Houses for Sale in San Diego Provides Resources for Buyers and Owners of San Diego Properties 

 

By Kathleen Behrens

February 7, 2010 

 

Petrone Properties is sponsoring a new blog called Houses for Sale in San Diego, which provides information and resources on issues related to the San Diego real estate market.  In addition to learning about current events and homeowner assistance programs, buyers who are interested in purchasing San Diego properties can access the complete San Diego Multiple Listing Service (MLS) to search for all types of homes for sale in San Diego, including San Diego foreclosures and short sales. 

 

Information is available on special programs which provide financial assistance to homebuyers for purchasing San Diego properties.  Articles include explanations of both local and federal programs.  Read the article entitled San Diego Regional Mortgage Credit Certificate Saves You Money on Houses for Sale in San Diego to learn how to reduce your federal taxes, which can help you qualify for a loan.  The article entitled Save Up to $8,000 on Houses for Sale in San Diego explains the latest revisions to the Worker, Homeownership, and Business Assistance Act of 2009, more commonly known as the First Time Home Buyer Credit.  Details regarding the extended deadlines, expanded income limits, and new provisions are discussed.

 

Homeowners who are having financial difficulties may benefit from learning about the Home Affordable Refinance Program (HARP), the Home Affordable Modification Program (HAMP), and the Home Affordable Foreclosure Alternatives (HAFA).  Information about these programs is available in the articles entitled Refinancing Regulations Restrict Relevancy of Record Low Mortgage Rates and Standardization of the Short Sale Process Promotes Stability in the San Diego Real Estate Market.

 

SDG&E also has programs designed to provide financial assistance to homeowners who are experiencing financial difficulties.  The article entitled SDG&E Programs Provide Financial Assistance for Owners of San Diego Properties provides explanations of the various programs and immediate actions owners of San Diego properties can take to find out if they qualify to receive assistance.

 

Beneficial tips are also available for both current and prospective San Diego property owners.  If you are facing the possibility of foreclosure, it is important to be aware of San Diego foreclosure scams so you can avoid becoming a victim.  Read the article San Diego Foreclosures Subject to Scams to learn how to recognize common foreclosure scam tactics.  It may be in your best interest to short sale your San Diego property to avoid a foreclosure.  If you are in danger of losing your home, call the San Diego Realtors at Petrone Properties at 858-259-1000 to learn about your options and find out how we can help you.

 

Buyers who are interested in purchasing San Diego properties may benefit from the FHA’s waiver of the anti-flipping rule.  This allows buyers who are using FHA financing access to a greater selection of San Diego properties.  For details see the article entitled The FHA Announces Waiver Requirements for the Anti-Flipping Rule.

 

Information is also provided on the CalSTRS 80/17 Loan Program designed to assist educators in purchasing San Diego properties.  The article entitled CalSTRS Home Loan Program Helps Educators Become Homeowners explains how this program works and why it may be the most beneficial option for California educators who wish to purchase San Diego properties.

 

Anyone who is interested in purchasing San Diego properties can benefit from the articles on Good Faith Estimates and the new search technology.  The article Houses for Sale in San Diego has Tips on Good Faith Estimates for Prospective Homeowners explains the rights borrowers have and what you should specifically ask for when you are shopping for escrow services.  The article entitled Houses for Sale in San Diego and Petrone Properties Provide Access to Cutting Edge Technology for Searching the San Diego Multiple Listing Service (MLS) for San Diego Properties explains the features and benefits of this cool, new search tool.  It is excellent for buyers who are familiar with San Diego and want to focus on specific areas to search for San Diego properties.  You can use the drawing tool to create your own boundaries on the map of San Diego, which you can also enlarge or reduce.  Try the new search technology today to simplify your search for San Diego properties.

 

 

 

Mortgage rate tops 5% for the first time since late October

 

December 25, 2009

 

The average fixed rate for a 30-year mortgage climbed above 5 percent for the first time in two months, leading to a decline in mortgage applications. The average fixed rate on a 30-yr mortgage was over 5.05 percent this week, up from 4.94 percent last week, Freddie Mac said. The last time rates were above 5 percent was the week ended Oct. 29, when they were 5.03 percent.

 

Mortgage rates have risen since they hit a record low of 4.71 percent the week of Dec. 3. They are closely tied to yields on long-term government debt, which have gone up since the. 

 

 

 

San Diego Foreclosed Homes Are A Terrific Way To Get Into The Desirable

 

By Joseph Smith

December 10, 2009

BSN Stock Photo

San Diego foreclosed homes in 2009 were expected to be at the forefront of the 2009 economic recovery. The San Diego real estate market is known for being competitive, as buyers generally outnumber the number of desired homes. In 2009, tax incentives and low prices pushed many buyers and investors into action, buying foreclosed homes in particular.

Local economic experts predicted that this was an excellent indicator of recovery of the local housing market. In the summer of 2009, prices on foreclosure homes and traditional real estate was down, while sales were up, spurring buyers and investors to take another look at foreclosed properties in the area. The Housing and Economic Recovery Act of 2008 seems to be a big factor in the recovery of the San Diego foreclosure and traditional real estate market. The act offers an $8,000 tax rebate to qualified first-time homebuyers. When combined with the already low prices of foreclosure properties, more buyers are able to use the incentive to buy rather than rent in the area.

The programs that compel lenders to hold off on foreclosing homes owned by troubled homeowners is also having its impact on foreclosure listings in San Diego, say experts. The moratorium imposed on lenders in 2008/2009 means that fewer foreclosures are available than might otherwise be on the market, and as a result many foreclosures even those that would have languished on the market a few years ago are being snapped up by ready buyers.

There is a lot of demand in the market for San Diego foreclosed homes in 2009. Even lower-end foreclosures are being bought. Many homebuyers even first-time homebuyers are also becoming more savvy about the foreclosure market and foreclosure listings, say experts. This has meant that it is not only experienced buyers and investors who are taking advantage of foreclosure properties in the area.

 

Wild Parties Trash San Diego Foreclosures 

Published: Dec. 3, 2009
By Steve Cook Real Estate Economy Watch  

In San Diego, one person's pain is another's…place to party.

San Diego neighborhoods are breaking out in late night, illicit raves in abandoned, foreclosed homes that leave properties trashed, neighbors furious and police overwhelmed. In fact, the San Diego County Sheriff's Department is recruiting extra help in an effort to control the parties that cause thousands of dollars worth of damage.

At least five "party crews" have been operating in the North County region, with such names as "Takin Over Krew" and "Til You Drop." They locate large, out-of-the-way houses that are vacant and provide plenty of space for parking.

One party last summer even featured strobe lights and a disc jockey.

"Whenever the door opened, it was like someone opened the door of a huge club, it was so loud," said a neighbor. He and his wife helped pick up hundreds of red plastic cups and liquor bottles littering the neighborhood the next morning, he said.

The underground parties are usually advertised on social networking Web sites such as MySpace and Facebook, but the location is kept secret until about an hour before party time. People who want to go can call an information line or receive a text message with directions to the location. They're charged $2 to $5 and when they're done, they leave behind beer cans, tequila bottles, drug paraphernalia, graffiti and trashed rooms and yards. It cost more than $8,000 to repair a million dollar home that was the site of a July Fourth party. Four young people have been arrested so far.

"This is a new phenomenon for us," said Fallbrook Sheriff's Detective Jeff Lauhon. "It's something we've never seen before."

In the Encinitas Ranch development, a neighborhood watch group has formed to monitor the parties and the sheriff's office has put out a county-wide alert. Crime prevention officers have sent a message to thousands of neighborhood watch groups across the county to call law enforcement if they see suspicious activity.

"Our resolve is we will do everything, working with the sheriff … that type of activity does not take place in Encinitas Ranch," said Dick Stern, coordinator of the Encinitas Ranch watch group. Stern's group is watching a handful of homes, including a $1.2 million foreclosure and a $1 million home up for short sale and it will take the added step of monitoring the exterior and landscaping of the homes. If the bank does not do a good job, the homeowners association would step in and charge the bank.

San Diego watch groups will have their hands full. Foreclosures rose 9.3 percent last month in San Diego County, the first upturn since spring. On the other hand, foreclosures are selling faster. Foreclosure sales totaled 1,203 last month, up from 1,101 in September and 5.2 percent more than a year earlier.

