner with housing," said economist Karl Case, who with Robert Shiller created the index. "As long as mortgage rates don’t jump and employment continues to improve, we should see housing play a key role in preventing a double-dip recession. Via Seeking Alpha

Monetary Policy; The Fed kept monetary placed a hold stating that conditions requiring low rates were likely to remain for an extended period.

Inflation: The economy is in a sweet spot with solid growth and inflation is low. Why the Fed is keeping rates low, to put behind us several quarters of growth and stimulate job growth and consumer confidence.

Counter Trends

Jobs: The economy will still have to expand at a decent rate for several more quarters before we get decent job growth

Defaults: 13.6 million homeowners have no equity or negative equity and therefore have little incentive to continue to pay high monthly mortgage debt.

Steep Losses: It will take quite a while to dig out. Note: The chart above compares this very steep decline with the last bust in the 1990's. See chart courtesy of papereconomy.com

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How to traverse the nightmare that is the Los Angeles Housing Department’s REAP Program

The other day a good friend of mine challenged me to write a journal. I have never been a person wholiked to write anything down, I figure, let’s just sit down and talk about it.Well after going through the process of pulling a few properties out of the LosAngeles City REAP Program, I decided that I would write about theexperience. Man oh man, what anexperience that was.

Let’s first discus what the REAP Program actually stands for. The REAP is a rent escrow account program that is administered by the Cityof Los Angeles Housing Department. Theonly way to even get put into the program is when your property, or theproperty you are representing, has had violations that were not taken care of. Once you have not complied with the demandsof the Housing Department (they do give you a chance) you are done. When theREAP Department starts collecting your rents and have placed a “cloud” on yourtitle, well now the real fun begins.

Where do I start? Let’s start with the day your nightmare began.

You wake up to a new REO listing, “YEAH”. It’s a multi-family dwelling located within Los Angeles City boundaries, “Oh no!” You check the Housing Department’s websiteand find out that the property has some issues and it is in the REAP Program.“Oh Boy! Now for the fun.” Oh, did Iforget to tell you that there is now a “Cloud” on the title, so forget abouttraditional financing options for your buyers. OK, now what do you tell theseller, (remember they have taken back the property and are now considered theowners, and guess what, they are responsible for the REAP and all of theproperties issues.) So you tell the Asset Manager the truth and they respond likeArnold from Different Strokes, “What you talkin’ bout Willis?” Thenthey snap back to reality, they either tell you to sell the property forcash. That’s so they don’t have to dealwith the title issues, but then you have to find an all cash buyer and/orsomeone who is going to deal with the REAP on their own (scary thought) or theyclear the title and get top dollar for the property.

So now let’s get the property out of the REAP Program and clear the title so you can sell your property. Now we have to deal with the Systematic Code Enforcement Program. Thisis pretty much where it all began for you. You have to get a copy of the previous violations and/or have theproperty re-inspected so that you can find out what the violations are. Thenyou fix the property and have it re-inspected by the Housing Inspector. Onceyou have cleared the Housing Inspector, you need to contact the OutreachContractor and have the property re-inspected by them. (Now understand thatmore than likely you have had a Building & Safety Inspection because youneed to get your permits signed off and you have had a Housing Department inspection,ok sorry I digressed for a moment, too many inspections). Ok the OutreachContractor has signed you off, now what? Make sure that all of the DWP bills on the property are paid, I mean allof them (and I don’t care who’s name they are in). The Housing Department alsohas an UMP Program (Utility Maintenance Program) that you must not be in; ifyou are then pay the bill. OK, now you have made sure that you don’t owe, DWPbut did you check to see if you owed the Housing Department any money? Well youneed to check that little bit of information. Ok, now we are cooking withgrease. You have paid the HousingDepartment bill and now they will clear you for removal from the REAP Program.Ok they refer the property to the City Council and recommend removal from theprogram. YEAH! well no , not yet. Oncethe property has gone through City Council and you have been cleared, you stillhave a few more steps to go. Now you have to wait, yes I said WAIT 30 daysuntil you can even ask the Housing Department if you owe them any moremoney. Yes, I said it; you may still owemore money. What you say, you just PAIDthe Housing Department. Well you will have to pay them again, yes again, tofinally remove your property from the REAP Program and remove the “Cloud” fromthe title. Once issued, this “Demand for Payment” is good for 30 days. You hadbetter get your loan funded within that 30 day window or pay the final demandamount, if you don’t, then there will be penalties and you will owe more money.But once paid, the Housing Department will remove the “Cloud” from the titleand you are REAP free. The moral of this story is if you own a multi-familydwelling within Los Angeles City Boundaries, “TAKE CARE OF YOUR PROPERTY,COMPLY WITH ANY AND ALL NOTICES FROM THE HOUSING DEPARTMENT AND KNOW THE RIGHTSOF A PROPERTY OWNER AND THE RIGHTS OF YOUR TENANTS.”

