Are Foreclosures Increasing or Decreasing?

Recent headlines have created tremendous confusion regarding the foreclosure situation in the country. Let’s give an example. Which of these two headlines are accurate?

Foreclosure Starts Plunge to 71-Month Low

Foreclosures Increase for the First Time Since 2010

The challenge is that both headlines are 100% accurate. How can foreclosures have increased for the first time in two years and, at the same time, be at a six year low? Each headline was reporting on a different measurement. Below are the explanations for each of the measurements as per RealtyTrac’s most recent Mortgage Foreclosure Report.

Foreclosure Starts

Foreclosure starts are the first steps taken by the bank after the borrower becomes delinquent on their mortgage payments (default notices or scheduled foreclosure auctions, depending on the state). They were filed for the first time on 77,494 U.S. properties in November. This was:

§ Down 13% from the previous month

§ Down 28% from November 2011

§ At the lowest level since December 2006

Foreclosures (Bank Repossessions)

This is when the lender completes the foreclosure process and repossesses the property. This occurred on 59,134 U.S. properties in November. This was:

§ An 11 percent increase from the previous month

§ A 5% increase from November 2011

§ The first year-over-year increase in bank repossessions since October 2010, when the practice of robo-signing foreclosure documents came to light and caused a sharp slowdown in foreclosure activity in the following months

In the report, Daren Blomquist, vice president at RealtyTrac, explained:

“The drop in overall foreclosure activity in November was caused largely by a 71-month low in foreclosure starts for the month, more evidence that we are past the worst of the foreclosure problem brought about by the housing bubble bursting six years ago. But foreclosures are continuing to hobble the U.S. housing market as lenders finally seize properties that started the process a year or two ago — and much longer in some cases.”

We hope this brings some clarity to the situation.

Why Wait Until Spring To Sell

 

We have been happy to report that house prices have increased over the last several months. However, we have also warned that month-over-month prices since 2009 have softened in the fall and winter. We are beginning to see that situation repeat itself in 2012.

CoreLogic, in their latest House Price Index revealed that prices increased by 5% over last year. Yet, prices actually dropped .3% month-over-month (m-o-m). Analytics firm FNC, in their latest Residential Price Index, reported that prices increased 2.3% over the last year but prices remained unchanged m-o-m.

What Does This Mean for Sellers?

Sellers should be excited about the headlines showing price appreciation across the country for the first time in a long time. However, if you want to sell your home in the next 6-8 months realize that there is a better chance that prices will soften than appreciate during that time span. Waiting to the spring for a better price probably makes little sense.

Is It Time to Buy A Rental Property?

Yesterday, I discussed rising rents and their impact on the long term housing expense of tenants. Today, I want to look at the opportunities that single-family rental units present for the small investor.

With house prices inching up and rents skyrocketing, this may be the perfect time to invest in single family residential real estate.

If you do, you won’t be alone. According to the National Association of Realtors’ (NAR) 2012 3rd Quarter Metro Area Report:

“Investors…accounted for 17 percent of all transactions in the third quarter.”

More than one out of every six houses sold are purchased by an investor. In the most recent MarketPulse Report by CoreLogic, their Principal Economist, Sam Khater, wrote on the subject in a story titled Roll Tide, or The Rise of the Single Family Rental Market. The major takeaways from the article are:

§ The single-family rental market remained very active in the late summer of 2012 with increases in demand, tightening inventory and rising rents.

§ Nationally, rental leasing volumes were up every month for two years. In August, they were up 7% over last year.

§ Supply was down 11% over the same period.

§ This tightness in supply has caused rents to increase.

§ Rent growth is expected to increase at a ‘strong clip’ late in 2012 and in 2013.

If a private investor is looking for a great hands-on opportunity, perhaps purchasing a single-family house to rent out makes sense. Give me a call at (910) 617-7654 to uncover the many opportunities in our area.

Where Are Mortgage Rates Headed?

I am often asked where I think mortgage rates are headed over the next year. The best people I can go to on this issue are the people who deal with it on a daily basis – The Mortgage Bankers Association (MBA). Here is what was reported by MarketWatch in a recent article:

“After reaching record lows in 2012, mortgage rates are expected to creep up slowly in the year ahead, the Mortgage Bankers Association predicted.

Rates on the 30-year fixed-rate mortgage are expected to average 3.8% in the fourth quarter of 2012, rising to 3.9% in the first quarter of 2013 and eventually rising to an average 4.4% by the fourth quarter of next year.”

If the MBA is correct, mortgage interest rates could inch up almost a full percentage point in the next year.

