San Francisco Chronicle: Chase: 138k mortgages modified in past 3 months06/30/2009Chase today announced it has approved 138,000 trial mortgage modifications in the past three months. Of the mortgage modifications approved, Chase said 87,100 were through Making Home Affordable.
NOTE: Interesting article. Always contact your bank, attorney and CPA when considering a modification, short sale or walking from your property. - Eisrael 831-809-8266
Printed in the Wall Street Journal
Even as California lawmakers slash services and lay off workers to help close the state's $21 billion budget deficit, there is one area where they want to increase funding: a home-buyer tax-credit program meant to help revive the local real-estate market.
California lawmakers introduced two bills to boost the cap for the tax-credit program by at least $200 million and to extend the length of the program by at least a year. One of the bills has been marked urgent by its sponsor, and a vote is expected in late July.
If passed, the bills would expand the state's home-buyer tax-credit program, which was designed to help clear out newly built homes and to spark new construction. Under the program, which was approved in February as part of the state budget, home buyers who purchase a new, previously unoccupied home can get a credit valued at up to $10,000 per buyer. The program was originally capped at $100 million and was set to run until March 2010.
But the pool of money for the program is being quickly depleted. The state has received about 9,800 applications requesting $94.7 million of the program's $100 million. Last week, California's Franchise Tax Board, which processes the credit applications, said it would cut short the program as soon as it received 12,000 applications.
"We didn't realize how successful [the tax credit program] would be," said state Sen. Bob Dutton, a Republican who sponsored one of the bills. Mr. Dutton added that he is confident the legislation will become law.
As the nation's largest housing market, California is being closely watched as a gauge for the nation's economic climate. Prices soared during the real-estate boom, but the collapse of housing prices has slammed homeowners and scared away many prospective buyers. The rapid response from home buyers in applying for the tax credit could serve as a instructive measure for other states to follow.
The tax-credit program appears to have had little immediate impact on new-home sales. Sales of new homes in California declined in units and average prices in March and April from a year earlier, according to Hanley Wood LLC, a market research firm in Washington.
In March, 2,781 new homes in the state were sold at a median price of $347,900, compared with 4,224 new homes for a median $406,000 a year earlier. In April, 2,717 new homes sold for a median price of $345,990, compared with 3,642 units sold for a median $395,205 a year earlier.
Still, Robert Kleinhenz, deputy chief economist for the California Association of Realtors, said the tax-credit program has helped draw first-time home buyers into the market. By the end of the year, the percentage of first-time home buyers is expected to reach about 45% of the total number of buyers, up from 36% last year and 26% in 2004, he said Some home buyers have been able to couple California's tax credit with an $8,000 federal tax credit also available to first-time buyers, he said.
The state's budget woes may deter some state lawmakers from approving the added funding. California Assemblyman Ira Ruskin, a Democrat, said he disagrees with parts of the bill and voted against an earlier version. He said the tax credit doesn't address the glut of foreclosures in California since the program is aimed just at new homes. In addition, "we have to be very careful what we do with general-fund money" given the state's budget deficit, he said.
Tim Coyle, chief lobbyist with the California Building Industry Association, said some state lawmakers he has spoken with are wary of approving the new funding. Mr. Coyle said he has met with the state's Republican and Democratic leadership and pressed them to extend the tax credit to at least through March 2010. He has also met with about 15 legislators in their home districts to try to persuade them to vote in favor of the bills.
Write to Bobby White at bobby.white@wsj.com
Hi Everyone,
Hope you are enjoying this articles. Also, keep your questions coming and thanks again for visiting!
This bill is designed for new home sales. Since we don't have many new homes for sale in Monterey County, only a few buyers will be able to take advantage of the credit.
Eisrael Gomez
831-809-8266
egomez@gomezhomes.com
By ALAN ZIBEL, AP Real Estate Writer,
Printed in San Francisco Chronicle
Monday, June 22, 2009
If President Barack Obama gets his way, consumers who take out mortgages would automatically get a "plain vanilla" loan — such as a traditional 30-year fixed-rate mortgage — unless they opted for a riskier variety.
Obama is expecting opposition to the plan, and cautioned Saturday in his radio address, "While I'm not spoiling for a fight, I'm ready for one."
