Archive for the ‘Real Estate news’ Category
Wednesday, February 13th, 2013
Is Fannie Mae hurting the real estate market? Those following the practices of this government lending giant know that as of late, Fannie has been accused by many in the industry of price fixing and falsely inflating the real estate market. What is going on, and how can this happen at this time, after the housing market is finally on the road to recovery?
The majority of lenders and those who guaranty loans seem to be cooperating recently with foreclosure avoidance, opting for the less painful option of short sales. They claim that not only do they want to ease the homeowners’ pain, but that they do not have a desire to own property, and would rather take a loss sooner than have to go through the foreclosure process – one which has a hefty price tag.
There is one exception to this rule, and real estate agents are baffled. Fannie Mae – a government agency, who along with it’s cousin Freddie Mac guarantees and purchases loans, and owns or controls about 31 million U.S. mortgages – has been implementing some strategies lately that go against this notion, despite statements of intentions to help:
1. Price Fixing? One of the claims expressed most frequently as of late by real estate professionals is that Fannie is engaging in price fixing. Here’s how it works: instead of opting for short sales, it is choosing to proceed with foreclosures. Then, once the home is ready to list, it’s selected agents list the property for over comparative market value, under Fannie’s Homepath program. No appraisals are needed, as Fannie is the largest provider of mortgage credit. Buyers are jumping in and paying over market value for these properties, and are closing escrows.
Initially this looks like a win-win, as the buyers get their home and do not have to go through the appraisal process, and the area comps are raised with the closing of the property at a value higher than any other recent sales, thus increasing comps for the next seller. Sounds good, right? Not so fast.
The downside of this tactic is that the buyers are literally moving into their new homes as UNDERWATER homeowners. Their homes have no equity – they own the most expensive property in the neighborhood because Fannie has falsely inflated the home values. Appraisers will not look solely to the most expensive home that sold, but will include it with the other comps…thus leading to the next problem:
As a result, future sellers will not likely benefit from the most expensive neighborhood sales (for more on this click here.). Appraisers will include the most expensive sale in their analysis, but they will not focus solely on that one sale; thus the next home to sell, even in better condition and with more to offer, will be evaluated by appraisers based on the combination of recent sales. What seller in their right mind, who did not have to sell, would choose to do so in such a situation? This will keep homes off the market, sustaining low inventory levels.
2. Countering short sale offers at prices higher than comparable sold properties. Another tactic that is being used by Fannie when they DO agree to short sales, is to counter offers received higher than comparable sold properties. Again, this is crazy! These homes will not appraise, but still there are buyers willing – and doing it! – to pay cash over and above appraisal value in order to close escrow. Again, these new homeowners move into their homes in negative equity positions. This tactic also prices many homebuyers out of the market.
I’m not sure how to explain what is going on, but it scares me. Our market is healing right now, and if prices are falsely inflated and comparable sold properties ignored, we will see large market increases in short time periods. If you remember, this is what led to the last market crash. Please share your thoughts.
Wednesday, December 5th, 2012
The real estate market continues to improve, demand is high, inventory is low, and prices are going up in many local markets, including here in San Diego county. Many areas/neighborhoods have even become “seller markets,” meaning that properties are going into escrow for over asking price or over neighborhood comparable sold values (and often times with multiple offers). But there is one type of buyer that seems to be taking a hit with the new surge – the first time homebuyer.
Armed with a preapproval letter and a saved downpayment, first time homebuyers in certain price ranges – usually under $400,000 – are faced with challenges. Many properties in this price range are being snatched up by investors and other cash buyers, oftentimes over asking price. If no appraisal is needed, these cash buyers can offer as much as they like – and for the great properties they are doing just that.
Most first time homebuyers, on the other hand, need to obtain a loan to purchase a property, and therefore the property value must appraise. Thus these buyers cannot offer over comparable value unless they have the cash to pay any difference between an appraisal and the offered price. This puts first time buyers in a hard position, as they can offer their best price but are prevented from going too high due to appraisal restraints. This usually causes them to be outbid by those buyers who either have cash or have a larger downpayment.
It is a frustrating prospect, and it is made even harder by the lack of local inventory. I showed 2 properties in the last week the day they came on the market. Both times we were ready to write offers, and then the listing agents called me back. Both properties had multiple offers (both properties had over 10 on the first day), several of them cash and most of them over asking price (and asking price was already higher than the comparable sold properties in the area). The rest of the offers at asking price were from buyers who were putting more money down than my first time buyers…it was not even worth it to write an offer.
