Real Estate Information

Last week, the Federal government and 49 state governments (Oklahoma being the exception) agreed to a $25 billion settlement regarding robo-signing and the challenges it created in the foreclosure process. We want to give a synopsis of the settlement and some perspective on what effect it will have on the housing market in 2012.

The Basics

The $25 billion in funds will be dispersed as follows:

$17 Billion National Commitment to Foreclosure Relief Efforts
The servicers collectively agree to commit a minimum of $17 billion directly to borrowers through foreclosure relief effort options, including principal reduction for qualifying borrowers, short sales, anti-blight measures, and enhanced homeowner transition programs.

$3 Billion National Commitment to Underwater Mortgage Refinancing Program
The servicers collectively agree to commit $3 billion to refinance “underwater” homes (when a homeowner owes more on a mortgage than a home’s current market value). To qualify, borrowers must be current on their mortgage payments on a mortgage owned by one of the five banks.

$5 Billion Payment to States and Federal Government
The servicers’ $4.25 billion payment to the states includes $1.5 billion for payments to borrowers who lost their home to foreclosure by one of the five servicers…$750 million of the state-federal payment will go to the federal government to resolve federal claims.

For further details on the settlement you can go to the official website.

Will the Settlement Have a Major Impact on a Housing Recovery?

Probably not. Though it is a step in the right direction, it may be too little too late. Here are some opinions on the settlement:

IHS Global Insights

 “Like many previous plans to stem foreclosures, this agreement will help at the edges. The problem is too big for it to have a large impact, however…This agreement will help the housing market move ahead in 2012 in a small way. But it is hardly a game changer.”

HSH.com

“While there is no doubt some benefit to formalizing and organizing the process of foreclosure and better monitoring of the process, the fact is that the settlement changes little.”

Capital Economics

 “While it is good that the settlement has been finalized and will offer principal reductions and refinancing schemes to borrowers, the bigger picture is that the settlement is not large enough to dramatically alter the outlook for the housing market or the wider economy.”

What about Foreclosures Moving Forward?

The settlement did bring clarity to one major issue – foreclosures. Banks have been holding off the foreclosure process on millions of homes over the last 18 months as they waited for the particulars of the settlement. They now know how they can move forward without penalty. The result will be an increase in foreclosures coming to the housing market.

Housing Wire

“It will speed up processing, and perhaps mean that foreclosures that have been waiting around since robo-signing came to light in 2010 will now gain legitimacy.”

Calculated Risk

“It does appear the number of completed foreclosures will increase following this settlement – especially in some judicial states with large backlogs – so there will probably be more REOs (lender Real Estate Owned) for sale.”

Bloomberg News

“The $25 billion settlement with banks over foreclosure abuses may result in a wave of home seizures…Lenders slowed the pace of foreclosures as they negotiated with attorneys general in all 50 states for more than a year over allegations of faulty and fraudulent paperwork used to repossess homes. With yesterday’s agreement, banks are likely to resume property seizures.”

Wells Fargo

“Mark Vitner, a senior economist at Wells Fargo Securities, said the settlement helps the housing market in the long run because it allows banks to proceed with millions of foreclosures that have been stalled. Many lenders have refrained from foreclosing on homes as they awaited the settlement.”

Since the estimate of state-level shadow inventory in March 2011, and an update in the fall of 2011, the aggregate size of the shadow inventory has not improved convincingly. The estimate of the shadow inventory nation-wide is still about 2.1 million. This is largely due to backed up foreclosure inventory, which has continually grown, and a significant backlog of the seriously delinquent inventory.

Generally, focusing on the size of the two inventories does not paint a full picture of what is going on because of the high degree of churning of delinquent loans between the two inventories. Currently about half of the loans leaving the foreclosure inventory are going back to the delinquent inventory due to process reviews and modifications. Foreclosure inventory itself is still heavily populated by loans that have been delinquent for longer than two years. In judicial states, that share increases to 50 percent of loans in foreclosure. On average, loans in the foreclosure inventory have been delinquent for 650 days, up from 250 days in January of 2008.