Government officials want to make the process of getting a mortgage as simple and abuse-free as signing up for a retirement savings plan: A growing number of companies now automatically enroll new employees in 401(k) plans unless they opt out.
For mortgage brokers, though, the plan threatens to shrink the fee income some have received from encouraging the use of adjustable-rate, interest-only and other sometimes risky loans.
Obama's plan to overhaul financial regulation, unveiled last week, would create a Consumer Financial Protection Agency to monitor consumer financial products and revamp the entire home-loan process.
It's the administration's latest step to tackle the aftermath of the housing bust. The administration in March launched a $50 billion plan to give the lending industry financial incentives to modify mortgages to lower payments.
But that plan is off to a slow start. Many housing counselors say it hasn't made much of a difference nationwide because lenders have been slow or reluctant to cooperate. As of mid-June, about 50,000 borrowers were enrolled in three-month trial modifications under the plan, according to the Treasury Department. The administration initially had said up to 4 million households could be helped.
Critics in the mortgage industry are denouncing Obama's plan for government-approved mortgages. Some call it a paternalistic intrusion that would restrict borrowers' options and make loans harder to get and potentially more expensive.
Guy Cecala, publisher of Inside Mortgage Finance, a trade publication, called the idea "un-American." He said it would make the U.S. mortgage market heavily regulated, like those of Germany or France, where consumers have fewer options.
"We're a free-enterprise country," Cecala said. "We encourage innovation. This is certainly not going to encourage innovation. It will stifle it."
But others in the industry are open to the idea. A good mortgage broker should always show a borrower plenty of options, including the traditional 30-year fixed-rate loan, and explain the risks clearly, said Kevin Iverson, a mortgage broker with Reed Mortgage Corp. in Denver.
During the lending boom, unscrupulous brokers "were selling bad products because it was one of the ways people made more money," Iverson said. They focused on closing deals fast, he said, rather than building customer relationships that would endure for years.
If the Obama plan for simplifying the mortgage process is approved, here's how it might work:
The government would give its seal of approval to a handful of mortgage types — a standard 30-year fixed-rate mortgage and perhaps a few varieties of adjustable-rate loans. For a loan to get the "vanilla" label, the lender would have to verify borrowers' income and have them set aside money for property tax and insurance.
Borrowers would still be able to get mortgages that don't pass the government's vanilla test. But they would be warned about the risks.
The Obama administration faces a tough fight over its financial overhaul plan. Powerful trade groups like the American Bankers Association, for example, oppose creating a consumer financial protection agency. Even lobbying groups open to the idea of a consumer-products regulator question whether the government should suggest which mortgages are best for consumers.
"We don't want to stifle innovation, and we don't want to stifle competition," said John Courson, president of the Mortgage Bankers Association.
Traditional fixed-rate loans fell out of favor during the housing boom. They dropped from a 75 percent market share in 2002 and 2003 to around 50 percent in 2004 and 2005, according to Inside Mortgage Finance. But with the housing bubble burst and mortgage rates near historic lows, fixed-rate loans — 30-year, 15-year and other types — now account for about 95 percent of the market.
Previous efforts in Congress to crack down on mortgage abuses have fallen short. Even regulatory proposals on seemingly simple issues, like reducing the paperwork to get a loan, have devolved into battles among industry factions.
Supporters say a new consumer regulator is sorely needed. They point to academic research suggesting that consumers, faced with a difficult choice about their personal finances, tend to choose the path of least resistance. As a result, they often make poor decisions.
That's particularly true with mortgages, which require signing numerous complex documents. Many borrowers say they didn't understand the loans they signed up for during the housing boom. Some say they were surprised when their rates adjusted to much higher payments.
"These loans are so complicated that the consumers can't figure out what's going on," said Bill Apgar, senior adviser for mortgage finance at the Department of Housing and Urban Development.
The Obama plan includes other elements likely to produce drawn-out lobbying fights. For example, administration officials want to curb the fees that brokers and lenders receive tied to inflated mortgage rates.
Brokers argue such fees are a legitimate way for borrowers to afford a loan without having to come up with thousands of dollars in closing costs, because the fees can be spread over the life of a loan. They also intend to fight a plan to have their compensation linked to whether a borrower winds up defaulting.
