(Reuters) - Walt Disney Co is banking on wealthy home buyers to plonk down some green on a luxury residential resort in Florida, defying the state's infamously high foreclosure rate.
U.S.
The company on Wednesday unveiled plans for its Golden Oak luxury homes at Walt Disney World Resort in Orlando, Florida.
Disney said it will offer fewer than 30 home sites for sale this year, at prices between $1.5 million and $8 million.
The gated community on a 980-acre development will eventually boast 450 homes and a Four Seasons hotel, where residents can enjoy a full-service spa and restaurants.
The Mouse House's blueprint calls for putting some of its wealthiest fans on the doorstep of its biggest theme park.
But it also comes as Florida muddles through a nationwide real estate crisis that, according to research firm RealtyTrac, has given the state a foreclosure rate that trails only Nevada and Arizona.
One in every 174 Florida properties received a foreclosure notice last month, RealtyTrac said.
Disney will allow home buyers at Golden Oak to hire their own architects, but they will be restricted to such styles as Venetian, Spanish Revival
Friday, June 25, 2010
California median home price rises in month
by Jacob Adelman, AP Real Estate Writer
Published Thursday, 24-Jun-2010 in issue 1174
LOS ANGELES (AP) - The median home price in California last month surged 20.9 percent from May 2009 to $278,000, as inventories of low cost foreclosures dwindled and transactions in midrange and high end neighborhoods claimed a greater share of sales, a tracking firm reported Thursday.
Last month’s median was up from $230,000 a year ago and up 9 percent from $255,000 in April, San Diego based MDA DataQuick said. The May median, which marked a seventh consecutive month of year over year increases, was at its highest level since October 2008.
DataQuick President John Walsh said some of the higher priced homes were reaching the market because of increasing economic troubles among middle and upper class families, who are compelled to sell.
But he said low mortgage rates and the now expiring federal tax credit for home buyers also had helped boost the proportion of more expensive homes within the sales mix.
“For now, at least, we’re seeing a more normal mix of sales across the region and across price categories,” Walsh said.
Sales of homes costing $500,000 or more made up 21.2 percent of all transactions in the state last month, up from 16.5 percent a year ago, DataQuick said.
Foreclosures, meanwhile, which typically account for the lowest priced homes, comprised 35.5 percent of resales last month, dropping from 50.2 percent a year ago to reach their lowest level since March 2008, the firm said.
John Husing, an economist with San Bernardino County based Economics & Politics Inc., said there have been far fewer foreclosures on the market, as banks become increasingly willing to reach alternative arrangements with delinquent borrowers.
“Banks haven’t followed through on the foreclosure process, which means the supply of foreclosures hasn’t been entering the market and that has been slowing down sales,” Husing said.
Walsh, however, cautioned that banks are still thought to be carrying large numbers of foreclosed properties on their books and that it was unknown when and how these homes would go on sale.
“Price stability would be threatened if lenders suddenly pushed much larger numbers of distressed properties onto the market,” he said.
DataQuick also said 40,965 homes were sold in the region in May, up 4.9 percent from 39,051 in May 2009. May’s sales were up 9.3 percent from 37,481 in April.
In a nine county region of Northern California, sales rose 11 percent to 8,264 in May from a year earlier. In the six county region of Southern California, sales increased 7.2 percent to 22,720 from May 2009.
The median home price in Northern California jumped 20.1 percent to $410,000 last month from $341,500 in April 2009. In Southern California, the median price surged 22.5 percent to $305,000, up from $249,000 in the year ago period.
Published Thursday, 24-Jun-2010 in issue 1174
LOS ANGELES (AP) - The median home price in California last month surged 20.9 percent from May 2009 to $278,000, as inventories of low cost foreclosures dwindled and transactions in midrange and high end neighborhoods claimed a greater share of sales, a tracking firm reported Thursday.
Last month’s median was up from $230,000 a year ago and up 9 percent from $255,000 in April, San Diego based MDA DataQuick said. The May median, which marked a seventh consecutive month of year over year increases, was at its highest level since October 2008.
DataQuick President John Walsh said some of the higher priced homes were reaching the market because of increasing economic troubles among middle and upper class families, who are compelled to sell.
But he said low mortgage rates and the now expiring federal tax credit for home buyers also had helped boost the proportion of more expensive homes within the sales mix.
“For now, at least, we’re seeing a more normal mix of sales across the region and across price categories,” Walsh said.
Sales of homes costing $500,000 or more made up 21.2 percent of all transactions in the state last month, up from 16.5 percent a year ago, DataQuick said.
Foreclosures, meanwhile, which typically account for the lowest priced homes, comprised 35.5 percent of resales last month, dropping from 50.2 percent a year ago to reach their lowest level since March 2008, the firm said.
John Husing, an economist with San Bernardino County based Economics & Politics Inc., said there have been far fewer foreclosures on the market, as banks become increasingly willing to reach alternative arrangements with delinquent borrowers.
“Banks haven’t followed through on the foreclosure process, which means the supply of foreclosures hasn’t been entering the market and that has been slowing down sales,” Husing said.
Walsh, however, cautioned that banks are still thought to be carrying large numbers of foreclosed properties on their books and that it was unknown when and how these homes would go on sale.
“Price stability would be threatened if lenders suddenly pushed much larger numbers of distressed properties onto the market,” he said.
DataQuick also said 40,965 homes were sold in the region in May, up 4.9 percent from 39,051 in May 2009. May’s sales were up 9.3 percent from 37,481 in April.
In a nine county region of Northern California, sales rose 11 percent to 8,264 in May from a year earlier. In the six county region of Southern California, sales increased 7.2 percent to 22,720 from May 2009.
The median home price in Northern California jumped 20.1 percent to $410,000 last month from $341,500 in April 2009. In Southern California, the median price surged 22.5 percent to $305,000, up from $249,000 in the year ago period.
Wednesday, June 23, 2010
New home sales plummet to record low
NEW YORK (CNNMoney.com) -- New home sales plummeted to a record low in May, the first month following the expiration of the homebuyer tax credit. This snapped a two-month streak of gains.
New home sales declined 32.7% to a seasonally adjusted annual rate of 300,000 last month, down from an downwardly revised 446,000 in April, the Commerce Department reported Wednesday. Sales year-over-year fell 18.3%.
This is the slowest sales pace since the Commerce Department began tracking data in 1963. The prior record was set in September 1981, when new homes sold at an annual rate of 338,000.
"We expected a slowdown, but the extent of this decline was a surprise," said Anika Khan, an economist at Wells Fargo. The figure was even worse than her relatively pessimistic forecast of an annual rate of 380,000 in May.
A consensus of economists surveyed by Briefing.com had expected May sales to slide to an annual rate of 430,000.
"Clearly, the lack of a tax credit had a lot to do with it, and it's going to be a bit of a bumpy road ahead as we get a few more months of payback," Khan said.
Home sales had surged in March and April as homebuyers scrambled to sign contracts ahead of the April 30 deadline for the tax credit. First-time homebuyers qualified for a tax credit up to $8,000, while repeat buyers could get as much as a $6,500 break.
Homebuyers have until June 30 to close deals, but the Senate may vote to push that deadline back to Sept. 30.
Khan expects home sales to remain depressed through the third quarter as home construction continues to contract and lending standards remain tight. But, she said, sales should pick up slightly in the fourth quarter.
Although, she added, we are still years away from a normal level of new home sales -- an annual rate between 800,000 and 900,000.
"A full housing recovery is contingent on employment," Khan said. "When we see the unemployment rate abate, and some growth in salaries and incomes, we'll get some sustainable momentum in the housing market."
A real estate industry report released earlier this week showed that existing home sales, based closed sales rather than signed contracts, slipped slightly last month but remained elevated.
New home sales declined 32.7% to a seasonally adjusted annual rate of 300,000 last month, down from an downwardly revised 446,000 in April, the Commerce Department reported Wednesday. Sales year-over-year fell 18.3%.
This is the slowest sales pace since the Commerce Department began tracking data in 1963. The prior record was set in September 1981, when new homes sold at an annual rate of 338,000.
"We expected a slowdown, but the extent of this decline was a surprise," said Anika Khan, an economist at Wells Fargo. The figure was even worse than her relatively pessimistic forecast of an annual rate of 380,000 in May.
A consensus of economists surveyed by Briefing.com had expected May sales to slide to an annual rate of 430,000.
"Clearly, the lack of a tax credit had a lot to do with it, and it's going to be a bit of a bumpy road ahead as we get a few more months of payback," Khan said.
Home sales had surged in March and April as homebuyers scrambled to sign contracts ahead of the April 30 deadline for the tax credit. First-time homebuyers qualified for a tax credit up to $8,000, while repeat buyers could get as much as a $6,500 break.
Homebuyers have until June 30 to close deals, but the Senate may vote to push that deadline back to Sept. 30.
Khan expects home sales to remain depressed through the third quarter as home construction continues to contract and lending standards remain tight. But, she said, sales should pick up slightly in the fourth quarter.
Although, she added, we are still years away from a normal level of new home sales -- an annual rate between 800,000 and 900,000.
"A full housing recovery is contingent on employment," Khan said. "When we see the unemployment rate abate, and some growth in salaries and incomes, we'll get some sustainable momentum in the housing market."
A real estate industry report released earlier this week showed that existing home sales, based closed sales rather than signed contracts, slipped slightly last month but remained elevated.
Tuesday, June 22, 2010
Sidewalks, Tree Trimming and Keeping Hancock Park Green and Water Wise
Due to the City of LA’s severe budget problems many services such as tree trimming, stump removal, median/parkway maintenance and sidewalk repair services have been all but eliminated. The City now considers these types of repairs and services to be the responsibility of the homeowner. The responsibility for sidewalk repairs has not yet been settled and many LA citizens are challenging whether this change is legal. The Association is considering plans to help support efforts to trim trees and grass by putting together a fund (using annual dues).
Because of recent, severe droughts, and other state wide water requirements, the times of ample, cheap water for landscaping are over. The Water Efficiency Landscape Ordinance (WELO) and the Low Impact Design Ordinance (LID) were passed in February of this year to further enforce landscape water use reductions. Because of these increasing restrictions on water use for landscaping, the Association has been exploring options for drought tolerant landscaping. At the recent Block Captains’ meeting, landscaper Mayita Dinos gave a talk on water wise plantings for our climate. Los Angeles is considered a Mediterranean climate which means hot, dry summers with little rain, and cool, wet winters. As beautiful as the lawns that surround most Hancock Park homes are these lawns are problematic in our climate. They need a lot of water and their static use compacts the soil. The fertilizer and pesticides that are applied often run off into the storm drain system polluting the Santa Monica Bay. So, consider drought tolerant, waterwise landscaping when planting your garden. The Association is working on more formal recommendations for relandscaping in a waterwise fashion and the information will be posted on our website.
Thanks to the Block Captain Committee for holding a great Block Captains’ meeting in May which highlighted the changes in City Services, landscaping, security and many other important issues for Hancock Park. The Block Captain network is one of the most effective protections against crime. If you want to be a block captain or don’t know who your block captain is contact the Association via the website. And, don’t forget, if you haven’t already, mail in your dues! Your dues support efforts like the tree trimming and grass cutting projects and they let you vote in the election for Board of Directors.
Because of recent, severe droughts, and other state wide water requirements, the times of ample, cheap water for landscaping are over. The Water Efficiency Landscape Ordinance (WELO) and the Low Impact Design Ordinance (LID) were passed in February of this year to further enforce landscape water use reductions. Because of these increasing restrictions on water use for landscaping, the Association has been exploring options for drought tolerant landscaping. At the recent Block Captains’ meeting, landscaper Mayita Dinos gave a talk on water wise plantings for our climate. Los Angeles is considered a Mediterranean climate which means hot, dry summers with little rain, and cool, wet winters. As beautiful as the lawns that surround most Hancock Park homes are these lawns are problematic in our climate. They need a lot of water and their static use compacts the soil. The fertilizer and pesticides that are applied often run off into the storm drain system polluting the Santa Monica Bay. So, consider drought tolerant, waterwise landscaping when planting your garden. The Association is working on more formal recommendations for relandscaping in a waterwise fashion and the information will be posted on our website.
Thanks to the Block Captain Committee for holding a great Block Captains’ meeting in May which highlighted the changes in City Services, landscaping, security and many other important issues for Hancock Park. The Block Captain network is one of the most effective protections against crime. If you want to be a block captain or don’t know who your block captain is contact the Association via the website. And, don’t forget, if you haven’t already, mail in your dues! Your dues support efforts like the tree trimming and grass cutting projects and they let you vote in the election for Board of Directors.
May home sales dip as housing market struggles
WASHINGTON - The housing market may be on the verge of taking another plunge that could weaken the broader economic recovery.
Sales of previously occupied homes dipped in May, even though buyers could receive government tax credits. And nearly a third of sales in May were from foreclosures or other distressed properties. That means home prices could soon be heading down after stabilizing over the past year.
Last month's sales fell 2.2 percent from the previous month to a seasonally adjusted annual rate of 5.66 million, the National Association of Realtors said Tuesday. Analysts who had expected sales to rise expressed concern that the real estate market could tumble once the benefit of the federal tax incentives is gone entirely, starting next month.
The report is "a worrisome sign for what will occur in July and thereafter when the effect of the tax credit is behind us," said Joshua Shapiro, chief U.S. economist at MFR Inc., an economic consulting firm in New York.
Sales have climbed 25 percent from the 4.5 million annual rate they hit in January 2009 — the lowest level of the recession. But they're still down 22 percent from the peak rate of 7.25 million in September 2005.
The report counts home sales once a deal closes. So federal tax credits of up to $8,000 for first-time buyers and up to $6,500 for existing homeowners helped prop up sales in May. The deadline to get a signed sales contract and qualify was April 30. Buyers must close their purchases by June 30.
The tax credits were expected to lift sales in May and June. Lawrence Yun, the Realtors chief economist, said delays in the mortgage-lending process put about 180,000 potential buyers in limbo. They are unlikely to qualify by the June 30 deadline. The trade group is pushing Congress to extend the deadline for closing a sale until Sept. 30.