In fact, the difference between judicial and non-judicial states is an underlying driver of the change in their delinquencies and shadow inventories. According to the December LPS Mortgage Monitor, the ten states with the largest drops in the share of delinquent inventories are all non-judicial states, including those hardest hit by the foreclosure crisis (Nevada, Arizona, California, with declines of 19 percent, 25 percent, and 21 percent respectively). Figure 1 illustrates the year-over-year percentage point change in foreclosure inventory at the state level.

States in the eastern part of the country, which are also generally judicial states, have seen increases in the foreclosure inventories while those in the West have seen the largest drops. Foreclosure inventories in judicial states, in fact, hover two and a half times higher than those of non-judicial states. That is in part related to the slower rate at which judicial states are moving foreclosure inventory into foreclosure sale. On a monthly basis, about 1.6 percent of the foreclosure inventory moves to foreclosure sale while in non-judicial states that rate reaches almost 7 percent.
Two figures below list states by size of their shadow inventory. The state by state estimate of shadow inventory presented here is based on the same method as described in the March 2010 shadow inventory article (PDF). Not unexpectedly, Florida, a judicial state, still ranks on top with largest shadow inventory. Since March 2011, the estimate has further expanded by over 46,000 more loans.  In contrast, the second highest ranking state California saw reduction of shadow inventory by some 11,000 loans. Illinois, previously ranking third, has now fallen to the fifth highest ranking state with shadow inventory shrinking by over 26,000 loans. New York and New Jersey, with a significant backlog of foreclosure inventory and a slow foreclosure process, are now the third and fourth highest ranking states. In New York, however, the size of the shadow inventory is about 4 percent lower than a year ago while in New Jersey it is over 4 percent higher. Some states had even larger relative increases. For example, shadow inventory increased by about 25 percent in Connecticut, Maryland, and North Carolina; and around 20 percent in Hawaii and Vermont.

Yet there has also been some significant improvement in a number of states, including Idaho, Utah, Wisconsin, Tennessee, Illinois, Colorado, and Arizona, where shadow inventory fell by more than 20 percent and up to 40 percent. A number of other states had decreases in double digits.

While the foreclosure backup will take years to clear up in some states, it is also important to monitor levels of new delinquencies entering the pipeline. Nationwide, only about a quarter of new delinquencies are first-time delinquencies. Figure 4 maps the year-over-year percentage point change in new delinquencies at the state level. Although the data does not break out first time delinquencies, only five states saw increases in new delinquencies and increases were relatively minimal – ranging from 0.01 to 0.11 percentage point increase. On the other hand, states struggling with the foreclosure crisis, Nevada, Arizona, and Florida, all saw significant drops in new delinquencies.

see the whole article at  http://economistsoutlook.blogs.realtor.org/2012/02/03/the-looming-shadow-state-estimates-of-shadow-inventory/#.TzaII6-mfDc.gmail

Nationwide, unemployment is high, though trending down; the median price of an existing home fell over 4 percent in 2011; and existing-home sales rose a modest 1.7 percent last year, according to the National Association of Realtors.

Stan Humphries, chief economist for Zillow, said 2012 will be a "transitional year" in the housing recovery, with an improvement in home sales and prices anticipated to fall to a long-awaited "bottom."

Zillow identified some markets that are "undervalued" on a historical basis in a chart provided for this report, and Inman News reached out to a range of other real estate research and information companies for their insight on those real estate markets expected to outperform others in the year ahead. Those companies' findings were not considered in the review and selection process of the top 10 markets featured in this report.

"While What is your home worth? are expected to fall further (another 2 to 4 percent) in 2012 with a definitive bottom probably a year away, encouraging precursors to a true stabilization of home values are falling into place as the new year begins," Humphries said in a forecast Tuesday.

"Home sales will show a more consistent upward trend this year, slowly reducing the amount of vacant housing inventory. This increased demand will eventually start to put a floor under What is your home worth? later this year."

U.S. foreclosure activity hit its lowest level since 2007 last year, though experts largely expect it to ramp up this year, putting downward pressure on home prices.

