Thousands of Bay Area homes have a ticking time bomb embedded in their mortgage. The homes were purchased with loans known as option ARMs, short for adjustable rate mortgages.
Next year, many option ARM payments will begin to readjust, slamming borrowers with dramatically higher monthly mortgage bills. Analysts say that could unleash the next big wave of foreclosures - and home-loan data show that the risky loans were heavily used in the Bay Area.
From 2004 to 2008, "one in five people who took out a mortgage loan (for both purchases and refinancing) in the San Francisco metropolitan region (San Francisco, Alameda, Contra Costa, Marin and San Mateo counties) got an option ARM," said Bob Visini, senior director of marketing in San Francisco at First American CoreLogic, a mortgage research firm. "That's more than twice the national average.
"People think option ARMs (will be) a national crisis," he said. "That's not really true. It's just in higher-cost areas like California where you see their prevalence."
Of the 10 metro areas nationwide with the most option ARMs, three are in the Bay Area, according to Fitch Ratings, a New York research firm. They are the East Bay counties of Alameda and Contra Costa, the South Bay area of Santa Clara and San Benito counties, and the counties of San Francisco, Marin and San Mateo.
Together, these areas account for the second-most option ARMs in the country, although they are still far behind the greater Los Angeles area (including Los Angeles, Riverside, San Bernardino and Orange counties), according to Fitch data.
Understated data
First American shows more than 54,000 option ARMs issued here with a value of about $30.9 billion. Fitch shows more than 47,000 option ARMs here with a value of about $28 billion. Both say their data underestimate the totals.
Why are so many option ARMs clustered here?
"In markets where home prices were going up rapidly, more and more borrowers needed a product like this to afford something," said Alla Sirotic, senior director at Fitch Ratings. Option ARMs were designed for savvy real estate investors and people whose income fluctuates, such as those paid on commission. Instead, the loans became a tool for regular people to "stretch" to buy homes that were beyond their means.
That's because option ARMs let borrowers choose to make very low payments for the first five years. During that initial period, borrowers can pick their payment option - they can pay interest and principal, interest only, or a minimum monthly payment that doesn't even cover the interest.
Fitch said 94 percent of borrowers elected to make minimum payments only. The shortfall gets added to their loan balance, which is called negative amortization. The amount they owe can grow substantially.
The mortgages 'recast'
After five years, or once the loan balance reaches a certain threshold above the original balance, the mortgages "recast" and borrowers must make full principal and interest payments spread over the loan's remaining life. Fitch said that new payments average 63 percent higher than the minimum payments, but could be more than double in some cases.
"When option ARMs recast, the payment shock is much more intense than we've seen (with other types of loans, such as subprime)," said Maeve Elise Brown, executive director of Housing and Economic Rights Advocates in Oakland, a consumer advocacy group. "That makes them potentially much more damaging."
Unlike subprime loans, which were more commonly used for entry-level homes, option ARMs started out with high balances. In the five-county San Francisco area, option ARMs average about $584,000 and were used to buy homes averaging $823,000, according to an analysis of First American data.
That means they'll spawn foreclosures among upper-end homes.
"The mid- to high-end real estate market is already stranded right now," said Mark Hanson, principal of Walnut Creek's the Field Check Group, a mortgage consultant. "Any sort of extra inventory is not going to be welcome for that market whatsoever."
Option ARMs became widespread starting in 2005, which is why the recasts and higher payments will hit starting in 2010, five years later.
Joey Amacker of Newark, who works as an account manager for a catering company, refinanced his home with an option ARM for $624,000 so he could pull out money to build an addition. The friend who sold him the loan assured him that an option ARM was a safe and affordable product, he said.
Amacker said he initially made only the minimum monthly payment of $1,800, which covered part of his interest and none of the principal. The amount he owed grew to $660,000 by November 2008, according to loan documents.
Meanwhile, payments that would cover both interest and principal also escalated above his reach, said Amacker, a single father of twin teenage boys. Although he wanted to pay more than the minimum, "it was a struggle, borrowing from Peter to pay Paul," he said. His 21-year-old daughter moved in to help out, and he rented out the addition he'd built. But he couldn't keep up with the payments. He's been trying to get his bank to modify the loan, but says it doesn't get back to him. The bank did not respond to a request for comment.
Between the negative amortization and his missed payment and penalties, Amacker's total debt has ballooned to $725,000, while the house is probably worth about $500,000, he said.
"I feel so ashamed of how I could have gotten myself in such a bad situation," he said.
Like Amacker, most option ARM borrowers owe much more than their homes are worth, so they cannot refinance their way out of trouble.