"There's no reason that we should have to assume that risk," said Marc Savitt, president of the National Association of Mortgage Brokers. He argues that brokers merely submit loans to lenders and don't influence whether the loans are approved.
Brokers have already seen their market share dwindle, from more than 60 percent of new loans at the peak of the market to less than 20 percent now, said David Olson, president of Access Mortgage Research in Columbia, Md.
If mortgage broker fees were eliminated, "that would be the complete kiss of death" for mortgage brokers, Olson said. "That's really how they make their money."
SACRAMENTO, Calif.—California is imposing a 90-day moratorium on housing foreclosures under a new law that takes effect Monday.
The law is expected to make lenders try harder to keep borrowers in their homes. Loan companies must prove they tried to modify the delinquent loans before they can begin foreclosing.
But supporters acknowledge the California Foreclosure Prevention Act won't stop thousands of foreclosures from eventually happening. There have been more than 365,000 foreclosures in California since early 2007, with many more already scheduled.
The bill passed in February is similar to the Obama administration's Making Home Affordable Program that began in March.
Both encourages lenders to cut interest rates or rewrite loans to affordable levels.
———
Information from: The Sacramento Bee, http://www.sacbee.com
We'll see how this impacts us here in Monterey County.
(831) 809-8266
Here's an opinion article from the Wall Street Journal. Interesting to see the impact this will have here in Monterey County, CA.
Rahm Emanuel was only giving voice to widespread political wisdom when he said that a crisis should never be "wasted." Crises enable vastly accelerated political agendas and initiatives scarcely conceivable under calmer circumstances. So it goes now.
Here we stand more than a year into a grave economic crisis with a projected budget deficit of 13% of GDP. That's more than twice the size of the next largest deficit since World War II. And this projected deficit is the culmination of a year when the federal government, at taxpayers' expense, acquired enormous stakes in the banking, auto, mortgage, health-care and insurance industries.
With the crisis, the ill-conceived government reactions, and the ensuing economic downturn, the unfunded liabilities of federal programs -- such as Social Security, civil-service and military pensions, the Pension Benefit Guarantee Corporation, Medicare and Medicaid -- are over the $100 trillion mark. With U.S. GDP and federal tax receipts at about $14 trillion and $2.4 trillion respectively, such a debt all but guarantees higher interest rates, massive tax increases, and partial default on government promises.
But as bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.
About eight months ago, starting in early September 2008, the Bernanke Fed did an abrupt about-face and radically increased the monetary base -- which is comprised of currency in circulation, member bank reserves held at the Fed, and vault cash -- by a little less than $1 trillion. The Fed controls the monetary base 100% and does so by purchasing and selling assets in the open market. By such a radical move, the Fed signaled a 180-degree shift in its focus from an anti-inflation position to an anti-deflation position.
The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10 (see chart nearby). It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless. The currency-in-circulation component of the monetary base -- which prior to the expansion had comprised 95% of the monetary base -- has risen by a little less than 10%, while bank reserves have increased almost 20-fold. Now the currency-in-circulation component of the monetary base is a smidgen less than 50% of the monetary base. Yikes!
Bank reserves are crucially important because they are the foundation upon which banks are able to expand their liabilities and thereby increase the quantity of money.
Banks are required to hold a certain fraction of their liabilities -- demand deposits and other checkable deposits -- in reserves held at the Fed or in vault cash. Prior to the huge increase in bank reserves, banks had been constrained from expanding loans by their reserve positions. They weren't able to inject liquidity into the economy, which had been so desperately needed in response to the liquidity crisis that began in 2007 and continued into 2008. But since last September, all of that has changed. Banks now have huge amounts of excess reserves, enabling them to make lots of net new loans.
The way a bank or the banking system makes new loans is conceptually pretty simple. Banks find an entity that they believe to be credit-worthy that also wants a loan, and in exchange for the new company's IOU (i.e., loan) the bank opens up a checking account for the customer. For the bank's sake, the hope is that the interest paid by the borrower more than makes up for the cost and risk of the loan. The recently ballyhooed "stress tests" on banks are nothing more than checking how well a bank can weather differing levels of default risk.