"There were strong signs in the second half of 2011 that lenders are finally beginning to push through some of the delayed foreclosures in select local markets. We expect that trend to continue this year, boosting foreclosure activity for 2012 higher than it was in 2011, though still below the peak of 2010," said Brandon Moore, CEO of RealtyTrac, in the company's year-end foreclosure report. RealtyTrac also provided a chart for this report.

To compile the list of 10 markets to watch this year, Inman News looked for markets with above-average median sales price growth, a low unemployment rate, a high rate of sales per population, high affordability, low and falling foreclosure activity, a low share of distressed sales, above-average projected job growth, median household income growth, low and falling vacancy rates, growth in the number of building permits issued, above-average population growth, high projected population growth, and a rise in in-migration from other states.

While no markets on the list fulfilled all of these ideal economic characteristics, they did meet most of them.

Contrary to last year's list, in which most of the resulting markets had populations under 250,000, half of the metros on this year's list had populations above 500,000. This may be partially a result of only considering metros with a population of 150,000 or above, while last year's list did not limit the list by population size.

Email me for a copy of the report.  Susan@desertdreamingrealty.com

Average on the 30-year home loan slides to 3.87 percent from 3.98 percent

The average rate on the 30-year fixed mortgage dropped to the lowest since records have been kept, creating a tempting target for people to refinance their homes.

Freddie Mac said Thursday the average rate on the 30-year fixedmortgage hit 3.87 percent, down from 3.98 percent the prior week. That's below the previous record of 3.88 hit two weeks ago.

The average on the 15-year fixed mortgage fell to 3.14 percent, also a record low. Records for mortgage rates date back to the 1950s.

Mortgage rates tend to track the yield on the 10-year Treasury note, which fell below 1.9 percent this week.

Mortgage rates have hovered near 4 percent for the past three months, and have perhaps contributed to a slight improvement in the housing market. But many homeowners remain underwater and the pipeline of foreclosures continues to be huge, putting heavy pressure on housing prices.

High unemployment and scant wage gains have made it harder for many people to qualify for loans. Many don't want to sink money into a home that they fear could lose value over the next few years.

Sales of previously occupied homes were dismal last year. New-home sales in 2011 were the worst on records going back half a century.

Builders are hopeful that the low rates could boost sales next year. But so far, they have had a minimal impact.

Mortgage applications have risen slightly over the past four weeks, according to the Mortgage Bankers Association. But they are coming off extremely low levels.

To calculate the average rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week. 

Mortgage applications have risen slightly over the past four weeks, according to the Mortgage Bankers Association. But they are coming off extremely low levels.

To calculate the average rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for the 30-year loan rose to 0.8 from 0.7; the average on the 15-year fixed mortgage was unchanged at 0.8.

For the five-year adjustable loan, the average rate fell to 2.80 percent from 2.85 percent. The average on the one-year adjustable loan rose to 2.76 percent from 2.74 percent.

The average fee on the five-year adjustable loan rose was unchanged at 0.7; the average on the one-year adjustable

The housing industry is showing some small but smart signs of improvement. But could these green shoots get mowed down before they can blossom? Here are four things to keep an eye on.

Some good signs are emerging in the housing industry. Selected markets around the country are stabilizing or experiencing modest growth. Nationally, inventory continues to fall towards market equilibrium. International dollars are helping urban areas absorb inventory and upper-end properties. Investors are gobbling up good deals and mopping up the distressed segment. Baby Boomers are cashing out of suburban homes bought long before the bubble, and taking that money into cities and luxury communities. By many accounts, there are some good things happening.

Brokers and agents are putting the recession to work for them, too, fundamentally altering organizational structures, improving efficiencies and trying new models (like auctions or no longer paying for leads) to drive down costs and drive up value to consumers. While some companies have closed their doors, others are springing up, without the legacy costs – and thinking – about how to sell properties. Little things – like improving standards, diligently pursuing leads and bringing an iPad to a listing presentation – are proving effective in creating opportunities in every market.

All good news. But let’s not let our guard down just yet.