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Case Shiller in Context

Prices are now up almost 4 percent from the bottom in May 2009, but off 30 percent from May 2006, largely considered the peak of the housing boom. The 20-city index was off just 0.7 percent from this time last year. The smallest decline in almost three years.

Case Shiller index tells us we are in a bottoming process, where prices will continue to stabilize and attract buyers. However the paper economy chart, comparing the 1990s housing bust to the present makes two points vividly. First, the size of this decline and second, the 1990s bust took eight years to return to normalcy, measured from peak to peak

Fed says goodby to MBS
Interest Rates Going Up
The Fed has been the lender of last resort, buying up paper nobody wanted, providing liquidity to mortgage-backed securities and keeping the whole thing afloat. However, the Fed declares this a self sustaining recovery and financial markets stable and profitable. Private investors, willing to purchase government backed mortgages will requrie higher rates. Its not clear to anyone how much of this mortgage backed debt is viable. Investors will require higher rates for mortgage backed securities to look attractive. Mortgage Bankers association predicts 6% rate years and NAR looks to 6.5% in 2011

Fed says Goodby To Tax Credit
Sales Driver

The homebuyer tax credit that gives first time home buyers up to an $8000 tax credit and repeat buyers up to $6500 is set to expire the end of April. You must be under contract by April 30th and close by June 30th to qualify. In the short term the homebuyer tax credit and spring markets are bringing buyers to the table. MBA Purchase Applications index rose 6.8% for the week, confirming solid activity.

Fed Says Hello Sustainable Recovery

The economy remains in a transitional phase from a period that depended on support of public sector programs to a period of resumed growth based on private spending, aqccording to Dennis Lockhart President of the Atlanta Fed President. Read we are off the lifeline and looking to the markets to gradually act more normally.

We created jobs! First time in two years, True a total of 160,000 jobs (including temp jobs) is a far cry from the 8 million we have lost, but its solid proof that we are on the right road.

Rising home prices also could boost consumer optimism. with the tax credit program ending we will likley see lower home prices and higher sales volumn. Prices are reaching equilibrium in some parts of the country, according to moodys.com. Looking at the 1990s-era comparison, even after prices stabilized, housing had a long slog ahead. Our economy is driven by consumer spending, so high unemployment means less consumer spending.

Home prices and sales volume will be held hostage to the economic recovery and will begin in earnest when job creation does so. On a positive note, with big headwinds in front, we are at the beginning of a long term healing process.

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Housing is a right?

Are Liberal Progressive Government policies pushing America toward a Federal takeover of housing?

I know for many of us, this question seems crazy however, make no mistake, Progressive Liberals would love to see America provide housing to each and every person in America, citizen or not. In fact, Franklin D. Roosevelt introduced this idea to America by including, “the right of every family to a decent home” as his 5th right in his proposed Second Bill of Rights.

So, would it be possible for the Government to just take over the housing industry and, promise everyone a home? It is not only possible, it’s happening and it’s taking place under the guise of “Housing Recovery” and the instrument which will be used to do the takeover is TARP.

Back in October of 2008, TARP was used to stabilize the financial institutions after their delinquent mortgages they were holding came close to causing these banks to melt down. What many people don’t realize is, this meltdown was a direct cause of Government regulation. I don’t want to bore you with all the details however, all you need to do is bring up Google and type, Community Reinvestment Act. Read for yourself how the Fed’s forced lenders to adopt risky loan practices and allowed community organizations similar to Acorn to dictate to these services how many loans they had to make and to whom they went to. I know that sounds crazy…..and, I am sure I am sounding like a broken record but, these banks and servicers didn’t make risky loans because they were greedy, like the media have you believe, they did it because they were mandated to do it.