 

 

Real estate experts see glimmer of hope

‘The recovery is about to begin,’ economist says

By Roger Showley, UNION-TRIBUNE STAFF WRITER

Wednesday, December 9, 2009 at 12:02 a.m

As housing experts cross off 2009 as the fourth year of the real estate downturn, they see a “dim light at the end of the tunnel” and a “glimmer of hope” in 2010.

“It’s not great, but it’s less bad than it was six months ago,” said Alan Gin, a University of San Diego economist who addressed USD’s annual real estate outlook conference yesterday.

Gin said his glimmer of hope means that San Diego “is on the verge of bottoming out” in the economic downturn. USD economist Ryan Ratcliff’s dim light means, “The recovery is about to begin, but we have a long way to go.”

Alan Jay Brinkmann, chief economist at the Mortgage Bankers Association in Washington, said California will find recovery difficult because it, along with Arizona, Florida and Nevada, saw high housing price appreciation and construction during the boom and now is wrestling with massive foreclosures and widespread construction shutdowns.

He said homes for sale have dropped from 322,000 in October 2007 to 187,000 this past October. That’s a sign that buyers have reduced the large inventory of unsold properties that existed at the outset of the recession. But, over the same two-year period, distressed properties that are 90 days delinquent or in foreclosure have skyrocketed to 690,000 from 160,000. If 75 percent of those properties — 517,500 — eventually end up on the market, that would swell inventories and depress prices.

“I see the market holding on in the low end,” he said, but falling at the high end, above the $700,000 mark.

Operating against such a big boost in distressed properties, Brinkmann said, is the Obama administration’s preference for mortgage modifications rather than working to streamline short-sales — deals in which homes are sold for less than the mortgage balance.

“Washington sees people in their homes, and short-sales are not favorably viewed,” he said.

But there might not be much choice to foreclosure, he said, because distressed properties carrying 30-year, fixed-rate prime loans are multiplying fast as unemployment lingers above the 10 percent level. Those are the most difficult mortgages to modify because they are generally held by households with plummeting income and no easy replacement close at hand.

While low prices should entice buyers, Brinkmann forecast a rise in interest rates starting in March, when the Federal Reserve plans to stop buying mortgages from lenders. Rates are at or near historic lows — 4.7 percent for 30-year fixed-rate loans last week, according to one survey — so a half-point increase that Brinkmann expects would raise rates to 5.2 percent or more. He did not agree with some economists who expect rates to rise one to two percentage points when the Fed exits the secondary mortgage market. Either way, higher rates mean less affordability to buyers.

And making purchases more difficult will be continued tough lending standards, he said.

Even with all these forces working against a rapid housing recovery, Ratcliff said economists are watching the housing market closely, because it is historically one of the first sectors, along with car buying, to emerge from a downturn and then serve as a trigger for more general economic growth.

Gin expressed the most optimism at the conference, citing his index of leading economic indicators for San Diego, which has risen for seven straight months — more than enough to indicate a turnaround.

Next year, he said, home sales should rise from the current year-to-date total of 30,000 and prices may go up, too, despite continued high levels of foreclosure. The current median price for San Diego County calculated by DataQuick stands at $325,000, up 2 percent over the last 12 months, and Gin said he believes it will rise in the single digits in 2010. That would carry the median price, potentially, up as much as 9 percent to $354,250.

But Gin cautioned against any expectation of a quick turnaround. He characterized the likely housing price recovery as a chart with an “elongated ‘U’ ” rather than the “V” shape seen in the past. 

 

 

 

Real Estate Market Report: Housing Prices Decline 0.4% in November

December 9, 2009 

The December 2009 National Real Estate Market Report, published by real-time real estate market data firm Altos Research, finds asking home prices declining in 25 of 26 metro markets. While lagging housing market indicators are just starting to report home price increases in the first half of the year, real-time data shows that prices have resumed their decline.

Mountain View, CA (PRWEB) December 8, 2009 -- The Altos 10-City Composite Price Index decreased by 0.4% during November and is down 0.8% for the most recent three-month period. Prices of properties listed for sale fell in 25 of 26 major markets and rose in just one market according to the Real-Time Real Estate Market Report, published by Altos Research, the premier source for real-time statistics on the real estate market.

National real estate market slowly declines in November 2009

The Real Estate Report is available for free download.

 

Asking prices fell at the fastest rate in San Diego with a decline of 3.1% during November, followed closely by Salt Lake City down 2.9% for the month and 6.1% for the most recent three-month period. Listing prices rose only in the recovering Miami market up 1.0%.

“Recent trends have persisted with widespread but limited price declines experienced in virtually all major markets,” said Michael Simonsen co-founder and chief executive officer of Altos Research. “High unemployment and high foreclosure rates combined with seasonal weakness will likely extend the trend until early spring of next year.”

For the month of November, listed property inventory declined in 22 of 26 markets tracked. Inventory declined by 2.9% across the 10 markets composing the Altos Composite index during October and 6.2% during the past three months. Inventory grew by the largest amount in San Diego - up 3.9% - and fell by the largest amounts in Boston – down 10% - followed by the Bay Area markets of San Francisco and San Jose with drops of 9.7% and 6.9% respectively.

“The contraction of inventory across most markets is in line with seasonal trends and will continue to moderate near-term price declines,” said Stephen Bedikian, partner and research director for Real IQ. “We’ve seen a sustained decrease of more than 6% in listed inventory during the past three-month period. With mortgage rates at historic lows and federal tax credits extended, demand should hold up.”

During November all markets except San Francisco and San Jose had a median days-on-market of 100 or more. By far, the market with the slowest rate of inventory turnover was again Miami, now at a median of 225 days-on-market or more than seven months. San Francisco experienced the fastest rate of inventory turnover with a median days-on-market of 89.

Data in the Real-Time Housing Market Report is based on analysis of over one million properties currently listed for-sale in 26 metropolitan statistical areas (MSAs): Atlanta, Austin, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Houston, Indianapolis, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, Salt Lake City, San Diego, San Francisco, San Jose, Seattle, Tampa, and Washington, DC. The first report was published December 7, 2007 and is released every month.

About Altos Research
Altos Research LLC pioneered real-time real estate research. Founded in 2005, the company's information products serve investors, traders, and thousands of real estate professionals. Because real estate data is traditionally obscure and highly latent, Altos built the Real-Time Market Intelligence(TM) platform to monitor dozens of real estate market statistics as they are right now in local markets across the country. The company publishes real estate statistics for thousands of local markets around the country

 

 

County's Home Sales Volume Picks Up in October 

By Tom York  San Diego Business Journal

Novemeber 23, 2009

San Diego County sold listings and sales volumes continue their strong trend upward, according to October statistics from Sandicor, the local trade association for professional residential real estate brokers.

Both single-family and attached home sales rose about 7% over September, and are up nearly 18% from 2008, said the report.

Sales volume for single-family homes increased more than 5% from September, and nearly 13% for attached homes, the report indicated.

Although median sales prices dipped slightly, the median prices in October did not change significantly from September, and, in a promising sign, are still up more than 4% from this time last year, the report said.

"Much of this upward trend can be attributed to the availability of the Home Buyer Tax Credit," said San Diego Association of Realtors 2009 President Erik Weichelt, in a news release.  "Since its inception earlier this year, the tax credit has brought 1.2 million new buyers into the market nationwide.  In California, nearly 40% of first-time homebuyers reported they would not have purchased a home without the tax credit."

 

 

Mortgage rates at record low 

4.71% is attractive for refinancing

By Roger Showley, UNION-TRIBUNE STAFF WRITER

Friday, December 4, 2009 at midnight

Mortgage rates have reached a historic low of 4.71 percent and set off another miniboom among homebuyers and owners wanting to refinance.

The rates, reported yesterday in the weekly Freddie Mac Primary Mortgage Market Survey, were down from last week’s 4.78 percent, which ties a record low set in April for 30-year, fixed-rate loans with a 20 percent down payment. The survey dates to 1971.

