Wednesday, October 19, 2011

Foreclosure Peak Expected in 2013

The sale of properties repossessed through foreclosure may not peak until 2013, keeping home prices from a meaningful recovery for some time, analysts estimated Monday.

Nearly half of the more than 552,000 REO properties liquidated in the first half of 2011 were held by private banks. In the years ahead, the government — including the Department of Housing and Urban Development, Fannie Mae and Freddie Mac — will begin taking a majority of the activity.

In 2013, REO sales could reach 1.48 million properties, according to estimates from Bank of America Merrill Lynch analysts, a 10% increase from projected amount in 2012.

"We do not expect to see anywhere near the downward pressure on home prices that we had back in 2008, since the expected percent changes in liquidation volumes are so much smaller," BofAML analysts said. "But home prices are starting from a negative point, so the implication is that home prices will continue to decline as the foreclosures transition through the pipeline."

Most of the projected increase will come as the government begins to unload its backlog. The government-sponsored enterprises and HUD, analysts estimate, will liquidate roughly 595,000 properties in 2013 alone.

Total REO liquidations wouldn't drop below 1 million until 2015, according to BofAML.

The Obama administration began work last month developing new strategies for selling this mass of properties, which may involve renting more of them. The Federal Housing Finance Agency is also working on a way to refinance more underwater borrowers to entice them from walking away.

"I would essentially rent the house back to those who are living in them now," said Susan Woodward, an economist with Sand Hill Econometrics. "I don't think it makes a lot of sense to push 4 million people out of their homes when they're victims of a slower economy they had nothing to do with."

Other analysts were skeptical of anyone who could predict accurately what the GSEs or Washington would do, especially after the elections in 2012.

"Do they really think that the government under any administration would let 500,000 homes hit the market and crash prices all over again, six years after the first crash?" said Scott Sambucci, chief analyst at Altos Research.

He said even if unemployment improved by a full percentage point or two — which he said would be a stretch — the market would still struggle to meet such a supply influx.

"It would crash the market, so no, it'll never happen," Sambucci said.

Daren Blomquist at RealtyTrac, which monitors foreclosure filings across the country, said the sale of REO is on track to reach 825,000 by the end of 2011.

"We do expect the REOs to pick back up in 2012 as lenders push through some of the foreclosures delayed by processing and paperwork issues," Blomquist said, adding the inventory needed to be sold could reach well into the millions.

If half of the 800,000 mortgages currently somewhere in the foreclosure process and another half of the 1.5 million loans in serious delinquency end up REO, it could mean an additional, 1.15 million properties that would need to be liquidated — not including new foreclosures that enter the process, according to RealtyTrac.

"That's very possible given continued high unemployment rates and high underwater rates," Blomquist said. RealtyTrac estimates roughly 27% of all outstanding mortgages are worth more than the underlying property.

Woodward said refinancing borrowers, in negative equity or not, down to current market rates could result in a total savings for U.S. households at $250 billion annually. When asked if private investors would return to fund the future mortgage market after such a radical change, she said they would.

"I think the whole world would see this as a one-time fix. We did similar extreme things during the Great Depression," Woodward said.

Investors themselves, though, showed little confidence they would take on such a risk again. In fact, most are trying to keep the government involved in the housing market for the future, to keep risks as low as possible. Otherwise, foreign investors would flee.

While the estimates on how many REO will be sold in the future are extremely difficult to nail down, the size of the best projections share a common and threatening scale. Analysts said major refinancing schemes or new strategies for liquidating REO on a local level would need to be completed soon to rescue house prices from the still increasing pressure of mounting foreclosures.

"The need for policy support would therefore be considered urgent," the BofAML analysts said.

The author of this article is: Jon Prior 

Friday, October 14, 2011

Prices Up, Listings Down, in Many Markets

National home sales and median price listings in September rose from a year ago with the home inventory down about 20%, according to multiple reports Thursday.  These positive signals were offset by a continued slight downward trend in home sales prices, down 3.3% from a year ago.  Of the 53 markets surveyed by the company,

17 saw yearly sales price increases, including Detroit (13.4%), Miami (8.4%) and Orlando, Fla. (7.8%).  Home sales nationally went up 7.6% from September 2010 with increases in 44 of 53 markets, including Des Moines, Iowa, (31.3%) and Minneapolis (30.1%).  Single-family home, condo, townhouse and co-op inventory was down 3.27% from August and down 20.09% from September last year, according to  This year-over-year decrease could mean a return to seasonal patterns and higher prices in the coming months, though markets are still fragile and could weaken in bad economic conditions.

Monday, October 10, 2011

Realtors Should Not Be the Obstacle to Selling Real Estate

I have spent the better part of two days responding to Realtor requests for showings that get cancelled, or rescheduled, or where the agent doesn’t even show up. Maybe I have just been in real estate too long. Maybe I just have an old fashioned sense of how to behave toward others. Yes, I really do believe that manners- treating others as you would like to be treated, and about making others feel comfortable, is important. I believe in the power of ethical and polite behavior.

Real estate veterans remember well the days when our professional relationships meant something. The pros know that we will deal with each other time and time again, and that has always nurtured camaraderie. For the most part real estate was a gentle business. It was a small community of Realtors that embraced ethics and the power of cooperation through the MLS. While there were still untrustworthy agents, we all knew who they were, and acted accordingly.