It is hard to keep your clients excited about the prospect of purchasing a home if they keep running into these situations. But my advice is to be persistent. Don’t let your buyers get frustrated and give up. The silver lining is that they will get to know different neighborhoods and floor plans. They will be more educated and will really know what they like and do not like. When the inventory starts to rise – which I am thinking will happen after the holidays end and we head toward Spring – your buyers will find the right property.
Saturday, October 27th, 2012
HARP is helping more borrowers to refinance: HARP, the Home Affordable Refinance Program, has recently been restructured, and this has allowed more homeowners to be able to take advantage and refinance to lower rates. The new guidelines allow those who are underwater with their mortgages to take avail of the program – a big welcome to homeowners struggling with mortgage payments. This also effects the foreclosure and short sale rates, which are good for the housing market and economy. As of July, approximately 75,000 homeowners have refinanced under HARP, up 50,000 from before the program was extended to help underwater homeowners. This is great news and hopefully it will continue to help people. Now if only they would apply these programs to non-Freddie Mac and Fannie Mae loans!
New home sales hit two year high: It’s official: builders are back in business. New home sales have reached the highest numbers in over two years. Here in North San Diego several new communities have popped up over the last 1-2 years, and they are all selling well. This is another great sign for the housing market recovery.
Pending home sales numbers increase: Pending home sales have been increasing lately, and September numbers, although slightly up from the previous month, held steady. The increase has been in effect for 17 consecutive months, according to the National Association of Realtors (NAR). NAR’s chief economist believes that this upward trend should continue into 2013. This coming Spring should be a great time for sellers and buyers.
Number of low priced homes shrink in California: Although inventory is scarce everywhere and in most price ranges, properties around $300,000 and under are suffering worse. According to Zillow, there has been a 40% reduction in inventory under $313,000 in California in the last year. This explains the multiple offer situation in these categories – there simply is not enough supply to meet the demand. Hopefully after the holidays we will see more properties on the market.
Big banks being sued:Wells Fargo is being sued over alleged fraud in a mortgage lending program administered by the Federal Housing Administration. Bank of America is also being sued, by the Justice Department, for mortgage fraud to the tune of over $1 billion. The B of A cases involve loans created through Countrywide, before Countrywide was acquired by B of A in 2008…gee, maybe borrowers will see some of the fruits of the penalties if B of A is found liable – but of course that it doubtful (one can hope). Many of the claims involved in both suits go back over the course of 10 years. Well, I would wish these banks good luck in their suits, but as I have no sympathy I hope they get what they deserve.
Tuesday, October 16th, 2012
It is almost here: the dreaded end of the federal short sale tax breaks, also known as the Mortgage Forgiveness Debt Relief Act. Come December 31, sellers who have not yet closed escrow on their short sales will no longer escape the capital gains tax on the difference between the sales price (of their home via a short sale) and the amount owed on their mortgage…UNLESS the tax breaks are extended. Will this happen, and if not, what will happen to short sales?
First of all, I have to say that I think the tax will be extended. It simply does not make sense at this critical economic time to not extend the tax break. Doing so wreaks all kind of havoc, including surges in foreclosures and bankruptcy filings, which neither the government nor the banks want to see.
Failure to extend the act would undermine everything that is improving in the real estate market and cause us to jump many steps backwards. The fact that an extension has not yet been announced makes people nervous, but due to the Presidential election and other important issues on the proverbial table, I think it has been put on the backburner for a short time.
Lets take a look at the main arguments for not extending the tax break:
1. Too costly. There are some who believe that the law will not be extended, as they feel the alleged $2.7 billion it will cost to do so is not justified due to the deficit. To this I would say it will be a lot more costly if millions of homes go into foreclosure again, as people find they have no other solution and cannot afford to stay in their homes. The lenders will be stuck with tons of inventory that they have to sell, many that will be trashed, and the market will drop again, creating another real estate nightmare. Just when we are coming out of the bad market is not a good time to cause it to dive again.
2. Easy escape for homeowners – ? Another argument in favor of not renewing the tax savings is that doing so encourages people to default on their loans. In other words, if people know they can short sale their homes and walk away without financial ramifications, it makes it easier than staying in a home they cannot afford and trying to make it work. I do not agree with this argument, as I think the stress would just lead to more bankruptcy filings and foreclosures, which in the end is even worse for the lending institutions (not to mention for millions of families).
It remains to be seen what will happen come the end of the year. The bottom line is this: if you are contemplating a short sale and your house is not yet listed on the market, or if your home is listed but you have not yet sent any offers over to your short sale lender, it is a good time to discuss your options with both your agent and a financial adviser, CPA and/or attorney. You must understand your options and what could happen if the law is not extended, because it could effect your decision whether to close your short sale.
If you are in the middle of a short sale and you have obtained or are soon to obtain lender approval, you need to make sure that the lender(s) release you in writing from any financial liability once escrow closes, if it is to close after December 31.