For a $300,000 loan, the latest rate would yield a principal and interest payment of $1,558, down from $1,570 last week, not counting origination fees and other expenses like taxes and insurance, according to an online mortgage calculator.

A year ago, the rate stood at 5.53 percent, yielding a monthly payment of $1,709.

“There are no guarantees that mortgage rates are going to stay at these low levels,” said Greg McBride, senior financial analyst at Bankrate.com .

In fact, they have inched up in recent days by about an eighth to a quarter of a percentage point after concerns eased about financial trouble in Dubai that had driven investors to safer markets.

The Federal Reserve is pumping $1.25 trillion into mortgage-backed securities to try to bring down mortgage rates, but that money is set to run out next spring.

The goal of the program is to make home buying more affordable and prop up the housing market.

Despite the government support, qualifying for a loan is still tough.

Lenders have tightened their standards dramatically, so the best rates are available to those with solid credit and a 20 percent down payment.

Millions of American families have not been able to take advantage of them, particularly in the areas where home prices have fallen the most.

About 11 million households, or 23 percent of homeowners with a mortgage, owe more on their home loans than their house is currently worth, according to real estate information company First American CoreLogic.

That makes refinancing difficult.

Dave McDonald, president of the local chapter of the California Mortgage Brokers Association, said that with lenders’ rule changes going into effect next month to tighten underwriting standards, those who wait for rates to drop again may not be able to qualify for the best loans at all. The additional problem this month is to get lenders to act on loan applications, since many lenders are short-staffed due to the holidays.

“If they are on the fence waiting for rates to go back down, they could be shooting themselves in the foot,” McDonald said.

Gabe del Rio, senior vice president of Community HousingWorks, a nonprofit housing advocacy group, said the low interest rates, even if they fluctuate a bit, mean more affordability to would-be buyers who have the necessary good credit, down payments and income security.

“I think it’s going to mean a whole wave of stable owners,” he said.

But del Rio did not see any reason to panic at the thought that rates might rise rapidly and push housing out of reach.

“It’s going to hover in this neighborhood for some time, and it needs to,” he said. “It’s the only way we’re going to slowly dig ourselves out of this (recessionary) hole.”

While many homebuyers are in trouble financially for having purchased at the heights of the boom and then seeing their values drop, others continue to have substantial equity in their properties and can save some money by refinancing. McDonald said he has one customer who is swapping his 30-year, fixed-rate loan at 6 percent into a 15-year loan at a lower rate so he pay it off early without raising his monthly costs.

Buyers and homeowners who want to refinance are picking up their phones. Mortgage applications rose 2 percent last week from a week earlier, the Mortgage Bankers Association said Wednesday, driven by a more than 4 percent increase in purchase applications and a nearly 2 percent increase in applications to refinance existing loans.

Erik Weichelt, president of the San Diego Association of Realtors, said low rates, still-low prices and quicker action on short sales — selling for less than the outstanding mortgage balance — are providing added stimulus to the housing market.

“Every time good news happens in the marketplace, we see people still sitting on the fence and coming off, wanting to get involved,” he said.

 

 

 

 

Foreclosures Decline for Third Straight Month

Jobless claims, housing data support recovery

NEW YORK—Homeowners received some uplifting news on Thursday as the latest RealtyTrac report showed that real estate foreclosures slowed for the third consecutive month in October, a sign that the U.S. housing market may finally be stabilizing.

Total U.S. foreclosures dropped 3.3 percent last month compared to September, the report indicated. Foreclosures include notices of bank repossessions and homeowner defaults.

The best news is that some of the hardest hit states are seeing improvements. Arizona’s filings dropped more than 10 percent compared to September, but the figures remain high as 1 in 200 housing units were under foreclosure. Florida and Nevada both saw 4 percent drops in foreclosure rates compared to the same month last year, the first year-over-year improvement since 2006.

“Three consecutive monthly declines is unprecedented for our report, and on first blush an indication that the foreclosure tide may be turning,” said James J. Saccacio of RealtyTrac in a statement.

The main cause of foreclosures and mortgage defaults lies with the nation’s unemployment rate, as most states’ jobless rate still hovers above 10 percent with no improvement in sight. The federal government has pressured banks and lenders to ease restrictions on homeowners and renegotiate terms to some loans—such as the Making Home Affordable Act passed earlier this year—which has mitigated the rising rate of defaults and foreclosures.

“However, the fundamental forces driving foreclosure activity in this housing downturn—high-risk mortgages, negative equity, and unemployment—continue to loom over any nascent recovery,” Saccacio continued. “And despite all the efforts and resources directed at helping homeowners avoid foreclosure, we continue to see foreclosure activity levels that are substantially higher than a year ago in most states.”

Home Prices Rising

Real estate prices across the United States are slowly recovering, but analysts say that the trend will depend on fluctuations in mortgage rates.

The S&P Case-Shiller home price index last month showed that U.S. home prices increased in August, the fourth straight month increase. The increases were most noticeable in California, where home prices rose 2.8 percent in San Francisco, 1.8 percent in Los Angeles, and 2.5 percent in San Diego in August.

Jobless Claims Lowest Since January

The main driver for economic activity—including home sales and consumer spending—received a much-needed boost on Thursday as government data showed that U.S. initial jobless claims last week fell to the lowest levels since Jan. 2009.

The seasonally adjusted 502,000 filings last week is lower than what economists expected and is a far cry from a peak of 674,000 seen in March.

While jobless claims are declining, the number of available jobs has not picked up—causing some analysts to worry that the lull in joblessness might be temporary. Nonetheless, retailers and investors are keenly eyeing the employment picture as the 2009 holiday shopping season approaches. Most market research firms project little or no increase in holiday sales from 2008, but much depends on consumers’ discretionary spending budgets.

“While layoffs have certainly declined in recent months, we still expect to see employers adding hours to their existing workforce before hiring will strongly increase,” said Gad Levanon, senior economist at The Conference Board, which publishes monthly employment forecasts.

Levanon predicted that “job losses will end in early 2010.”

 

 

If You Thought the Housing Meltdown Was Bad…

 

 

 

 

 

 

 

 

 

…wait until you see what’s in the cards for commercial real estate.

That’s right, the next train wreck will be in commercial real estate. Couldn’t be worse than last year’s residential market crash? That remains to be seen. But it’s coming soon, probably as early as the second quarter of next year, and there’s nothing that can prevent it. The government will intervene, trying desperately to delay the day of reckoning, and may even succeed. For a while. But make no mistake about it, that train is going off the tracks no matter what.

Every part of the sector – from multifamily apartment buildings to retail shopping centers, suburban office buildings, industrial facilities, and hotels – has accumulated a huge amount of defaulted or nonperforming paper. It’s an impossible, swaying structure that cannot long stand.

Just ask Andy Miller.

Andy is one of the most knowledgeable people around when it comes to commercial real estate. Co-founder of the Miller Fishman Group of Denver, he has spent twenty years buying and developing apartment communities, shopping centers, office buildings, and warehouses throughout the country. He’s also worked extensively – especially lately – with asset managers and special servicers (those who handle commercial mortgage-backed securities, or CMBS) from insurance companies, conduits, and the biggest banks in the U.S., advising them on default scenarios, helping them develop realistic pricing structures, and making hold or sell recommendations.

It isn’t easy. Commercial real estate sales are off a staggering 82% in 2009, compared with 2008, and last year was worse than ’07. No one is selling at depressed prices, but it hardly matters as there are no buyers, either because they’re afraid of the market or can’t meet more stringent loan requirements. Two years ago, the value of all commercial real estate in the U.S. was about $6.5 trillion. Against that was laid $3-3.5 trillion in loans. The latter figure hasn’t changed much. But the former has sunk like a bar of lead in the lake, so that now between half and two-thirds of those loans will have to be written down, Andy estimates. “If the banks had to take that hit all at once, there wouldn’t be any banks,” he says.

And it’s actually worse than that. As even average citizens became aware during the subprime meltdown, loans in recent years were bundled into exotic financial vehicles that could be sold and resold, a class generically known as conduits. These commercial mortgage-backed securities, while less well known than their cousins built upon home loans, are nonetheless ubiquitous. Three guesses who were among the significant buyers of CMBS. If you said banks, banks, and more banks, you got it. Thus these folks are sitting not only on their own malperforming loans, but on a whole lot of everyone else’s toxic junk, too.