'Significantly underwater'
"The average option ARM borrower is significantly underwater, so much that they don't think they'll get out," Sirotic said. On average nationwide, option ARM borrowers started out with loans for about 79 percent of their home's value (the other 21 percent may have been covered through a down payment, a second loan or a combination of the two). But now, on average, the amount these borrowers owe is 126 percent of their home's value, based on depreciation and not including the effects of negative amortization, Sirotic said. That means, for instance, someone with a $600,000 mortgage might have a home now worth only $476,000.
That could explain the ominously high default rates. Even though most option ARMs have not yet adjusted higher, 27 percent of option ARM loans in the five-county San Francisco metro area are at least 90 days past due or in foreclosure, First American said.
The option ARM scenario will unfold over several years, which offers some hope that there may be time to avert a deluge of foreclosures. The bulk of option ARMs recast dates are spread out from 2010 through 2012. Especially for the loans that recast later, it's possible that a solution will arise, either through rising home prices allowing them to refinance, or through extra intervention from the government or lenders to help these borrowers.
"This will be another factor keeping home prices from recovering," said Cynthia Kroll, senior regional economist with the Fisher Center for Real Estate and Urban Economics at UC Berkeley's Haas School of Business. "It should be a message to policymakers in Washington that there is a big group out there that falls outside the parameters of what's being addressed by current policy."
Bay Area option ARMs
From 2004 to 2008, almost one-fifth of all mortgages, for both home purchases and refinancing, in the San Francisco and San Jose metro areas were option ARMs - more than double the national average. Option ARMs were even more common in the suburban counties of Sonoma (25% of home loans) and Solano (28%). Though most option ARMs have not yet recast and hit borrowers with higher payments, they are going into default at extremely high rates. One quarter or more of all option ARMs in the regional areas are more than 60 days delinquent or already in foreclosure. Analysts say option ARM borrowers are so underwater that they may be choosing to walk away.
Source: San Francisco Chronicle
Friday, September 25, 2009
Want The Home Buyer Tax Credit? Don't Shop For Furniture
With the deadline on the first-time home buyer tax credit looming, plenty of buyers are under contract and looking to close before Nov. 30.
Excited to move into a new home, some of these first-timers start hitting the stores shopping for new furniture, appliances or curtains.
Big mistake.
Real estate agents are reminding buyers to wait until the close to start buying stuff.
The reason: Lenders are occasionally running credit reports on closing day, and they might not like to see an increase in credit card debt or indications that debt could soon increase, says Lew Reich, a Realtor with Keller Williams Realty in Plano, Texas.
Buying is off the table, but so is serious looking: Don’t even think about checking out that new car or boat because even an inquiry on a credit report might raise red flags. Too many inquiries, Mr. Reich adds, might be detrimental, particularly for those who just met the lender’s minimum requirements.
“If someone’s squeaking by and, all of a sudden, they may be looking at increasing debt, the lenders will have a keener eye in looking at your loan,” he says. “Don’t look until you’ve closed is basically what it comes down to. That’s the safest way. Stay out of the stores.”
While such measures have been used over the years, lenders, still dealing with the fallout from the boom’s lax lending standards, are being especially particular these days. Even buyers with great credit scores face scrutiny.
Agents also advise not moving money between accounts, so don’t join two savings accounts, transfer large sums out of savings or add more funding to checking. Emptying out an account could look like money’s being spent, and lenders might request a paper trail for the money flow, Mr. Reich explains. That could delay the closing or, in rare cases, terminate the loan. That wouldn’t necessarily free the buyer from the obligation to buy the home, he warns.
Dan Rider, a broker with Dickson Realty in Reno, Nev., says one of his recent closings was delayed by five days when lenders spotted a $500 deposit in a buyer’s checking account. It wasn’t a gift – it was a repaid loan from her mother – but it sparked concerns that the buyer needed help to close the deal. Though the buyer had a healthy checking balance, the lender wanted canceled checks and bank statements and both parties had to write an explanatory letter.
“The simplest things can create fairly major delays,” Mr. Rider says, adding buyers could face financial penalties for late closings. And of course, with the clock ticking on that tax credit, there’s also the penalty of missing out on eight grand. Although, delayed buyers could still get lucky: A Senate bill introduced Thursday seeks to extend the credit for another six months
Source: The Wall Street Journal
Excited to move into a new home, some of these first-timers start hitting the stores shopping for new furniture, appliances or curtains.
Big mistake.
Real estate agents are reminding buyers to wait until the close to start buying stuff.
