Excerpts taken from Keeping Current Matters, Real Estate Web Site
Predicting trends during the most volatile housing market in American real estate history is no easy task. We strongly believe these are four real estate items we should keep an eye on in 2012:
1. Buyers Will Return
In 2011, a lack of consumer confidence in the overall economy dramatically impacted the housing market. Buyers were afraid to make a purchasing decision on any big ticket item. By the end of 2011, consumer confidence began to return and sales increased. Economic conditions will continue to improve throughout 2012 and consumer sentiment will solidify. Once that happens, home buyers will realize that now is the time to buy.
2. Foreclosures Will Increase
The ‘shadow inventory’ of foreclosures which has been growing since the robo-signing challenges of late 2010 will finally be introduced to the market. Distressed properties sell at discounted prices. They will impact the housing values of the non-distressed homes in the area.
3. Prices Will Soften
As more and more foreclosures come to market, there will be greater downward pressure on the values of houses in the region. Foreclosures impact values of non-distressed properties in two ways:
■ They will eat up some of the buyer demand in the market.
■ They will impact the appraisal on ALL transactions in the area.
An increase in foreclosures will have a negative impact on values. This will cause more homes to be underwater.
4. Short Sales Will Increase
As mentioned above, we strongly believe that home prices will soften through at least the first half of 2012. Falling prices will force more homeowners into a position of negative equity. Negative equity is one of the triggers that cause people to strategically default on their mortgage obligations. If this happens, there could be an increase in the number of foreclosures. However, we predict that banks will take preventative measures which will help many of these homes avoid foreclosure by easing the requirements in the short sale process for both homeowners and real estate professionals
What are some of the bottom lines from all of this? Here is yours truly's best shot at his clearest crystal ball.
+ We will see a bottom in prices in PA in 2012. In fact, there are some indications this has already happened.
+ Once it becomes common knowledge that we hit the bottom and are on the way back up, there will probably be a mini panic of people jumping to get on the band wagon before it gets too far out of the station.
+ Now is the best time to buy a house that we have seen in the last 50 years, and that we probably will see for the next 50.
How many of these will come true? I will keep track and let you know.
Showing posts with label Foreclosure. Show all posts
Showing posts with label Foreclosure. Show all posts
Friday, February 3, 2012
Friday, July 15, 2011
SOME MORE PERSPECTIVE ON HOW WE GOT INTO THIS ECONOMIC CRUNCH
This is another in a series of blog posts in which I intend to excerpt and expand upon portions of a recent book, "Reckless Endangerment".
The authors of this book investigate and take apart the various factors that led to the current recession or depression (you pick the term) in the real estate market.
From 2000 through 2006, the average price of a single family house in Delaware County increased by 61%. (From $160,000 to $257,000 as per MLS, Trend). Since then we have had a market correction that has driven the average resale price down by 27% nationally. In Pennsylvania, the average decline since 2006 has been 13% (Freddie Mac, 05/11).
One of the predictable results of that kind of a decline is a glut of houses on the market. As per MLS Trend, in Delaware county, there are 4,103 single family houses for sale as of June, 2011. Back in the height of the good old (or was it really) seller's market, the inventory of single family houses was around 1,600. Wow, a 256% increase in inventory. No wonder prices are down.
One other indicator of stress in the housing market is the rate at which single family houses are either 90+ days behind in mortgage payments or in foreclosure. According to CalculatedRiskBlog.com, the rate for Fannie Mae purchased loans was under 1% until late 2007. Since then, in 2010, it spiked to a heretofore unheard of 5+%, a five fold increase.
Along with this glut has come the now all too familiar litany of high unemployment, declining incomes and immense pain on the part of a lot of people.
What caused this dramatic shift and all of the corresponding misery? More on that in the next blog post which will be out next week. Suffice it to say, it came about because lenders made way too many easy loans, with standards that were way too lax.
However, was it because of the "Greedy Bankers and Wall Street Sharks" who
"Took Advantage of Government De Regulation to mess up the economy? That is the basic line that has been pushed by most of the major media in this country.
However, as I think you will see, the answer is Not Really. It was caused by deliberate policies of our federal government interfering in and, in effect, over regulating the loan market.
I would welcome your comments and thoughts.