This is how bad conduits are: A 3% default rate last year jumped to 6% in 2009 and is expected to double again, to 12%, in 2010. An entity that takes a 12% hit to its portfolio – and this includes countless banks, pension and annuity funds, international institutional investors, and others – is in deep, deep trouble.

The real tsunami is coming, probably in the second quarter of 2010, Andy estimates. Because that’s when banks will have to start preparing for the wave of mortgages that were written near the market top and are maturing in 2011-12. Unlike home loans, commercial loans tend to be relatively short-term in nature (average 5-7 years), because – outside of apartment building loans backed by Fannie or Freddie – there are no government programs to subsidize longer-term ones. These guys mature in bunches.

According to a recent Deutsche Bank presentation, the delinquency rate on commercial loans as of the end of 2Q09 was greater than 4%. Of these, they expect that north of 70% will not qualify for refinancing. Imagine what will happen to the estimated $2 trillion in commercial mortgages that mature between now and 2013.

And even that is not the end of it. There’s a second huge wave on the way in 2015-16.

Problem is, instead of trying to meet this inevitable challenge head on, asset managers have decided to believe in such phantoms as the tooth fairy, honesty at the Fed, and an economic turnaround powerful enough to bail them all out. De Nile is not just a river in Egypt.

To be fair, it’s difficult to envision what an intelligent, aggressive response would look like, given the breadth and depth of the crisis, and the lack of resources available to deal with it. Miller recently met with a group of asset managers from a number of different, prominent banks. They reported that they’re completely overwhelmed and can’t even begin to cope with the sheer volume of problem loans on their calendar. It’s so bad that they’re now dealing with some borrowers who haven’t paid a cent in a year and a half.

What do you do if, as Andy thinks is the case, 85-90% of the entire commercial real estate market is under water relative to its financing? What happens to a property when its value drops way below the loan, a seller can’t get enough money to get out, a buyer can’t raise enough money to get in, and the bank can’t afford to foreclose? Simple. It just sits there, carried along on the bank’s books at some inflated “mark to fantasy” price that makes the institution’s balance sheet look passable. The industry even has a catchphrase for the situation: “A rolling loan gathers no moss.”

In the case of a retail store, a bankrupt tenant walks away. Andy looked at just the part of Phoenix where his firm does business and found 90 vacant big box stores, with an aggregate floor space of 8 million square feet. If Christmas season is as lackluster as cash-strapped consumers are likely to make it, there will be many others to follow.

The hotel business is terrible. Overbuilding based upon travelers who went into debt to finance lavish vacations is taking its toll on tourist destinations. At the same time, business travel has seriously contracted. Flights into Las Vegas, which caters to both, have been slashed so much that even if every seat on every remaining flight were filled and visitors stayed for an average number of days, the hotels still couldn’t break even. In industry parlance, banks are now engaged in “extend and pretend,” i.e., giving hotels three- to six-month loan extensions in the hope that things will somehow improve in the near future.

Office space is doing okay in central business districts, but not faring well elsewhere. Some estimates tab the national office vacancy rate at over 16.5%, compared with 12.6% in January 2008. It exceeds 20% in parts of Atlanta and San Diego, and in many places in between.

Multifamily apartment buildings – and the very creaky Fannie and Freddie are carrying a load of them – may be the next to topple. As values deteriorate and landlords are faced with loans coming due, there is no incentive to fix whatever goes wrong. If, for example, you have a $10 million loan maturing in two years, and the property value has declined to $6 million, why would you spend half a million to fix leaky roofs? The question answers itself. Yet, as capital spending needs are not attended to, the apartments deteriorate. Which leads to working-class tenants replaced by meth labs. Which leads to even lower property values. And so on. In the end, when the banks are forced to take possession, they will be left with either expensive repair jobs, or the cost of demolition and a total write-off.

As the overall commercial real estate crisis escalates, the banks will do the same thing they did last year: run to the government, palms outstretched.

How will Washington respond? Good question. On the one hand, further bailouts will further infuriate the public. But on the other, the political sentiment will be that allowing the banks to fail will have even more dire consequences.

The Fed has already tried to let some of the relentlessly building pressure out of the balloon through TALF (Term Asset-Backed Securities Loan Facility). But that hasn’t worked, because TALF only backs the most senior, creditworthy bonds in a CMBS pool. Those aren’t the problem. The problem is the junior notes no one wants.

In order to increase market liquidity and get conduits moving again, the government will likely be forced to create a guarantee program similar to the FHA, Miller thinks, whereby short-term money (on the order of 5-7 years) is made available. Will that just push our problems five to seven years down the road? Quite possibly. But what is being purchased is time, the only thing left to buy. The hope, of course, is that it’s enough time – for the real estate market to stabilize, prices to return to more “normal” levels, and the world to turn all hunky dory.

Rock, meet hard place. Let all the troubled banks fail, and the consequences will range from some excruciating but short-term pain, to a plunge into full-bore depression. Prop them up with yet more newly printed fiat money, and anything from high to hyperinflation will inevitably result, along with the possibility of extending the problem well into the next decade.

Both are frightening prospects. We don’t want either, but realistically, we’re going to get one or the other. Let’s be clear, it won’t be the end of the world. However, it will be the end of the world as we know it. That makes it imperative to prepare for the new one that’s coming.

 

 

 

SENATE PASSES BILL TO EXTEND $8,000 "FIRST-TIME HOMEBUYER" CREDIT & EXTEND A $6,500 TAX CREDIT TO "MOVE-UP BUYERS". 

11/5/2009 

WASHINGTON -- The U.S. Senate late Wednesday unanimously passed legislation extending unemployment benefits and also significantly expanding a tax credit that was championed by Republican U.S. Sen. Johnny Isakson of Georgia.

As part of the unemployment package, the Senate also voted to extend an $8,000 first-time homebuyer tax credit through April 30, 2010.

The homebuyer tax-credit program, which is currently set to expire Nov. 30, 2009 , also would be expanded to give all homebuyers a $6,500 credit as long as they have benn in their previous home for at least five years.

"We are about to do something very meaningful for the American Economy," Isakson said in a statement. "The bill in the end is a jobs bill.

Isakson, a former Atlanta-area real estate broker, has said extending and expanding the homebuyer credit was essential on getting the beleaguered housing market -- and in turn, the overall economy -- on track. He had been working on the tax credit idea for months, and co-sponsored the latest version with Democratic Sen. Chris Dodd of Connecticut as an amendment to the unemployment benefits bill.

The U.S. House has already passed an extension of unemployment benefits, but must still approve teh homebuyer tax credit. A spokeswoman for Isakson said Senate leadership has gotten assurances from House leaders that the amendment will get approval, and President Obama is expected to sign it.

Under the amendment passed by the Senate Wednesday, both the $8,000 first-time homebuyer tax credit as well as the $6,500 tax credit for "move-up" buyers would end April 30.

It would be limited to home buyers who make $125,000 or less as an individual or $225,000 or less as a couple. The cost of the home being purchased may not exceed $800,000.

In extending the unemployment benefits, the $24 billion bill will continue the benefits of more than 1 million out-of-work Americans who would otherwise run out of benefits by the end of the year.

The bill also provides tax relief for businesses that are losing money, allowing them to use net operating losses in 2008 or 2009 to offset taxable profits from the previous five years.

 

 

Real Estate Price Plunge Makes U.S. Homeownership Perilous Path

By Kathleen M. Howley

(November 3, Bloomberg) Kajal and Vishal Dharod paid $559,000 in 2006 for a new four-bedroom house built in Rancho Cucamonga, California. Today, it’s worth about $360,000.

“We don’t know how we can come back from a loss like that,” said Kajal Dharod, 29, a first-time homeowner with a $4,200-a-month mortgage. “Buying the house was a mistake.”

American homeownership, once considered a path to wealth, is now leading to disillusionment. Home prices in the last four years have been the most volatile on record, swinging from a gain of 12 percent in 2005 to an estimated 13 percent loss this year, according to the National Association of Realtors. Those gyrations have embittered many property owners and potential buyers, said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies in Cambridge, Massachusetts.