The reason: Lenders are occasionally running credit reports on closing day, and they might not like to see an increase in credit card debt or indications that debt could soon increase, says Lew Reich, a Realtor with Keller Williams Realty in Plano, Texas.
Buying is off the table, but so is serious looking: Don’t even think about checking out that new car or boat because even an inquiry on a credit report might raise red flags. Too many inquiries, Mr. Reich adds, might be detrimental, particularly for those who just met the lender’s minimum requirements.
“If someone’s squeaking by and, all of a sudden, they may be looking at increasing debt, the lenders will have a keener eye in looking at your loan,” he says. “Don’t look until you’ve closed is basically what it comes down to. That’s the safest way. Stay out of the stores.”
While such measures have been used over the years, lenders, still dealing with the fallout from the boom’s lax lending standards, are being especially particular these days. Even buyers with great credit scores face scrutiny.
Agents also advise not moving money between accounts, so don’t join two savings accounts, transfer large sums out of savings or add more funding to checking. Emptying out an account could look like money’s being spent, and lenders might request a paper trail for the money flow, Mr. Reich explains. That could delay the closing or, in rare cases, terminate the loan. That wouldn’t necessarily free the buyer from the obligation to buy the home, he warns.
Dan Rider, a broker with Dickson Realty in Reno, Nev., says one of his recent closings was delayed by five days when lenders spotted a $500 deposit in a buyer’s checking account. It wasn’t a gift – it was a repaid loan from her mother – but it sparked concerns that the buyer needed help to close the deal. Though the buyer had a healthy checking balance, the lender wanted canceled checks and bank statements and both parties had to write an explanatory letter.
“The simplest things can create fairly major delays,” Mr. Rider says, adding buyers could face financial penalties for late closings. And of course, with the clock ticking on that tax credit, there’s also the penalty of missing out on eight grand. Although, delayed buyers could still get lucky: A Senate bill introduced Thursday seeks to extend the credit for another six months
Source: The Wall Street Journal
U.S. Home Prices Rise 0.3 Percent In July
U.S. home prices rose slightly in July from a month earlier, according to a government index, further evidence the housing market is stabilizing.
The Federal Housing Finance Agency said Tuesday prices rose 0.3 percent in July from the prior month, but June's price increase was revised down to 0.1 percent from 0.5 percent.
The index is still 4.2 percent below last year's levels and 10.5 percent off its peak from April 2007. It is based on loans owned or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac.
The index has declined less than other housing market measurements because it excludes the most expensive homes and some of the subprime loans that have fallen into foreclosure.
The report "supports other evidence that the three-year long decline in prices has come to halt," Paul Dales, U.S. economist with Capital Economics, wrote in a note to clients. But he cautioned that "rising foreclosures and the fragile economic environment suggest that further gains in prices will be modest and patchy."
A tax credit of up to $8,000 for first-time homebuyers expires Nov. 30, and lawmakers have yet to decide whether to extend it. While the Federal Reserve has been able to keep mortgage rates near historic lows, it's unclear how long that will last.
Another measurement of home prices, the widely watched Standard & Poor's/Case-Shiller national index, posted its first quarterly increase in three years during the April-June quarter. That fed hopes that the long-awaited bottom has arrived.
Other economists, however, warn that prices could start falling again.
"We think house price indexes are likely to edge somewhat lower in the fall when foreclosures become a larger share of home sales," Barclays Capital economist Nicholas Tenev wrote in a client note.
Source: San Francisco Chronicle
The Federal Housing Finance Agency said Tuesday prices rose 0.3 percent in July from the prior month, but June's price increase was revised down to 0.1 percent from 0.5 percent.
The index is still 4.2 percent below last year's levels and 10.5 percent off its peak from April 2007. It is based on loans owned or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac.
The index has declined less than other housing market measurements because it excludes the most expensive homes and some of the subprime loans that have fallen into foreclosure.
The report "supports other evidence that the three-year long decline in prices has come to halt," Paul Dales, U.S. economist with Capital Economics, wrote in a note to clients. But he cautioned that "rising foreclosures and the fragile economic environment suggest that further gains in prices will be modest and patchy."
A tax credit of up to $8,000 for first-time homebuyers expires Nov. 30, and lawmakers have yet to decide whether to extend it. While the Federal Reserve has been able to keep mortgage rates near historic lows, it's unclear how long that will last.
Another measurement of home prices, the widely watched Standard & Poor's/Case-Shiller national index, posted its first quarterly increase in three years during the April-June quarter. That fed hopes that the long-awaited bottom has arrived.
Other economists, however, warn that prices could start falling again.