Why would the government allow citizens to dictate how a bank would give out loans? It’s all part of the progressive evolution of this country. It was set into motion by F.D.R. Progressives knew they couldn’t revolutionize our country, Americans lover freedom too much however, they knew they could slowly progress us away from our “inadequate” Bill of Rights and Constitution with small steps and Freddie Mac, Fannie Mae and the Federal Reserve were all part of the larger picture. To put a chill down your spine, let me give you a quote to further my point.

Franklin Roosevelt said in his radio address to the nation in January 1944.

“This Republic (the United States of America) had its beginning and, grew to its present strength, under the protection of certain inalienable political rights – among them the right of free speech, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty.

As our nation has grown in size and stature, however, - as our industrial economy expanded these political rights proved inadequate to assure us equality in the pursuit of happiness.”

You may not have known this was an agenda item on the Progressive left but, let me assure you, it is. It is my opinion, Progressive Liberals are using this Housing Crisis to their advantage. In fact, I am of the opinion that this crisis is engineered by Progressive Liberals. For those of you reading this thinking to yourself, it’s not possible, it could never happen, well……have you seen this?

http://banking.senate.gov/public/_files/ChairmansMark31510AYO10306_xmlFinancialReformLegislationBill.pdf

It’s a new bill being floated around, pay special attention to Title III, TRANSFER OF POWER TO THE COMPTROLLER OF THE CURRENCY, THE CORPORATION, AND THE BOARD OF GOVERNORS. This bill is laying the groundwork for a true and complete takeover of the financial institutions and likewise, as exemplified with Bank of America, the Government will mandate to banks that they have to “forgive debt” or “lower payments”. All that sounds good on its face value but, who do you think is paying for all this “forgiveness” and “lower payments”………………………YOU ARE, THE AMERICAN TAX PAYER.

Now, I do believe that President Obama is a FDR Progressive Liberal. I can give you quotes and examples of this, just let me know if you need them. Because he is a FDR Progressive Liberal, he believes everyone should have a decent home and he is going to use the American Tax Payer to redistribute the wealth of this country through the Progressive Liberal engineered Housing Crisis to make it happen. Did you read what the White House said yesterday? Just in case you missed it, let me tell you.

“The White House plans to announce on Friday that it will require lenders to lower the mortgage payments of some unemployed workers and encourage lenders to eliminate some principal debt of homeowners who owe more than their home is worth, sources familiar with the plan said Thursday.”

http://www.foxbusiness.com/story/markets/industries/government/update--white-house-announce-housing-aid-friday--sources-493713530/

All of that sounds great till you figure out who is paying for it. Make no mistake, I am all about helping the down and out, let’s not forget, I know what it is like to live in a shelter for a year in six months. I know what it’s like to have a single parent with 2 jobs and you as the eldest child had to take care of younger sibilings, I know what it’s like to live with 5 people in a one room apartment in the worse part of town you can imagine…I know because I have personally been there. In fact, I still have family members that are still living that life and my heart breaks every single day for them but, no matter how hard things get, no matter how bad the outlook appears today, we are Americans, we love Freedom and Liberty and Roosevelt was wrong in 1944 and his Progressive Liberals are wrong today.

Homeownership is not a right, it is a privilege, an honor, an accomplishment, you have to work hard to own a home. In fact, because homeownership has been so easy for so many, I walk into homes that have been abandoned and abused because the homeowners didn’t care or couldn’t afford the maintenance on the home, either way…..it’s wrong!

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What will 2010 Bring for Portland Oregon?

Okay kid’s here’s the skinny. 2010 What will it bring? If you are looking to make a move in Real Estate in the Portland Metro Market you are probably in what I would consider your perfect window. Price’s are going to continue to creep down as Seller’s compete against REO and Short Sales for Buyer’s.Interest Rates today are amazing. Under 5%, with good credit! Rates are probably as low as they are going to get because it wouldn’t be profitable to the lender’s to go any cheaper. Looking around I see the price of gas going up and we should be at $3 a gallon shortly. To me, that says inflation. Inflation says to the FED that they need to raise the Prime Rate in order to control it. It’s not their only tool but at some point lending at 1/4 % will end. Now, this is something that they do not want to do, but at some point in 2010 they will have to. Once this occurs and your rates go up, the buying power that is available today will decrease. There’s really only one reaction that can occur; prices will get pushed down again.I know that no one wants to hear that housing values are going to continue to fall, but unless people get pay raises in conjunction with the upcoming interest rate increases, the Buyer’s buying power will decrease. For example; if you can afford a $1,500 mortgage PITI, and the rates go up, you can’t afford more you just have to buy a cheaper house. For example at 5% interest $10,000 borrowed will cost you approximately 5.02. If interest rates are at 6% and now that $10,000 cost you $6.27. You still make what you make so your buying power is weakened. If you’re a Seller and the Buyer’s have been pushed out of your price range what are you going to do? Lower the price down to where the Buyer’s can again afford your home. So, I think that prices will continue to get pushed down some more. I just don’t see a different solution, but nothing would please me more than to be wrong.I’ve said a mouthful let's get some feedback and help us all have a better 2010. How hard could that be? ;0P
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2010 Housing Predictions