“We always talk about homeownership as being the American dream, but during the last decade people forgot it’s shelter and started thinking of it as a fast way to make or lose money,” said Retsinas. “The quicker we move back to seeing real estate as a place to live, a place to put down roots, the quicker the housing recovery will strengthen.”

Home-price growth in the next decade probably will average about 3.5 percent a year, based on Retsinas’s estimate of increases of about 1.5 percent above inflation and the Federal Reserve’s long-term inflation forecast of about 1.7 percent to 2 percent. On that basis, it could take a decade or more for the Dharods to recover from the 36 percent loss on their home.

Cities Gained

While median home prices increased 83 percent in the decade preceding the recession, according to the National Association of Realtors, the gain was far higher in the most populous cities. In New York, prices increased 146 percent. In San Francisco the jump was 160 percent, and in Los Angeles it was 205 percent, according to S&P/Case-Shiller Home Price indices.

Even in cities where the increases weren’t as steep, the U.S. embraced the idea of the “ownership society” advanced by former President George W. Bush in speeches including his 2005 inaugural address at the apex of the housing boom.

As homeowners watched real estate values surge, many began using their residence for debt repayment, college tuition, or vacation money, said Mark Goldman, who teaches real estate courses at San Diego State University. Homes became the linchpin for retirement planning, he said. The U.S. personal savings rate in 2005 dropped below zero for the first time since 1933, according to the Bureau of Economic Analysis in Washington.

Spending Spree

“Everyone expected their house would increase in value and they could cash out their equity to fuel their spending,” said Goldman.

In mid-2006, home prices began a 28 percent decline after reaching a peak that was almost four times the U.S. median household income. Unable to refinance, subprime borrowers started defaulting on mortgages as their rates adjusted higher and their payments ballooned. The slump in the value of bonds backed by mortgages sparked a global recession.

The U.S. homeownership rate fell to a nine-year low of 67.3 percent in 2009’s first quarter, even after Congress passed an $8,000 first-time homebuyer tax credit in February that was retroactive to Jan. 1. U.S. sales of houses and condominiums dropped to an annual pace of 4.49 million at the beginning of 2009, the lowest on record, according to data from the Chicago- based Realtors group.

“It will be a long time before people think of owning a home as a good investment again,” said John Vogel, a professor at the Tuck School of Business at Dartmouth College in Hanover, New Hampshire. “A lot of what drives housing is psychological, and right now there’s a distinct lack of confidence in real estate.”

Economy Accelerating

In a Sept. 23 statement, Fed policy makers signaled for the first time since August 2008 that the U.S. economy is accelerating. The world’s largest economy expanded at a 3.5 percent pace from July through September, according to an Oct. 29 government report. Household purchases climbed 3.4 percent, the most in two years.

Recoveries aren’t what they used to be. The average increase in the U.S. median single-family home price was about 6 percent in the first year of economic expansion following the last six recessions, using data from the National Bureau of Economic Research and NAR. The 2010 gain in existing home prices is forecast to be 0.8 percent, according to the Washington-based Mortgage Bankers.

More Losses

Fannie Mae and Freddie Mac, the government-run mortgage buyers, are predicting losses will continue. Washington-based Fannie Mae estimates home prices will retreat 1.7 percent in 2010, and McLean, Virginia-based Freddie Mac puts the drop at 1.5 percent.

The U.S. cities with the best prospects for home-price growth over the next five years are Seattle, San Jose, San Francisco and Washington, according to Steve Blitz, president of Pangea Market Advisory in New York, an economic forecasting firm. They have a “scarcity of housing and strong economies,” Blitz said.

Miami, where prices have tumbled 47 percent since a 2006 peak, is No. 5, Blitz said.

“Latin American currencies are going to do very well versus the dollar, and Miami is seen as the capital of Latin America,” said Blitz. “Its long-term economic prospects are good, so its current oversupply will be worked off.”

San Diego

Other cities on his list are San Diego, Phoenix, Las Vegas, Los Angeles, and, at No. 10, New York. While home prices may see additional declines in some of those cities over the next year, their long-term prospects are good, Blitz said.

“If you buy a home in Beverly Hills or an apartment on Manhattan’s Upper East Side, over the next five and even 10 years you are going to do very well,” Blitz said. “The greatest threat to price growth in the New York area would be the diminution of Manhattan as a trading capital, and I don’t see that happening.”

The 10 cities where real estate prospects are the worst, Blitz said, are: Detroit; Cleveland; Milwaukee; St. Louis; Tampa, Florida; Sacramento, California; Indianapolis, Indiana; Atlanta; Columbus, Ohio; and Minneapolis. Some are losing population and others don’t have economies strong enough to absorb an oversupply of available properties.

Gains Return

“It’s not just a question of sales and inventory -- price growth also is based on population patterns, income growth and employment,” Blitz said.

While prospects are grim in some areas, it wouldn’t be the first time prices made a comeback. The median U.S. home value tumbled 39 percent during the 1930s to $2,938 from $4,778 at the start of a decade dominated by the Great Depression, according to the Census Bureau.

Within 10 years the loss was erased, as servicemen back from World War II began buying houses financed with G.I. Bill benefits. The median home value increased to $7,354 by 1950, an average gain of 6.2 percent each year during the 1940s.

In the 1950s, home values surged an average of 15 percent a year, according to the Census. In the 1960s, the pace dropped to 4.3 percent before jumping to 18 percent a year in the 1970s, boosted by a U.S. inflation rate that reached 13 percent. In the 1980s, the average annual increase was 6.8 percent. The pace dropped to 5.1 percent during the 1990s.

Homebuilders Gain

If NAR’s forecast for a median home price of $172,700 this year is correct, it would put the average annual increase at 2.5 percent during this decade even with the collapse of prices.

The Standard & Poor’s Supercomposite Homebuilding Index of 12 companies gained 43 percent from January through Sept. 16 as the homebuyers’ tax credit boosted August new-home sales to a 2009 high. In September, sales dropped 3.6 percent as time ran out to complete homes by the tax credit’s Nov. 30 deadline, the Commerce Department said last week.

Resales rose to a 5.57 million annual rate in September, the highest in more than two years, NAR said in an Oct. 23 report. The median price fell 8.5 percent from a year earlier, 2009’s smallest decrease. 

Even so, some Americans who have never held property aren’t convinced that $8,000 from the government will make buying a home a good investment. Mian Raman, 40, said he won’t buy, for now, even though the U.S. tax code provides perks such as mortgage interest as a deduction.

“If I buy a $300,000 home now to get the tax credit and prices drop by even 3 percent next year I’ve lost that $8,000 and more,” said Raman, owner of used-car dealerships in Boston’s Jamaica Plain neighborhood, where he rents an apartment, and Revere, Massachusetts.

Homes as Commodities

No matter how much money the government puts into the housing market to stimulate sales, a recovery won’t be on firm ground until people stop viewing homes as commodities, said Joe Carson, head of global economic research at AllianceBernstein LP in New York.

“After every major bust there is a rethinking of that asset class,” Carson said. “I think people will change their views about real estate and begin to look at it as a long-term investment that provides shelter, rather than a way to make a quick buck.”

After losing almost $200,000 in the value of her home, Dharod in Rancho Cucamonga said she has had many sleepless nights.

“We should have rented an apartment rather than doing what we thought was the right thing and putting everything we had into the house,” Dharod said.  

 

 

Good news to report

California Association of Realtors: 11/1/09

President Obama is expected to sign a resolution passed late yesterday by Congress extending the current limits for Fannie Mae, Freddie Mac, and FHA loans through 2010. The limits were set to expire at the end of this year. This is especially critical for California, where more than 80 percent of all loans are financed by Fannie Mae, Freddie Mac, or FHA, and will help maintain the positive signs we are now seeing in California’s mortgage market. President Obama is expected to sign the resolution today or tomorrow as part of a broader piece of budgetary legislation that will prevent a government shutdown.

While home prices in California have declined, the demand for housing has not. The market has been dominated by first-time home buyers who have faced a shortage of financing opportunities. The loan limits are set at 125 percent of local median home sales prices, up to a maximum of $729,750 in high-cost areas, including many regions in California. Sales in move-up and high-end markets have been constrained this year; the loan limits extension will help qualified home buyers in these markets to move forward with their purchases.