"We think house price indexes are likely to edge somewhat lower in the fall when foreclosures become a larger share of home sales," Barclays Capital economist Nicholas Tenev wrote in a client note.
Source: San Francisco Chronicle
Thursday, September 24, 2009
804 Palermo Dr. - Sold
Enjoy the gleaming wood floors, fireplace and spacious backyard of this 4 bedroom, 2 bath Hidden Valley home. The wood floors extend through out most of the home. The living room fireplace offers a cozy focal point for entertaining. The kitchen and dining area have received some tasteful updating with added cabinetry for storage. The adjacent indoor laundry room is convenient to the master bedroom and the three additional bedrooms.The front yard is a blank slate waiting for you to create your own personalized attractive setting. Likewise, the backyard is spacious, usable and ready for you to create an environment that will meet your needs with a covered patio already in place. Offered at $750,000
Click here for more information
Monday, September 21, 2009
Homeowners Outraged Over Cancellation of Their Home Equity Lines
A growing Number of homeowners in the Bay Area and around the country are finding themselves unable to borrow against the equity in their home, as beleaguered banks take away a financial safety net many homeowners had counted on.
And now some of those homeowners are fighting back.
Cupertino homeowners Jeff and Jenifer Schulken filed suit this summer against JPMorgan Chase, charging that the bank unfairly terminated their home equity line of credit even though the couple provided documents showing that they could repay the money.
"They weren't even interested in verifying whether I could pay it back. They just want these things off the books," Jeff Schulken said, adding he had $160,000 available on his credit line in March when he got a letter from Chase asking for tax documents. He sent them immediately, and was told when he called the bank that the inquiry was only a formality and his equity line was not in jeopardy.
"The next morning, I got online and we had zero available credit," he said.
A spokeswoman for Chase said the company would not comment on pending litigation.
In the early part of this decade, home equity lines of credit, or HELOCs, were a regular feature of Silicon Valley homeownership. Longtime owners sitting on a few hundred thousand dollars in equity could easily borrow against it to remodel, pay their children's college tuition or use as a rainy-day fund.
But falling property values and the financial meltdown that started last year have led banks to cut off many HELOCs, not letting the homeowner borrow any more money against his or her house.
Attorney Steven Lezell of Chicago law firm KamberEdelson is representing the Schulkens and hopes to gain class action status for their case and other similar suits. The firm filed a suit against Wells Fargo last month on behalf of an Illinois homeowner who claims the bank used faulty appraisal methods to undervalue his home and freeze his credit line.
Lezell said that following the news of that lawsuit, his firm has fielded at least 500 calls and e-mails from homeowners who may have been similarly affected. Well over half are from California, he said.
Lezell said the banks' strategies for reducing their exposure to the risk from home equity lines was to "slash and burn, and close as many HELOCs as possible, hope people don't complain too much and just go away."
But in a statement, Wells Fargo said last month's suit "appears to mischaracterize credit controls designed to sustain homeownership." Further, the company said, "We are confident in our fair and responsible lending practices, including how we determine home equity credit limits available to customers depending on the amount of equity in their home." The bank also said it has a "fair appeals process."
Nationwide, homeowners borrowed $116 billion worth of home equity loans and lines of credit in 2008, down from about $350 billion in 2007, according to Inside Mortgage Finance. California borrowers make up 20 to 25 percent of the market.
Since early 2008, lenders have been methodically suspending many Bay Area homeowners' lines of credit for one of two reasons — banks either determined that declining home values made it imprudent to extend the credit to certain homeowners, or they judged that homeowners' worsened financial situations made them a bad credit risk.
Guy Cecala, publisher of Inside Mortgage Finance Publications, said there's no data on how many homeowners have had their HELOCs reduced or frozen in the past couple of years. But, he said, "As far as lawsuits, it's just going to get worse, because there are more people who've been impacted."
The Schulkens got a $250,000 line of credit against their three-bedroom Cupertino house in 2005, used about $123,000 to remodel their home and had paid down the balance to about $90,000 by the time they got the letter from Chase, Jeff Schulken said. Schulken said every month he pays extra on his mortgage and more than the minimum due on the equity line of credit, carries no credit card or other debt, and his income from the family business — a day care run from his home of 21 years — has not faltered during the recession. Having the remaining $160,000 on his line of credit yanked away irked him.
He said he's not interested in making any money from his lawsuit, but just hopes to make a point. "Bottom line, they weren't willing to listen or look at any of the facts," he said. "I feel we were wronged."
Source: The Mercury News
And now some of those homeowners are fighting back.