Real estate agents report a decline in foot traffic, meaning sales could worsen in the coming months.
"The urgency just isn't there," said Pat Lashinksky, CEO of ZipRealty Inc., which has agents in 22 states.
Floyd Scott, broker-owner of Century 21 Arizona-Foothills in Phoenix, said his office had about 25 percent fewer signed contracts to buy homes in May than it did a month earlier.
"The tax credit stopped and boy, I'll tell you, it was like, 'Wait a minute. Is the phone still working?'" Scott said.
Another troubling sign is the number of foreclosures and short sales. Short sales occur when lenders let borrowers sell a home for less than they owe on their mortgage. Together, foreclosures and short sales made up 31 percent of sales in May. And those numbers could rise because the government's efforts to help troubled homeowners keep their homes have had only modest success.
More than a third of the 1.2 million borrowers who have enrolled in the Obama administration's $75 billion mortgage modification program have dropped out. About 340,000 homeowners, or 27 percent of those who started the program, have received permanent loan modifications and are making payments on time.
The decline in May home sales reflected a plunge of more than 18 percent in the Northeast. Sales were unchanged in the Midwest but rose nearly 5 percent in the West and 0.5 percent in the South.
The inventory of unsold homes on the market dropped 3.4 percent to 3.9 million. That's an 8.3 month supply at the current sales pace, compared with a healthy level of about six months. The median sales price in May was $179,600, up 2.7 percent from a year earlier.
First-time buyers made up 46 percent of sales.
The report "suggests that even government stimulus in the form of a tax credit isn't enough," to support the U.S. housing market, wrote Guy LeBas, an analyst with Janney Montgomery Scott.
___
AP Real Estate Writer Alex Veiga in Los Angeles contributed to this report.
Source: www.cnbc.com
Sales of previously occupied homes dipped in May, even though buyers could receive government tax credits. And nearly a third of sales in May were from foreclosures or other distressed properties. That means home prices could soon be heading down after stabilizing over the past year.
Last month's sales fell 2.2 percent from the previous month to a seasonally adjusted annual rate of 5.66 million, the National Association of Realtors said Tuesday. Analysts who had expected sales to rise expressed concern that the real estate market could tumble once the benefit of the federal tax incentives is gone entirely, starting next month.
The report is "a worrisome sign for what will occur in July and thereafter when the effect of the tax credit is behind us," said Joshua Shapiro, chief U.S. economist at MFR Inc., an economic consulting firm in New York.
Sales have climbed 25 percent from the 4.5 million annual rate they hit in January 2009 — the lowest level of the recession. But they're still down 22 percent from the peak rate of 7.25 million in September 2005.
The report counts home sales once a deal closes. So federal tax credits of up to $8,000 for first-time buyers and up to $6,500 for existing homeowners helped prop up sales in May. The deadline to get a signed sales contract and qualify was April 30. Buyers must close their purchases by June 30.
The tax credits were expected to lift sales in May and June. Lawrence Yun, the Realtors chief economist, said delays in the mortgage-lending process put about 180,000 potential buyers in limbo. They are unlikely to qualify by the June 30 deadline. The trade group is pushing Congress to extend the deadline for closing a sale until Sept. 30.
Real estate agents report a decline in foot traffic, meaning sales could worsen in the coming months.
"The urgency just isn't there," said Pat Lashinksky, CEO of ZipRealty Inc., which has agents in 22 states.
Floyd Scott, broker-owner of Century 21 Arizona-Foothills in Phoenix, said his office had about 25 percent fewer signed contracts to buy homes in May than it did a month earlier.
"The tax credit stopped and boy, I'll tell you, it was like, 'Wait a minute. Is the phone still working?'" Scott said.
Another troubling sign is the number of foreclosures and short sales. Short sales occur when lenders let borrowers sell a home for less than they owe on their mortgage. Together, foreclosures and short sales made up 31 percent of sales in May. And those numbers could rise because the government's efforts to help troubled homeowners keep their homes have had only modest success.
More than a third of the 1.2 million borrowers who have enrolled in the Obama administration's $75 billion mortgage modification program have dropped out. About 340,000 homeowners, or 27 percent of those who started the program, have received permanent loan modifications and are making payments on time.
The decline in May home sales reflected a plunge of more than 18 percent in the Northeast. Sales were unchanged in the Midwest but rose nearly 5 percent in the West and 0.5 percent in the South.
The inventory of unsold homes on the market dropped 3.4 percent to 3.9 million. That's an 8.3 month supply at the current sales pace, compared with a healthy level of about six months. The median sales price in May was $179,600, up 2.7 percent from a year earlier.
First-time buyers made up 46 percent of sales.
The report "suggests that even government stimulus in the form of a tax credit isn't enough," to support the U.S. housing market, wrote Guy LeBas, an analyst with Janney Montgomery Scott.
___
AP Real Estate Writer Alex Veiga in Los Angeles contributed to this report.
Source: www.cnbc.com
Monday, June 21, 2010
California Foreclosure Activity Declines Again
La Jolla, CA.--Lending institutions started formal foreclosure proceedings on fewer California homes last quarter. It is unclear how much of the drop can be attributed to shifts in market conditions, and how much is because of changing policies, a real estate information service reported.
A total of 81,054 Notices of Default ("NODs") were recorded at county recorder offices during the January-to-March period. That was down 4.2 percent from 84,568 for the prior quarter, and down 40.2 percent from 135,431 in first-quarter 2009, according to San Diego-based MDA DataQuick.
The year-ago number is the highest in DataQuick's statistics, which go back to 1992 for NODs. The quarterly average is 44,041, while the low of recent years was 12,417 in third-quarter 2004, when housing market annual appreciation rates were around 20 percent.
"Several factors are at play here and it's hard to know how they play into each other right now. A year-and-a-half ago the subprime loan mess was the black hole. Now, playing catch-up, is the financial distress households are experiencing because of the recession. Add to the mix shifting policy decisions, both by lending institutions and in public policy," said John Walsh, DataQuick president.
"We are seeing signs that the worst may be over in the hard-hit entry-level markets, while problems are slowly spreading to more expensive neighborhoods. We're also seeing some lenders become more accommodating to work-outs or short sales, while others appear to be getting stricter about delinquencies. It's very noisy out there," Walsh said.
The state's most affordable sub-markets, which represent 25 percent of the state's housing stock, accounted for 47.5 percent of all default activity a year ago. In first-quarter 2010 that fell to 40.9 percent.
California's mid- to high-end housing markets were more likely to have seen a rise in mortgage defaults last quarter, though the concentration of default activity - measured by defaults per 1,000 homes - remained relatively low in those areas.
For example, zip codes statewide with median home sale prices of $500,000-plus saw mortgage defaults buck the overall trend and rise 1.5 percent last quarter compared with the prior quarter, while year-over-year the decline was 19 percent (versus a 40.2 percent marketwide annual decrease). Collectively, these zips saw 4.5 default notices filed for every 1,000 homes in the community, compared with the overall market's rate of 9.3 NODs for every 1,000 homes statewide.
In zip codes with medians below $500,000, mortgage default filings fell 5.8 percent from the prior quarter and declined nearly 43 percent from a year earlier. However, collectively these zips saw 10.5 NODs filed for every 1,000 homes - more than double the default rate for the zips with $500,000-plus medians.
On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the NOD. The borrowers owed a median $14,066 in back payments on a median $330,147 mortgage.
On home equity loans and lines of credit in default, borrowers owed a median $3,897 on a median $64,422 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.
While many of the loans that went into default during first-quarter 2010 were originated in early 2007, the median origination month for last quarter's defaulted loans was July 2006, the same month as during the prior four quarters.
San Diego-based MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.
Although 81,054 default notices were filed last quarter, they involved 79,457 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit). Multiple default recordings on the same home are trending down, DataQuick reported.
Following a historical pattern, mortgages were least likely to go into default in Marin, San Francisco and San Mateo counties. The probability was highest in Merced, Stanislaus and San Joaquin counties.
The number of Trustees Deeds (TDs) recorded, which reflect the number of houses or condo units lost to the foreclosure process, totaled 42,857 during the first quarter. That was down 16.1 percent from 51,060 for the prior quarter, and down 1.7 percent from 43,620 for first-quarter 2009. The all-time peak was 79,511 in third-quarter 2008.
In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The state's all-time low was 637 in the second quarter of 2005, MDA DataQuick reported.
There are 8.5 million houses and condos in California.
On average, homes foreclosed on last quarter spent 7.5 months winding their way through the formal foreclosure process, beginning with an NOD. A year ago it was 6.8 months. The increase could reflect, among other things, lender backlogs and extra time needed to pursue possible loan modifications and short sales.
Foreclosure resales accounted for 42.6 percent of all California resale activity last quarter. It was up from a revised 40.6 percent the prior quarter, and down from 57.8 percent a year ago, the peak. Foreclosure resales varied significantly by county last quarter, from 13.8 percent in San Francisco to 67.7 percent in Merced.
At formal foreclosure auctions last quarter, an estimated 24.6 percent of foreclosed properties went to investors and others who do not appear to be lender or government entities. That's up from an estimated 17.6 percent a year ago.
The lenders that originated the most loans that went into default last quarter were Countrywide (7,282), World Savings (6,459), Washington Mutual (6,371), Wells Fargo (5,204) and Bank of America (3,851). These were also the most active lenders in the second half of 2006, and their default rates were well below 10 percent.
Smaller subprime lenders had far higher default rates for that period: ResMAE Mortgage, Ownit Mortgage, Master Financial, First NLC Financial Services and Fieldstone Mortgage all had default rates of more than 65 percent of the loans they originated in the second half of 2006. These and most other subprime lenders are long gone.
Most of the loans made in 2006 are owned or serviced by institutions other than those that made the loans. The servicers pursuing the highest number of defaults last quarter were ReconTrust Co., Cal-Western Reconveyance and NDEx West, MDA DataQuick reported.
Source: DataQuick Information Systems
Media calls: Andrew LePage (916) 456-7157 or John Karevoll (909) 867-9534
Copyright 2010 DataQuick Information Systems. All rights reserved.
A total of 81,054 Notices of Default ("NODs") were recorded at county recorder offices during the January-to-March period. That was down 4.2 percent from 84,568 for the prior quarter, and down 40.2 percent from 135,431 in first-quarter 2009, according to San Diego-based MDA DataQuick.
The year-ago number is the highest in DataQuick's statistics, which go back to 1992 for NODs. The quarterly average is 44,041, while the low of recent years was 12,417 in third-quarter 2004, when housing market annual appreciation rates were around 20 percent.
"Several factors are at play here and it's hard to know how they play into each other right now. A year-and-a-half ago the subprime loan mess was the black hole. Now, playing catch-up, is the financial distress households are experiencing because of the recession. Add to the mix shifting policy decisions, both by lending institutions and in public policy," said John Walsh, DataQuick president.
"We are seeing signs that the worst may be over in the hard-hit entry-level markets, while problems are slowly spreading to more expensive neighborhoods. We're also seeing some lenders become more accommodating to work-outs or short sales, while others appear to be getting stricter about delinquencies. It's very noisy out there," Walsh said.
The state's most affordable sub-markets, which represent 25 percent of the state's housing stock, accounted for 47.5 percent of all default activity a year ago. In first-quarter 2010 that fell to 40.9 percent.
California's mid- to high-end housing markets were more likely to have seen a rise in mortgage defaults last quarter, though the concentration of default activity - measured by defaults per 1,000 homes - remained relatively low in those areas.
For example, zip codes statewide with median home sale prices of $500,000-plus saw mortgage defaults buck the overall trend and rise 1.5 percent last quarter compared with the prior quarter, while year-over-year the decline was 19 percent (versus a 40.2 percent marketwide annual decrease). Collectively, these zips saw 4.5 default notices filed for every 1,000 homes in the community, compared with the overall market's rate of 9.3 NODs for every 1,000 homes statewide.
In zip codes with medians below $500,000, mortgage default filings fell 5.8 percent from the prior quarter and declined nearly 43 percent from a year earlier. However, collectively these zips saw 10.5 NODs filed for every 1,000 homes - more than double the default rate for the zips with $500,000-plus medians.
On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the NOD. The borrowers owed a median $14,066 in back payments on a median $330,147 mortgage.
On home equity loans and lines of credit in default, borrowers owed a median $3,897 on a median $64,422 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.
While many of the loans that went into default during first-quarter 2010 were originated in early 2007, the median origination month for last quarter's defaulted loans was July 2006, the same month as during the prior four quarters.
San Diego-based MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.
Although 81,054 default notices were filed last quarter, they involved 79,457 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit). Multiple default recordings on the same home are trending down, DataQuick reported.
Following a historical pattern, mortgages were least likely to go into default in Marin, San Francisco and San Mateo counties. The probability was highest in Merced, Stanislaus and San Joaquin counties.
The number of Trustees Deeds (TDs) recorded, which reflect the number of houses or condo units lost to the foreclosure process, totaled 42,857 during the first quarter. That was down 16.1 percent from 51,060 for the prior quarter, and down 1.7 percent from 43,620 for first-quarter 2009. The all-time peak was 79,511 in third-quarter 2008.
In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The state's all-time low was 637 in the second quarter of 2005, MDA DataQuick reported.
There are 8.5 million houses and condos in California.
On average, homes foreclosed on last quarter spent 7.5 months winding their way through the formal foreclosure process, beginning with an NOD. A year ago it was 6.8 months. The increase could reflect, among other things, lender backlogs and extra time needed to pursue possible loan modifications and short sales.
Foreclosure resales accounted for 42.6 percent of all California resale activity last quarter. It was up from a revised 40.6 percent the prior quarter, and down from 57.8 percent a year ago, the peak. Foreclosure resales varied significantly by county last quarter, from 13.8 percent in San Francisco to 67.7 percent in Merced.
At formal foreclosure auctions last quarter, an estimated 24.6 percent of foreclosed properties went to investors and others who do not appear to be lender or government entities. That's up from an estimated 17.6 percent a year ago.
