Archive for February, 2010
Homeowners’ equity is again on the rise after three years of unprecedented shrinkage
February 16th, 2010 Categories: Real Estate Tools
Reporting from Washington – With all the bad news about underwater homeowners and strategic walkaways, you might think that U.S. homeowners’ equity holdings are continuing to slide.
But a little-publicized recent statistic on real estate is that home equity is again on the rise.Is that some piece of rosy propaganda put out by housing lobbyists to stimulate more home buying? Not unless you consider Federal Reserve economists to be shills for the real estate industry. The Fed conducts massive ongoing research into mortgage balances and home-value changes in hundreds of local markets around the country, and reports its findings quarterly.
According to the Fed’s most recent “flow of funds” survey, homeowners’ net equity grew by nearly $1 trillion from the recession’s nadir in the first quarter of 2009 through the third quarter.
From June 30 through Sept. 30, equity rose by $418 billion.That’s not impressive compared with the quarterly increases registered during the hyperinflationary housing boom years, but it could signal something important: After three years of unprecedented shrinkage in home equity — and three years of rapid expansion in the number of underwater borrowers with negative equity — there are signs the down cycle may be shifting.Last week, online real estate valuation researcher Zillow.com released its latest quarterly numbers on negative equity in major markets. The findings were sobering, but the study also offered some hints of improvement.
The overall negative equity rate among U.S. homeowners remained flat in the fourth quarter at 21.4%. But like the Fed’s numbers, that represented a decrease from the first two quarters of last year, when 22% and 23% of owners owed more on their mortgages than the estimated market value of their real estate.Zillow’s study found that in dozens of housing markets — including Washington, Los Angeles, San Francisco, Detroit, Miami, San Jose, Seattle and Tampa-St. Petersburg — the percentage of homeowners with negative equity appears to be on the decline.Some of the largest declines occurred in cities hardest hit by the recession and the housing bust — Ann Arbor, Mich. (down 9 percentage points), Riverside (down 5.7 points) and Phoenix (down 2 points). Florida markets that have struggled with major devaluations also saw significant improvement in negative equity ratios in the fourth quarter.
On the other hand, Zillow’s study found historically high rates of negative equity continuing to prevail in key cities. In Las Vegas, for example, 81.3% of homeowners — 256,000 households — were still underwater on their mortgages in the fourth quarter. This number is down from 82.5% in early 2009, but that’s no consolation to the affected owners.
In Phoenix, 61.5% of borrowers were in negative territory — 2 points lower than in the previous quarter, yet still high.Which major markets have the lowest underwater rates? As you might guess, they tend to be areas where the equity boom never quite boomed, and where toxic mortgages and fog-the-mirror underwriting by lenders were never the rage: Tulsa, Okla. (4.2%), Harrisburg, Pa. (5.7%), Binghamton, N.Y. (5.6%), and Peoria, Ill. (8%).Negative equity rates are crucial barometers of local housing markets’ propensity to experience high rates of default, foreclosure and strategic walkaways.
Communities with single-digit negative equity rates tend to have lower rates of walkaways and foreclosures.The reverse is the case in areas where large numbers of underwater homeowners see no economic rationale for continuing to send in their monthly mortgage payments on properties worth tens or even hundreds of thousands of dollars less than the principal balance owed to the bank. They believe they are throwing away money on albatross real estate.
Mortgage market analyst Laurie Goodman, senior managing director of Amherst Securities, recently warned lenders to be especially vigilant about borrowers in markets where negative equity ratios are high. Once underwater borrowers miss just one payment on their mortgage, according to Goodman, there is a 75% to 80% probability that they will chuck the whole deal.Borrowers with even minimal positive equity, on the other hand, are far less likely to do the same.kenharney@earthlink.net.Distributed by the Washington Post Writers Group.
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business. Buy it here.
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Home sales, prices increase during fourth quarter
February 12th, 2010 Categories: Buying a Home
Distressed property — either bank-owned homes or those sold by homeowners who can’t make their payments — accounted for 32% of all transactions in the fourth quarter, a decline from 37% a year earlier. Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and the district. All but three states registered double-digit annual increases. “The surge in home sales was driven by buyers responding strongly to the tax credit combined with record-low mortgage interest rates,” said Lawrence Yun, chief economist for the Realtors group. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.” The national median existing single-family price was $172,900, a 2.9% increase from the third quarter and a decline of 4.1% from the fourth quarter of 2008. The median is the point at which half of the homes sold for more and half sold for less. The median price for a condominium in 54 metro areas was $177,300 in the fourth quarter, a decline of 4.8% from the fourth quarter of 2008. Eleven metro areas showed increases in the median condo price from a year earlier and 43 areas had declines. In the third quarter only four metros experienced annual price gains. Sales of previously owned homes in the West jumped 16.2% in the fourth quarter to an annual rate of 1.38 million and are 18.2% above a year ago. The median existing single-family home price in the West was $227,200 in the fourth quarter, a decline of 8.9% from the fourth quarter of 2008.