Cupertino homeowners Jeff and Jenifer Schulken filed suit this summer against JPMorgan Chase, charging that the bank unfairly terminated their home equity line of credit even though the couple provided documents showing that they could repay the money.
"They weren't even interested in verifying whether I could pay it back. They just want these things off the books," Jeff Schulken said, adding he had $160,000 available on his credit line in March when he got a letter from Chase asking for tax documents. He sent them immediately, and was told when he called the bank that the inquiry was only a formality and his equity line was not in jeopardy.
"The next morning, I got online and we had zero available credit," he said.
A spokeswoman for Chase said the company would not comment on pending litigation.
In the early part of this decade, home equity lines of credit, or HELOCs, were a regular feature of Silicon Valley homeownership. Longtime owners sitting on a few hundred thousand dollars in equity could easily borrow against it to remodel, pay their children's college tuition or use as a rainy-day fund.
But falling property values and the financial meltdown that started last year have led banks to cut off many HELOCs, not letting the homeowner borrow any more money against his or her house.
Attorney Steven Lezell of Chicago law firm KamberEdelson is representing the Schulkens and hopes to gain class action status for their case and other similar suits. The firm filed a suit against Wells Fargo last month on behalf of an Illinois homeowner who claims the bank used faulty appraisal methods to undervalue his home and freeze his credit line.
Lezell said that following the news of that lawsuit, his firm has fielded at least 500 calls and e-mails from homeowners who may have been similarly affected. Well over half are from California, he said.
Lezell said the banks' strategies for reducing their exposure to the risk from home equity lines was to "slash and burn, and close as many HELOCs as possible, hope people don't complain too much and just go away."
But in a statement, Wells Fargo said last month's suit "appears to mischaracterize credit controls designed to sustain homeownership." Further, the company said, "We are confident in our fair and responsible lending practices, including how we determine home equity credit limits available to customers depending on the amount of equity in their home." The bank also said it has a "fair appeals process."
Nationwide, homeowners borrowed $116 billion worth of home equity loans and lines of credit in 2008, down from about $350 billion in 2007, according to Inside Mortgage Finance. California borrowers make up 20 to 25 percent of the market.
Since early 2008, lenders have been methodically suspending many Bay Area homeowners' lines of credit for one of two reasons — banks either determined that declining home values made it imprudent to extend the credit to certain homeowners, or they judged that homeowners' worsened financial situations made them a bad credit risk.
Guy Cecala, publisher of Inside Mortgage Finance Publications, said there's no data on how many homeowners have had their HELOCs reduced or frozen in the past couple of years. But, he said, "As far as lawsuits, it's just going to get worse, because there are more people who've been impacted."
The Schulkens got a $250,000 line of credit against their three-bedroom Cupertino house in 2005, used about $123,000 to remodel their home and had paid down the balance to about $90,000 by the time they got the letter from Chase, Jeff Schulken said. Schulken said every month he pays extra on his mortgage and more than the minimum due on the equity line of credit, carries no credit card or other debt, and his income from the family business — a day care run from his home of 21 years — has not faltered during the recession. Having the remaining $160,000 on his line of credit yanked away irked him.
He said he's not interested in making any money from his lawsuit, but just hopes to make a point. "Bottom line, they weren't willing to listen or look at any of the facts," he said. "I feel we were wronged."
Source: The Mercury News
Mortgage Problems Are Walloping Americans' Credit Scores
Homeowners who find themselves struggling with mortgage payments and unsure how to handle the situation—short sale, foreclosure, or walk away—are advised to consider the impact of each on their credit scores.
Loan modifications that roll late payments and penalties into principal debt owed on the house can actually increase borrowers’ scores modestly, while refinancing underwater mortgages may have little or no negative effect on credit scores, according to Vantage Solutions, a scoring company created by the three national credit bureaus.
Short sales on the other hand can trigger large declines in credit scores, according to researchers. A homeowner with an excellent credit score might see a 120 to 130 point decline after a short sale.
Homeowners who choose to walk away from the home and stop payments altogether should expect their credit scores to fall 140 to 150 points, plus negative marks on their credit bureau files for up to seven years.
People filing for bankruptcy protection covering all their debts will get hit with an average 355- to 365-point drop in their scores. Bankruptcies remain on borrowers’ credit bureau files for 10 years.
But there is good news. Homeowners facing financial stress can experience minimal declines to their scores if they contact their loan servicer or lender when they first discover that they may have trouble making their monthly payments.
Loan modifications that roll late payments and penalties into principal debt owed on the house can actually increase borrowers’ scores modestly, while refinancing underwater mortgages may have little or no negative effect on credit scores, according to Vantage Solutions, a scoring company created by the three national credit bureaus.