[Note that regardless of when your short sale is closing, you should ALWAYS make sure the lender approval letter has language to this effect...most lenders automatically state such in the approval letters, but if not you need to have your agent or negotiator ask that it be included]. You also need to check your state laws to determine state tax liability with short sales, as laws do vary. For more information about short sales you can visit my website.
Wednesday, October 3rd, 2012
Bank of America announced this week it’s plan to eliminate debt accrued on second lien mortgages for some lucky borrowers – approximately 150,000 lienholders across the country. This is big news for those who are underwater and would like to be able to stay in their homes. The lender says the goal behind the program is to help homeowners stay in their homes and build equity.
If you have a second mortgage that is serviced by B of A, you may soon receive a letter in the mail telling you your second lien can be extinguished. But don’t get too excited – the 150,000 letters are being sent out only to pre-qualified borrowers, and you cannot elect to be in the program. Apparently if you receive a letter your debt will be released within 30 days if you do not opt out of the program.
There is no data on which specific parts of the country may benefit the most, although one article mentioned the inland empire may see quite a few of these releases, as there were many second mortgages in that area and a substantial number of those loans that were issued by Countrywide (which was acquired by Bank of America). There is also no word on how credit may be effected, but if the bank is agreeing to release the debt in full there is a chance there may not be a credit ding…that remains to be seen.
While this is not a solution to preventing foreclosure, it could be a very powerful tool in it’s prevention, and those who are included in the program could really be receiving a life preserver. It is a new start and the chance to stay in a home that otherwise may not have been possible for much longer.
If you are the lucky recipient of one of these letters from B of A, please let me know. I would love to read the letter and understand the terms. You can email it to me at Rachel@LaMarRealEstate.org.
Thursday, September 13th, 2012
The decline in the real estate market these last several years led many California homeowners to seek reductions in their property taxes. All they had to do was show the decline in market value of their homes, via a comparative market analysis, and local tax assessors were generous in granting annual reductions. BUT… now that prices are increasing, homeowners must realize that so too can their property taxes.
Normally property taxes do not increase more than 2% annually, thanks to the voter-approved Proposition 13 (also passed by voters in 1978). However, just as assessors have the authority to temporarily reduce taxes when property values go down, so can they increase taxes, even more than 2%, when the values come back up (Proposition 8, 1978).
The 2% limit outlined in Proposition 13 only takes effect when the value of the property reaches the level it would have reached had the market never dropped. There are areas in California that have already been subject to tax increases.
If you live in an area that has seen market value increases, and you have had a property tax reduction, be prepared for possible property tax increases soon. It may not be welcome news to you, but it is good news for your county and the economy to see these improvements in the housing sector.
Tuesday, September 11th, 2012
Wednesday, September 5th, 2012
The latest news from the CoreLogic, a national provider of real estate statistics, is that the home price index has increased 3.8% on a national level – the largest increase since 2006. The figures include distressed properties. What does this mean?
A home price increase is good for the housing industry, as it means that housing is on the road to recovery. This is great news for the economy. What will be interesting to see is how the news affects home sellers. Either we will begin to see more inventory on the market, which is desperately needed to meet demand, or we will continue to see low inventory as sellers wait for the market to climb.
Unfortunately there will not be any drastic increases in price – it will be gradual. Hopefully those sellers who are sitting on the proverbial fence waiting to sell will realize this shortly, and then list their homes anyway. Lack of inventory is one of our biggest challenges right now in real estate, but undoubtedly is one of the reasons for the price increase.
The future index measures by CoreLogic indicate that sales will rise, moving forward, 4.6% on a year to year basis from August of 2011, and at least 0.6% on a month over month basis from July of 2012. These predictions are derived from measuring multiple listing service (MLS) data that measure price changes in prior months.
The 5 states with the highest levels of appreciation, including distressed properties, were Arizona, Idaho, Utah, South Dakota and Colorado.
In North San Diego county we have seen a slight price decrease (for attached and detached homes) in median price, from $403,500 to $395,000, for the month of July, compared to July of last year. San Diego county a as whole enjoyed a price increase of 1.28% from June to July of 2012, with a year to year increase of 5.33% from July of 2011.
As always, it is imperative to focus on your specific neighborhood if you are interested in specific sales data, as information varies depending on where you are located. The good news is that most areas across the nation are experiencing price increases, which is a great sign for the housing market and the economy.
Tuesday, August 21st, 2012
The Federal Housing Finance Agency’s bulk sales plan, whereby certain banks will allow third party institutional investors to purchase multitudes of bank owned (REO) loans in bulk, is moving ahead at full speed, and is doing so quietly.