The lenders that originated the most loans that went into default last quarter were Countrywide (7,282), World Savings (6,459), Washington Mutual (6,371), Wells Fargo (5,204) and Bank of America (3,851). These were also the most active lenders in the second half of 2006, and their default rates were well below 10 percent.
Smaller subprime lenders had far higher default rates for that period: ResMAE Mortgage, Ownit Mortgage, Master Financial, First NLC Financial Services and Fieldstone Mortgage all had default rates of more than 65 percent of the loans they originated in the second half of 2006. These and most other subprime lenders are long gone.
Most of the loans made in 2006 are owned or serviced by institutions other than those that made the loans. The servicers pursuing the highest number of defaults last quarter were ReconTrust Co., Cal-Western Reconveyance and NDEx West, MDA DataQuick reported.
Source: DataQuick Information Systems
Media calls: Andrew LePage (916) 456-7157 or John Karevoll (909) 867-9534
Copyright 2010 DataQuick Information Systems. All rights reserved.
California May Home Sales
An estimated 40,965 new and resale houses and condos were sold statewide last month. That was up 9.3 percent from 37,481 in April, and up 4.9 percent from 39,051 for May 2009. California sales for the month of May have varied from a low of 32,223 in 1995 to a peak of 67,958 in 2004, while the average is 47,024. MDA DataQuick's statistics go back to 1988.
The median price paid for a home last month was $278,000, up 9 percent from $255,000 in April and up 20.9 percent from $230,000 a year ago. The year-over-year increase was the seventh in a row, following 27 months of year-over-year declines. The median peaked at $484,000 in early 2007.
Of the existing homes sold last month, 35.5 percent were properties that had been foreclosed on during the past year. That was down from 38.1 percent in April and down from 50.2 percent a year ago. The last time foreclosure resales were as low as last month was in March 2008, when they also represented 35.5 percent of the resale market. The all-time high was in February 2009 at 58.8 percent.
The typical mortgage payment that home buyers committed themselves to paying last month was $1,179. That was up from $1,108 in April, and up from $972 a year ago. Adjusted for inflation, last month's mortgage payment was 45.4 percent below the spring 1989 peak of the prior real estate cycle. It was 54.5 percent below the current cycle's peak in June 2006.
MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.
Indicators of market distress continue to move in different directions. Foreclosure activity is off its peaks reached in the past couple of years but remains high in a historical context. Financing with multiple mortgages is low, down payment sizes are stable, cash and non-owner-occupied buying eased last month but remain above average, MDA DataQuick reported.
Media calls: Andrew LePage (916)456-7157 or alepage@dqnews.com
Copyright MDA DataQuick Information Systems. All rights reserved.
The median price paid for a home last month was $278,000, up 9 percent from $255,000 in April and up 20.9 percent from $230,000 a year ago. The year-over-year increase was the seventh in a row, following 27 months of year-over-year declines. The median peaked at $484,000 in early 2007.
Of the existing homes sold last month, 35.5 percent were properties that had been foreclosed on during the past year. That was down from 38.1 percent in April and down from 50.2 percent a year ago. The last time foreclosure resales were as low as last month was in March 2008, when they also represented 35.5 percent of the resale market. The all-time high was in February 2009 at 58.8 percent.
The typical mortgage payment that home buyers committed themselves to paying last month was $1,179. That was up from $1,108 in April, and up from $972 a year ago. Adjusted for inflation, last month's mortgage payment was 45.4 percent below the spring 1989 peak of the prior real estate cycle. It was 54.5 percent below the current cycle's peak in June 2006.
MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.
Indicators of market distress continue to move in different directions. Foreclosure activity is off its peaks reached in the past couple of years but remains high in a historical context. Financing with multiple mortgages is low, down payment sizes are stable, cash and non-owner-occupied buying eased last month but remain above average, MDA DataQuick reported.
Media calls: Andrew LePage (916)456-7157 or alepage@dqnews.com
Copyright MDA DataQuick Information Systems. All rights reserved.
Saturday, June 19, 2010
Minorities hit harder by foreclosure crisis
Minorities hit harder by foreclosure crisis
By Renae Merle
Washington Post Staff Writer
Saturday, June 19, 2010
Minority homeowners have been disproportionately affected by the foreclosure crisis and stand to lose homes at a faster pace than white borrowers in the future, according to a report released Friday by a nonprofit research group.
The study by the Center for Responsible Lending found that whites made up the majority of the 2.5 million foreclosures completed between 2007 and 2009 -- about 56 percent -- but that minority communities had significantly higher foreclosure rates.
While about 4.5 percent of white borrowers lost their homes to foreclosure during that period, black and Latino borrowers had 7.9 and 7.7 percent foreclosure rates, respectively. That means that blacks and Latinos were more than 70 percent more likely to lose their homes to foreclosure during that period, the study found.
Overall, blacks lost about 240,020 homes to foreclosure, while Latinos lost about 335,950, according to the study, which analyzed government and industry data on millions of loans issued between 2005 and 2008 -- the height of the housing boom.
The "analysis suggests dramatic differences in how the foreclosure crisis has affected racial and ethnic groups," the report said. "African American and Latino borrowers have borne and will continue to disproportionately bear the burden of foreclosures."
The study is the latest to examine the housing crisis and its disparate impact on minority communities. A study by the National Community Reinvestment Coalition released in April found that black and Latino homeowners in the Washington region were almost 20 percent and 90 percent more likely, respectively, to face foreclosure or lose their homes than similarly situated whites.
Housing experts have pointed to a variety of factors to explain the disparity, including higher unemployment rates in minority communities and traditionally fewer financial resources for black and Latino borrowers to fall back on.
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But the Center for Responsible Lending's study found that the disparate foreclosure rates also apply to well-to-do homeowners. High-income black borrowers, for example, were 80 percent more likely to lose their homes to foreclosure than their white counterparts, while Latino borrowers were 90 percent more likely.
Research has shown that minority borrowers were more likely to receive subprime loans during the housing boom even if they had credit scores, incomes and loan sizes similar to those of whites. Some housing experts say that minority borrowers received higher rates on subprime loans compared with similarly situated white borrowers, resulting in higher monthly payments and quicker defaults.
"I think it reflects that minority borrowers were targeted by the sellers of these [risky] mortgages," said Barry Zigas, director of housing and credit policy at the Consumer Federation of America.
The Treasury Department has said it will collect data on the racial makeup of homeowners helped under its Making Home Affordable foreclosure-prevention program. That program's standards and processes should minimize disparities between how homeowners are treated, lending industry officials have said.
"It is incumbent upon us to make sure that we look at all of the options" under the federal program to help all homeowners, said Faith Schwartz, senior adviser and consultant to Hope Now, an industry group. "We can always step back and say, 'Is there anything more that can be done to neutralize any negative impact on minorities or borrowers' " with particularly risky types of loans.
In addition to the millions of borrowers who have already lost their homes, about 5.7 million are at risk of foreclosure, the report said. About 494,930 blacks and 731,660 Latinos are at imminent risk of foreclosure, the report said.
By Renae Merle
Washington Post Staff Writer
Saturday, June 19, 2010
Minority homeowners have been disproportionately affected by the foreclosure crisis and stand to lose homes at a faster pace than white borrowers in the future, according to a report released Friday by a nonprofit research group.
The study by the Center for Responsible Lending found that whites made up the majority of the 2.5 million foreclosures completed between 2007 and 2009 -- about 56 percent -- but that minority communities had significantly higher foreclosure rates.
While about 4.5 percent of white borrowers lost their homes to foreclosure during that period, black and Latino borrowers had 7.9 and 7.7 percent foreclosure rates, respectively. That means that blacks and Latinos were more than 70 percent more likely to lose their homes to foreclosure during that period, the study found.
Overall, blacks lost about 240,020 homes to foreclosure, while Latinos lost about 335,950, according to the study, which analyzed government and industry data on millions of loans issued between 2005 and 2008 -- the height of the housing boom.
The "analysis suggests dramatic differences in how the foreclosure crisis has affected racial and ethnic groups," the report said. "African American and Latino borrowers have borne and will continue to disproportionately bear the burden of foreclosures."
The study is the latest to examine the housing crisis and its disparate impact on minority communities. A study by the National Community Reinvestment Coalition released in April found that black and Latino homeowners in the Washington region were almost 20 percent and 90 percent more likely, respectively, to face foreclosure or lose their homes than similarly situated whites.
Housing experts have pointed to a variety of factors to explain the disparity, including higher unemployment rates in minority communities and traditionally fewer financial resources for black and Latino borrowers to fall back on.
ad_icon
But the Center for Responsible Lending's study found that the disparate foreclosure rates also apply to well-to-do homeowners. High-income black borrowers, for example, were 80 percent more likely to lose their homes to foreclosure than their white counterparts, while Latino borrowers were 90 percent more likely.
Research has shown that minority borrowers were more likely to receive subprime loans during the housing boom even if they had credit scores, incomes and loan sizes similar to those of whites. Some housing experts say that minority borrowers received higher rates on subprime loans compared with similarly situated white borrowers, resulting in higher monthly payments and quicker defaults.
"I think it reflects that minority borrowers were targeted by the sellers of these [risky] mortgages," said Barry Zigas, director of housing and credit policy at the Consumer Federation of America.
The Treasury Department has said it will collect data on the racial makeup of homeowners helped under its Making Home Affordable foreclosure-prevention program. That program's standards and processes should minimize disparities between how homeowners are treated, lending industry officials have said.
"It is incumbent upon us to make sure that we look at all of the options" under the federal program to help all homeowners, said Faith Schwartz, senior adviser and consultant to Hope Now, an industry group. "We can always step back and say, 'Is there anything more that can be done to neutralize any negative impact on minorities or borrowers' " with particularly risky types of loans.
In addition to the millions of borrowers who have already lost their homes, about 5.7 million are at risk of foreclosure, the report said. About 494,930 blacks and 731,660 Latinos are at imminent risk of foreclosure, the report said.
Thursday, June 17, 2010
Mortgage rates up from yearly low
Rates on 30-year fixed mortgages backed off from yearly lows this week, but still remain historically cheap.
Mortgage finance company Freddie Mac says the average rate rose to 4.75 percent, up from 4.72 percent last week. The rate hit 4.71 percent in December, the lowest since Freddie Mac began keeping records in 1971.
The average rate on a 15-year fixed-rate mortgage edged up to 4.2 percent, up from its all-time low of 4.17 percent set last week.
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A Federal Reserve program to reduce borrowing costs for consumers pushed rates down to extraordinarily low levels last year. Rates were expected to rise after the campaign ended this spring, but have declined instead over the past two months as investors shifted money into the safety of U.S. Treasury bonds.
Concerns over the European debt crisis and the volatile stock market have made U.S. Treasury debt more attractive. And mortgage rates tend to follow the yield on U.S. Treasury debt.
Low mortgage rates could help buoy housing demand after the expiration of federal tax credits. First-time buyers could get a credit of up to $8,000, while current owners who bought and moved into another home could qualify for a credit of up to $6,500. Buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.
Home sales started to lag after the credits' deadline. But a recent report offered a sign that buyers are finally taking advantage of low rates. The number of customers applying for refinance and purchase mortgages climbed 18 percent last week after falling sharply the month before, the Mortgage Bankers Association said Wednesday.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
Rates on five-year, adjustable-rate mortgages averaged 3.89 percent, down from 3.92 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 3.82 percent from 3.91 percent. That was the lowest average since May 2004.
The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.
The nationwide fee for loans in Freddie Mac's survey averaged 0.7 a point for 30-year, 15-year and 5-year loans. The average fee for 1-year loans was 0.6 of a point.
Mortgage finance company Freddie Mac says the average rate rose to 4.75 percent, up from 4.72 percent last week. The rate hit 4.71 percent in December, the lowest since Freddie Mac began keeping records in 1971.
The average rate on a 15-year fixed-rate mortgage edged up to 4.2 percent, up from its all-time low of 4.17 percent set last week.
Story continues below ↓advertisement | your ad here
A Federal Reserve program to reduce borrowing costs for consumers pushed rates down to extraordinarily low levels last year. Rates were expected to rise after the campaign ended this spring, but have declined instead over the past two months as investors shifted money into the safety of U.S. Treasury bonds.
Concerns over the European debt crisis and the volatile stock market have made U.S. Treasury debt more attractive. And mortgage rates tend to follow the yield on U.S. Treasury debt.
Low mortgage rates could help buoy housing demand after the expiration of federal tax credits. First-time buyers could get a credit of up to $8,000, while current owners who bought and moved into another home could qualify for a credit of up to $6,500. Buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.
Home sales started to lag after the credits' deadline. But a recent report offered a sign that buyers are finally taking advantage of low rates. The number of customers applying for refinance and purchase mortgages climbed 18 percent last week after falling sharply the month before, the Mortgage Bankers Association said Wednesday.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
Rates on five-year, adjustable-rate mortgages averaged 3.89 percent, down from 3.92 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 3.82 percent from 3.91 percent. That was the lowest average since May 2004.
The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.
The nationwide fee for loans in Freddie Mac's survey averaged 0.7 a point for 30-year, 15-year and 5-year loans. The average fee for 1-year loans was 0.6 of a point.
Wednesday, June 16, 2010
Food Trucks Not Welcome in Larchmont Village
During lunch time, at an event, or after a night out on the town, queuing up at one or more parked food trucks can give you a great sense of community. People come together to eat, to be out in the city, and to give a little bit of money to some entrepreneurs. But the food trucks aren't always welcomed by the communities in which they park (see: Wilshire Blvd. businesses) and now one community has gone as far as to tell their residents to shun the food trucks.
The Larchmont Chronicle's June 2010 issue includes an item in the "Community Platform" section by Jane Gilman requesting readers give food trucks that come into the 'hood no love: "We ask that you do NOT patronize food trucks on Larchmont," Gilman writes. "You are taking away funds from eateries who pay rent and staff employees. The trucks also take up valuable parking places."