The authors of this book investigate and take apart the various factors that led to the current recession or depression (you pick the term) in the real estate market.
From 2000 through 2006, the average price of a single family house in Delaware County increased by 61%. (From $160,000 to $257,000 as per MLS, Trend). Since then we have had a market correction that has driven the average resale price down by 27% nationally. In Pennsylvania, the average decline since 2006 has been 13% (Freddie Mac, 05/11).
One of the predictable results of that kind of a decline is a glut of houses on the market. As per MLS Trend, in Delaware county, there are 4,103 single family houses for sale as of June, 2011. Back in the height of the good old (or was it really) seller's market, the inventory of single family houses was around 1,600. Wow, a 256% increase in inventory. No wonder prices are down.
One other indicator of stress in the housing market is the rate at which single family houses are either 90+ days behind in mortgage payments or in foreclosure. According to CalculatedRiskBlog.com, the rate for Fannie Mae purchased loans was under 1% until late 2007. Since then, in 2010, it spiked to a heretofore unheard of 5+%, a five fold increase.
Along with this glut has come the now all too familiar litany of high unemployment, declining incomes and immense pain on the part of a lot of people.
What caused this dramatic shift and all of the corresponding misery? More on that in the next blog post which will be out next week. Suffice it to say, it came about because lenders made way too many easy loans, with standards that were way too lax.
However, was it because of the "Greedy Bankers and Wall Street Sharks" who
"Took Advantage of Government De Regulation to mess up the economy? That is the basic line that has been pushed by most of the major media in this country.
However, as I think you will see, the answer is Not Really. It was caused by deliberate policies of our federal government interfering in and, in effect, over regulating the loan market.
I would welcome your comments and thoughts.
Thursday, May 19, 2011
HOUSE PRICES IN OUR AREA, WHAT DO THE TEA LEAVES SAY NOW?
As new economic data become available, it is possible to try and read the tea leaves and divine what is going to happen to house prices over the next year or so. This is my shot to do just that. Thanks for reading and I hope that it makes sense.
First a little background. It is generally understood that house prices peaked in our area (and in most of the country) in mid to late 2006. That means we have been in a downturn going on five years now.
According to CNN Money, prices kept declining until April of 2009, at which point they began to recover. A few pundits felt this was the bottom. However, the national number dipped again and hit a new low in February of 2011.
Further, numbers of foreclosures are still accelerating. According to the OCC and OTS Mortgage Metrics Report of 3/20/11, forclosures in process nationwide were 1,290,253 in the fourth quarter of 2010. That is up by 19.6% from the same quarter a year earlier.
According to the same report, new short sales are up by 30.3% from a year earlier, although the pace is down a little from the third quarter of 2010.
One nice thing about history is that at least you know where you have been. With respect to forecasts, the only thing you know for sure is that you will be wrong. You never know if you will be wrong early, wrong late, wrong high or wrong low - just that you will be wrong. However, knowing about general directions in advance can be real helpful in making plans, so here goes.
One of the factors driving real estate price declines across the country has been the number of foreclosures and short sales. California, Nevada and Arizona have been cited as worst examples of the basket cases in real estate. However, the S&P Report of 4/20/11 shows that many areas in those three states are projected to be clearing up their backlogs in from 18 to 36 months. On the other hand, many areas in SE Pennsylvania are projected to need between 72 to as much as 120 months to clear the backlog. If true, that would say that we are in for a long spell of working off excess inventory which will keep prices low.
Reuters News Service in February stated, "...economists now expect home prices will fall 2.3 percent in 2011 and then begin a slight recovery in 2012..."
David Stiff, chief economist of Fsserv said this in February, 2011. "Large supplies of foreclosed properties will continue to be the biggest downside risk for home prices..."
Radar Logic reported in March, 2011, "The supply of homes for sale and potentially for sale is very large relative to demand, and it continues to be fed by high rates of mortgage defaults and foreclosures. At the same time, demand for houses is constrained by tight lending standards. Unfortunately, delcining home prices are likely to exacerbate these challenges to the housing market"
I could quote more of the same, but you get the idea. My bottom line and what I am advising people is this:
+ If you absolutely need to sell, sell now. This is as good a time as you will probably have in the next two years.