Short sales on the other hand can trigger large declines in credit scores, according to researchers. A homeowner with an excellent credit score might see a 120 to 130 point decline after a short sale.
Homeowners who choose to walk away from the home and stop payments altogether should expect their credit scores to fall 140 to 150 points, plus negative marks on their credit bureau files for up to seven years.
People filing for bankruptcy protection covering all their debts will get hit with an average 355- to 365-point drop in their scores. Bankruptcies remain on borrowers’ credit bureau files for 10 years.
Source: LA Times
But there is good news. Homeowners facing financial stress can experience minimal declines to their scores if they contact their loan servicer or lender when they first discover that they may have trouble making their monthly payments.
Saturday, September 12, 2009
Fix the House, But Don’t Conceal Things
Fixing your house up for sale is highly recommended in the current market if you hope to sell within a reasonable period of time and for an acceptable price. Today’s buyers want houses that they can move into without having to do much work.
Source: San Francisco Chronicle
Source: San Francisco Chronicle
Home Price Increases Depends on Foreclosure Sales
Where will home prices head this fall? It depends, in large part, on how many more foreclosures are made available for sale, as a new study by LPS Applied Analytics, a real-estate research firm, makes clear.
LPS looked at the link between sales of bank-owned foreclosures (known as REO, for real-estate owned) and the rate of home price declines. In Michigan, for example, REO accounted for 64% of sales in the first half of 2009. Home prices declined by 47% over that time, though the decline falls to just 26% when excluding REO properties.
REO accounted for more than six in 10 sales in both Michigan and Nevada in the first half of the year, the highest in the nation. California and Arizona followed with an REO share of sales at 50%.
If the share of foreclosure sales increase later this year–as banks complete efforts to modify loans and as fewer traditional sellers put their homes on the market–that could generate even larger price declines. One sobering conclusion from the study: fewer homes sold in the first half of the year compared to previous years in several states, even as the share of REO sales more than doubled.
States that haven’t had as many foreclosures have seen less severe price declines, according to the LPS study. In Massachusetts, for example, REO sales accounted for 14% of all sales in the first half of 2009. Overall, prices fell by 19% in the state, and after excluding REO sales, prices were down by 15%.
Source: Wall Street Journal
LPS looked at the link between sales of bank-owned foreclosures (known as REO, for real-estate owned) and the rate of home price declines. In Michigan, for example, REO accounted for 64% of sales in the first half of 2009. Home prices declined by 47% over that time, though the decline falls to just 26% when excluding REO properties.
REO accounted for more than six in 10 sales in both Michigan and Nevada in the first half of the year, the highest in the nation. California and Arizona followed with an REO share of sales at 50%.
If the share of foreclosure sales increase later this year–as banks complete efforts to modify loans and as fewer traditional sellers put their homes on the market–that could generate even larger price declines. One sobering conclusion from the study: fewer homes sold in the first half of the year compared to previous years in several states, even as the share of REO sales more than doubled.
States that haven’t had as many foreclosures have seen less severe price declines, according to the LPS study. In Massachusetts, for example, REO sales accounted for 14% of all sales in the first half of 2009. Overall, prices fell by 19% in the state, and after excluding REO sales, prices were down by 15%.
Source: Wall Street Journal
New Normal for Home Sales: Buyers Have the Power
Following the downturn in the housing market, lenders started requiring more money up front, higher credit scores, proof of income, and all paperwork in order—quite different than earlier this decade when subprime mortgages were rampant and buyers purchased homes deemed unaffordable by today’s standards. For sellers, the standards are different too: Be patient and maybe lower the asking price, because the balance of power has swung strongly to buyers. Many REALTORS®, mortgage brokers, economists, and home buyers across the country say they’ve noticed a shift in attitudes that they expect will last for years.
MAKING SENSE OF THE STORY FOR CONSUMERS
• Traditional sellers are finding that the number of offers received is not nearly as high as those received on REO properties, which often receive multiple bids. The negotiation process also differs between traditional sellers today and traditional sellers during the height of the market. According to one REALTOR®, if a house is not being shown, then it is overpriced. The record number of foreclosed homes on the market gives buyers even more leverage.
• Resulting from the credit crisis, lenders now often require much more paperwork and thoroughly review borrowers’ credit histories, bank statements, tax returns, and job histories. The average mortgage applications today starts three times thicker than what it was at the start of the housing boom, and often gets thicker as the process moves along. One mortgage broker reports that now lenders want to know everything about the buyer, “It’s a true and full underwriting process on every particular loan.”