Against pleas from members of Congress, the California Association of Realtors (C.A.R.) and others involved in the real estate industry, this program does not offer much for the market nor for individual communities and neighborhoods. In allowing institutional lenders (the identity of which is not being disclosed) to purchase this lender “shadow inventory” (that inventory that is owned by the lenders but not yet on the market), there are several threats to the housing market that are concerning:
• It could bring comparable prices down. Just at the time when home prices are starting to come up, and when demand is high with low inventory, selling large numbers of bank owned homes at discount prices could have significant effects on neighborhoods.
Also alarming, current market data may not have been used. According to C.A.R., old market data may have been used to value the homes that are being sold. With a market that is moving upwards this could create a big problem in some areas, establishing lower sales prices for homes, which in turn bring down the values in those neighborhoods. I know that if it were my neighborhood, and all of a sudden 10 homes sold in the area for way under current comparative market value, I would certainly not be happy. This could be a big problem in areas such as the Inland Empire (Riverside County).
• Increased losses to taxpayers. If these bank owned properties are sold in bulk at discount prices, the burden will fall upon us, the taxpayers, via increased losses on the sale of these homes.
The solution is to put these homes on the market as traditional lender-owned sales. With the market prices trending upwards and the lack of inventory, this is a perfect time to do so. It seems asinine to not consider such an option, as it will save taxpayers, keep the market moving, and keep prices moving up instead of down. And we can’t forget that if these properties sell at higher prices, the lenders also benefit as well!
If you agree that bulk REO sales should not be allowed in California, please contact FHFA:
Federal Housing Finance Agency
400 7th Street SW
Washington D.C. 20024
Graphic courtesy of Dreamstime
Sunday, July 22nd, 2012
If I had a dollar for every time someone asked me how the housing market is doing, I would be a very happy lady. Right now there are a lot of stories and speculation out there as to the status of the housing market. There is definitely a lot of positive news, and that seems to be the majority. But nevertheless, when I report on it I still get comments from people claiming that their area is still hard hit, rife with foreclosures, etc. Can we answer the question, “how is the market?” in general terms?
The answer is “not really.” Although most areas of the country are in a better place than they were say, two years ago, the answer to the housing market status question is still area-specific. Some areas – like many parts of California and Arizona (due in part to inventory shortages) and Idaho – are experiencing positive signs, like increased sales, multiple offer situations, lower foreclosure numbers, and construction booms. Yet other areas, such as New Jersey, have thousands of empty homes that have not hit the market yet (New Jersey has one of the highest “shadow inventory” rates in the country – the number of homes owned by lenders but not yet active on the resale market).
So in some areas of the country we are seeing housing improvements on different levels, while in other areas we are not seeing such signs. Therefore, looking at housing from a national perspective really does not provide an adequate picture as to what is going on in your area. As I always say, it is more important to focus on your specific area and ignore the media reports on housing (unless they are hyper-local reports). So let’s take a look at what’s going on locally.
The California housing market improved 8.5% in sales in June from the same time last year. Prices also increased 8.1% from the same time last year, according to the California Association of Realtors (CAR). Low inventory rates in many areas, as well as low interest rates and ready buyers, combined to jack up the competition and bring more offers and more closed escrows.
Here in San Diego county, the median price for all North County homes – attached and detached – increased $13,000 from May to June, 2012. Wow! That is a big increase in one month. Among detached homes, North County experienced the highest median price recorded for single family detached homes since 2010 (a 4.68% increase in price from May to June of this year). Attached homes in North County also increased – 1.97% from May to June of this year. [Data complied by NSDCAR via HomeDex]
The number of sold homes in North County increased for the 5th month in a row, while the number of single family detached home listings decreased from May to June by 6.15%, with a fall of over 35% from June 2011. Normally the busiest selling time of the year, this Spring and Summer have definitely been different in the local housing market. The lack of inventory and the demand for such continues to strengthen the local market in terms of price and sales.
Outside of North County (the rest of San Diego county), detached home prices increased 0.87% from May to June, and attached home prices remained steady from May to June (at $210,000).
Locally, we are definitely seeing a housing market rebound. For those who have to purchase it can be trying, due to the low inventory and fierce competition, including investor buyers who often can present cash offers. What we need locally is more inventory. Although prices are down from the heyday of the market, it still can be a great time for sellers who need to sell or have equity in their homes.
When focusing on the housing market and whether it is truly “recovering,” my advice is to ignore the national media and look at housing reports in your area, or the area in which you would like to purchase. If you would like a copy of the HomeDex report, please send an email to me at Rachel@LaMarRealEstate.org, and I will be happy to send it to you. I am also happy to provide a thorough market analysis of any San Diego neighborhood.
Photos courtesy of Dreamstime