Although loan limits are safe through 2010, there is still work to be done. Congress has yet to act to extend the First Time Home Buyer Tax Credit past its current Nov. 30 expiration date. Yet the impact of the home buyer tax credit is clear: A C.A.R. survey of first-time home buyers shows that 40 percent would not have purchased a home without the tax credit.

Housing bottom behind us, experts say

By Ryan Carter
10/26/2009

Housing prices were up for the seventh straight month in September, causing economists Monday to declare the dismal housing market had cleared the abyss.

And it had Realtors hoping Congress extends an $8,000 first-time homebuyer credit this week.

While the median price of a home was still 7.3 percent below where it was last year at this time, demand caused by 2.1 percent year-to-year sales increase pushed statewide prices up for the seventh month in a row.

"We've come back a long way," said Steve Goddard, president-elect of the California Association of Realtors, which published the report. "Even though we're down (compared with last year) we're not down as much. That's showing a good direction."

Locally, the numbers mostly followed the state trend.

In Los Angeles County, home prices stood at $333,000 - down 8.8 percent from $365,000 in September 2008.

But that decline in value is becoming less steep. In fact, over the past few months in several San Gabriel Valley cities, prices are up compared with last year.

In Monrovia, for instance, the median price of a single family home stood at $458,000 - a 3.5 percent increase from last year's $442,450 median.

A home in Pasadena jumped from $510,000 in September 2008 to $514,250 last month.

Even with the jumps, affordability levels remain high, and that's driving the market, said John Husing, an economist who specializes in the Inland Empire.

"I believe the bottom of the housing downturn is now behind us," Husing said. "We bottomed in the second quarter."

Still, there doesn't look to be a smooth recovery.

The market is "bouncing along the bottom," Husing said.

In Baldwin Park, the past three months have been spotty.

In September - and in contrast to many other local cities - the city actually saw its home values dip even further, down 18.8 percent to $235,000.

It was unclear why the median prices in Baldwin Park have been so up and down.

While it's easy to blame unemployment, experts cautioned against putting too much stock in lack of jobs.

Development patterns and available housing stock also play a role, they said.

What was clear to CAR officials was that in order to continue fueling demand for homes, Congress needed to extend the first-time homebuyer credit. That came as early as this week, Goddard said.

"There's an awful lot of people who really need that $8,000," Goddard said. "For some, that going to be half of their down payment."

 

 

Home prices in major cities continue to climb

By Alejandro Lazo
October 28, 2009

Standard & Poor's/Case-Shiller index rises 1% in August from July in its third consecutive monthly gain. Southern California cities, led by L.A. and San Diego, show notable increases.

The nation's biggest cities are posting steady gains in home prices, a closely followed index showed Tuesday, adding fresh evidence that the U.S. housing market is stirring to life.

But economists are divided over whether the recent improvement is the result of temporary federal policies or a sign that homes have gotten cheap enough to spur a lasting recovery.

Home prices in 20 metropolitan areas rose 1% in August from the month before, according to the Standard & Poor's/Case-Shiller index released Tuesday. The index has posted three consecutive month-to-month gains, bringing home prices in August to pre-bubble levels of autumn 2003. The price index is down 30% from its May 2006 peak.

"We are seeing stabilization," said Patrick Newport, an economist with IHS Global Insight.

A variety of federal policies has contributed to the steadying of home prices. The federal government has offered an $8,000 tax credit for first-time buyers. Interest rates on mortgages have hit their lowest levels in years as a result of the Federal Reserve's campaign to keep credit flowing throughout the economy. And a dreaded wave of foreclosures appears to have been averted as banks responded to government pressure to work with borrowers facing foreclosure.

What remains uncertain is where the housing market will go if these policies ease.

Michael D. Larson, an interest rate and real estate analyst for Weiss Research, said he expects the real estate market to stumble with the expiration of the tax credit at the end of November.

Still, he said, relatively low prices will continue to spur demand from shoppers.

"You are going to see some give-back; you are probably going to see a pause in the recovery," Larson said.

"But I think the fundamental story is that housing got way too expensive and now you could argue that housing is cheap again, and that is what it boils down to."

Christopher Thornberg, a Los Angeles economist who was an early predictor of the housing bubble, disagreed.

"I can't emphasize enough how this rally in the market is being driven by policy and not fundamentals," he said.

August home prices declined 11.3% compared with the same month a year earlier, according to the index, although the year-to-year decline wasn't as steep as in recent months.

The index's annual rate of decline has been improving since early 2009, S&P said.

Looking at the seasonally adjusted monthly data, 17 of the metro areas tracked by the index showed improvements in August compared with July. Meanwhile, 19 of the 20 markets showed moderation in their year-over-year rates of decline.

Southern California cities -- San Diego and, in particular, Los Angeles -- have seen notable gains, separating themselves from other Sun Belt cities, including Las Vegas and Phoenix, Blitzer said.

Los Angeles-area prices in August improved 1.3% over July on a seasonally adjusted basis. The index for Los Angeles was down 12% compared with the same month a year earlier.

Home prices in San Diego rose 1.5% on a seasonal basis from July but fell 8.9% compared with August 2008.

San Francisco-area homes gained 2.6% on a seasonally adjusted basis over the month of July.

On a year-over-year basis, San Francisco-area homes declined 12.5% in August.

Only the cities of Las Vegas, Charlotte, N.C., and Cleveland reported monthly declines in August.

August home prices in the Las Vegas area dropped 0.8% over July on a seasonally adjusted basis. Las Vegas also had the biggest year-over-year drop, falling 29.9% in August.

Las Vegas has been hit hard by the drop in tourism, oversupply in housing, construction crash and high unemployment, said Larson, the analyst with Weiss Research.

Phoenix fared better, posting a 1% home price increase in August over July. But the city had the second-largest year-over-year drop with a 25.1% decline in August.

The index compares the latest sales of detached houses and accounts for factors such as remodeling that might affect a home's sale price over time.

Using those data, an index score is determined to show price changes, with a score of 100 reflecting January 2000 prices.

 

S&P/Case-Shiller Home Price Index Reports Continued Upward Movement 

 

News Source: Standard & Poor's   10-28-09

(NEW YORK, NY) -- Data through August 2009, released today by Standard & Poor's for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the annual rate of decline of the 10-City and 20-City Composites improved compared to last month's reading. This marks approximately seven months of improved readings in these statistics, beginning in early 2009.


 


The chart above depicts the annual returns of the 10-City and 20-City Composite Home Price Indices, declining 10.6% and 11.3%, respectively, in August compared to the same month last year. Nineteen of the 20 metro areas and both Composites showed an improvement in the annual rates of decline with August's readings compared to July. Cleveland was the only exception.

"Broadly speaking, the rate of annual decline in home price values continues to improve," says David M. Blitzer, Chairman of the Index Committee at Standard & Poor's. "The two Composites and 19 of the 20 metro areas showed an improvement in the annual rates of return, as seen through a moderation in their annual declines. Looking at the monthly data, 17 of the MSAs and both Composites saw price increases in August over July. While many of the markets remain down versus this time last year, the relative rate of decline has shown some real improvement. California, in particular, has seen some real positive prints in recent months. We see this general trend whether you look at the as-reported data or the seasonally adjusted figures. Once again, however, we do want to remind people of the upcoming expiration of the Federal First-Time Buyer's Tax Credit in November and anticipated higher unemployment rates through year-end. Both may have a dampening effect on home prices."





The chart above shows the index levels for the 10-City and 20-City Composite Indices. As of August 2009, average home prices across the United States are at similar levels to where they were in the autumn of 2003. From the peak in the second quarter of 2006 through the trough in April 2009, the 10-City Composite is down 33.5% and the 20-City Composite is down 32.6%. With the relative improvement of the past few months, the peak-to-date figures through August 2009 are -30.2% and -29.3%, respectively.

In terms of annual declines, all metro areas and the two composites remain in negative territory, albeit most showing an improvement over the previous month's figures. Dallas and Denver are continuing their trend from the past month, edging closer into positive territory with August figures of -1.2% and -1.9%, respectively. In addition, both New York and San Diego have emerged out of double-digit declines. New York was down 9.6% in August and San Diego was down 8.9%.