• It is not uncommon nowadays for closings to take 60 days. One reason is because of the adoption of the Home Valuation Code of Conduct (HVCC), which often results in appraisers evaluating homes in areas they are not familiar with and often using comparables that are inaccurate. This has caused delays in closing sales, and in some cases, undermining sales because appraisals are coming in too low.
• Just about everyone in the real estate industry agrees that another dramatic boom-bust cycle isn’t going to happen again anytime soon. Albert Saiz, assistant real estate professor at the University of Pennsylvania’s Wharton School, expects that new regulations and a different consumer mind-set will help real estate return to a more traditional cycle.
Source: San Francisco Chronicle
MAKING SENSE OF THE STORY FOR CONSUMERS
• Traditional sellers are finding that the number of offers received is not nearly as high as those received on REO properties, which often receive multiple bids. The negotiation process also differs between traditional sellers today and traditional sellers during the height of the market. According to one REALTOR®, if a house is not being shown, then it is overpriced. The record number of foreclosed homes on the market gives buyers even more leverage.
• Resulting from the credit crisis, lenders now often require much more paperwork and thoroughly review borrowers’ credit histories, bank statements, tax returns, and job histories. The average mortgage applications today starts three times thicker than what it was at the start of the housing boom, and often gets thicker as the process moves along. One mortgage broker reports that now lenders want to know everything about the buyer, “It’s a true and full underwriting process on every particular loan.”
• It is not uncommon nowadays for closings to take 60 days. One reason is because of the adoption of the Home Valuation Code of Conduct (HVCC), which often results in appraisers evaluating homes in areas they are not familiar with and often using comparables that are inaccurate. This has caused delays in closing sales, and in some cases, undermining sales because appraisals are coming in too low.
• Just about everyone in the real estate industry agrees that another dramatic boom-bust cycle isn’t going to happen again anytime soon. Albert Saiz, assistant real estate professor at the University of Pennsylvania’s Wharton School, expects that new regulations and a different consumer mind-set will help real estate return to a more traditional cycle.
Source: San Francisco Chronicle
Wednesday, September 9, 2009
1346 Manitou Rd. - SOLD!
BREATHTAKING VIEW; LEISURELY LIFESTYLE!Enjoy breathtaking views in a natural setting. Among the features you will find in this remodeled 3 bedroom, 2 bathroom home are 4 large sliding- glass, pocket doors, that seem to vanish, and invite the view and nature inside. The driveway provides an escape to privacy in a coveted central location minutes from everything from leisure activities (beach, golf, tennis, Douglas Preserve, Elings Regional Park, etc.) to shopping and services. Once you arrive you will find abundant an easy parking for guests and visitors. This is a wonderful first or second home.
Offered at $1,395,000
Offered at $1,395,000
7345 Davenport Rd. - Sold
Enjoy Your Vacations At Home!
Approaching this home you will notice it is situated on a quiet, non-thru street that ends where a greenbelt begins, adjacent to neighborhood leisure facilities. There is a wading pool plus a deeper pool area for swimmers and sunbathers to enjoy. To this add a tennis court, sand volleyball court, basketball court, children’s play equipment and picnic area creating a virtual outdoor leisure center for only about $240 per year. The lack of unsightly utility lines further enhances the location of this 3 bedroom, 1.5 bath home.
Approaching this home you will notice it is situated on a quiet, non-thru street that ends where a greenbelt begins, adjacent to neighborhood leisure facilities. There is a wading pool plus a deeper pool area for swimmers and sunbathers to enjoy. To this add a tennis court, sand volleyball court, basketball court, children’s play equipment and picnic area creating a virtual outdoor leisure center for only about $240 per year. The lack of unsightly utility lines further enhances the location of this 3 bedroom, 1.5 bath home.
The house is a fixer, but we’ve done some of the work for you. All you have to do is personalize the house and make it your home. There is a new cooking range, dishwasher, disposal, new vanities in the bathrooms, a fresh coat of interior paint and a new trellis over the patio in the usable backyard. Although the price may suggest it, this is not a short sale or bank owned property involving problematic negotiations or scary bank requirements. Reports are available for viewing including a pest control notice of completion report. Offered at $549,000.