+ If you can afford to stay in your present house for two years or more, it may be best to do that.
+ However, you really need to consider what you will do if you sell. It could be that the low mortgage rates and prices will help you to make up more in your next purchase than you will lose in selling now.
Where is the bright side you ask? - it is a fantastic time to buy. Prices are soft and going lower; mortgage interest rates are at historic lows. If you have equity in your house and want to move up, now is a great time.
How can a seller make use of these current trends? Well if you need to sell, now is probably the best time that you will have in the next couple of years. If you can wait for more than two years to sell, my advice would be to do it. I certainly hope that prices will be better by then. Of course, if somebody had asked me two years ago if prices would still be going down, I would have said probably not.
Not an easy set of trade offs to manage, but it can be done. If anyone would like some help in that or has another related real estate question, please feel free to email me at delcorealestate@gmail.com or call me at 484-468-1306.
Would appreciate your thoughts and comments.
First a little background. It is generally understood that house prices peaked in our area (and in most of the country) in mid to late 2006. That means we have been in a downturn going on five years now.
According to CNN Money, prices kept declining until April of 2009, at which point they began to recover. A few pundits felt this was the bottom. However, the national number dipped again and hit a new low in February of 2011.
Further, numbers of foreclosures are still accelerating. According to the OCC and OTS Mortgage Metrics Report of 3/20/11, forclosures in process nationwide were 1,290,253 in the fourth quarter of 2010. That is up by 19.6% from the same quarter a year earlier.
According to the same report, new short sales are up by 30.3% from a year earlier, although the pace is down a little from the third quarter of 2010.
One nice thing about history is that at least you know where you have been. With respect to forecasts, the only thing you know for sure is that you will be wrong. You never know if you will be wrong early, wrong late, wrong high or wrong low - just that you will be wrong. However, knowing about general directions in advance can be real helpful in making plans, so here goes.
One of the factors driving real estate price declines across the country has been the number of foreclosures and short sales. California, Nevada and Arizona have been cited as worst examples of the basket cases in real estate. However, the S&P Report of 4/20/11 shows that many areas in those three states are projected to be clearing up their backlogs in from 18 to 36 months. On the other hand, many areas in SE Pennsylvania are projected to need between 72 to as much as 120 months to clear the backlog. If true, that would say that we are in for a long spell of working off excess inventory which will keep prices low.
Reuters News Service in February stated, "...economists now expect home prices will fall 2.3 percent in 2011 and then begin a slight recovery in 2012..."
David Stiff, chief economist of Fsserv said this in February, 2011. "Large supplies of foreclosed properties will continue to be the biggest downside risk for home prices..."
Radar Logic reported in March, 2011, "The supply of homes for sale and potentially for sale is very large relative to demand, and it continues to be fed by high rates of mortgage defaults and foreclosures. At the same time, demand for houses is constrained by tight lending standards. Unfortunately, delcining home prices are likely to exacerbate these challenges to the housing market"
I could quote more of the same, but you get the idea. My bottom line and what I am advising people is this:
+ If you absolutely need to sell, sell now. This is as good a time as you will probably have in the next two years.
+ If you can afford to stay in your present house for two years or more, it may be best to do that.
+ However, you really need to consider what you will do if you sell. It could be that the low mortgage rates and prices will help you to make up more in your next purchase than you will lose in selling now.
Where is the bright side you ask? - it is a fantastic time to buy. Prices are soft and going lower; mortgage interest rates are at historic lows. If you have equity in your house and want to move up, now is a great time.
How can a seller make use of these current trends? Well if you need to sell, now is probably the best time that you will have in the next couple of years. If you can wait for more than two years to sell, my advice would be to do it. I certainly hope that prices will be better by then. Of course, if somebody had asked me two years ago if prices would still be going down, I would have said probably not.
Not an easy set of trade offs to manage, but it can be done. If anyone would like some help in that or has another related real estate question, please feel free to email me at delcorealestate@gmail.com or call me at 484-468-1306.
Would appreciate your thoughts and comments.
Friday, May 6, 2011
HELP, I'M GETTING BEHIND ON MY MORTGAGE AND DO NOT KNOW WHAT TO DO
To begin here is a shocking statistic. 28% of the homeowners in the United States are "Under Water". That means they owe more on their mortgage than their house is worth.