Where Are House Prices Headed?

I am often asked where we think home prices are headed over the next year. Recently, several groups have stepped forward and given their projections as to what level of appreciation we can expect by the end of 2013. Here is what they said:

§ Demand Institute Study: 1.75% appreciation

§ Urban Land Institute: 2%

§ Home Price Expectation Survey: 2.44%

§ National Assoc of Business Economists: 2.8%

§ Wall Street Journal’s Survey of Economists: 3.25%

All five groups are calling for home values to rise through the end of next year. However, none are projecting that we will hit historic annual appreciation levels (3.6%) that existed prior to the housing bubble.

Thinking of a Vacation or Retirement Home? Buy It Now!

When the economy was exploding in the early 2000s, many of us began to dream about purchasing that vacation home on the lake or securing a home in a more appropriate location for our retirement years. However, with the booming economy came skyrocketing house prices. Many of the homes we fell in love with quickly became out of reach financially. Perhaps we should take a second look at these same homes today.

With prices dropping by over 30% in some markets and with interest rates at historic lows, this may be the perfect time to do what we and our families have always dreamt of doing – buying that second home. Let’s look at the numbers.

Back in 2006 we may have seen the ‘perfect’ home but the $500,000 price tag was just out of reach. Today, we could probably get that home for $400,000 (if not less). We also would be financing it at the current mortgage rate instead of the rates available six years ago. The table below shows the difference in impact on our family’s finances:

 

Not every family is in the financial position to take advantage of the tremendous opportunities the current real estate market offers. But, if yours is, this may be the time for dreams to come true.  If you are thinking of buying at the beach, please email me at joyce@intracoastalrealty.com or visit my website at www.joycebarnwell.com to see what your dollars can buy.

How the Serenity Prayer Applies to Real Estate

You may be wary of either buying or selling a home in today’s market. You may feel powerless to the process. How could YOU possibly know whether the current good news about housing will continue? There is no doubt that today’s real estate market is extremely difficult to navigate. However, we want you to know that thousands of homes sold yesterday, thousands will sell today and thousands will sell each and every day from now until the end of the year.

It is totally within your power to decide whether it is the right time for you and your family to move. Even in the current market.

“How?” Let’s look at the simplicity of the famous Serenity Prayer and apply it to selling a home in today’s real estate market.

“God, grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.”

Accept the things you cannot change

The two main concerns many talk about when discussing the housing market are:

1.      the current economy

2.      the election later this year

As an individual, there is very little you can do to impact either of those two situations (outside of voting on Election Day). The best think-tanks in the country are struggling to discover what impact each of these items have on real estate.

Have the courage to change the things you can

If you are a seller, there are plenty of buyers in the market for a home they consider priced correctly. You have to decide what the correct price is for your home if you truly want to sell. If you want your house sold, you must list it at a price a buyer will pay for it. Not a buyer from 2006 but today’s buyer who has plenty of homes from which to choose. It will take courage to sit with a real estate professional and honestly decipher the true value of your home. If you want to sell, you must have that courage.

If you are a buyer, and you believe now is the right time for your family to purchase a home – DO IT! Prices are back to pre-bubble prices and interest rates are at historic lows. That means that your monthly housing expense will be lower than any time in the last 50 years – and probably lower than your current rent payment.

The wisdom to know the difference

We all realize that the economic situation will take some time to correct. The question is whether or not it makes sense to delay moving on with your life until everything gets ‘better’. Should you not sell your home and delay reconnecting with friends and relatives that have all moved to another part of the country? Should you not buy a house and enable your kids to attend the school you have already decided is best for them? Should you spend another winter up north even though your doctor recommends you move to a climate better suited to your current medical situation?

This is where your wisdom must kick in. You already know the answers to the questions we just asked. You have the power to take back control of the situation by moving forward. The time has come for you and your family to move on and start living the life you desire. That is what is truly important.

Housing Update

The Good News Is…

the recovery of the Real Estate Market is unfolding exactly as it should and exactly as we have predicted. We are still in “Step 1” of the recovery, which basically is working to sell off the current oversupply of inventory (too many homes for sale).  This oversupply is the reason prices have not yet started to rise in many parts of the country.

The number of sales is increasing nicely and that is one way we know the recovery is taking place. When the number of homes for sale reaches a level that results in a 5-6 month supply we will then be back in a “normal” market, instead of the “buyers market” we have had over the last few years.  Once we are back in a “normal” market, prices will begin to go up at a healthy rate of about 3% per year (3% appreciation…versus the depreciation we have had).  Some other factors that let us know the recovery is under way are the fact that pending home sales (under contracts) are at their highest level since 2007 and prices on average are at 2003 levels (this shows prices have adjusted downward as a result of the oversupply).