Regardless of your political leanings and regardless of your economic philosophies, much of the country will see continued rise in foreclosures for 2010, if we stay on the path we are currently on. A jobless recovery, isn’t a recovery! The first problem is reduced tax collections. As many states are already noticing, they have brought in far less taxes than ever before due to the recessed economic conditions the country faces. These reduced tax collections will only put greater strains on these States budgets and therefore a reduction of State Government will be imminent. A recent example of this is the 25 states that have run out of unemployment insurance and are now borrowing upwards of 24 billion from the Fed in interest free loans. Even though they are borrowing the money, many states will have no choice but to reduce unemployment benefits to individuals so that they will have money to cover the expected increased number of the unemployed. Secondly, a reduction of unemployment benefits does nothing to help individuals maintain homeownership. Many, if not all Loan Modifications are now considering unemployment benefits as income. This was a necessary change in strategy because of the Government mandate to keep 500,000 people in their home by end of 2009. In other words, banks and lenders had to lessen their lending guidelines to consider unemployment benefits as income in order to stay in lock step with the White House Mandate to “save” 500,000 homeowners from foreclosure. With less government subsidy in the form of unemployment insurance to individuals we can expect one of two outcomes. Either the government wises up and stops putting these politically motivated mandates on our lending institutions and gives them the autonomy to handle these situations as they deem best or, we can expect more mandates, more government influence, more subsidies and in return higher taxes to pay for it all. Thirdly, we have got to reduce the Loan Modification Default Rate. It is no surprise to me that people default out of loan mod’s by 73-76% in 3-6 months. I am surprised when people can’t seem to figure out why this is happening. In my experience, the majority of these loan mod defaults is because of reduced or completely eliminated standards in order to be approved for a loan mod in the first place. When we reduce or eliminate any standard to be approved, we deceive ourselves as to the real financial picture of the homeowner and ultimately are only delaying the inevitable. The proof is in the numbers, how can any one call a 73% default rate a success………? Fourthly, we need to have a reduction of Government interference. To gain a true appreciation for less government influence, I challenge each and everyone who reads this blog to take a very close and critical look at the Community Reinvestment Act of 1977. Back in 1977 Congress passed this act in an effort to reduce discriminatory credit practices against low-income people. It was this Act that introduced Sub-Prime to the country. It has gone through several changes in it’s time, most notably in 1989 when George H.W. Bush, after the S&L Crisis, agreed with Congress that more PUBLIC oversight of lenders was necessary and they introduced CRA Ratings. This allowed special interest groups to basically grade lenders and banks as to how well they provided lending to their local communities. These ratings had consequences so, if your bank got a low grade they were penalized with inspections, fees and direct government interference. Ben Bernanke himself said, “This law greatly increased the ability of advocacy groups….to perform more sophisticated, quantitative analyses of banks’ records, thereby INFLUENCING THE LENDING POLICIES OF BANKS.” Who in their right mind wants an advocacy group or anyone else for that matter greatly influencing your banks lending practices? Does this sound right? Needless to say, the CRA went through a couple more changes, giving more and more power to special interest and in return, forcing banks and lenders to loosen or even eliminate credit standards, remember the NINJA loan, No Income No Job, Accepted. My point is, less government influence because government influence comes with special interest and that is corrupt! Fifthly, we need to reduce small business operating cost. Small business counts for almost three quarters of business in America. If we can reduce the cost burden on these businesses we leave more money in their pocket. More money in the pocket of a small business gives them financial security and with that comes innovation, higher pay, increased benefits and increased production. I believe that if given a choice, most people would rather have a job than a government check. Sixth need is a reduction of housing inventory. Price’s will only go up when we have less supply, even if the demand stays the same. You don’t reduce inventory by keeping people who can’t afford the home, in the home. Have we not learned this lesson yet? People who can’t afford the home need to go through a disposition method that gives them an incentive to protect the asset / home and gives them the ability to obtain temporary housing or an apartment. Some banks are doing this now in the form of Cash for Keys negotiations and Short Sales but, in my opinion, it isn’t happening enough. In the end, just changing one of these 6 points I made would have a huge impact on housing for 2010. I hope we, as a Country, wise up and make the changes necessary before we go down a path of imminent bankruptcy…..it is possible.
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Is FHA The New Subprime?