In the monthly data, only Charlotte, Cleveland and Las Vegas reported monthly declines in August over July. Minneapolis and San Francisco reported positive returns greater than +2.0%, and nine of the MSAs plus the two Composites reported monthly returns greater than +1.0%.

Since its launch in early 2006, the S&P/Case-Shiller Home Price Indices have published, and the markets have followed and reported on, the non-seasonally adjusted data set used in the headline indices. For analytical purposes, Standard & Poor's does publish a seasonally adjusted data set covered in the headline indices, as well as for the 17 of 20 markets with tiered price indices and the five condo markets that are tracked. A summary of the monthly changes using the seasonally adjusted (SA) and non-seasonally adjusted (NSA) data can be found in the table below.


 

 

Foreclosure activity slows in California as banks hold back 

By Daniel B. Wood  |  Staff writer/ October 23, 2009 Los Angeles

California, the state which has led the nation in home foreclosures, has finally seen a significant drop in the number of mortgage defaults and house repossessions. But many economists say the trend is less about improved economic conditions than about banks holding off on foreclosure or renegotiating loan agreements.

The number of mortgage default notices fell 10.3 percent in the past three months compared to the previous quarter, dropping to 111,689 in the July through September period, according to San Diego-based MDA DataQuick. Repossessions were down 37 percent over the previous year.

Lenders may have intentionally slowed down the pace of foreclosure proceedings, DataQuick says. Default notices are the first step in the foreclosure process.

“It’s not out of the goodness of their hearts,” says Andrew LePage, DataQuick senior analyst. “Foreclosures are expensive and the more homes you dump on the market, the more you drive down prices and it becomes a vicious cycle.” Mr. LePage says the industry is in the early stages of “trying alternatives … such as short sales [selling for less than is owed on the mortgage] and loan modifications.”

California is home to 1 in 9 Americans and has 8.5 million houses.

“There is no reason to believe this is a trend and that the worst has passed,” agrees Ginna Green, spokesperson for the California office of Center for Responsible Lending. She points out that the state is still at 12.5 percent unemployment.

Also, a state moratorium on foreclosures was in effect through most of the last quarter, and has just been lifted.

The California Mortgage Foreclosure Prevention Act, which went into effect June 15 this year, placed a 90 day delay on some foreclosures, where the lenders were deemed to have less than comprehensive loan modification programs. Many lenders already have federal incentives to offer loan modifications, but the new law was intended to give California lenders further incentive to renegotiate mortgages instead of foreclosing.

“Now that the moratorium has been lifted, there should be a tsunami of them [foreclosures] coming shortly,” says Chuck Cochran, a real estate assessor based in the San Fernando Valley. “A lot of properties are due to hit the market, which could push prices down another notch.”

There are other concerns for lenders and borrowers, says Perry Wong, senior managing economist for the Milken Institute in Santa Monica, Calif.. Most notably, adjustable rate mortgages are due to be reset from cycles in 2003 and 2005. Considering this additional instability, Mr. Wong says he thinks there’s a hopeful sign in the fact that that banks are not forging ahead with foreclosures.

“We must all look at the up side, which is that when a bank is not quick to do a foreclosure, that itself is a good sign,” says Wong. “They may not be seeing that the market is going to go up quickly, but the fact that they don’t see as much of a downside in holding on to it, is a very important signal.”

The DataQuick study released this week showed that while most foreclosure activity was still concentrated in affordable inland communities, the foreclosure problem has continued to slowly migrate into more expensive areas. Default notices are rising fastest in the affluent counties of the Bay Area – San Francisco (up 72 percent over a year ago), San Mateo (up 58.5 percent), and Marin (up 65.9 percent).

What is unknown now, say analysts, is how many borrowers will decide to modify their loans – an initiative promoted by the Obama administration – how many with adjustable rate mortgages will experience unfavorable rate resets, and the trend with other housing prices.

“There are lots of unknowns at the moment, especially in California,” says Jed Kolko, real estate specialist for the California Public Policy Institute. “Among them is that there is no way to know if what the government is doing to help people renegotiate more comfortable mortgages will have a permanent effect or only a delaying one.”

Strong rebound seen for home sales

 By ALAN ZIBEL (AP) – 10/23/09

WASHINGTON — With homebuyers rushing to complete their purchases before a tax credit for first-time owners expires, a report Friday is expected to show strong September sales.

Home resales are expected to show an almost 5 percent increase to a seasonally adjusted annual rate of 5.35 million, up from 5.1 million in August, according to economists polled by Thomson Reuters. If the report meets forecasts it would be the best month for home sales in more than two years.

The National Association of Realtors' report is scheduled for 10 a.m. EDT.

The sales jump, however, could be far larger than Wall Street expects, according to a monthly survey of 1,500 real estate agents for Campbell Communications, a research firm. That's because foreclosure sales are booming in cities like Los Angeles, San Diego and Las Vegas.

"There's a mini-boom going on in the housing market," said Thomas Popik, who conducted the survey for Campbell and expects a double-digit increase.

First-time homebuyers and investors are snapping up those homes and taking advantage of low mortgage rates. These buyers can also take advantage of a tax credit of 10 percent of the sales price, up to $8,000, if the deal is completed by the end of November.

The tax credit is so important to some buyers that they are adding a clause to their contracts, allowing them to back out if the sale doesn't close by Nov. 30.

While home sales and housing construction have risen steadily after hitting bottom earlier this year, most economists believe that the worst isn't over for home values. In August, the median price was $177,700, down from the peak of $230,300 in July 2006, but still above the bottom of $164,800 in January, according to the Realtors group.

Prices could see a double dip because rising unemployment is having a ripple effect on foreclosures. The jobless rate, currently at 9.8 percent is expected to rise as high as 10.5 percent next year, causing more people to be unable to afford their monthly mortgage payment.

"There's more supply that's going to come into the marketplace," said Stan Humphries, chief economist at real estate Web site Zillow.com. "That additional supply will outpace demand."

Some signs of softer prices may already be appearing. A government index released Thursday showed U.S. home prices dipped 0.3 percent from July to August.

That drop "supports our view that the housing recovery will be slow and bumpy," wrote Paul Dales, U.S. economist with Capital Economics.

With concerns about the housing market still prominent, Congress is considering several proposals to extend the tax credit for first-time buyers. Senators Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn., want to extend it through June 30, and expand it to include all home buyers, at an estimated cost of $16.7 billion.

One potential roadblock, however, emerged this week. There are concerns that some of the 1.5 million applications for the tax credit are fraudulent.

At a hearing before a House subcommittee Thursday, J. Russell George, the Treasury Department's inspector general for taxes, questioned the legitimacy of some 100,000 claims for the credit, potentially including some illegal immigrants and 580 people under 18. The youngest taxpayers to apply for the credit were 4 years old, his office said.

While the program has widespread support in Congress, there are growing concerns about the costs. The cause, said Sen. Jack Reed, D-R.I., "is a worthy one." But "I hope we can find ways to pay for it."

 

 

Banks Bite Bullet on Loans

Lenders Start to Write Off Some Principal in Modifying Terms for Troubled Mortgages 

By Kenneth R. Harney
2:00 a.m. September 27, 2009
 

WASHINGTON — Will Congress extend the wildly popular $8,000 home-buyer tax credit beyond its Dec. 1 expiration date?
That's a question generating huge pressure on Capitol Hill, from would-be buyers who haven't found the right house to realty agents, builders, lenders and squads of lobbyists working on their behalf.

But here's the first hint of an answer: On Sept. 17, the leadership of Congress' primary tax legislative committee introduced a tax credit bill that's likely to zip through the House and move to the Senate rapidly. Charles Rangel, chairman of the House Ways and Means Committee, sponsored the bipartisan Service Members Homeownership Tax Act (H.R. 3590), which would extend the credit for another 12 months for thousands of military, Foreign Service and intelligence agency personnel who've been posted abroad during 2009.

Rangel's bill, with 29 co-sponsors, would keep the credit alive through Nov. 30, 2010, for service members who had at least 90 days of overseas duty assignments during 2009 and who otherwise meet the eligibility tests for the credit. The bill would also prohibit the IRS from “recapturing” the $8,000 credit when service members are forced to sell or rent out their houses because they are ordered to deploy to a different duty station, overseas or inside the country.