First, significant headwinds remain. High unemployment continues to impede sales growth, especially amongst younger buyers: 18 to 24 year olds face 18%-plus unemployment, and carry high college debt loads. That is stalling many first-time buyers, even with today’s low prices. Foreclosures undermine many neighborhoods, not just in the sand states. New York will require 8 more years of red tape to clear the current backlog. Throw in underwater (but not delinquent) mortgages, and a usually more mobile workforce remains trapped, unable to move to improve wages and opportunities. Let’s not forget the Federal Reserve, who has announced its intention to artificially undermine interest rates andencourage 2% inflation targets for the next few years. The former keeps credit tight; the latter destroys consumer purchasing power.

These are all serious headwinds that aren’t going away soon.

Which means you have to keep them factored into your business plan for 2012 and beyond. There will be plenty of opportunities in the marketplace, but you must remain realistic even as you become moreoptimistic. That means keeping at least one eyebrow raised when you hear the media start repainting the picture. It’s an election year, after all.

Still, plenty of great strategies exist for this year: Targeting qualified Gen X move-up buyers, tapping into growing rental demand, building relationships with investors using cash, learning the language of foreign buyers, and targeting sellers with decades of equity.

It would be unfortunate if we gave up on our diligent industry innovations and restructuring, simply because a few trends are on the uptick. We’ve been over-optimistic before, if you remember. That earned us a dangerous bubble. If we relax too soon, it might earn us a quadruple-dip in housing.

Specifically, I’m concerned about lending more than anything this year. It could be argued that foreclosures have been baked into pricing already. It might even be argued that high unemployment and current inflation in energy and food prices have been baked into buyer wage expectations. That leaves as the biggest challenge lending options. That means keeping an eye on four things this year:

• Home prices continue to fall, while jobless claims continue to rise. This will lead to natural reluctance on the part of banks to lend to anybody but the most solid credit, least risk borrowers.
• Interest rates remain low and flat. The Fed’s interest rate targets are having unintended consequences. By keeping spreads low, banks see little profit in lending to a shaky housing sector. By promising to keep them low for the next two years, they encourage banks to look for better investments for the long term. Big Banks – currently 50% of all housing lending in America – can easily make money in higher return sectors around the globe, with less risk of political witch hunts, too.
• Major banks are exiting the mortgage market. Bank of America is trying to shed its correspondent lending business;  GMAC/Ally did it last year in Massachusetts. MetLifeexited the forward home loan business earlier this year. Credit unions and local banks are not ready to step into that space.
• The Consumer Financial Protection Bureau is about to regulate the mortgage industry at unprecedented levels through its “Nonbank Supervision Program.” Essentially, the regulatory burden for mortgage brokers is about to get more complex and bigger. That means new costs for compliance, and guess who pays for those? Consumers, of course. Add in forced settlements for pseudo-scandals like robo-signing, and banks have less and less reason to make housing lending a priority.

The point is, we can’t relax our efforts to keep restructuring the housing industry.Especially if we get over-optimistic, and tell ourselves, it’s finally all coming back! It’s not, and it won’t. Even if money fell from heaven, the shift has already occurred in the fundamentals – of consumers, of demand, of debt, of finance, of regulation. If you’re only trying new strategies until things go back you’ve missed the point of the recession.

Stay focused. Keep on track to innovate. Be happy about successes that happen. Grab onto any momentum that’s building. But stick to your plan to work the market of the future, not return to the market of the past. There are real, measurable, specific opportunities in your marketplace. In fact, as the lending headwinds indicate, more structural changes are coming, complete with yet-to-be-discovered unintended consequences.

Most of all: Manage expectations. Your own, and your customer’s. Sellers must remain committed to sensible prices for buyers constrained for credit. Buyers must understand the risks of low-ball offers and further waiting on the sidelines: borrowing costs are prepped to soar. Agents must take the dangers of sitting on unsellable inventory seriously. Brokers must plan carefully for new and multiple revenue streams to thrive in the future.

Water the shoots. Nurture them. But keep an eye on the horizon, because there are still a few more storm clouds to come.

A majority of Americans recently surveyed say now is a good time to buy a home. That's no surprise, given that record-low mortgage interest rates and bargain home prices are boosting affordability.