Those who side with Gilman believe that the businesses along Larchmont need all the help that they can get; never mind that for years Larchmont blocked the addition of chain restaurants to try to protect the mom-and-pops and now they are protecting a great many chains and turning away mom-and-pops in the form of trucks. Paying rent and for staff, along with other costs, are also things food trucks contend with, as well as competition among their own kind and with brick-and-mortars. And if someone travels to Larchmont to buy an item from a food truck, aren't they as likely to need and pay for a parking space as someone who goes there to eat at the Village Pizzeria?
The Larchmont Chronicle's June 2010 issue includes an item in the "Community Platform" section by Jane Gilman requesting readers give food trucks that come into the 'hood no love: "We ask that you do NOT patronize food trucks on Larchmont," Gilman writes. "You are taking away funds from eateries who pay rent and staff employees. The trucks also take up valuable parking places."
Those who side with Gilman believe that the businesses along Larchmont need all the help that they can get; never mind that for years Larchmont blocked the addition of chain restaurants to try to protect the mom-and-pops and now they are protecting a great many chains and turning away mom-and-pops in the form of trucks. Paying rent and for staff, along with other costs, are also things food trucks contend with, as well as competition among their own kind and with brick-and-mortars. And if someone travels to Larchmont to buy an item from a food truck, aren't they as likely to need and pay for a parking space as someone who goes there to eat at the Village Pizzeria?
Tuesday, June 15, 2010
Builders less confident in housing market
By Alan Zibel
updated 11:31 a.m. ET June 15, 2010
WASHINGTON - Homebuilders are losing confidence in the housing market now that government incentives that spurred home sales have ended.
The National Association of Home Builders said Tuesday its housing market index fell to 17 in June, sinking five points after two straight months of increases. It was the lowest level since March.
Builders had been more optimistic earlier in the year when buyers could take advantage of tax credits of up to $8,000. Those incentives expired on April 30, although buyers with signed contracts have until June 30 to complete their purchases.
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Experts anticipate home sales will slow in the second half of this year. In addition, high unemployment and tight mortgage lending continue to keep many buyers on the sidelines.
The drop in activity is "a wake-up call to the fact that the market will struggle to stand on its own two feet without the tax credit," wrote Paul Dales, an economist with Capital Economics. "The double-dip in both activity and prices that we have been expecting for some time appears to have begun."
Another problem for the building industry is that lenders are reluctant to make construction loans to developers. The builders group is pressing for legislation that would require the Treasury Department to guarantee loans made to developers.
"We're encouraging banks to make prudent loans to projects that pencil out and are in markets that are ripe for recovery," Jerry Howard, the trade group's president, said in an interview.
Thanks to the tax credits, sales of new homes rose nearly 15 percent in April. That followed a nearly 30 percent surge in March, the biggest monthly increase in 47 years.
But now that they are gone, "the reduction in consumer activity may have been more dramatic than some builders had anticipated," said Bob Jones, a builder from Bloomfield Hills, Mich., and the Washington-based trade group's chairman.
In a typical economic recovery, the construction sector provides much of the fuel. But developers are trying to sell a tremendous glut of homes built during the boom years and they are competing against foreclosed homes selling at deep discounts.
While home sales are not likely to return to the depressed levels of the housing bust, they are unlikely to return soon to those levels aided by the tax credit program, wrote Joshua Shapiro, chief U.S. economist at MFR Inc., an economic consulting firm in New York.
The builders' trade group's index is made up of three components. The reading for current sales conditions fell one point to 16, while the index measuring expectations for the next six months fell two points to 26. The index measuring foot traffic from prospective buyers held steady at 13.
The report reflects a survey of 344 residential builders nationwide.
updated 11:31 a.m. ET June 15, 2010
WASHINGTON - Homebuilders are losing confidence in the housing market now that government incentives that spurred home sales have ended.
The National Association of Home Builders said Tuesday its housing market index fell to 17 in June, sinking five points after two straight months of increases. It was the lowest level since March.
Builders had been more optimistic earlier in the year when buyers could take advantage of tax credits of up to $8,000. Those incentives expired on April 30, although buyers with signed contracts have until June 30 to complete their purchases.
Story continues below ↓advertisement | your ad here
Experts anticipate home sales will slow in the second half of this year. In addition, high unemployment and tight mortgage lending continue to keep many buyers on the sidelines.
The drop in activity is "a wake-up call to the fact that the market will struggle to stand on its own two feet without the tax credit," wrote Paul Dales, an economist with Capital Economics. "The double-dip in both activity and prices that we have been expecting for some time appears to have begun."
Another problem for the building industry is that lenders are reluctant to make construction loans to developers. The builders group is pressing for legislation that would require the Treasury Department to guarantee loans made to developers.
"We're encouraging banks to make prudent loans to projects that pencil out and are in markets that are ripe for recovery," Jerry Howard, the trade group's president, said in an interview.
Thanks to the tax credits, sales of new homes rose nearly 15 percent in April. That followed a nearly 30 percent surge in March, the biggest monthly increase in 47 years.
But now that they are gone, "the reduction in consumer activity may have been more dramatic than some builders had anticipated," said Bob Jones, a builder from Bloomfield Hills, Mich., and the Washington-based trade group's chairman.
In a typical economic recovery, the construction sector provides much of the fuel. But developers are trying to sell a tremendous glut of homes built during the boom years and they are competing against foreclosed homes selling at deep discounts.
While home sales are not likely to return to the depressed levels of the housing bust, they are unlikely to return soon to those levels aided by the tax credit program, wrote Joshua Shapiro, chief U.S. economist at MFR Inc., an economic consulting firm in New York.
The builders' trade group's index is made up of three components. The reading for current sales conditions fell one point to 16, while the index measuring expectations for the next six months fell two points to 26. The index measuring foot traffic from prospective buyers held steady at 13.
The report reflects a survey of 344 residential builders nationwide.
Monday, June 14, 2010
Million-dollar homes are falling prey to foreclosure
By Joseph Pisani, Special from CNBC.com
Heated pools, ocean views and media rooms are not what most people would expect to find in a foreclosed property, but more high-end homes — priced at more than a million dollars — have been falling into the hands of banks this year.
Foreclosures of homes worth more than $1 million began increasing at the end of 2009, according to data provided to CNBC.com by foreclosure tracking website RealtyTrac.
Foreclosures reached a high in February 2010, the last month data were available, when 4,169 high-end homes were somewhere in the foreclosure process; having received a foreclosure notice, had an auction scheduled or had ownership taken over by the lender. That's a 121% increase from a year ago.
The deterioration comes just as housing experts say that foreclosures in the low and middle ends of the housing market are showing signs of stabilization.
SLIDE SHOW: Million dollar foreclosures
SLIDE SHOW: America's double-dip real estate markets
SLIDE SHOW: The world's best places to live
Owners of expensive homes "were able to stave off foreclosure longer," says independent real estate analyst Jack McCabe, CEO of McCabe Research and Consulting in South Florida. "Lower-end homeowners were the first ones to see the escalating foreclosures, because they generally do not have the cash reserves or credit available that the luxury homeowners do. They had the ability to take their credit cards and pull out thousands of dollars, while the lower-end buyers were already tapped out."
McCabe expects foreclosures in the high-end market will increase into 2011.
DELINQUENCIES DROP: First time since 2006
Though the RealtyTrac data on high-end homes are not available on a regional or metropolitan basis, anecdotal evidence indicates the problem is cropping up across the country. High-end and luxury categories vary widely from market to market. In some suburban areas, in the Northeast and California, for instance, million-dollar homes are fairly common, but nationwide, they represent 1.1% of overall housing stock.
"We have seen an increase, in the million-plus range, of the number of foreclosures and short sales in the greater Chicago area," says Jim Kinney, vice president of luxury home sales at Baird & Warner.
He says that of the 295 million-dollar, single-family properties sold in the first quarter this year, 37 were either a foreclosure or short sale, when a bank and homeowner agree to sell the home for less than the loan is worth. During the same period a year ago, 10 of 231 fell into those categories.
In the Fort Myers, Fla., area, Mike McMurray of McMurray and Nette and the VIP Realty Group says he has seen a few foreclosed high-end homes on the market compared with none last year. He's currently showing a 4,800-square-foot, $3.65 million home on Captiva Island, where foreclosures are usually rare. The bank-owned home has five bedrooms and access to 150 feet of Gulf Coast beachfront.
"There are more we see coming down the pipeline," McMurray says.
Data show that may be the case around the country. The 90-day delinquency rate on home loans worth more than a million dollars hit a high in February at 13.3%, above the overall rate of 8.6%, according to real estate data firm First American CoreLogic. Foreclosure proceedings generally start after a homeowner has been at least 90 days late on a mortgage payment, experts say.
One difference in the high-end market is that lenders are willing to do more to head off foreclosure by renegotiating the loan or accepting a short-sale transaction, which is essentially a last-ditch effort.
"Lenders are far more likely to go the short-sale route," says Andrew LePage, an analyst at real estate research firm DataQuick. "There's a lot more money at stake, and maintenance can be high if a foreclosure just sits there."
A $1.15 million condominium in Chicago in the landmark Palmolive Building was initially offered as a short sale, but after a buyer did not materialize, it's now owned by the bank, says Janice Corley, founder of Sudler Sotheby's International Realty, which is currently listing it. The condo has lake views and a long list of luxury-building amenities, including a steam room, doorman and gym.
The rise in luxury foreclosures has one Las Vegas real estate agent flying prospective buyers into the city via private jet. Luxury Homes of Las Vegas and JetSuite Air teamed to offer the complimentary trip for buyers flying from Los Angeles to view three foreclosed homes priced between $4.9 million and $6.1 million.
Agent Ken Lowman says he gave three tours over a one-week period and hopes to expand the offer to buyers from other West Coast cities.
There's just too much competition, Lowman says. "It takes an innovative approach like this to get results."
Heated pools, ocean views and media rooms are not what most people would expect to find in a foreclosed property, but more high-end homes — priced at more than a million dollars — have been falling into the hands of banks this year.
Foreclosures of homes worth more than $1 million began increasing at the end of 2009, according to data provided to CNBC.com by foreclosure tracking website RealtyTrac.
Foreclosures reached a high in February 2010, the last month data were available, when 4,169 high-end homes were somewhere in the foreclosure process; having received a foreclosure notice, had an auction scheduled or had ownership taken over by the lender. That's a 121% increase from a year ago.
The deterioration comes just as housing experts say that foreclosures in the low and middle ends of the housing market are showing signs of stabilization.
SLIDE SHOW: Million dollar foreclosures
SLIDE SHOW: America's double-dip real estate markets
SLIDE SHOW: The world's best places to live
Owners of expensive homes "were able to stave off foreclosure longer," says independent real estate analyst Jack McCabe, CEO of McCabe Research and Consulting in South Florida. "Lower-end homeowners were the first ones to see the escalating foreclosures, because they generally do not have the cash reserves or credit available that the luxury homeowners do. They had the ability to take their credit cards and pull out thousands of dollars, while the lower-end buyers were already tapped out."
McCabe expects foreclosures in the high-end market will increase into 2011.
DELINQUENCIES DROP: First time since 2006
Though the RealtyTrac data on high-end homes are not available on a regional or metropolitan basis, anecdotal evidence indicates the problem is cropping up across the country. High-end and luxury categories vary widely from market to market. In some suburban areas, in the Northeast and California, for instance, million-dollar homes are fairly common, but nationwide, they represent 1.1% of overall housing stock.
"We have seen an increase, in the million-plus range, of the number of foreclosures and short sales in the greater Chicago area," says Jim Kinney, vice president of luxury home sales at Baird & Warner.
He says that of the 295 million-dollar, single-family properties sold in the first quarter this year, 37 were either a foreclosure or short sale, when a bank and homeowner agree to sell the home for less than the loan is worth. During the same period a year ago, 10 of 231 fell into those categories.
In the Fort Myers, Fla., area, Mike McMurray of McMurray and Nette and the VIP Realty Group says he has seen a few foreclosed high-end homes on the market compared with none last year. He's currently showing a 4,800-square-foot, $3.65 million home on Captiva Island, where foreclosures are usually rare. The bank-owned home has five bedrooms and access to 150 feet of Gulf Coast beachfront.
"There are more we see coming down the pipeline," McMurray says.
Data show that may be the case around the country. The 90-day delinquency rate on home loans worth more than a million dollars hit a high in February at 13.3%, above the overall rate of 8.6%, according to real estate data firm First American CoreLogic. Foreclosure proceedings generally start after a homeowner has been at least 90 days late on a mortgage payment, experts say.
One difference in the high-end market is that lenders are willing to do more to head off foreclosure by renegotiating the loan or accepting a short-sale transaction, which is essentially a last-ditch effort.
"Lenders are far more likely to go the short-sale route," says Andrew LePage, an analyst at real estate research firm DataQuick. "There's a lot more money at stake, and maintenance can be high if a foreclosure just sits there."
A $1.15 million condominium in Chicago in the landmark Palmolive Building was initially offered as a short sale, but after a buyer did not materialize, it's now owned by the bank, says Janice Corley, founder of Sudler Sotheby's International Realty, which is currently listing it. The condo has lake views and a long list of luxury-building amenities, including a steam room, doorman and gym.
The rise in luxury foreclosures has one Las Vegas real estate agent flying prospective buyers into the city via private jet. Luxury Homes of Las Vegas and JetSuite Air teamed to offer the complimentary trip for buyers flying from Los Angeles to view three foreclosed homes priced between $4.9 million and $6.1 million.
Agent Ken Lowman says he gave three tours over a one-week period and hopes to expand the offer to buyers from other West Coast cities.
There's just too much competition, Lowman says. "It takes an innovative approach like this to get results."
Saturday, June 12, 2010
San Francisco Office Tower Sold in Biggest City Deal Since 2007
By Dan Levy, Dakin Campbell and Saeromi Shin
June 12 (Bloomberg) -- A San Francisco office tower occupied by Wells Fargo & Co. sold for $333 million to a group of South Korean investors in the city’s biggest commercial property deal in three years.
Korean Teachers’ Credit Union and Korean Federation of Community Credit Cooperatives were among the buyers of 333 Market Street, a 33-story building in the city’s financial district, the teachers union said in an e-mailed statement. The purchasers paid about $507 a square foot, said Goodwin Gaw, a Hong Kong-based developer who helped broker the deal and will manage the tower. The sale closed June 10.