Under the regular rules of the program, buyers who obtain the credit must use their houses as a principal residence for 36 months or be required to repay the credit to the IRS. As a result of the 36-month rule, many military and diplomatic employees have been hesitant to buy a house and claim the credit, or are worried that their absence from the country could force them to repay the money.

For example, the spouse of a Foreign Service officer posted to the Philippines this summer for a two-year assignment wrote to Rep. Earl Blumenauer, D-Ore., to alert him to a flaw in the tax credit program. The Oregon couple bought their first home earlier this year, encouraged by affordable prices and the $8,000 credit. But having now been posted abroad, they cannot claim to occupy the house as their principal residence. Under current rules, they even face recapture of the full credit.
Blumenauer, who is a member of the Ways and Means Committee, said “it is absurd that thousands of Americans serving our country, away from friends and family, must choose between their service work and homeownership.” He wrote corrective legislative language that ultimately was incorporated into Rangel's tax bill.

Though nothing is guaranteed on Capitol Hill, legislation eliminating tax penalties on the military during wartime looks like a good bet for early passage in both houses. Equally significant: It now appears likely that there will be an $8,000 tax credit available a year from now — at least for some purchasers. Which raises the question: Why not leave it in place for all first-time buyers?

There's growing support for that on both sides of the Capitol, but there are also some complicating issues. In the Senate, the most outspoken advocate for months has been a Republican, Sen. Johnny Isakson of Georgia, a former real estate broker. He wants not only to extend the credit to Dec. 1, 2010, but to raise the maximum to $15,000, and make it available to all home buyers next year.

But recently, key Senate Democrats produced their own version of an extension, limited to six months, retaining the ceiling at $8,000 and targeting only first-time purchasers. The bill's primary sponsor is Sen. Benjamin Cardin, D-Md. Democratic co-sponsors include Majority Leader Harry Reid of Nevada and Debbie Stabenow of Michigan. Republicans John Ensign of Nevada and Isakson have signed on as well.

In a statement, Cardin raised what may prove to be the crucial issue affecting the scope and duration of any credit extension: Cost. “A six-month extension is a fiscally responsible way to provide adequate time to nudge even more prospective home buyers off the sidelines,” he said.

Estimates of the revenue costs of the current credit vary widely, from $3 billion to $8 billion and up. How do you pay for any extension without worsening the budget deficit? The new Rangel bill includes the answer: You raise taxes somewhere else — you “pay as you go.” The Rangel bill pays for most of the servicemen's credit extension by increasing IRS penalties on taxpayers who fail to file partnership or “S” corporation returns.

This would raise an estimated $327 million over the next 10 years. Where and how to raise taxes to cover the far larger cost of a six-month or 12-month extension of the current tax credit could prove much more controversial 

 

Mortgage problems are walloping Americans' credit scores

By Kenneth R. Harney

September 13, 2009 

Late payments, delinquencies, short sales and foreclosures are on the rise -- and so are the number of borrowers seeing their credit scores plummet, according to scoring company VantageScore Solutions

Reporting from Washington - When you do a short sale of a house, or modify the mortgage, is there much of an effect on your credit score? What if you walk away from the mortgage altogether?

A scoring company created by the three national credit bureaus -- Equifax, Experian and TransUnion -- has some eye-opening numbers. VantageScore Solutions, whose risk-prediction scores are now being used by some of the largest mortgage companies and banks, has found that the way consumers handle their mortgage problems can have profound effects on their credit scores.

For example, loan modifications that roll late payments and penalties into the principal debt owed on the house can actually increase borrowers' scores modestly. Refinancings of underwater, negative-equity mortgages -- which the Obama administration's Making Home Affordable program offers through government-controlled Fannie Mae and Freddie Mac -- may have little or no negative effect on scores, even though the homeowners might have been tottering on the edge of serious delinquency before refinancing.

The Vantage credit score, the primary competitor to the long-dominant FICO credit score, rates borrowers on a scale range of 501 (subprime, the highest risk) to 990 (super-prime, the lowest risk). Unlike Fair Isaac Corp.'s FICO scoring system, whose scores can vary by 50 to 100 points based on which bureau supplied the underlying credit data, Vantage scores are about the same for each consumer.

When homeowners negotiate a short sale with lenders, they sometimes assume that there will be relatively little effect on their scores. After all, the loan was successfully paid off, there was no foreclosure, and the lender voluntarily agreed to accept a lower balance than was owed.

But according to VantageScore researchers, short sales can trigger big drops in credit scores. Sarah Davies, senior vice president of analytics, said a homeowner with an excellent score of 862 might plummet 120 to 130 points after a short sale.

Although it's true the lender may lose less money through a short sale compared with a foreclosure, "it's still a derogatory event," Davies said. The full debt was not repaid and the lender lost money.

What happens when borrowers walk away from their mortgage debts altogether -- the so-called strategic defaults that have become commonplace in some large markets such as in California? They should expect 140- to 150-point hits to their scores, plus negative marks on their credit bureau files for as long as seven years.

People who file for bankruptcy protection covering all their debts (mortgage, credit cards, auto loans, etc.) will get hit with an average 355- to 365-point drop in their scores. Bankruptcies remain on borrowers' credit bureau files for 10 years.

With all the mortgage delinquencies, short sales and foreclosures experienced by U.S. consumers in the last couple of years, has there been a deterioration of average scores across the board? Absolutely.

For example, roughly 36.6 million of the 213 million consumers tracked by the three national credit bureaus in the first quarter of 2008 had Vantage scores above 900 -- the super-prime credit rung. That select group represented 17.2% of the country's consumers.But by the end of the second quarter of this year, just 15.4% -- 33.3 million out of 216.9 million individuals' files -- were left among the elite. By credit industry standards, that's huge.

More Americans' scores are slipping into the worst credit category as well. In the third quarter of 2006, 34.4 million consumers were in the lowest segment -- 16.6% of 206.9 million individuals. But by the second quarter of this year, 18.3% of all files were in that category -- 39.8 million consumers out of 216.9 million.

Most of these changes -- fewer people with excellent credit, more people in the lowest brackets -- have been caused by late payments on home mortgages, serious delinquencies, short sales and foreclosures, according to VantageScore researchers.

But the bottom-line good news about scores is that homeowners facing financial stress can experience minimal dings to their credit if they contact their loan servicer or lender early in the game -- when they first discover that they may have trouble making their monthly payments -- and take the first steps toward a loan modification or refinancing.

"Start that conversation early," said Barrett Burns, a former lender and now chief executive of VantageScore. If you wait and fall several payments behind before seeking a modification, "you can lose 240 points on your score" and damage your ability to obtain credit for years.

 

 

Residents say bank official partied at foreclosed home

 

Source: ASSOCIATED PRESS

2:00 a.m. September 11, 2009

MALIBU — A Wells Fargo & Co. executive who oversees foreclosed properties hosted parties and spent long summer weekends in a $12 million Malibu beach house, moving into the home just after it had been surrendered to Wells Fargo to satisfy debts, neighbors said.

The previous owners of the beachfront home in Malibu Colony — a densely built stretch of luxury homes that has been a favorite of celebrities over the years — were financially devastated in Bernard Madoff's massive fraud scheme, real estate agent Irene Dazzan-Palmer said.

The couple signed the property over to Wells Fargo last spring, and the bank subsequently denied requests to show the house to prospective buyers, Dazzan-Palmer said. Residents in the gated community told the Los Angeles Times a woman they believe was Cheronda Guyton took up occupancy at the home in May. Residents said they obtained Guyton's name from the community's guards, who had issued her a homeowner's parking pass.

Residents also wrote down the license plate number of a 2007 Volvo sport-utility vehicle they say was parked in the home's garage. A check of state motor vehicle license plates by the newspaper found the vehicle was registered to Guyton.

Guyton is a Wells Fargo senior vice president responsible for foreclosed commercial properties, resident Phillip Roman said.

Wells Fargo said in a written statement that it would conduct a thorough investigation of the allegations by neighbors

 

 

 

 

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