For more information click here
Friday, September 4, 2009
Fast Facts
Calif. median home price - July 09: $285,480
Calif. highest median home price by C.A.R. region July 09: Santa Barbara So. Coast $885,000
Calif. lowest median home price by C.A.R. region July 09: High Desert $110,650
Calif. First-time Buyer Affordability Index - Second Quarter 2009: 67 percent
Mortgage rates - week ending 8/27/09 30-yr. fixed: 5.14% Fees/points: 0.7% 15-yr. fixed: 4.58% Fees/points: 0.7% 1-yr. adjustable: 4.69% Fees/points: 0.6%
Source: California Association of Realtors and Freddie Mac
Calif. highest median home price by C.A.R. region July 09: Santa Barbara So. Coast $885,000
Calif. lowest median home price by C.A.R. region July 09: High Desert $110,650
Calif. First-time Buyer Affordability Index - Second Quarter 2009: 67 percent
Mortgage rates - week ending 8/27/09 30-yr. fixed: 5.14% Fees/points: 0.7% 15-yr. fixed: 4.58% Fees/points: 0.7% 1-yr. adjustable: 4.69% Fees/points: 0.6%
Source: California Association of Realtors and Freddie Mac
Housing Production in Calif. Falls in July
According to statistics compiled by the Construction Industry Research Board, homebuilders pulled permits for 3,011 total housing units in July, down 14 percent from June. Permits for single-family homes totaled 2,045 in July, a 29 percent decrease from June, when builders pulled permits for 2,864 units, according to the report. June’s tally was the highest since July 2008.
California homebuilders pulled back on new-home production in July as home buyers retreated from housing markets around the state following the discontinuation of the successful home buyer tax credit early in the month, the California Building Industry Association recently announced.
“Our homebuilders reported a significant drop in traffic last month, largely due to the state closing the window on the home buyer tax credit,” said Robert Rivinius, CBIA’s President and CEO, who noted that the Franchise Tax Board stopped taking applications for the $10,000 new-home credit at the beginning of July. “With the advent of the credit in March, our homebuilders reported shoppers returning to housing markets in droves,” said Rivinius. That, he said, led to an immediate increase in sales and, ultimately, new home starts.
CIRB also announced that it is revising its forecast downward from 40,000 total units to just 39,500 total units in 2009, which would be by far the lowest total on record.
Source: California Building Industry Association
California homebuilders pulled back on new-home production in July as home buyers retreated from housing markets around the state following the discontinuation of the successful home buyer tax credit early in the month, the California Building Industry Association recently announced.
“Our homebuilders reported a significant drop in traffic last month, largely due to the state closing the window on the home buyer tax credit,” said Robert Rivinius, CBIA’s President and CEO, who noted that the Franchise Tax Board stopped taking applications for the $10,000 new-home credit at the beginning of July. “With the advent of the credit in March, our homebuilders reported shoppers returning to housing markets in droves,” said Rivinius. That, he said, led to an immediate increase in sales and, ultimately, new home starts.
CIRB also announced that it is revising its forecast downward from 40,000 total units to just 39,500 total units in 2009, which would be by far the lowest total on record.
Source: California Building Industry Association
Mortgage Loan Delinquencies Rise, Foreclosures Flat
The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.24 percent of all loans outstanding as of the end of the second quarter of 2009, up 12 basis points from the first quarter of 2009, and up 283 basis points from one year ago, according to the most recent Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate increased 64 basis points from 8.22 percent in the first quarter of 2009 to 8.86 percent this quarter, according to the report. The delinquency rate breaks the record set last quarter, based on MBA data dating back to 1972.
“While the rate of new foreclosures started was essentially unchanged from last quarter’s record high, there was a major drop in foreclosures on subprime ARM loans,” said Jay Brinkmann, MBA’s chief economist. “The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase. As a sign that mortgage performance is once again being driven by unemployment, prime fixed-rate loans now account for one in three foreclosure starts. A year ago they accounted for one in five.
California, Florida, Arizona, and Nevada continue to have a disproportionately high share of foreclosure starts, although the share has fallen slightly from last quarter, according to the report, with 44 percent of all of the nation’s new foreclosures during the second quarter of this year, down from 46 percent in the first quarter.
Source: Mortgage Bankers Association
“While the rate of new foreclosures started was essentially unchanged from last quarter’s record high, there was a major drop in foreclosures on subprime ARM loans,” said Jay Brinkmann, MBA’s chief economist. “The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase. As a sign that mortgage performance is once again being driven by unemployment, prime fixed-rate loans now account for one in three foreclosure starts. A year ago they accounted for one in five.
California, Florida, Arizona, and Nevada continue to have a disproportionately high share of foreclosure starts, although the share has fallen slightly from last quarter, according to the report, with 44 percent of all of the nation’s new foreclosures during the second quarter of this year, down from 46 percent in the first quarter.
Source: Mortgage Bankers Association
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