What's important for the overall economy, however, is how fast these loans are made and how rapidly the quantity of money increases. For our purposes, money is the sum total of all currency in circulation, bank demand deposits, other checkable deposits, and travelers checks (economists call this M1). When reserve constraints on banks are removed, it does take the banks time to make new loans. But given sufficient time, they will make enough new loans until they are once again reserve constrained. The expansion of money, given an increase in the monetary base, is inevitable, and will ultimately result in higher inflation and interest rates. In shorter time frames, the expansion of money can also result in higher stock prices, a weaker currency, and increases in commodity prices such as oil and gold.
At present, banks are doing just what we would expect them to do. They are making new loans and increasing overall bank liabilities (i.e., money). The 12-month growth rate of M1 is now in the 15% range, and close to its highest level in the past half century.
With an increased trust in the overall banking system, the panic demand for money has begun to and should continue to recede. The dramatic drop in output and employment in the U.S. economy will also reduce the demand for money. Reduced demand for money combined with rapid growth in money is a surefire recipe for inflation and higher interest rates. The higher interest rates themselves will also further reduce the demand for money, thereby exacerbating inflationary pressures. It's a catch-22.
It's difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed's actions because, frankly, we haven't ever seen anything like this in the U.S. To date what's happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits. Gold prices went from $35 per ounce to $850 per ounce, and the dollar collapsed on the foreign exchanges. It wasn't a pretty picture.
Now the Fed can, and I believe should, do what it must to mitigate the inevitable consequences of its unwarranted increase in the monetary base. It should contract the monetary base back to where it otherwise would have been, plus a slight increase geared toward economic expansion. Absent this major contraction in the monetary base, the Fed should increase reserve requirements on member banks to absorb the excess reserves. Given that banks are now paid interest on their reserves and short-term rates are very low, raising reserve requirements should not exact too much of a penalty on the banking system, and the long-term gains of the lessened inflation would many times over warrant whatever short-term costs there might be.
Alas, I doubt very much that the Fed will do what is necessary to guard against future inflation and higher interest rates. If the Fed were to reduce the monetary base by $1 trillion, it would need to sell a net $1 trillion in bonds. This would put the Fed in direct competition with Treasury's planned issuance of about $2 trillion worth of bonds over the coming 12 months. Failed auctions would become the norm and bond prices would tumble, reflecting a massive oversupply of government bonds.
In addition, a rapid contraction of the monetary base as I propose would cause a contraction in bank lending, or at best limited expansion. This is exactly what happened in 2000 and 2001 when the Fed contracted the monetary base the last time. The economy quickly dipped into recession. While the short-term pain of a deepened recession is quite sharp, the long-term consequences of double-digit inflation are devastating. For Fed Chairman Ben Bernanke it's a Hobson's choice. For me the issue is how to protect assets for my grandchildren.
Mr. Laffer is the chairman of Laffer Associates and co-author of "The End of Prosperity: How Higher Taxes Will Doom the Economy -- If We Let It Happen" (Threshold, 2008).
Please add your comments to the Opinion Journal forum.
Worried that rising mortgage rates could damp the prospects for a housing recovery, a business group is making a new push for Congress to boost and extend a home-buyer tax credit.
In February, Congress approved a 10% tax credit for first-time home purchases, up to a maximum of $8,000. The credit, which expires Dec. 1, phases out for buyers with incomes above $170,000 for married couples and $95,000 for individuals.
The National Association of Home Builders and other industry groups have long argued that the credit isn't large enough to help reinvigorate the housing sector. Now the groups are being joined in their efforts by the Business Roundtable, an association of chief executives.
The Business Roundtable is calling on Congress to increase the credit to $15,000 and extend it to all home buyers. "What is being billed as a recovery is not showing up in the cash register yet," says Richard A. Smith, chief executive of Realogy Corp. and a member of the Business Roundtable. Realogy is the parent of real-estate brokers Century 21 and Coldwell Banker.
The Business Roundtable is also urging policy makers to sustain efforts to keep mortgages at or below 5% for one year. Mortgage rates climbed to 5.74% on Tuesday a six-month high and up from 5.03% two weeks ago, according to HSH Associates, a financial publisher. Rates have fallen since the Federal Reserve stepped up debt purchases earlier this year in an effort to drive down rates.