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business. Buy it here. Subscribe to this blog: Valerie Fitzgerald Group Blog Follow me on Twitter: http://twitter.com/ValreFitzgerald Follow me on Facebook:http://www.facebook.com/ValerieFitzgeraldRealEstate
Total existing-home sales, including single-family and condominium units, increased to a seasonally adjusted annual rate of 6.03 million in the fourth quarter, a 27.2% increase from the fourth quarter of 2008, according to the National Assn. of Realtors.
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Market Forecast: Trends to Watch | Valerie Fitzgerald | Beverly Hills & West L.A. Real Estate
February 5th, 2010 Categories: Real Estate Tools
FROM REAL ESTATE MAGAZINE
Jobs, foreclosures, option-adjustable-rate mortgages, and interest rates are among the top trends that could dictate what will happen in California’s housing markets this year. Here’s what you need to know to make sense of how these trends could affect the real estate market.
1. Market Fundamentals
Three market fundamentals that turned positive in 2009 could be good indicators this year as well. First, home prices have fallen lower than replacement costs in many markets. This means a home can be bought for less than the cost to build it.
Second, home prices are “a lot more attractive” relative to rents than they have been in many years; and third, inventory of for-sale homes has “dropped very dramatically,” says Richard K. Green, director of the USC Lusk School of Real Estate in Los Angeles. That suggests some markets have stabilized, although
homes priced at more than $1 million may be an exception. “There is still a lot of pain left to come” in that segment of the market, Green warns.
2. Jobs
“Painful” describes the employment picture and the outlook for wage hikes and job security. Moreover, housing may now be less sensitive to traditional jobmoving patterns, observes Stefan Swanepoel, a real estate trends expert, author, and speaker in Aliso Viejo. Home sales that involve corporate relocations or year-end job changes may be moribund until the employment situation improves.
3. Foreclosures
Jobs are an important factor in foreclosures, though “not everyone who has lost a job has lost their house yet,” Swanepoel says. Homeowners who’ve lost a job may have had to live on lower wages or one income, or may have had to tap into their savings or retirement accounts to get by. “If they don’t get a decent job or a good job soon, I can see their houses still coming on the market in foreclosures or short sales,” he says.
Another trend to watch is that some homewners have dodged foreclosure even though they haven’t made their mortgage payments, according to Sean O’Toole, chief executive of ForeclosureRadar.com.
“We don’t have the political or societal will to foreclose on [that many] people, but nor do we have the will to bail out those homeowners who can’t afford their payments,” O’Toole says. That stalemate has slowed the pace of foreclosures, which may mean fewer opportunities for REALTORS® to list and sell those homes, he suggests.
4. Lenders and Loans
Home loans are crucial to healthy housing markets, so REALTORS® need to keep an eye on national lenders that originate loans locally, Swanepoel suggests. “As they digest the companies they’ve acquired and find out what loans they have, what loans they are servicing, and what their exposure in certain markets is, they might change their rules and terms and conditions,” he warns. Tougher requirements for loans insured by the Federal Housing Administration (FHA) could have an effect on housing as well.
5. Interest Rates
Interest rates could turn out to be the ultimate wild card. How long the Federal Reserve will keep interest rates low is an unanswerable question on which hangs the future of housing. The Fed’s ability to maintain low interest rates is “the greatest risk to the real estate industry right now,” says O’Toole. “If interest rates go to 8 percent, this market is over.”
6. Option-ARM Recasts
Low interest rates have taken the sting out of adjustable-rate mortgages (ARMs), but the payment option variety is still watch-worthy because a recast to make up negative amortization can result in an enormous payment shock, Green notes. “You could set up a fairly simple example where interest rates don’t go up at all, but the payment doubles,” he says. “If that loan was originated with a 90 percent
loan-to-value ratio and you are piling up principal, you could be deeply underwater and unable to make the payment.” Aggressive loan modification programs have blunted the expected blow from option-ARM recasts, but many homeowners still owe more than their home is worth and 30-day delinquencies
have continued to climb, O’Toole observes.
That suggests more homeowners may throw in the towel. “Strategic walk-aways from negative equity and/or due to job loss are going to be a bigger issue because modification programs and low interest rates likely have taken up the slack from the reset/recast issue,” he explains.
The Valerie Fitzgerald Group specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business. Buy it here.
Subscribe to this blog: Valerie Fitzgerald Group Blog
Follow me on Twitter: http://twitter.com/ValreFitzgerald
Follow me on Facebook: http://www.facebook.com/ValerieFitzgeraldRealEstate
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FHA Revises ‘Anti-Flipping’ Rule | Valerie Fitzgerald | Beverly Hills & West L.A. Real Estate
February 5th, 2010 Categories: Real Estate Tools
Reporting from Washington — Call it three birds with one stone: The federal government hopes simultaneously to help low-down-payment home buyers, investors who fix up foreclosures, and local communities burdened with too many bank-owned and foreclosed homes — all with one potentially far-reaching policy change.
The Federal Housing Administration is revising its long-standing “anti-flipping” rule starting Monday and just might score a hit with all three target groups.
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