The seller was Des Moines, Iowa-based insurer Principal Financial Group Inc., which bought the tower from Wells Fargo for $370 million in 2006 before a collapse in commercial property values. The last single San Francisco office building to change hands for a comparable price was 650 California St., which sold for $300 million in July 2007, according to broker Jones Lang LaSalle Inc.
“A Market Street high-rise combined with a long-term lease with Wells Fargo makes this an extremely attractive asset,” said Daniel Cressman, executive vice president at Grubb & Ellis Co. in San Francisco. “It shows you how well-located, well- leased assets hold value even in difficult times.”
San Francisco-based Wells Fargo occupies 100 percent of the rentable space and has a lease that runs to 2026. The bank owns its headquarters at 420 Montgomery Street.
Paula Chizek, a spokeswoman for Principal Financial, confirmed the Market Street building was for sale and declined to comment further.
Plunge in Values
U.S. commercial real estate values were down 42 percent in March from the October 2007 peak, according to the Moody’s/REAL Commercial Property Price Index. Retail and office properties in the biggest metropolitan areas led the decline, Moody’s said May 19.
Prime office rents in San Francisco fell to $30.48 a square foot in the first quarter from $38.80 a year earlier, according to Colliers International, a Seattle-based brokerage. The vacancy rate for the highest-quality, best-located offices, known as Class A space, rose to 14.5 percent from 12.8 percent.
Tenants including Del Monte Foods Co., Brown & Toland Medical Group and Credit Suisse Group AG took advantage of low rates in the fourth quarter and leased about 1 million square feet of office space, said Tove Nilsen, research director for Colliers International in San Francisco.
South Korean Funds
The 657,115-square-foot Market Street high-rise is expected to provide “stable cash flow,” the South Korean funds said in the statement. South Korean pension funds also agreed to buy Berlin’s Sony Center from a Morgan Stanley real-estate fund in April for about $768 million and purchased two buildings in Tokyo and Yokohama, Japan this month for $116 million.
Wells Fargo, the biggest U.S. commercial property lender, will provide a $200 million loan to the buyers, according to Gaw. The purchasers are paying an interest rate of 4.5 percent on the loan, he said.
The capitalization rate for the transaction is close to 7 percent, Gaw said. The rate, a measure of real estate returns, is derived by dividing net operating income from the property by its purchase price.
Gaw’s Los Angeles-based Downtown Properties LLC owns the Roosevelt Hotel and Bradbury Building in Los Angeles and has operated offices, hotels and golf courses in Los Angeles, New York, San Francisco and Hawaii, according to its website.
He bought San Francisco’s 550 Montgomery St., a Class B office building built in 1908, for $12.65 million, or $134 a square foot, in February, according to Colliers.
--With assistance from Kevin Cho in Seoul. Editors: Kara Wetzel, Rob Urban
To contact the reporters on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net; Dakin Campbell in San Francisco at dcampbell27@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net.
June 12 (Bloomberg) -- A San Francisco office tower occupied by Wells Fargo & Co. sold for $333 million to a group of South Korean investors in the city’s biggest commercial property deal in three years.
Korean Teachers’ Credit Union and Korean Federation of Community Credit Cooperatives were among the buyers of 333 Market Street, a 33-story building in the city’s financial district, the teachers union said in an e-mailed statement. The purchasers paid about $507 a square foot, said Goodwin Gaw, a Hong Kong-based developer who helped broker the deal and will manage the tower. The sale closed June 10.
The seller was Des Moines, Iowa-based insurer Principal Financial Group Inc., which bought the tower from Wells Fargo for $370 million in 2006 before a collapse in commercial property values. The last single San Francisco office building to change hands for a comparable price was 650 California St., which sold for $300 million in July 2007, according to broker Jones Lang LaSalle Inc.
“A Market Street high-rise combined with a long-term lease with Wells Fargo makes this an extremely attractive asset,” said Daniel Cressman, executive vice president at Grubb & Ellis Co. in San Francisco. “It shows you how well-located, well- leased assets hold value even in difficult times.”
San Francisco-based Wells Fargo occupies 100 percent of the rentable space and has a lease that runs to 2026. The bank owns its headquarters at 420 Montgomery Street.
Paula Chizek, a spokeswoman for Principal Financial, confirmed the Market Street building was for sale and declined to comment further.
Plunge in Values
U.S. commercial real estate values were down 42 percent in March from the October 2007 peak, according to the Moody’s/REAL Commercial Property Price Index. Retail and office properties in the biggest metropolitan areas led the decline, Moody’s said May 19.
Prime office rents in San Francisco fell to $30.48 a square foot in the first quarter from $38.80 a year earlier, according to Colliers International, a Seattle-based brokerage. The vacancy rate for the highest-quality, best-located offices, known as Class A space, rose to 14.5 percent from 12.8 percent.
Tenants including Del Monte Foods Co., Brown & Toland Medical Group and Credit Suisse Group AG took advantage of low rates in the fourth quarter and leased about 1 million square feet of office space, said Tove Nilsen, research director for Colliers International in San Francisco.
South Korean Funds
The 657,115-square-foot Market Street high-rise is expected to provide “stable cash flow,” the South Korean funds said in the statement. South Korean pension funds also agreed to buy Berlin’s Sony Center from a Morgan Stanley real-estate fund in April for about $768 million and purchased two buildings in Tokyo and Yokohama, Japan this month for $116 million.
Wells Fargo, the biggest U.S. commercial property lender, will provide a $200 million loan to the buyers, according to Gaw. The purchasers are paying an interest rate of 4.5 percent on the loan, he said.
The capitalization rate for the transaction is close to 7 percent, Gaw said. The rate, a measure of real estate returns, is derived by dividing net operating income from the property by its purchase price.
Gaw’s Los Angeles-based Downtown Properties LLC owns the Roosevelt Hotel and Bradbury Building in Los Angeles and has operated offices, hotels and golf courses in Los Angeles, New York, San Francisco and Hawaii, according to its website.
He bought San Francisco’s 550 Montgomery St., a Class B office building built in 1908, for $12.65 million, or $134 a square foot, in February, according to Colliers.
--With assistance from Kevin Cho in Seoul. Editors: Kara Wetzel, Rob Urban
To contact the reporters on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net; Dakin Campbell in San Francisco at dcampbell27@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net.
Top Cities For Real Estate Flipping
Wasn't flipping houses a fad that ended when the real estate bubble burst? Actually, even in a depressed housing market, there are opportunities to make money in flipping. Investors are profiting by purchasing foreclosed homes, often at auction, fixing them up quickly and inexpensively, and reselling them.
But while just about anyone could buy and hold a property and quickly resell it for a profit during the bubble, in today's market it takes real skill to locate and purchase the right properties at the right price.
In Pictures: 5 Simple Ways To Invest In Real Estate
What Is Flipping?
Flipping refers to making a profit by buying and selling a property within a short time frame. That time frame can range from a week to a few months. The profit comes from buying the property at a significant discount and/or from a rapid appreciation in housing market values (the former is obviously more common in today's market). Flippers commonly need to make cosmetic changes to the home to increase its value, and experienced flippers may even undertake structural repairs or improvements. (For background reading, see Top 5 Must-Haves For Flipping Houses.)
Flipping is often glorified as a quick and easy way to generate income, but there are plenty of opportunities to lose money in the process as well. The home may not sell. It may not sell for as much as you'd hoped. The renovations may take longer or be more expensive than you anticipated. You may discover a hidden defect that makes the property expensive to repair or difficult to sell. Unforeseen factors, like a major nearby company closing its doors, can cause an unexpected tumble in area real estate values. In other words, it's not a sure thing. (To learn more, read 5 Mistakes That Make House Flipping A Flop.)
Real Estate Markets Ripe For Flipping
Home values declined in numerous metropolitan areas in the first quarter of 2010, according to the National Association of Realtors, and there have been reports that a large shadow of inventory is poised to enter the market in the coming months. However, there are some bright spots in the housing data that real estate investors shouldn't miss. These three cities have seen home prices increase every month for almost a year now, but still offer potential bargains in the foreclosure market.
1. San Diego
According to the Case-Shiller Index, San Diego has seen 11 consecutive months of home price increases. But RealtyTrac data for April 2010 shows that in the 92122 and 92104 zip codes, which include neighborhoods like University City, La Jolla Colony, and the area northwest of the San Diego Zoo and Balboa Park, foreclosures offer a savings of up to 46%.
The greatest difference between the average overall sale price and that of a foreclosed property was $95,750 in the 92115 zip code, the area surrounding San Diego State University. The area has a blend of condos and single family homes with an average list price of $329,500. Redfin data shows that the median sold price in this area was up 40.5% as of February.
Real estate investors should keep an eye on two troublesome indicators, however: San Diego's unemployment rate, which at 10.9% is 1.2% above the national average, and new single-family housing permits, which had significantly increased since last year as of April. New homes mean more inventory, which can lower prices.
2. San Francisco
The city by the bay has also experienced 11 consecutive months of rising home prices. Buying a foreclosure here can result in savings of up to 29%, with the biggest discounts in the 94107 zip code. This includes the Central Waterfront, Inner Mission, Mission Bay, Potrero Hill, South Beach and South of Market areas, which consist largely of condos.
The biggest difference between the average foreclosure price and the average sales price is in the 94112 zip code, where the difference is $59,673. The average sale price is $567,548, while $507,875 is the average foreclosure sale price. The 94112 zip code includes Bernal Heights, Crocker Amazon, Excelsior, Ingleside, Ingleside Heights, Mission Terrace, Oceanview, the Outer Mission, and a smattering of other areas. Most of the properties for sale in this area are single-family homes.
Like San Diego, San Francisco experienced 10.8% unemployment in recent months. It has also seen a significant increase in new single-family housing permits, with 830 issued as of April, a 51% increase since last year.
3. Los Angeles
Home prices in Los Angeles have been steadily increasing since May 2009 with only a small dip in March 2010, the most recent month for which data is available. The Los Angeles Times reported in April that house flipping is back in South Los Angeles (not one of the city's more desirable areas).
Numerous zip codes show high foreclosure rates. L.A.'s foreclosure rate of 0.38% is below California's average of 0.52% but above the national rate of 0.26%. The 90027 zip code, which includes parts of Hollywood and Los Feliz, shows the highest discount potential of up to 57%, while the nearby 90026 zip code, which includes parts of Silverlake, Echo Park and downtown, shows the greatest difference between the average foreclosure price, $407,500, and the average sales price, $506,714, a difference of $99,214.
The Los Angeles metro area is experiencing high unemployment (11.8% as of March) and has seen a 38% increase in new single-family housing permits since last year.
A Word Of Caution
Anyone interested in flipping still needs to have plenty of cash to buy the house, remodel it, and pay carrying costs like taxes, insurance, mortgage interest and utilities. Flippers should also be prepared to compete with investors looking for rental properties and sometimes with owner-occupants who are willing to put in some elbow grease or live in a less-than-ideal house to get a deal.
The end of tax incentives to buy a home and continued foreclosures could reverse housing market recoveries in some areas, and investors should consider the impact of a declining market on the purchase price they can pay if they hope to earn a profit. But for the adventurous and the industrious, it's still possible to make money in flipping.
Catch up on the latest financial news in Water Cooler Finance: Buffett Speaks Up, AIG Deal Collapses.
Original story - Top Cities For Real Estate Flipping
Copyright (c) 2010 Investopedia ULC. All rights reserved. Investopedia.com is a Forbes Digital Company.
But while just about anyone could buy and hold a property and quickly resell it for a profit during the bubble, in today's market it takes real skill to locate and purchase the right properties at the right price.
In Pictures: 5 Simple Ways To Invest In Real Estate
What Is Flipping?
Flipping refers to making a profit by buying and selling a property within a short time frame. That time frame can range from a week to a few months. The profit comes from buying the property at a significant discount and/or from a rapid appreciation in housing market values (the former is obviously more common in today's market). Flippers commonly need to make cosmetic changes to the home to increase its value, and experienced flippers may even undertake structural repairs or improvements. (For background reading, see Top 5 Must-Haves For Flipping Houses.)
Flipping is often glorified as a quick and easy way to generate income, but there are plenty of opportunities to lose money in the process as well. The home may not sell. It may not sell for as much as you'd hoped. The renovations may take longer or be more expensive than you anticipated. You may discover a hidden defect that makes the property expensive to repair or difficult to sell. Unforeseen factors, like a major nearby company closing its doors, can cause an unexpected tumble in area real estate values. In other words, it's not a sure thing. (To learn more, read 5 Mistakes That Make House Flipping A Flop.)
Real Estate Markets Ripe For Flipping
Home values declined in numerous metropolitan areas in the first quarter of 2010, according to the National Association of Realtors, and there have been reports that a large shadow of inventory is poised to enter the market in the coming months. However, there are some bright spots in the housing data that real estate investors shouldn't miss. These three cities have seen home prices increase every month for almost a year now, but still offer potential bargains in the foreclosure market.
1. San Diego
According to the Case-Shiller Index, San Diego has seen 11 consecutive months of home price increases. But RealtyTrac data for April 2010 shows that in the 92122 and 92104 zip codes, which include neighborhoods like University City, La Jolla Colony, and the area northwest of the San Diego Zoo and Balboa Park, foreclosures offer a savings of up to 46%.
The greatest difference between the average overall sale price and that of a foreclosed property was $95,750 in the 92115 zip code, the area surrounding San Diego State University. The area has a blend of condos and single family homes with an average list price of $329,500. Redfin data shows that the median sold price in this area was up 40.5% as of February.
Real estate investors should keep an eye on two troublesome indicators, however: San Diego's unemployment rate, which at 10.9% is 1.2% above the national average, and new single-family housing permits, which had significantly increased since last year as of April. New homes mean more inventory, which can lower prices.
2. San Francisco
The city by the bay has also experienced 11 consecutive months of rising home prices. Buying a foreclosure here can result in savings of up to 29%, with the biggest discounts in the 94107 zip code. This includes the Central Waterfront, Inner Mission, Mission Bay, Potrero Hill, South Beach and South of Market areas, which consist largely of condos.