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?
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A nationwide rise in homeowners’ “negative equity” is convincing more people to walk out on their mortgages, even if they have favorable credit ratings and can afford to pay their loan, according to recent studies.Two reports – one by researchers at Northwestern University and two other colleges, the other by the national credit bureau Experian and the consulting firm Oliver Wyman – are offering a clearer picture of “strategic defaultees” than has been previously available.According to Experian and Wyman, numbers of strategic defaults are far greater than you might expect. Nearly 600,000 borrowers nationwide fell into this category in 2008, more than double the number in the previous year. That number also represents 18 percent of all serious delinquencies from last year.So what kind of people turn in the keys and walk out on their homes, even when they can pay the mortgage? It’s not who you think – not entirely, anyway.The Experian report looked at 24 million U.S. credit records and found that borrowers with the highest credit ratings are 50 percent likelier to strategically default than lower-rated homeowners. The defaultees often have no adverse credit history, going from a record of perfect payments to no mortgage payments at all.It’s not longtime homeowners; the Northwestern report said borrowers who bought more than five years ago were less likely to default. Surprisingly, though, “young people” don’t account for that many walkouts, either. “The young are more dependent on the loans market and thus face higher reputation costs from defaulting,” the report says.Above all, though, the studies agree that negative equity – being severely “underwater” in a mortgage – is the biggest factor in strategic defaults. “The homeowners who walk away know full well they are damaging their credit records, but are making a calculated decision that sticking it out over the long-term would be worse,” writes Boston Globe real estate reporter Scott Van Voorhis.Not all underwater borrowers are equal, however. The Northwestern study says homeowners never walk out if their negative equity totals less than 10 percent of the home’s value. Once that shortfall reaches 50 percent, though, a significant number of borrowers will default strategically.The Experian report agrees. Strategic defaults are much higher in boom-and-bust markets with jumbo loans, like California – where walkouts have risen 6800 percent since 2005 – and Florida, where they’re up 4500 percent. (By contrast, walkouts nationwide rose 9 times since 2005.)There is one upside in the statistics: According to the Northwestern report, moral sensibilities keep the walkout numbers lower than they might be otherwise. Eighty percent of borrowers “think it is morally wrong to do a strategic default,” and even “amoral people can choose not to default when it is in their narrow economic interests to do so because of the social costs this decision entails.”But as unemployment and foreclosure inventories continue to rise, it remains to be seen just how much of a deterrent the “social costs” of strategic default will remain.
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Isn't that a question almost all of us asks? How much am I really going to spend on this trip and what am I really going to get out of it?Well, there are a number of ways to look at to determine if it's "worth it" or not. I guess we need to start by figuring out what the cost actually is. We can use the round numbers from my trip as a basis. I got a decent plane fair, an average "king" room, add in the cost of the conference and the cost of food and drink. I can round it out to just under $3000.00. Now, what do you get for your hard-earned $3000.00? A lot of that depends on what you intend to get for it. You can go to the conference for the education, for the networking or to gain business.If you go for the education you can definitely get your money's worth. There were a multitude of courses and panels with the most up-to-date information available, ranging from information on short-sales and BPOs all the way through Bulk REO sales. The classes and panels are conducted by industry experts. Additionally there were speakers like Steve Forbes and James B. Lockhart III. You can get great industry information there, some of which you can find else where, but most of which you will NOT get anywhere else. So, if you go for the education, you can get your money's worth. It may be an expensive education, but you can load up with classes all-day, everyday of the conference.If you go for the networking, you'll probably find the best networking you'll find anywhere. Networking with agents from areas outside your market area is one of the best ways to gain insight into the industry. There were hundreds, if not thousands of agents from all over the country at the conference. In addition to that, there were countless opportunities to network with those agents at the conference and outside the conference.If you go to gain business, you can do it, you just have to go with the right attitude, the right plan and be a networker. You must realize that you are competing with those "hundreds, if not thousands of agents from all over the country". I can honestly say that I have either gained new business or strengthened the bond with an existing client at every conference I've been to except for one. I've been to seven conferences in the past 2 1/2 years.Now back to the cost...so, if you gain insight into the industry through a class, from another agent or if you happen to get the attention of someone in the asset management community or the valuation community, what would it take to make it worth your money? A couple REO assets? 50 or 60 BPOs? After you write-off the trip, what would it take to make it worthwhile? Just the education? I have a friend that currently works with about 38 different banks/asset management companies and STILL attends all the conferences. Why? It must be worth the time to him.I'm not here to tell you should or shouldn't attend the conferences, but hopefully I've given you enough information to make an educated decision on your own. Of course, this is all just my point of view... :)
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Climb in U.S. House Prices Pauses in July