A buyer typically needs income of $92,000, assuming a 10% down payment, to qualify for a $400,000 30-year fixed-rate mortgage. With rates at 4.5%, the borrower only needs income of around $84,000, according to an estimate by real-estate firm Long & Foster Cos.
The real-estate industry made a similar push for a $22,000 tax credit for all buyers and interest-rate subsidies earlier this year as Congress considered a range of measures to stimulate the economy. Congress instead opted to increase to $8,000 an existing tax credit for first-time buyers.
Business leaders say that while the first-time-buyer credit has succeeded in jump-starting the bottom end of the housing market, more needs to be done to lure "trade-up" buyers back to the market. Realtors and builders argue that boosting sales among existing owners as opposed to first-time buyers will spur more sales because each transaction involves two home sales. "That 'move-up' buyer has got to have somewhere to go," says Mr. Smith, who warns that without more incentives for existing homeowners, the housing market's "stalemate will be nasty and protracted."
The business group's campaign also pushes for Congress to make permanent recently expanded limits for loans eligible for government backing or purchase.
Congress in February boosted those limits to as high as $729,750 in the nation's most expensive housing markets, from $417,000, and the February stimulus bill renewed the higher limits through the end of the year. Those limits are set to expire at the end of the year and are tied to median home prices, which have fallen.
Write to Nick Timiraos at nick.timiraos@wsj.com
Supervisors Tuesday approved an agreement with several cities hardest hit by the housing market downturn to buy foreclosed houses and sell them to lower-income buyers.
Under the agreement, the county Housing and Redevelopment Agency would apply for about $2.1 million in federal stimulus grant money on behalf of the county and the cities of Marina, Seaside, Soledad, Gonzales, King City and Greenfield, for use in a local Neighborhood Stabilization Program.
Under the program, the county and the six cities would purchase already foreclosed homes at 15 percent below market rate, make minor repairs and upgrades, and re-sell them to qualified very-low-, low- and moderate-income buyers.
Those categories would include families earning up to 120 percent of the area's median income. The funding would be used to educate prospective buyers and provide some down-payment assistance.
The city of Salinas is applying on its own for $2.6 million in federal funding for the program.
According to county Director of Redevelopment and Housing Jim Cook, who first proposed the program in February, the program is designed to restore the quality of the area's housing stock. It would reduce the number of homes vacant due to foreclosure but which haven't been re-sold, and the associated problems of blight, vandalism and theft. As a result, the program is expected to help stabilize plummeting home values.
And a glut of foreclosed homes is making things worse. In North County, including Prunedale and Castroville, there are 317 foreclosed homes, while in Soledad there are 257 bank-owned units and in Greenfield there are 166. In Seaside, there are 135 foreclosed houses.
Team approach
Cook said the collaboration between the county and the cities allows the smaller local governments to qualify for the funding, which requires a minimum $1 million bid. He pointed out that the housing problem is a countywide issue and could be most effectively dealt with through a team approach.
Under the agreement, the county would retain jurisdiction over the funding and pass it along to the cities. Cook estimated about 40 homes could be flipped under the program, with potentially more in the future as other funding becomes available and the initial investments are paid back.
Supervisor Simon Salinas praised the program and said the county should vigorously pursue the funding.
"This is something where I think we'd be remiss if we didn't do something," Salinas said.
Cook noted that the funding must be spent by Dec. 30, meaning the county and local cities would have to move quickly if they qualify for the stimulus money to purchase available homes.
River Road plan OK'd
Tuesday, the board narrowly approved a long-debated and controversial 14-lot River Road subdivision on former farmland. But the project is almost certain to draw a court challenge.
By a 3-2 vote, with Supervisors Dave Potter and Jane Parker dissenting, the board offered a series of approvals ranging from certifying the project's environmental impact report and a general plan amendment to lot line adjustment and zoning change, as well as a combined development permit, for the project.
Located on property zoned for agriculture and owned by a three families — the Mohsins, the Samoskes and the Riehls — the project was fiercely opposed by slow-growth groups, including LandWatch Monterey County, and a neighborhood group dubbed the River Road Ranchers for Responsible Growth.