The biggest difference between the average foreclosure price and the average sales price is in the 94112 zip code, where the difference is $59,673. The average sale price is $567,548, while $507,875 is the average foreclosure sale price. The 94112 zip code includes Bernal Heights, Crocker Amazon, Excelsior, Ingleside, Ingleside Heights, Mission Terrace, Oceanview, the Outer Mission, and a smattering of other areas. Most of the properties for sale in this area are single-family homes.
Like San Diego, San Francisco experienced 10.8% unemployment in recent months. It has also seen a significant increase in new single-family housing permits, with 830 issued as of April, a 51% increase since last year.
3. Los Angeles
Home prices in Los Angeles have been steadily increasing since May 2009 with only a small dip in March 2010, the most recent month for which data is available. The Los Angeles Times reported in April that house flipping is back in South Los Angeles (not one of the city's more desirable areas).
Numerous zip codes show high foreclosure rates. L.A.'s foreclosure rate of 0.38% is below California's average of 0.52% but above the national rate of 0.26%. The 90027 zip code, which includes parts of Hollywood and Los Feliz, shows the highest discount potential of up to 57%, while the nearby 90026 zip code, which includes parts of Silverlake, Echo Park and downtown, shows the greatest difference between the average foreclosure price, $407,500, and the average sales price, $506,714, a difference of $99,214.
The Los Angeles metro area is experiencing high unemployment (11.8% as of March) and has seen a 38% increase in new single-family housing permits since last year.
A Word Of Caution
Anyone interested in flipping still needs to have plenty of cash to buy the house, remodel it, and pay carrying costs like taxes, insurance, mortgage interest and utilities. Flippers should also be prepared to compete with investors looking for rental properties and sometimes with owner-occupants who are willing to put in some elbow grease or live in a less-than-ideal house to get a deal.
The end of tax incentives to buy a home and continued foreclosures could reverse housing market recoveries in some areas, and investors should consider the impact of a declining market on the purchase price they can pay if they hope to earn a profit. But for the adventurous and the industrious, it's still possible to make money in flipping.
Catch up on the latest financial news in Water Cooler Finance: Buffett Speaks Up, AIG Deal Collapses.
Original story - Top Cities For Real Estate Flipping
Copyright (c) 2010 Investopedia ULC. All rights reserved. Investopedia.com is a Forbes Digital Company.
Friday, June 11, 2010
Lawmakers move to extend homebuyer credit
WASHINGTON - Homebuyers may get an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring.
Senate Majority Leader Harry Reid, D-Nev., said Thursday he wants to give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.
The proposal would only allow people who already have signed contracts to finish at the later date.
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Reid introduced the proposal as an amendment to a bill that would extend jobless benefits through the end of November. Joining him were Sen. Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn.
Reid, who faces perhaps the toughest re-election campaign of his political career, represents a state that has the nation's highest foreclosure rate.
The National Association of Realtors has been pushing hard in Congress for the extension. Mortgage lenders, the trade group says, have been swamped with borrowers trying to get approved by the end of the month. Many potential borrowers are unlikely to make the deadline.
"Time is of the essence," said Lucian Salvant, a spokesman for the group. "It's important for Congress to get this done, because there's whole bunch of loans that aren't' going to close on time."
First-time buyers were eligible for a tax credit of up to $8,000. Current owners who bought and moved into another home could qualify for a credit of up to $6,500.
Senate Majority Leader Harry Reid, D-Nev., said Thursday he wants to give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.
The proposal would only allow people who already have signed contracts to finish at the later date.
Story continues below ↓advertisement | your ad here
Reid introduced the proposal as an amendment to a bill that would extend jobless benefits through the end of November. Joining him were Sen. Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn.
Reid, who faces perhaps the toughest re-election campaign of his political career, represents a state that has the nation's highest foreclosure rate.
The National Association of Realtors has been pushing hard in Congress for the extension. Mortgage lenders, the trade group says, have been swamped with borrowers trying to get approved by the end of the month. Many potential borrowers are unlikely to make the deadline.
"Time is of the essence," said Lucian Salvant, a spokesman for the group. "It's important for Congress to get this done, because there's whole bunch of loans that aren't' going to close on time."
First-time buyers were eligible for a tax credit of up to $8,000. Current owners who bought and moved into another home could qualify for a credit of up to $6,500.
Thursday, June 10, 2010
Foreclosure rate steadies as banks hold back
WASHINGTON - The foreclosure crisis appears to be leveling off.
The number of people facing foreclosure is nearly flat from a year ago, according to the latest report from a private foreclosure listing service. A third fewer people are receiving legal warnings that they could lose their homes. And foreclosures are receding in some of the hardest-hit cities.
Still, the number of foreclosures remains extraordinarily high. Experts caution that a big reason for the stabilization is that banks are letting delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market. New consumer protection laws, which vary by state, have also meant borrowers can spend more time in their homes.
Story continues below ↓advertisement | your ad here
A new wave of foreclosures could be coming in the second half of the year, especially if the unemployment rate remains high, mortgage-assistance programs fail, and the economy doesn't improve fast enough to lift home sales.
"It's not anything like a recovery yet," said Rick Sharga, a senior vice president at RealtyTrac Inc., a foreclosure listing service.
RealtyTrac reported Thursday that nearly 323,000 households, or one in every 400 homes, received a foreclosure-related notice in May. That was up 0.5 percent from a year earlier but down 3 percent from April. The report tracks notices for defaults, scheduled home auctions and home repossessions.
But in a sign that the crisis is far from over, the number of homeowners who lost their homes to foreclosure hit a record of nearly 94,000 in May. That number may finally peak next year, as lenders try to work their way through millions of delinquent loans.
Economic woes, such as unemployment or reduced income, are the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. Now, homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.
A record high of more than 10 percent of homeowners with a mortgage had missed at least one payment as of the end of March, according to the Mortgage Bankers Association. But the number of homeowners just starting to show trouble is trending downward as the economy improves.
"That's a very good thing," said Thomas Lawler, an independent housing economist in Virginia. But he noted that even with that positive trend, "you are highly likely to see an acceleration in the number of actual completed foreclosures."
Lenders are offering to help some homeowners modify their loans. But many borrowers can't qualify or they are falling back into default. The Obama administration's $75 billion foreclosure prevention effort has made only a small dent in the problem.
About 25 percent of the 1.2 million homeowners who started the program over the past year had received permanent loan modifications as of April. About 23 percent of those enrolled dropped out during a trial phase that lasts at least three months. Many more are in limbo.
Among states, Nevada posted the highest foreclosure rate in May. One in every 79 households there received a foreclosure notice. However, foreclosures there are down 16 percent from a year earlier.
Arizona, Florida, California and Michigan were next among states with the highest foreclosure rates. Rounding out the top 10 were Georgia, Idaho, Illinois, Utah and Maryland.
Las Vegas continued to be the city with the nation's highest foreclosure rate, but activity there was down 18 percent from a year earlier. And nine out of the top 10 cities with the highest foreclosure rates posted annual declines. The exception was the Vallejo-Fairfield area in California, where foreclosures were up 1 percent from a year ago.
Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties. That's a concern for local communities, and a drag on the economic recovery.
The number of people facing foreclosure is nearly flat from a year ago, according to the latest report from a private foreclosure listing service. A third fewer people are receiving legal warnings that they could lose their homes. And foreclosures are receding in some of the hardest-hit cities.
Still, the number of foreclosures remains extraordinarily high. Experts caution that a big reason for the stabilization is that banks are letting delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market. New consumer protection laws, which vary by state, have also meant borrowers can spend more time in their homes.
Story continues below ↓advertisement | your ad here
A new wave of foreclosures could be coming in the second half of the year, especially if the unemployment rate remains high, mortgage-assistance programs fail, and the economy doesn't improve fast enough to lift home sales.
"It's not anything like a recovery yet," said Rick Sharga, a senior vice president at RealtyTrac Inc., a foreclosure listing service.
RealtyTrac reported Thursday that nearly 323,000 households, or one in every 400 homes, received a foreclosure-related notice in May. That was up 0.5 percent from a year earlier but down 3 percent from April. The report tracks notices for defaults, scheduled home auctions and home repossessions.
But in a sign that the crisis is far from over, the number of homeowners who lost their homes to foreclosure hit a record of nearly 94,000 in May. That number may finally peak next year, as lenders try to work their way through millions of delinquent loans.
Economic woes, such as unemployment or reduced income, are the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. Now, homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.
A record high of more than 10 percent of homeowners with a mortgage had missed at least one payment as of the end of March, according to the Mortgage Bankers Association. But the number of homeowners just starting to show trouble is trending downward as the economy improves.
"That's a very good thing," said Thomas Lawler, an independent housing economist in Virginia. But he noted that even with that positive trend, "you are highly likely to see an acceleration in the number of actual completed foreclosures."
Lenders are offering to help some homeowners modify their loans. But many borrowers can't qualify or they are falling back into default. The Obama administration's $75 billion foreclosure prevention effort has made only a small dent in the problem.
About 25 percent of the 1.2 million homeowners who started the program over the past year had received permanent loan modifications as of April. About 23 percent of those enrolled dropped out during a trial phase that lasts at least three months. Many more are in limbo.
Among states, Nevada posted the highest foreclosure rate in May. One in every 79 households there received a foreclosure notice. However, foreclosures there are down 16 percent from a year earlier.
Arizona, Florida, California and Michigan were next among states with the highest foreclosure rates. Rounding out the top 10 were Georgia, Idaho, Illinois, Utah and Maryland.
Las Vegas continued to be the city with the nation's highest foreclosure rate, but activity there was down 18 percent from a year earlier. And nine out of the top 10 cities with the highest foreclosure rates posted annual declines. The exception was the Vallejo-Fairfield area in California, where foreclosures were up 1 percent from a year ago.
Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties. That's a concern for local communities, and a drag on the economic recovery.
Banks seizing more foreclosed homes
By Tami Luhby, staff writerJune 10, 2010: 3:32 AM ET
NEW YORK (CNNMoney.com) -- Banks are seizing more foreclosed homes even as the number of people falling behind on their mortgages is declining.
Bank repossessions hit a record monthly high in May, according to RealtyTrac, the online marketer of foreclosed properties. Lenders took back 93,777 properties, up 1% from the previous month's record and 44% from the same period a year earlier.
Foreclosure filings, meanwhile, fell by 3% from a month earlier and edged up less than 1% from May 2009. One in every 400 homes received a foreclosure notice last month.
"Lenders appear to be ramping up the pace of completing those forestalled foreclosures even while the inflow of delinquencies into the foreclosure process has slowed," said James Saccacio, RealtyTrac's chief executive.
After foreclosure: How long until you can buy again?
Overwhelmed by the mortgage meltdown, lenders have been relatively lax in repossessing homes as they try to cope with the flood of borrower defaults. As the housing market starts to stabilize, however, they are turning their attention to taking back homes.
It can take more than a year to complete a foreclosure, on average, Jack Schakett, credit loss mitigation strategies executive at Bank of America, told reporters last week. In states that require lenders to take delinquent borrowers to court before foreclosure, the process can drag on closer to two years.
Worst states
Nevada, Arizona and Florida once again top the state foreclosure rates in May, though the pace is moderating.
One in every 79 homes in Nevada received a foreclosure filing last month, down nearly 12% from April and 16% from a year ago. The state's foreclosure rate is five times the national average.
Arizona, meanwhile, saw its foreclosure activity increase by less than 1% in May from the prior month and drop 5% from May 2009. One in every 169 properties received a foreclosure notice in May.
In Florida, one in every 174 properties got a foreclosure filing in May, up 4.76% from a month ago but down nearly 14% from a year ago.
Nationwide, one in every 400 homes received a notice in May, down 3.27% from last month and up 0.45% from a year ago. To top of page
source: CNN
NEW YORK (CNNMoney.com) -- Banks are seizing more foreclosed homes even as the number of people falling behind on their mortgages is declining.
Bank repossessions hit a record monthly high in May, according to RealtyTrac, the online marketer of foreclosed properties. Lenders took back 93,777 properties, up 1% from the previous month's record and 44% from the same period a year earlier.
Foreclosure filings, meanwhile, fell by 3% from a month earlier and edged up less than 1% from May 2009. One in every 400 homes received a foreclosure notice last month.
"Lenders appear to be ramping up the pace of completing those forestalled foreclosures even while the inflow of delinquencies into the foreclosure process has slowed," said James Saccacio, RealtyTrac's chief executive.
After foreclosure: How long until you can buy again?
Overwhelmed by the mortgage meltdown, lenders have been relatively lax in repossessing homes as they try to cope with the flood of borrower defaults. As the housing market starts to stabilize, however, they are turning their attention to taking back homes.
It can take more than a year to complete a foreclosure, on average, Jack Schakett, credit loss mitigation strategies executive at Bank of America, told reporters last week. In states that require lenders to take delinquent borrowers to court before foreclosure, the process can drag on closer to two years.
Worst states
Nevada, Arizona and Florida once again top the state foreclosure rates in May, though the pace is moderating.
One in every 79 homes in Nevada received a foreclosure filing last month, down nearly 12% from April and 16% from a year ago. The state's foreclosure rate is five times the national average.
Arizona, meanwhile, saw its foreclosure activity increase by less than 1% in May from the prior month and drop 5% from May 2009. One in every 169 properties received a foreclosure notice in May.
In Florida, one in every 174 properties got a foreclosure filing in May, up 4.76% from a month ago but down nearly 14% from a year ago.
Nationwide, one in every 400 homes received a notice in May, down 3.27% from last month and up 0.45% from a year ago. To top of page
source: CNN
Tuesday, June 8, 2010
Wasn't commercial real estate supposed to crash?
FORTUNE -- During the long years of the financial crisis, the American economy has been like a retelling of the Somerset Maugham story "Appointment in Samarra," in which a man unsuccessfully runs from city to city in attempts to avoid a run-in with Death -- who, of course, is one step ahead of him. Similarly, investors have now spent years dodging disaster in one area of the markets, only to find their investments coming to a bad end elsewhere.