Now, that does not mean that every one of these homeowners is in trouble. Many are still making their payments on time and plan to continue.
The folks who are in real trouble are the ones who are "Under Water and who also lose a job, need to sell right now to move to another part of the country, have a serious illness that interrupts employment, undergo a divorce or other big family upset. If they owe more than the house is worth and also encounter anything that undermines their ability to pay, they can be in a real pickle.
In other words, they find themselves in a place where they need to sell their house but the proceeds are too small to pay off the lender(s). What in the world can they do? Is foreclosure the only option? Most people would probably say yes to this question, but they would be wrong. A homeowner in this position has options other than foreclosure, but they need to get help. An experienced realtor, backed up with the right kind of legal and accounting help can provide this help.
If a homeowner is really "Under Water" and cannot make ongoing mortgage payments, the better avenue is to present the lender, who holds the first mortgage, with all of the facts in the case. If the lender agrees that the homeowner has a legitimate case, they will probably agree to a "Short Sale".
What is a "Short Sale" you say? That is an agreement wherein the lender agrees to accept whatever proceeds come from the sale of the home, even if it is less than what is owed, as full satisfaction of the debt. The lender will insist on the right to approve the deal, but in most cases, they will accept significantly less than the total amount owed.
Stated differently, if the lender(s) agree and the homeowner sells the house, all of the debt/liens that were on the house can be forgiven.
There are lots of advantages to this course of action as opposed to foreclosure. A few of them are:
Person who undergoes foreclosure is ineligible for another Fannie Mae backed mortgage for 5 years. A person who closes a short sale may become eligible after only 2-3 years.
After foreclosure, the former homeowner may find that he or she still owes the bank a lot of money. With a short sale, whatever the bank does not recover from the sale is forgiven and the homeowner owes nothing more.
Foreclosure lowers credit scores from 150 to 300 points, typically for over 3 years. A short sale can lower the credit score by as little as 50 points and the impact can be as short as 12 to 18 months.
Short sales are also better for the banks. On average, a short sale property sells for 89% of the full market value of the house. If the bank has to foreclose, that typically costs the bank another $60,000. For that reason, if the bank becomes convinced that the homeowner really cannot be expected to pay, it is also in their best interest to arrange for a short sale.
For the above and a lot of other reasons, a short sale is a lot better than foreclosure.
If you or anyone you know would like to learn more, in confidence, please email me at DelcoRealEstate@Gmail.com or call me at 484-574-4088.
Now, that does not mean that every one of these homeowners is in trouble. Many are still making their payments on time and plan to continue.
The folks who are in real trouble are the ones who are "Under Water and who also lose a job, need to sell right now to move to another part of the country, have a serious illness that interrupts employment, undergo a divorce or other big family upset. If they owe more than the house is worth and also encounter anything that undermines their ability to pay, they can be in a real pickle.
In other words, they find themselves in a place where they need to sell their house but the proceeds are too small to pay off the lender(s). What in the world can they do? Is foreclosure the only option? Most people would probably say yes to this question, but they would be wrong. A homeowner in this position has options other than foreclosure, but they need to get help. An experienced realtor, backed up with the right kind of legal and accounting help can provide this help.
If a homeowner is really "Under Water" and cannot make ongoing mortgage payments, the better avenue is to present the lender, who holds the first mortgage, with all of the facts in the case. If the lender agrees that the homeowner has a legitimate case, they will probably agree to a "Short Sale".
What is a "Short Sale" you say? That is an agreement wherein the lender agrees to accept whatever proceeds come from the sale of the home, even if it is less than what is owed, as full satisfaction of the debt. The lender will insist on the right to approve the deal, but in most cases, they will accept significantly less than the total amount owed.
Stated differently, if the lender(s) agree and the homeowner sells the house, all of the debt/liens that were on the house can be forgiven.
There are lots of advantages to this course of action as opposed to foreclosure. A few of them are:
Person who undergoes foreclosure is ineligible for another Fannie Mae backed mortgage for 5 years. A person who closes a short sale may become eligible after only 2-3 years.