But selling a home? That's a different story.

According to 71% of the 1,000 people surveyed by Fannie Mae in December, now is a good time to buy a house. But only 11% think it's a good time to sell.

That's because sellers sense that even if the housing market and the economy continue to show signs of improvement in 2012, the good news likely won't be good enough for buyers to return to the market in droves—even if they can buy a home for a steal.

 

 

Lisa Haney

"For people to start buying in larger volume, they need to see home prices go up a bit," says Ingo Winzer, president of Local Market Monitor, a firm that analyzes housing markets for bankers.

Many potential buyers also are waiting to see the jobs picture improve, which will give them confidence in the stability of their own employment, Mr. Winzer says.

Improvements Ahead

Still, various forecasts and surveys suggest better times for the housing market this year:

Sales of existing homes are expected to grow between 2% and 5% in 2012, according a recent forecast from Freddie Mac.

A recent survey of about 1,000 real-estate agents found that 39% of agents think prices have hit bottom in their market, while almost 75% think home prices in their markets will have stopped declining by the end of 2012.

The number of improving housing markets rose to 76 in January, from 41 in December, according to the Improving Markets Index, from First American Financial Corp. and the National Association of Home Builders.

Nationwide, home prices are expected to be relatively flat in 2012, says Alex Villacorta, director of research and analytics at Clear Capital, a provider of real-estate asset-valuation data for financial-services companies. Indeed, 2012 seems to be a turning point before a healthier and sustained recovery in 2013, he says.

If You Can Hold Out

While now still may not be the perfect time to sell a home, it may be time for home sellers to get their places ready for a sale next year.

Of course, markets vary. Prices already are on the rise in some places, including parts of Florida, Washington, D.C., and Dayton, Ohio, Mr. Villacorta says.

But other markets—including Chicago, Atlanta, Detroit and Las Vegas—continue to be on a "downward slide," according to a December report from Realtor.com.

Either way, holding out until next year could mean a quicker and more profitable sale.

"From a seller's point of view, it's still a little early, though tempting, to put the house up for sale and expect a lot of demand," Mr. Villacorta says. "Unless there are circumstances that dictate they have to sell now, certainly waiting and tracking the markets a little bit more would be a more prudent thing to do."

Still, some sellers have delayed their moving decisions for years now. For those champing at the bit to make a sale and move on with their lives, 2012 may offer glimmers of hope.

"There are a lot of people over the last few years that decided to put their life on hold," says Budge Huskey, president of real-estate brokerage Coldwell Banker. Some now are saying, 'I've waited long enough. I can't put life on hold forever,' " Mr. Huskey says.

The market is finally nearing the point where people who don't need to sell for financial reasons are starting to consider a move for lifestyle-related reasons, he says, such as a growing family that would be more comfortable in a larger home.

The good news for them: Inventory plunged to a 6.2-month supply in December, from a 12.4 month supply in July 2010, according to the National Association of Realtors. That means there are fewer sellers competing for buyers. (The month-supply figure is how long it would take to sell all the homes on the market now based on the current rate of sales per month. The higher the number, the more sellers there are looking for buyers.)

If You Can't Wait

If you plan to sell a home this year, get the house in the best possible condition and price it to sell before it hits the market, Mr. Huskey says.

An appealing online listing, complete with quality photographs, is also crucial to bring traffic to your home.

"The buyer has the opportunity to prescreen all the homes online and see only the few that really shine online," Mr. Huskey says, so a seller should do everything he or she can to get on a buyer's shortlist of homes to physically visit.

written by Amy Houk of the Wall Street Journal

Getting a home signifies financial security and an investment for the future. Owning a home is part of the American Dream. There are some surprising reasons why you can’t get a home.