Oddly, however, there is one sector that has been outrunning the reaper since 2007, and it's the last place you'd expect to have survived so long: commercial real estate. For much of 2008 and 2009 CRE was awash in red ink, and yet it hangs on. Richard LeFrak, chairman of the LeFrak Organization, said at the Milken Institute Global Conference in April, "The failure that we were all anticipating in the commercial real estate market, it kind of didn't happen. We blinked, it went away."
The only question now is how long it can keep up the sprint while the ghosts of boom-time leverage haunt the sector, and $1.4 trillion in loan maturities loom three years over the horizon.
To crash or not to crash: Which side is right?
There is a sharp disagreement among experts in how things will play out. Some predict foreclosures, loan defaults and a national crisis of disastrous proportions. In that corner is Elizabeth Warren's Congressional Oversight Panel, which flatly predicted this year that commercial real estate loans are heading for a crash that will bring down small banks, destroy small-business lending and create "a downward spiral of economic contraction," in her ominous words.
On the other side, investors in commercial properties and buyers of commercial mortgage-backed securities believe that the commercial real estate market will continue to suffer until it hits a bottom, but it will never crash in the way that the residential market collapsed. They believe that commercial real estate will be an example of how a market can take the hits and keep on ticking, that not every spot of trouble results in a crisis, that an industry can actually, somehow, stop a crisis if it acts early enough and has enough support.
Peter Roberts, Chief Executive Officer of the Americas for property giant Jones Lang LaSalle (JLL), put it this way: "We're not going to see a 'crash'. We're going to see a long work-through." Roberts believes commercial property values are in the process of bottoming out and will get to the ground floor by early 2011.
He credits the government's support programs in capital markets with reversing the psychology of nervous markets in 2009: "The powers that be are very focused in making sure that we don't have a crash in the real estate market. That has infused the mindset of investors."
The Hilton maneuver
Investors are making the most of their good luck while they can. There have already been deals of several different varieties that show us their plan for addressing the problem of high-water mark commercial mortgages coming due.
Of them, there's no better example of temporarily sidestepping the debt monster than Blackstone Group's clutch move with Hilton Hotels. The PE firm's $26 billion buyout of Hilton in 2007 -- with $20 billion of outstanding debt due by 2013 -- is a prime example of the sweaty palms that high leverage deals can cause even savvy investors.
But in April, Blackstone (BX) bought back $1.8 billion of Hilton's debt and restructured another $2.1 billion to turn it into preferred equity. Blackstone also pushed off the maturities of the remaining $16 billion until 2015, buying itself two whole years of breathing room. Hilton is still debt-laden, but it's not dead -- and hedge-fund investors speak approvingly of Blackstone's decisions to face its problems early.
The deal has kicked off a quiet trend of what one real-estate investor at a hedge fund calls "mini-Hiltons" -- a pending wave of real estate investors seeking to buy back and restructure their own debt to stay alive until the recovery.
In another pattern, auctions for distressed assets are becoming more and more competitive, giving troubled assets quick homes. One of the most notable was the acquisition of Corus Bankshare's $4.5 billion real estate portfolio, sold for a mere 60 cents on the dollar in an FDIC auction to a group of real estate investors and hedge funds including Barry Sternlicht of Starwood Capital Group, TPG Capital, WLR LeFrak and Perry Capital. The FDIC kept the majority of the portfolio, but gave the buyers zero-percent financing -- a sweet deal for any investor.
Unhinged loans
Since properties have become so hard to buy, many investors have turned with voraciousness to the bundles of securitized loans known as commercial mortgage-backed securities, or CMBS. If anything in commercial real estate stands ready for a reckoning, it is these securities.
Despite CMBS hurtling toward higher default rates, however, investors who have faith in them are practicing some serious compartmentalization. They say that there are only some CMBS -- and some tranches of CMBS -- that will be hurt. They believe that the highest-rated tranches, rated triple-A, are in no danger.
They also say that CMBS could never create as much havoc as their residential cousins because of their structure: They are made of whole loans that haven't been chopped up as much in the Wall Street sausage factory, and are based on stronger assets.
The tranches most likely to be hurt, of course, are those with the worst ratings - the triple Bs. These were the biggest victims of lax underwriting standards. According to Commercial Mortgage Alert, the boom years of 2005 through 2007 saw a total of $602 billion in CMBS issuance. (The CMBS written during those three years, by the way, account for a whopping 49% of all CMBS written over the past 20 years.) Those are likely to be the problematic securities. The CMBS written before and after don't have as much leverage put on them, say investors.
CMBS, however, accounts for only about 20% of the total loan market, according to Jones Lang LaSalle's Roberts. The bigger danger to the capital markets -- and to banks -- are speculative commercial loans, like those in construction and land loans. Those aren't backed by firm assets and are a key part of the reason that many smaller banks have failed in recent years. It is these loans, in particular, that worry Warren and others, and could yet bring a reckoning to CRE.
There is a lot riding on the outcome of commercial real estate's do-it-yourself salvation. If the sector can escape the same kind of crash that took down residential real estate, then we have a case study in how investors and government can prevent a crash before it happens. If it doesn't work, however, the economy could be hit again at a moment when it is least able to bear the punch. To top of page.
Oddly, however, there is one sector that has been outrunning the reaper since 2007, and it's the last place you'd expect to have survived so long: commercial real estate. For much of 2008 and 2009 CRE was awash in red ink, and yet it hangs on. Richard LeFrak, chairman of the LeFrak Organization, said at the Milken Institute Global Conference in April, "The failure that we were all anticipating in the commercial real estate market, it kind of didn't happen. We blinked, it went away."
The only question now is how long it can keep up the sprint while the ghosts of boom-time leverage haunt the sector, and $1.4 trillion in loan maturities loom three years over the horizon.
To crash or not to crash: Which side is right?
There is a sharp disagreement among experts in how things will play out. Some predict foreclosures, loan defaults and a national crisis of disastrous proportions. In that corner is Elizabeth Warren's Congressional Oversight Panel, which flatly predicted this year that commercial real estate loans are heading for a crash that will bring down small banks, destroy small-business lending and create "a downward spiral of economic contraction," in her ominous words.
On the other side, investors in commercial properties and buyers of commercial mortgage-backed securities believe that the commercial real estate market will continue to suffer until it hits a bottom, but it will never crash in the way that the residential market collapsed. They believe that commercial real estate will be an example of how a market can take the hits and keep on ticking, that not every spot of trouble results in a crisis, that an industry can actually, somehow, stop a crisis if it acts early enough and has enough support.
Peter Roberts, Chief Executive Officer of the Americas for property giant Jones Lang LaSalle (JLL), put it this way: "We're not going to see a 'crash'. We're going to see a long work-through." Roberts believes commercial property values are in the process of bottoming out and will get to the ground floor by early 2011.
He credits the government's support programs in capital markets with reversing the psychology of nervous markets in 2009: "The powers that be are very focused in making sure that we don't have a crash in the real estate market. That has infused the mindset of investors."
The Hilton maneuver
Investors are making the most of their good luck while they can. There have already been deals of several different varieties that show us their plan for addressing the problem of high-water mark commercial mortgages coming due.
Of them, there's no better example of temporarily sidestepping the debt monster than Blackstone Group's clutch move with Hilton Hotels. The PE firm's $26 billion buyout of Hilton in 2007 -- with $20 billion of outstanding debt due by 2013 -- is a prime example of the sweaty palms that high leverage deals can cause even savvy investors.
But in April, Blackstone (BX) bought back $1.8 billion of Hilton's debt and restructured another $2.1 billion to turn it into preferred equity. Blackstone also pushed off the maturities of the remaining $16 billion until 2015, buying itself two whole years of breathing room. Hilton is still debt-laden, but it's not dead -- and hedge-fund investors speak approvingly of Blackstone's decisions to face its problems early.
The deal has kicked off a quiet trend of what one real-estate investor at a hedge fund calls "mini-Hiltons" -- a pending wave of real estate investors seeking to buy back and restructure their own debt to stay alive until the recovery.
In another pattern, auctions for distressed assets are becoming more and more competitive, giving troubled assets quick homes. One of the most notable was the acquisition of Corus Bankshare's $4.5 billion real estate portfolio, sold for a mere 60 cents on the dollar in an FDIC auction to a group of real estate investors and hedge funds including Barry Sternlicht of Starwood Capital Group, TPG Capital, WLR LeFrak and Perry Capital. The FDIC kept the majority of the portfolio, but gave the buyers zero-percent financing -- a sweet deal for any investor.
Unhinged loans
Since properties have become so hard to buy, many investors have turned with voraciousness to the bundles of securitized loans known as commercial mortgage-backed securities, or CMBS. If anything in commercial real estate stands ready for a reckoning, it is these securities.
Despite CMBS hurtling toward higher default rates, however, investors who have faith in them are practicing some serious compartmentalization. They say that there are only some CMBS -- and some tranches of CMBS -- that will be hurt. They believe that the highest-rated tranches, rated triple-A, are in no danger.
They also say that CMBS could never create as much havoc as their residential cousins because of their structure: They are made of whole loans that haven't been chopped up as much in the Wall Street sausage factory, and are based on stronger assets.
The tranches most likely to be hurt, of course, are those with the worst ratings - the triple Bs. These were the biggest victims of lax underwriting standards. According to Commercial Mortgage Alert, the boom years of 2005 through 2007 saw a total of $602 billion in CMBS issuance. (The CMBS written during those three years, by the way, account for a whopping 49% of all CMBS written over the past 20 years.) Those are likely to be the problematic securities. The CMBS written before and after don't have as much leverage put on them, say investors.
CMBS, however, accounts for only about 20% of the total loan market, according to Jones Lang LaSalle's Roberts. The bigger danger to the capital markets -- and to banks -- are speculative commercial loans, like those in construction and land loans. Those aren't backed by firm assets and are a key part of the reason that many smaller banks have failed in recent years. It is these loans, in particular, that worry Warren and others, and could yet bring a reckoning to CRE.
There is a lot riding on the outcome of commercial real estate's do-it-yourself salvation. If the sector can escape the same kind of crash that took down residential real estate, then we have a case study in how investors and government can prevent a crash before it happens. If it doesn't work, however, the economy could be hit again at a moment when it is least able to bear the punch. To top of page.
Harry Warner's Hancock Park Manor Sold at $2.9 Million.
The late Harry Warner's Hancock Park manor was recently sold for $2.9 million by a bank, the real estate firm that handled the transaction announced this week.
The structure was built in 1923 by Warner, the movie mogul who cofounded the Warner Bros. studio. The 5,555 square foot Georgian colonial estate boasts seven bedrooms and five and a half baths as well as a tennis court, pool, and marble staircase. Located at 501 S. Rossmore Ave, the estate was originally priced at $4.75 million.
Warner reportedly hosted the industry's top parties at the estate and held movie showings at the home basement screening room, which was lined with maple paneled walls and which contained a movie projection booth. He sold the house after a few years to help finance one of the industry's first talking pictures, The Jazz Singer.
The transaction was handled by Media West Realty, which created a promotional website and a high definition video of the property to help sell it.
Monday, June 7, 2010
Foreclosure Glut: Is 'Shadow Inventory' Really a Threat?
Every once in a while, the term "shadow inventory" makes it into the business headlines. Invariably, stories warn of a looming flood of foreclosures that will drag the housing market down as soon as homeowners begin to feel optimistic again.
Tips to help stave off foreclosure.
But what is shadow inventory -- and is it really such a big threat?
Different experts have different definitions. Some only include homes that have already been repossessed by banks and are awaiting distressed sales. Others include those whose owners are long-overdue on mortgage payments, while others still count homes whose owners would like to sell but are waiting for conditions to improve.
8 Million More Foreclosures May Be Waiting
"The definition of shadow inventory has gotten out of control," says Rick Sharga, senior vice president at RealtyTrac, an online market for distressed homes.
Related
Mortgage Bailouts: $2.1B to 'Hardest-Hit'
WATCH: Foreclosure Rescue Scams
Time to Buy a Home? Yes, But Keep an Eye on the Local Data
As a result, estimates of homes in the shadows vary widely between 2 million and 8 million. By comparison, approximately 5.5 million homes are expected to change hands this year, of which about a third are in some kind of distress.
High estimates usually include include repossessed homes that have not yet been listed for sale, homes that have been moved from the delinquent bucket and into foreclosure, and homes that are more than 60 days delinquent.
"Theoretically you could say up to 7 million homes are in the pipeline, but not all of them will go into the market and if even if they do, not all of them will hit at once," says Sharga. Given the current pace of sales, Sharga believes shadow inventory could be cleared by the end of 2013, at which point the housing market can begin a real recovery.
Shadow Inventory Can Be Lethal
The problem with shadow inventory is that it does not simply represent additional supply. It's supply of the worst kind: distressed homes that are often in hard-hit regions, often in a state of disrepair. Homes in foreclosure have more power to drag down real estate prices and keep them depressed for years to come.
"If you can buy a cheap foreclosed home next door to a normal home, many people will choose to buy the discounted home," says Celia Chen, housing analyst at Moody's Economy.com. She estimates that 4.6 million homes are currently waiting in the shadows, almost a whole year's worth of housing supply.
Tips to help stave off foreclosure.
But what is shadow inventory -- and is it really such a big threat?
Different experts have different definitions. Some only include homes that have already been repossessed by banks and are awaiting distressed sales. Others include those whose owners are long-overdue on mortgage payments, while others still count homes whose owners would like to sell but are waiting for conditions to improve.
8 Million More Foreclosures May Be Waiting
"The definition of shadow inventory has gotten out of control," says Rick Sharga, senior vice president at RealtyTrac, an online market for distressed homes.
Related
Mortgage Bailouts: $2.1B to 'Hardest-Hit'
WATCH: Foreclosure Rescue Scams
Time to Buy a Home? Yes, But Keep an Eye on the Local Data
As a result, estimates of homes in the shadows vary widely between 2 million and 8 million. By comparison, approximately 5.5 million homes are expected to change hands this year, of which about a third are in some kind of distress.