At Tuesday's hearing, attorney and former LandWatch Executive Director Gary Patton led a cadre of opponents who argued that the project was inappropriate, and even illegal, because it converted farmland. The groups sued to halt the county's previous approval of an earlier version of the project, arguing that it required an EIR, a position with which the state Supreme Court agreed.
But supporters, including attorney Tony Lombardo representing the project applicants, argued that the land is not viable for farming and has been planned for development for decades, noting the presence of another subdivision nearby.
Despite concerns from Potter and Parker about the expense and potential exposure to the county of a lawsuit, Supervisor Lou Calcagno said the property wasn't good for much else besides housing, and Salinas and Supervisor Fernando Armenta concurred.
The project includes a 150-acre conservation easement for cattle grazing.
Jim Johnson can be reached at 753-6753 or jjohnson@montereyherald.com.
Here's a couple of great links that all buyers should check out when asking "Is this area safe?"
In addition you should also call local law enforcement.
www.CrimeReports.com
www.CrimeMapping.com
I know it's been a while! Business is brisk and we are seeing parts of Monterey County Foreclosure activity seeing multiple offers.
Is it temporary? Hard to say, one bank representative told me today they were behind on processing short sales because they had received 30,000 short sale requests last month alone!!! He commented that we are going to see another wave of foreclosures here in Monterey County.
I would also like to thank everyone for the referrals and questions on this blog. Great questions, keep them coming. Hope you enjoy this article. egomez@gomezhomes.com
Best regards,
Eisrael
Falling home prices are starting to ignite bidding wars in a few parts of the U.S. as first-time buyers compete with investors for the same foreclosed properties.
In most of the nation, the supply of unsold homes continues to swamp demand. Home prices in many markets continue to fall, and foreclosures, which slowed in late 2008 as mortgage companies delayed taking action against delinquent borrowers, are picking up again.
But real-estate brokers say multiple offers on certain homes have recently become more common in parts of California and Arizona and the Washington, D.C., and Minneapolis-St. Paul metropolitan areas.
See changes in the housing markets in 28 major metro areas.
Some home buyers are bidding against each other on foreclosures:
Tamby Leonard of Santa Ana, Calif., southeast of Los Angeles, says she has been outbid four times since January when trying to buy a home for her family of five. The more appealing bank-owned homes in her price range, around $300,000, tend to be sold quickly to investors who can pay cash. The market for homes in the Santa Ana area in that price range is "blazing hot," says Ed Mixon of Altera Real Estate, Ms. Leonard's agent.
On Wednesday, the Federal Housing Finance Agency reported that home prices nationwide rose a seasonally adjusted 0.7% in February from January, led by gains on the West Coast. When compared with a year earlier, however, home prices were down 6.5%.
Bidding wars -- common during the housing boom -- had all but disappeared soon after the market peaked about three years ago. Even now, they remain the exception rather than the rule.
The Wall Street Journal's quarterly survey of 28 major metro areas shows that there is still a glut of homes available in most markets. But the glut has shrunk, and some areas are running into shortages of moderately priced homes in middle-class neighborhoods.
Many housing economists expect the market to bottom out gradually over the next couple of years, with some parts of the country stabilizing well before others. California and Washington, D.C., for instance, are likely to recover faster than South Florida, which has an immense glut of vacant condominiums, and the New York City area, which has been hurt by Wall Street's collapse, says Kenneth Rosen, chairman of the Fisher Center for Real Estate at the University of California, Berkeley.
Across the nation, there is still a tug of war between bullish and bearish forces. On the bullish side, falling prices and the lowest mortgage rates since the 1950s have made homes far more affordable, luring shoppers like Ms. Leonard, who has been renting for years. Adding to the attraction, the U.S. government is offering tax credits for certain people who buy homes before Dec. 1. The credit -- equal to 10% of the purchase price, up to a maximum of $8,000 -- is available to buyers who haven't owned any other primary residence in the U.S. during the three years before the date of purchase.
On the bearish side, rising unemployment has knocked many people out of the housing market and made those who still have jobs skittish. Even those with secure jobs who want to buy can't always get loans on attractive terms because of today's tightened credit standards.
A foreclosure sign sits outside a home for sale in Phoenix.