Integrated Asset Services®, LLC (IAS®) (www.iasreo.com), a leader in default management and residential collateral valuations, today released the latest IAS360™ House Price Index (HPI). Based on the timeliest and most granular data available in the industry, the index for national house prices was down 0.5% in July.The slight decline marked the first down month for the IAS360 since February. The leading U.S. housing benchmark remains ahead fractionally for the year but still well off (-16.2%) its high in June 2007.“We are seeing normal seasonality with a slight July pullback, but we are not out of the weeds yet as we will see waves of volatility while the markets correct themselves and settle down,” said Dave McCarthy, President and CEO of Integrated Asset Services. “Meanwhile, there’s an awful lot going on down at the neighborhood level that will take time to normalize at the top.”Conspicuous among the nation’s 10 major metropolitan statistical areas (MSAs) were the 3.8% declines in both Denver, which had been reliably stable since the first of the year, and San Francisco, which had jumped almost 8.0% from February. Notable, too, was a sizable 4.8% drop for the month in Las Vegas. While the region has fallen month over month since August of 2006, July’s plunge represents the largest percentage drop to date.“A lot of this volatility has to reflect Washington's near-term influence on price behavior through actions like the foreclosure moratorium,” says McCarthy. “We’re already seeing buying activity moving around in different price segments. The beauty of the IAS360 is that the index captures and reports on these changes in a way that reveals the reality of the market.”The IAS360 House Price Index is a comprehensive housing index tracking monthly change in the median sales price of detached single-family residences across the U.S. The index, based on all arms-length transactions, tracks data for 15,000 neighborhoods, that roll up to report on the changes in 360 counties, nine census divisions, four regions, and the nation overall. The IAS360 House Price Index is delivered on a monthly basis.
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These are staggering numbers. I heard a lecture from an analyst from Anderson School of Business at UCLA which was a bit gloomier than this but these are some of the gravest predictions I have seen in print. Will we see more aggressive programs from the administration to combat the forecasts? The various moratoriums so far have had less than robust results. A contact at Wells Fargo tells me they have had less than a 1% success rate in loan mods. I can't see a substantial turn around until at least 2013, any thoughts?From Housingwire.com.By AUSTIN KILGOREAugust 6, 2009 4:18 PM CSTDeutsche Bank (DB: 66.81 +3.39%) believes continued declines in home values will increase the number of US mortgagors with negative equity from 14m in Q109 to 25m in Q111.According to a report Deutsche released this week, the 25m represents a projected 48% of all US mortgages. While subprime and option adjustable-rate mortgages (ARM) are the biggest source of underwater borrowers in the current market, Deutsche said a larger percentage of prime conforming and prime jumbo borrowers will join the fray.Prime conforming and prime jumbo will make up 79% of all US mortgages and Deutsche estimates 41% of conforming and 47% of jumbo will be underwater, up from current levels of 16% and 29%, respectively.This rapid influx of underwater borrowers will have a significant impact on default rates. In addition to future underwater borrowers being forced into default from a “life event” — unemployment, divorce, disability, etc. — Deutsche warned others may “ruthlessly” or strategically default.Increased defaults in the middle class will suppress consumption, added Deutsche, further slowing housing recovery.It’s hard to predict exactly how high the default rates will go. The current housing recession is unique in that it was brought on and perpetuated by a number of factors — unstable loan products, crashing housing prices, and unemployment, among others. Deutsche cited a study of the Massachusetts housing decline of the late 1980s and early 1990s that showed less than 7% of underwater borrowers defaulted as perspective on the default rate for underwater borrowers.But in the early 1990s, borrower and loan product quality were significantly better, the home price decline wasn’t as severe, and unemployment was lower. Deutsche said the 7% experienced in Massachusetts should be the floor — a best-case scenario — for the surge of underwater borrowers it expects in 2011.Borrowers with loan products with already high underwater rates will only get worse.By 2011, Deutsche predicts 89% of option ARM borrowers will be underwater, up from 77% in 2009. The rate of underwater subprime borrowers will increase from 50% to 69%, and underwater Alt-A borrowers will increase from 49% to 66%.An important factor to consider is how deep underwater borrowers will be, and it depends on their loan type.For prime conforming borrowers, Deutsche predicts the number of borrowers with negative equity — loan to value (LTV) between 105% and 125% — will virtually equal the number of borrowers with what it calls “severe negative equity” — LTV over 125%.But Deutsche expects the 89% of option ARM borrowers underwater to be split with most — 77% of total option ARM borrowers — holding severe negative equity. For underwater prime jumbo loans, more borrowers will have severe negative equity — 29% of the combined 47%.The split for underwater Alt-A borrowers is expected to take an opposite proportion, with 49% of all Alt-A borrowers in negative equity and only 18% in severe negative equity. Underwater subprime borrowers will face a similar breakdown.
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We aren’t near a bottom.