After foreclosure, the former homeowner may find that he or she still owes the bank a lot of money. With a short sale, whatever the bank does not recover from the sale is forgiven and the homeowner owes nothing more.
Foreclosure lowers credit scores from 150 to 300 points, typically for over 3 years. A short sale can lower the credit score by as little as 50 points and the impact can be as short as 12 to 18 months.
Short sales are also better for the banks. On average, a short sale property sells for 89% of the full market value of the house. If the bank has to foreclose, that typically costs the bank another $60,000. For that reason, if the bank becomes convinced that the homeowner really cannot be expected to pay, it is also in their best interest to arrange for a short sale.
For the above and a lot of other reasons, a short sale is a lot better than foreclosure.
If you or anyone you know would like to learn more, in confidence, please email me at DelcoRealEstate@Gmail.com or call me at 484-574-4088.
Monday, April 18, 2011
BEHIND ON THE MORTGAGE? HELP IS AVAILABLE FOR YOU
As the economic slowdown seems to go on and on forever, more and more homeowners are feeling the pinch of trying to keep up with their monthly payment. As of today, there are 3,838 houses listed for sale in Delaware County. 257 of these are "Short Sales" (about 7%) which means that the sellers have too little equity in the property to pay off the mortgage when they sell.
The bad news is that this trend seems to be increasing. The good news is that help is available and that lenders are willing to work with homeowners and their agents to work out a settlement. More good news (for buyers at least, is that Short Sales can be a chance to buy a house at a significant discount to the market.
Many homeowners feel that there is no choice between keeping up their payments and declaring bankruptcy. Actually, they do have significant leverage with their lenders, for these reasons.
If a homeowner decides to just leave and "Give the house back to the bank", his or her credit rating takes an enormous hit that sticks with them for years. Banks do not like it either, because the foreclosure process is long (14-18 months in PA),it costs them a lot of money and the average foreclosure sells for only 59% of the normal value.
If however, the homeowner approaches the bank and lays out the case for a short sale, the average sale price for that situation is 81% of the normal value. That is 22 percentage points. On a house that is worth $300,000 in today's market, that is a difference of about $66,000 in more money to the bank. Other positives for the lender are that the whole short sale process costs a lot less and it can be done a lot faster. While neither a Short Sale nor a Foreclosure is a good thing for the lender, the Short Sale is a lot less damaging.
Not all situations are candidates for a Short Sale, but a lot of them are. If you think that you might qualify or if you know someone who might, you or they will be relieved to know that help is available that can get you out from under a real bad situation. However, this is not something that you should try on your own. You need the help of a trained and able Realtor to help you through the process.
If you would like to learn more about Short Sales, please send me a confidential email at DelcoRealEstate@Gmail.com or make an equally confidential phone call to me at 484-574-4088.
The bad news is that this trend seems to be increasing. The good news is that help is available and that lenders are willing to work with homeowners and their agents to work out a settlement. More good news (for buyers at least, is that Short Sales can be a chance to buy a house at a significant discount to the market.
Many homeowners feel that there is no choice between keeping up their payments and declaring bankruptcy. Actually, they do have significant leverage with their lenders, for these reasons.
If a homeowner decides to just leave and "Give the house back to the bank", his or her credit rating takes an enormous hit that sticks with them for years. Banks do not like it either, because the foreclosure process is long (14-18 months in PA),it costs them a lot of money and the average foreclosure sells for only 59% of the normal value.
If however, the homeowner approaches the bank and lays out the case for a short sale, the average sale price for that situation is 81% of the normal value. That is 22 percentage points. On a house that is worth $300,000 in today's market, that is a difference of about $66,000 in more money to the bank. Other positives for the lender are that the whole short sale process costs a lot less and it can be done a lot faster. While neither a Short Sale nor a Foreclosure is a good thing for the lender, the Short Sale is a lot less damaging.
Not all situations are candidates for a Short Sale, but a lot of them are. If you think that you might qualify or if you know someone who might, you or they will be relieved to know that help is available that can get you out from under a real bad situation. However, this is not something that you should try on your own. You need the help of a trained and able Realtor to help you through the process.
If you would like to learn more about Short Sales, please send me a confidential email at DelcoRealEstate@Gmail.com or make an equally confidential phone call to me at 484-574-4088.
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