Today there are a huge number of new Realtors in the business who lack the basic fundamentals of business behavior. Market knowledge, professionalism, respect for your peers, empathy, ethical behavior and adherence to the Realtor Code of Ethics are keys, if not to success, then certainly to a respectable career that doesn’t abuse the rest of us.

The nature of the business has changed so that the traditional mentoring relationship that a broker had with a new agent doesn’t exist. How can we expect professionalism when franchise offices recruit new agents like mad in pursuit of a profit margin? I am amazed by the number of Realtors who lack respect for the value of other Realtor’s time. Please, let’s not ruin it for everyone. At the very least can you speak clearly on the phone, make appointments in advance during the business day and keep them, get familiar with a map, qualify your buyers and be on time? Is that too much to ask?

Friday, October 07, 2011

Upside Down in Your House?

Upside down in your house? Owe more than it is worth? Rob can help you turn your house over and get it sold via a short sale. Rob uses a local law firm to handle the short sale negotiations with your lender, at no cost to you. Often they are able to wipe out the debt as part of the negotiated settlement. There are many tricky issues that arise with a short sale. Preparing the buyer for the process, qualifying you with your lender, negotiating a contract price that is likely to be approved by your lender, then negotiating with your lender and the buyer again in the event they don't agree to the contract price, and keeping the buyer from walking away out of frustration are among the tasks unique to selling properties as a short sale. Most short sales fall apart, and properties are often put under contract multiple times before a successful short sale closes. I recently sold a short sale house as the buyers agent where in the 11th hour we were told by the listing agent a foreclosure sale would occur that week. I was able to get the attorney I use to go to court to ask the Judge to delay the sale in order to allow the short sale to go through. A hair-raising ordeal for all concerned but the final outcome was a successful short sale. Not something a novice could accomplish. Please contact me to discuss the finer points of your short sale situation, and give me the opportunity to explain how I can help you get your short sale approved and closed.

Photo - A postcard of The Upside Down House, a developers promotion for houses in Sunrise Gold Village, Sunrise Florida, early 1960's

Have We Reached The Bottom?

The biggest question my clients seem to have is whether we have reached the bottom of the market. I agree with real estate pundit Barbara Corcoran who says that when we have a consensus that the bottom has been reached, it is long past. I think for the most part the bottom was sometime mid-2010. What has the market in Broward been like so far in 2011? I have worked with a number of out of town buyers and have had hundreds of inquiries from others in the last few months, who have gathered from the news that Florida is having a huge fire sale. A big part of selling real estate has always been reconciling buyer’s expectations with the reality of the market. That is the biggest challenge in today’s market. I worked with four different clients in the last few months who all bid on foreclosure properties. I advised each of them to offer full price, and even more, and they all did. Two succeeded and two lost out to higher offers, one to an offer 50,000 more than the 840,000 list price. Before you think I am nuts to suggest anyone should pay over list during the worst real estate market of my 30-plus year career, let’s look at what the Broward County real estate market of condominiums and houses over 100,000 has done in the last 90 days according to the area MLS data. There are currently 4,206 houses for sale in Broward County over $100,000 that are conventional listings. There are 476 foreclosure listings and 1944 that are short sales. In the last 90 days 1000 conventional sales, 118 foreclosures sales and 443 short sales occurred. In the condominium market priced over $100,000 there are 4106 conventional listings, 291 foreclosures, and 1214 short sale listings. In the last 90 days 721 conventional sales, 330 foreclosure sales and 287 short sales occurred. I looked closer at this data and there are some definite trends that should help buyers understand what is happening in the market. First of all, the number of foreclosure listings is less than most consumers would expect. Foreclosures are the fastest selling category, with most selling within a few weeks of being listed. Most importantly, foreclosure listings are selling in a range from 5% under list to full price, to over list price in many cases. Buyers expecting to get discounts on foreclosure buys were entirely unsuccessful with that strategy, according to the numbers. The sales of short sale properties, that is, homes and condos where the mortgage balance is higher than the market value, had the longest days on market of all. Banks are still not moving with any speed in approving short sales. Short sales are the most frustrating segment of the market where the buyer has little control over the time frame for approval and closing, or if it will happen at all. Pre-approved short sales are the best bet, that is, one where the seller is pre-qualified and a price has been agreed on by the bank. The mortgage company is going to be looking for market value. Some sellers list short sales low to encourage a buyer, but be prepared to agree to a number that aligns with recent comparable sales when the lender responds. Conventional sales have been relatively strong in the last 90 days, pointing to strength in the market coming from the bottoming out of prices. Condos with water views and houses in all price ranges that are priced well, are attracting buyers. Again, the numbers show that properties sell when the price is within ten percent of what they sell for. No huge discounts off list are happening, but the seller has to be realistic in pricing to attract a realistic buyer. It looks like in general Broward County is trending to toward a stronger market. Smart buyers have the largest inventory of available properties to choose from right now. The best deals are in those places where there was the most speculative buying during the boom, such as condos downtown, and infill townhome developments. We don’t have the condo glut that downtown Miami has, or the housing glut of west Florida where overdevelopment was rampant, two areas that have contributed most to the perception of Florida being a real estate disaster. The market in Broward County will continue to be aggravated by the poor economy more than anything. The savvy buyer, however is acting now, and getting some of the best buys Broward County real estate consumers will see for a long, long time.