So, I have been hearing a lot of talk lately about the housing market hitting bottom and we are on the rebound. Well, I am not as optimistic and let me share with you why. First, you need to understand that I am a true believer that the Community Re-Investment Act” is what caused the housing bubble, which ultimately led to the fall of the sub-prime market but, that is another blog of another time. So, back in 1999, President Clinton signed into law the Gramm-Leach-biley Act aka the Financial Modernization Act, that President Clinton said, “establishes the principles that, as we expand the powers of banks, we will expand the reach of the [Community Reinvestment] Act". As we now know…was an under statement. This Act ultimately made it easier for banks to provide bad debt to un worthy consumers. In other words, this direct action on President Clinton’s part, as well as the sitting Congress at that time made NINJA (No Income, No Job, Accepted) loans and Sub-Prime lending the way most banks did business for the next 5 years. 2005 is when we started to see the first signs of the housing bubble burst and many argue that it was only 5 years of bad lending so, by 2010, we should be out of the woods….well, not so fast. It wasn’t till 2007 with the regulatory changes by the Office of Thrift Supervision that changed the Community Re-Investment Act’s home purchase loan reviews that actually stopped the Sub-Prime, Bad Debt and NINJA loans. So, in reality, the bad lending was from 1999 – 2007, or 8 years. In other words, here in 2009, we still have at least 5-6 years before all these loans are completely worked out of the system. Not to mention home prices / value have dropped so significantly that HELOCS and A(+) debt is being called in, we have a credit crunch so no loans are being made, our bond market is tanking due to increase governmental debt, and interest rates are on the rise due to inflation. We still got a ways to go folks…..3-5 years, at least.
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Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing is gaining speed. The moratorium was initiated in January to give Obama's anti-foreclosure program---which is a combination of mortgage modifications and refinancing---a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes, but it's clear now that the program will fall well-short of its objective.In March, housing prices accelerated on the downside indicating bigger adjustments dead-ahead. Trend-lines are steeper now than ever before--nearly perpendicular. Housing prices are not falling, they're crashing and crashing hard. Now that the foreclosure moratorium has ended, Notices of Default (NOD) have spiked to an all-time high. These Notices will turn into foreclosures in 4 to 5 months time creating another cascade of foreclosures. Market analysts predict there will be 5 MILLION MORE FORECLOSURES BETWEEN NOW AND 2011. It's a disaster bigger than Katrina. Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. 40 percent of delinquent homeowners have already vacated their homes. There's nothing Obama can do to make them stay. Worse still, only 30 percent of foreclosures have been relisted for sale suggesting more hanky-panky at the banks. Where have the houses gone? Have they simply vanished?600,000 "DISAPPEARED HOMES?"For the rest of the story follow this link: http://activerain.com/blogsview/1045921/Housing-Bubble-Smackdown-Bigger-Crash-Ahead-Huge-Shadow-Inventory
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Real Estate & REO Outlook for 2009

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.
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