In addition, the supply of bank-owned homes is expected to grow over the next few months because many mortgage companies have ended moratoriums during which they refrained from proceeding with foreclosures.
The moratoriums artificially reduced the supply of foreclosed homes listed for sale, says Chad Neel, president of LPS Asset Management Solutions Inc. in Westminster, Colo., which sells such properties for banks. Now "there's a flood about to come on the market," Mr. Neel says. Foreclosures are likely to weigh on the market for years as courts and mortgage companies struggle to catch up with huge backlogs of unresolved cases.
Foreclosures, though far above normal levels in most of the country, are heavily concentrated in a few states, including California, Arizona, Nevada, Florida and Michigan. In areas with large numbers of bank-owned homes, buyers are mainly concentrating on those properties. That leaves ordinary homes languishing as owners generally refuse to slash prices enough to compete with banks.
In the Sacramento, Calif., metro area, about two-thirds of all March sales were foreclosures, says Michael Lyon, chief executive of Lyon Real Estate. The supply of foreclosed homes currently listed for sale is enough to last only about a month at the recent sales pace, he calculates. But there are plenty of homes listed for sale that aren't bank-owned, enough to last more than eight months.
In West Sacramento, a buyer represented by Cherie Hunt of Prudential California Realty recently competed against two other bidders for a three-bedroom home built in 2001. Ms. Hunt's buyer won by agreeing to pay about $220,000, or nearly $10,000 above the asking price. But that's still way down from $405,000, the price at which the same home sold in 2005.
"I have 20 buyers looking desperately," says Ms. Hunt.
Frank Borges LLosa, owner of FranklyRealty.com, a real-estate brokerage in Arlington, Va., is advising clients that banks favor all-cash bids or offers from people who seem certain to qualify for financing. Sellers may well choose the offer least likely to fall through rather than the highest bid, he says. He and other brokers say banks appear to be deliberately setting asking prices low in some cases to provoke bidding battles.
"There are a lot of buyers who think they can lowball," says Connie Vaughn, an agent at ZipRealty in the Los Angeles area. But in some cases mortgage companies already have cut asking prices enough to generate multiple bids. One of her clients recently prevailed over more than 30 other bidders by offering about $86,000 -- or $20,000 above the asking price -- for a four-bedroom house in Adelanto, Calif., that had sold for $200,000 in 2004.
A mortgage company recently slashed the asking price on a two-family home in Norwich, Conn., to $73,900 from $144,900. That price cut prompted five offers that the company is now considering, says Linda Davis of Re/Max Realty Group, the listing agent. She says the price cut was unusually steep but adds, "At some point, [banks] just decide to let it go."
That's encouraging, says Ronald Peltier, chief executive of HomeServices of America Inc. in Minneapolis, which owns real-estate brokerages in 19 states. "We do need to flush out the distressed inventory," he says, before the rest of the market can stabilize.
One positive trend is affordability. A family earning the national median pretax income of $52,800 a year needs to spend 25% of that income to buy a median-priced home, down from 44% in mid-2006, according to John Burns, a real-estate consultant in Irvine, Calif. For the Los Angeles metro area, that ratio has dropped to 45% from 102%. In Phoenix, it is down to 19% from 46%.
Among the markets Mr. Burns expects to recover earliest are the metro areas of Washington, D.C.; San Antonio; Raleigh, N.C.; Denver; Sacramento; and San Diego.
Write to James R. Hagerty at bob.hagerty@wsj.com
Why Choose Me | Contact Us | BUYERS | Home | Search MLS | Fixed Rate Mtg Calc | 15 vs 30 Year Mtg Calc | Mtg Tax Savings Calc | ARM vs Fixed Rate Calc | Rent vs Buy Calc | Refi Interest Savings Calc | Refi Breakeven Calc | Mortgage Calculators | Interest Only Calc | Request FREE Reports | Your Dream Home VIDEO | 9 Steps to Ownership VIDEO | How to Sell Your Home VIDEO | Staging Your Home VIDEO | Buying Foreclosures/REO's
Copyright © 2009 CENTURY 21 A Property Shoppe - Eisrael GomezPortions Copyright © 2009 a la mode, inc.Another XSite by a la mode, inc. | Terms of Use| Site MapAll rate, payment, and area information are estimates and approximations only.