High estimates usually include include repossessed homes that have not yet been listed for sale, homes that have been moved from the delinquent bucket and into foreclosure, and homes that are more than 60 days delinquent.
"Theoretically you could say up to 7 million homes are in the pipeline, but not all of them will go into the market and if even if they do, not all of them will hit at once," says Sharga. Given the current pace of sales, Sharga believes shadow inventory could be cleared by the end of 2013, at which point the housing market can begin a real recovery.
Shadow Inventory Can Be Lethal
The problem with shadow inventory is that it does not simply represent additional supply. It's supply of the worst kind: distressed homes that are often in hard-hit regions, often in a state of disrepair. Homes in foreclosure have more power to drag down real estate prices and keep them depressed for years to come.
"If you can buy a cheap foreclosed home next door to a normal home, many people will choose to buy the discounted home," says Celia Chen, housing analyst at Moody's Economy.com. She estimates that 4.6 million homes are currently waiting in the shadows, almost a whole year's worth of housing supply.
Calif. Senate Passes Foreclosure Prevention Bill
California's Senate Bill 1275 (S.B.1275), which allows for limited remedy for certain eligible homeowners whose homes are erroneously sold at foreclosure, was passed out of the chamber last week by a 21-12 vote. The legislation will now be heard in the Assembly Banking Committee.
Authored by Sen. Mark Leno, D-San Francisco, and Senate President Pro Tem Darrell Steinberg, D-Sacramento, S.B.1275 would allow eligible homeowners to seek limited damages that are directly related to the severity of a servicer's errors, or, in some cases, would allow homeowners to reverse foreclosure sales and require servicers to restart the foreclosure process.
The bill would also prevent servicers from foreclosing on homeowners who have requested modifications until a decision has been made and the homeowner has been notified. Currently, servicers can proceed concurrently with foreclosure actions concurrent and loan modification negotiations - a "dual track" process that housing advocates say can cause confusion among borrowers.
"Simple fairness dictates that no one should lose their home while they are in the middle of trying to save it," Paul Leonard, director of the California office of the Center for Responsible Lending, said in a statement.
SOURCE: Center for Responsible Lending. Office of Sen. Mark Leno
Authored by Sen. Mark Leno, D-San Francisco, and Senate President Pro Tem Darrell Steinberg, D-Sacramento, S.B.1275 would allow eligible homeowners to seek limited damages that are directly related to the severity of a servicer's errors, or, in some cases, would allow homeowners to reverse foreclosure sales and require servicers to restart the foreclosure process.
The bill would also prevent servicers from foreclosing on homeowners who have requested modifications until a decision has been made and the homeowner has been notified. Currently, servicers can proceed concurrently with foreclosure actions concurrent and loan modification negotiations - a "dual track" process that housing advocates say can cause confusion among borrowers.
"Simple fairness dictates that no one should lose their home while they are in the middle of trying to save it," Paul Leonard, director of the California office of the Center for Responsible Lending, said in a statement.
SOURCE: Center for Responsible Lending. Office of Sen. Mark Leno
Saturday, June 5, 2010
Open House: Getting away from it all
By KARA McGUIRE, Star Tribune
Despite an uptick in prices and a more balanced supply of homes on the market -- signs that the housing market may have turned the corner -- foreclosures continued to increase across the nation in the first quarter.
During the first three months of 2010, 16 percent more households received a foreclosure-related filing such as a default notice or a scheduled sheriff's sale than in the first quarter of 2009, according to RealtyTrac's foreclosure market report. Foreclosure-related filings rose 7 percent compared with the last quarter of 2009. Ten states -- led by California, Florida and Arizona -- account for nearly three-quarters of the nation's foreclosure activity, the report found.
In Minnesota, one in every 253 households received a foreclosure-related notice in the first quarter -- an increase of 28 percent over last year's first quarter and flat with the fourth quarter of 2009. Still, foreclosure-related notices were 13 percent lower than they were in the third quarter last year, when filings peaked in the state. Minnesota is 26th-highest in the nation for the rate of foreclosure-related notices received.
Ed Nelson, spokesman for the Minnesota Homeownership Center, has said he expects that the number of homeowners who ultimately lose their homes to foreclosure will be similar to what was seen in 2009, when 23,019 foreclosures occurred. That was down 12 percent from 2008.
Separately, the government's Home Affordable Modification Program (HAMP) announced Wednesday that 57,000 more homeowners had their mortgages modified in March, bringing the total of troubled borrowers with HAMP loan modifications to more than 1.1 million.
Friday, June 4, 2010
Hope seen for commercial real estate
A University of St. Thomas survey of 50 commercial real estate experts in the Twin Cities shows that they expect a slow turnaround in the battered sector.
The school's Minnesota Commercial Real Estate Survey released Thursday had a composite index of 53.5. The midpoint of 50 is neutral, so the results tilted positive, indicating future growth.
"We're basically trying to find out their outlook for the next two years because we think they'll make decisions based on their own outlook," said Herb Tousley, director of real estate programs at the University of St. Thomas.
Experts indicated through survey results that they expect Twin Cities rental rates and occupancy rates to increase in the next two years. The index for occupancy was 69.4; the index for rental rates was 60.2.
The survey results showed that they also think land prices and building materials will rise from today's historic lows. The indexes for land prices and the cost of building materials were 42.9 and 33.7, respectively, indicating a more negative outlook.
"If land prices and building prices go up, that could temper things a little, but I don't think that'll be a huge drag on it," Tousley said.
The survey consists of six questions about the future of office, retail and industrial properties between now and 2012. Each question has a value from 0 to 100.
Since this is the school's first survey, it'll provide a benchmark for future surveys. Surveys will be conducted twice a year, in
the spring and fall.
ipt type="text/javascript"> var owHost = (("https:" == document.location.protocol) ? "https://" : "http://");document.write(unescape("%3Cscript src='" + owHost + "onlywire.com/btn/button_17317' ad='no' title='Hope seen for commercial real estate.' tags='Amp, Angeles California, Bedrooms, Bel Air, Beverly Hills California, Beverly Hills Real Estate, Celebrity Home, Coldwell Banker Previews, Condominiums, Guest House, Hancock Park, Hollywood Hills, Holmby Hills, Homes For Sale, Investment Properties, North Canon Drive, Previews International, Real Estate Group, West 6th Street, Westside Areas' url='http://www.hancockparkmls.com/blog.html' class='owbutton' type='text/javascript'%3E%3C/script%3E"));
-- Gita Sitaramiah
The school's Minnesota Commercial Real Estate Survey released Thursday had a composite index of 53.5. The midpoint of 50 is neutral, so the results tilted positive, indicating future growth.
"We're basically trying to find out their outlook for the next two years because we think they'll make decisions based on their own outlook," said Herb Tousley, director of real estate programs at the University of St. Thomas.
Experts indicated through survey results that they expect Twin Cities rental rates and occupancy rates to increase in the next two years. The index for occupancy was 69.4; the index for rental rates was 60.2.
The survey results showed that they also think land prices and building materials will rise from today's historic lows. The indexes for land prices and the cost of building materials were 42.9 and 33.7, respectively, indicating a more negative outlook.
"If land prices and building prices go up, that could temper things a little, but I don't think that'll be a huge drag on it," Tousley said.
The survey consists of six questions about the future of office, retail and industrial properties between now and 2012. Each question has a value from 0 to 100.
Since this is the school's first survey, it'll provide a benchmark for future surveys. Surveys will be conducted twice a year, in
the spring and fall.
ipt type="text/javascript"> var owHost = (("https:" == document.location.protocol) ? "https://" : "http://");document.write(unescape("%3Cscript src='" + owHost + "onlywire.com/btn/button_17317' ad='no' title='Hope seen for commercial real estate.' tags='Amp, Angeles California, Bedrooms, Bel Air, Beverly Hills California, Beverly Hills Real Estate, Celebrity Home, Coldwell Banker Previews, Condominiums, Guest House, Hancock Park, Hollywood Hills, Holmby Hills, Homes For Sale, Investment Properties, North Canon Drive, Previews International, Real Estate Group, West 6th Street, Westside Areas' url='http://www.hancockparkmls.com/blog.html' class='owbutton' type='text/javascript'%3E%3C/script%3E"));
-- Gita Sitaramiah
Boom in real estate auctions
NEW YORK (CNNMoney.com) -- Going, going, gone: An increasing number of homes are now being sold at auction -- rather than through real estate brokers -- in an effort to dump properties more quickly and efficiently.
Auctions have increased by about 10% a year since the early 2000s, with homes worth nearly $17 billion sold this way in 2007, according to the National Auctioneers Association.
Auction sales have already spiked 14% in the first three months of 2010, according to the group.
"One auctioneer told me yesterday that he's been doing two, sometimes even three auctions a day, up from one a day or less a couple of years ago," said Hannes Combest, CEO of the National Auctioneers Association.
In fact, Robert Friedman, chairman of Real Estate Disposition Corp., said his company has done 195 auctions this year through mid-May, a pace that would exceed 520 for the year, a 50%-plus increase compared with the 340 sales total in 2009.
The biggest auction advantage is speed, of course: From first marketing to closing can be less than 10 weeks, according to Pam McKissick, COO of Williams & Williams Worldwide Real Estate Auction.
Clarity for sellers is also crucial. With most auctions, properties are sold as is. Bidders can inspect the homes beforehand, but they cannot easily back out of the deals without penalty. Sellers pretty much know that when the gavel descends, the house is sold.
Plus, Friedman stressed, price discovery is an important part of the auction process, as well as savings. Most homes sold are near market value but rarely above.
For his company, the main contributor to its added sales volume is the flood of bank repossessions. "We are almost entirely REO at this point," he said, referring to real-estate owned properties, the industry term for homes taken back by banks.
There is such a huge volume of REOs on the market -- 92,000 homes were seized in April alone -- that banks are anxious to turn the properties over quickly. Rather than waiting for the local housing market, they turn to auctioneers.
Another boost to the auction market has come from new developments gone bust. Big tracts of single-family homes and, especially, condominium projects planned during the boom didn't get finished until after markets nose-dived. That left developers with huge loans on properties they could no longer move.
As a result, these developers -- or the lenders who took over after they defaulted on their construction loans -- usually want to sell homes quickly to get out from under the ongoing expenses, including the financing costs.
Price declines have added urgency for ordinary people, too. Today, sellers are resorting to auctions after watching their homes languish on the market for months.
"We're seeing more movement in that market from what we were seeing a year ago," said Mike Jones of United Country Auction Services, whose company primarily works with conventional sellers.
Often, they're disillusioned by brokers who have been over enthusiastic about the prices their homes can fetch. When markets were bubbling, even badly overpriced homes were selling, and buyers were rescued by soaring market values. It's a different story in the downturn. As overpriced homes languish on the market, the gap between asking prices and market values only balloons.
Agents then must persuade sellers to slash prices, sometimes more than once, as the prices race the market to the bottom. Eventually, selling at auction can seem like a more viable solution.
Plus, sellers have little leverage these days. Buyers are filling contracts with contingencies that enable them to seize on any shortcoming to renegotiate, or back out of, deals.
"At this point, 80% of our clients have lived through this scenario," said George Graham, CEO of Concierge Auctions, a dealer in high end residences.
Selling through an auction avoids that. Sales are quick and clean. "People appreciate the purity," he said.
Auctions have increased by about 10% a year since the early 2000s, with homes worth nearly $17 billion sold this way in 2007, according to the National Auctioneers Association.
Auction sales have already spiked 14% in the first three months of 2010, according to the group.
"One auctioneer told me yesterday that he's been doing two, sometimes even three auctions a day, up from one a day or less a couple of years ago," said Hannes Combest, CEO of the National Auctioneers Association.
In fact, Robert Friedman, chairman of Real Estate Disposition Corp., said his company has done 195 auctions this year through mid-May, a pace that would exceed 520 for the year, a 50%-plus increase compared with the 340 sales total in 2009.
The biggest auction advantage is speed, of course: From first marketing to closing can be less than 10 weeks, according to Pam McKissick, COO of Williams & Williams Worldwide Real Estate Auction.
Clarity for sellers is also crucial. With most auctions, properties are sold as is. Bidders can inspect the homes beforehand, but they cannot easily back out of the deals without penalty. Sellers pretty much know that when the gavel descends, the house is sold.
Plus, Friedman stressed, price discovery is an important part of the auction process, as well as savings. Most homes sold are near market value but rarely above.
For his company, the main contributor to its added sales volume is the flood of bank repossessions. "We are almost entirely REO at this point," he said, referring to real-estate owned properties, the industry term for homes taken back by banks.
There is such a huge volume of REOs on the market -- 92,000 homes were seized in April alone -- that banks are anxious to turn the properties over quickly. Rather than waiting for the local housing market, they turn to auctioneers.
Another boost to the auction market has come from new developments gone bust. Big tracts of single-family homes and, especially, condominium projects planned during the boom didn't get finished until after markets nose-dived. That left developers with huge loans on properties they could no longer move.
As a result, these developers -- or the lenders who took over after they defaulted on their construction loans -- usually want to sell homes quickly to get out from under the ongoing expenses, including the financing costs.
Price declines have added urgency for ordinary people, too. Today, sellers are resorting to auctions after watching their homes languish on the market for months.
"We're seeing more movement in that market from what we were seeing a year ago," said Mike Jones of United Country Auction Services, whose company primarily works with conventional sellers.
Often, they're disillusioned by brokers who have been over enthusiastic about the prices their homes can fetch. When markets were bubbling, even badly overpriced homes were selling, and buyers were rescued by soaring market values. It's a different story in the downturn. As overpriced homes languish on the market, the gap between asking prices and market values only balloons.
Agents then must persuade sellers to slash prices, sometimes more than once, as the prices race the market to the bottom. Eventually, selling at auction can seem like a more viable solution.
Plus, sellers have little leverage these days. Buyers are filling contracts with contingencies that enable them to seize on any shortcoming to renegotiate, or back out of, deals.
"At this point, 80% of our clients have lived through this scenario," said George Graham, CEO of Concierge Auctions, a dealer in high end residences.
Selling through an auction avoids that. Sales are quick and clean. "People appreciate the purity," he said.
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