1. Down Payment – You may have the required 10%-25% on the asking price of the home you are interested in but how you acquired it and how long you’ve had it could keep you from getting the home. Many times relatives offer young couples the down payment. Lending institutions take this into consideration when looking at the ability of a homeowner to keep up with mortgage payments. Saving the down payment over time lends to the credibility of money management.
2. Credit– Credit history is an ongoing process. Student loans are one of the first obligations a person may have as an adult. Late payments may have a bearing on your ability to acquire a home later in life. Credit scores are also affected by utility payments. Any recurring bill that is paid late may come back to haunt you even though your financial situation is now more sound. Your debt to income ratio ideally needs to be under 45%. Less than a 3 month asset reserve in a bank account will generally keep you from getting a home. Check your credit score with all 3 agencies and make sure there is nothing being reported incorrectly. You need to aim for a score of 660 or better.
3. Job Security – Your job history may be why you can’t get a home. Lenders look for stability. If you jump from job to job, regardless of monetary or career improvement, lenders see you as a financial risk. When the economy takes a downward turn, employers tend to retain employees with seniority. Also taken into consideration is the risk of the job.
4. Parent History – If your parents have a questionable credit history, you may be dealing under their shadow. If parents foreclosed, you may be affected. If they were late with mortgage or credit card payments, you may be looked upon as having the same traits. If you are asked information on parent particulars, you may need to look elsewhere for home financing.
5. Location – The location of a home may affect whether or not a lender is willing to risk mortgaging it. LNG routes, Super Site areas, fault lines, destructive weather patterns all have bearings on mortgage risks lenders are willing to take on.
6. Inspection – More and more, home inspections are being required to seal the closing deal. Hopes have been dashed to learn major expenses must be incurred to pass inspection for the approval of the sale.
7. Condition – Fixer-uppers may offer pricing that appears affordable. If you have no background of construction or home improvement projects completed, lenders are leery to finance such undertakings. They may require a lump sum amount be in an account to cover the improvements necessary to ensure the property does not result in a loss to the lender.
8. Liens – If you owned property before and were subject to liens for unacceptable reasons such as credit card debt or unpaid taxes, you may not get the home you desire. A current homeowner may also have substantial liens that need to be satisfied at closing either from the sale itself or as additional costs to the buyer.
9. History – The history of the home may be the deciding factor that keeps a lender from financing in your behalf. A murder, haunting, nearby sinkhole, or other less favorable activity, bear upon the lender’s willingness to finance such a home.
10. The Bank – Economic conditions and bank lending history may be the reason you can’t get a home. Banks may be leaning toward only very secure clients to up their lending credibility. If a bank turns you down, look to other options before you decide to settle on thinking you can’t get a home. FHA, VHA, or a first time buyer program offer other alternatives for which you may qualify.

If you can’t get a home loan with one lender, chances are good that another institution will also turn you down. You should take some time and work at increasing the good points that will work in your favor. Try again when your situation has improved.

Several recent indicators for the real estate industry are pointing to a market that is on the mend and entering recovery mode.

Housing experts’ predictions for the new year tend to center around a market stabilizing before entering a gradual, albeit very slow, recovery. However, the tone is more upbeat than it has been in years for the housing market.

Here are a few of the signs that are showing the market moving in a more positive direction:

1. Home sales: Existing home sales are expected to increase 12 percent this year, following a 2 percent jump last year, Moody’s Analytics predicts. The signs are already showing: In November, pending home sales — a gauge for future home buying — reached its highest level in 19 months, the National Association of REALTORS® reported.

2. New-home market: Coming off of what could be considered the worst year for new-home building ever recorded, the sector is expected to bounce back this year. New-home sales and starts were already showing a rebound in the last few months of 2011. Moody’s is predicting that single-family housing starts will increase 37 percent this year, and new-home sales will soar 74 percent.

3. Housing stocks: Investors are starting to get optimistic about the possibility of a rebound too, and are turning to home builder stocks. These equities have recently outperformed the broader stock market and the S&P 1500 home building  index has increased 38 percent since mid-October, USA Today reports.

Consumer confidence: With mortgage rates at record lows and housing affordability high, about 71 percent of Americans say now is a good time to purchase a home. Also, more Americans are optimistic that home prices will rise over the next year — about 26 percent say prices will rise in 2012, an increase of 4 percent over the last survey, according to Fannie Mae’s December National Housing Survey