Gaining Perspective…

on what this all means to you should be your biggest concern and that depends on your point of view.

Sellers:

This all means that your house is worth as much today as it is going to be worth for a while. Prices are not fluctuating by large amounts right now they are either up or down by very small percentages. Even when the market begins to return to normal the gains per year will be small and gradual (1% to3% annually). Some projections say that in the next 18 months there will be an increase in value of 1%… Here’s the perspective you need, if you want to wait for a year and a half for prices to go up the most you would gain is 1%, so if you have a $250,000.00 house you would be waiting 18 months for $2500.00….doesn’t seem worth waiting for, does it?  Especially when you consider what your reason for moving is in the first place. If you are moving to be close to your grandchildren is it worth waiting until they are two years old before you are closer to them just so you can have $2500.00 more dollars?  Just one example….

Buyers:

There is zero question that now is the time to buy a home. Even if you have a home to sell (see section above about Sellers). The selection of homes is incredible (Buyers benefit from the oversupply because selection is great and prices are great) Also, as of this writing, interest rates for 30 year fixed rate mortgages are 3.59% this is so low it is unheard of….this is what you would call “cheap money”!  Don’t wait until the market has recovered because if you do the selection of homes will not be as good, the prices will be higher and the interest rates will be higher….probably much higher.

Investors:

You should be rejoicing. This kind of market only comes around once in a generation or so.  Money is cheap and prices are low. The rental market is extremely strong right now, it’s certainly a “landlords” market. Houses are now cash flowing and showing very good returns on investment. Investors, if you wait, you will miss your best chance at earning the wealth that history proves is best earned in real estate.

In summary, sometimes in life you really have to step back and gain some perspective. Waiting is sometimes the right course of action…as long as you know the value of what you are giving up by waiting….

You may make 1% more or you may lose 1% less but maybe not….the one thing you know for sure is that time waits for no man (or woman) – you can never get today back.  You can never spend the time with your grandkids that you’ll miss while you are waiting on a 1% gain to your home’s value.  Don’t be the one we have all heard say….”If Only”….

The Difference Between Excellent and Perfect

Why does a buyer or seller look for a real estate professional in today’s new market reality? There’s plenty of information readily available for them to look at and analyze as they’re going through the process.

That’s just the point. Information being readily available causes confusion. That’s when people seek out professionals (whether it be a doctor, lawyer, or real estate professional) for an analysis of the information and their situation. Because of the wealth of information available, people are yearning for expert advice.

We are not afraid of those two words. Remember:

§ An expert doesn’t mean you’re going to give perfect advice.

§ An expert means you’re going to give excellent advice.

Here’s the difference:

If you go to a doctor with a serious illness, she can’t tell you how it’s all going to wind up in the end. She doesn’t know. If she did, that would be perfect advice.

However, your doctor can give you excellent advice in that she can tell you about your illness and your options, whether it be surgery or medications. She can also explain what she believes to be the best option for you based on your history, symptoms, and overall health. Ultimately, though, you’re going to make the final decision of whether you go through with the treatment plan.

Once you make that decision, your doctor will take you by the hand and walk you down the road to recovery. She will explain to you that there might be adjustments that need to be made to the treatment plan, because no one can know for certain how things will turn out. She might have to adjust your medications or increase or decrease your treatment schedule. But every step of the way, she’s there with you, helping you get to your ultimate goal. This is called excellent advice.

Similarly, if you went to an attorney, he can’t tell you how the case is going to end up or how the judge or jury will rule. That would be perfect advice. What a good attorney can do is explain your options. He might pick one or two options he believes to be the best ones to pursue. He will then leave you to make the decision on which option you want to take. Once you decide, he will help put a plan together based on the facts at hand. He will help you get to the best possible resolution of the case. And along the way, he’ll make whatever changes are needed. This is excellent advice.

My role as a real estate professional is similar to the role of the doctor and lawyer. I can’t give buyers or sellers perfect advice because I don’t know what’s going to happen—I can’t predict the future. However, I can give excellent advice based on the information and situation at hand. I can guide you through the process and help you make the necessary changes along the way. And that’s exactly what my clients deserve…and want!

Give me a call at (910) 617-7654 or email me at joyce@intracoastalrealty.com for "Excellent Advice" on real estate in Carolina Beach, Kure Beach, Wrightsville Beach, Wilmington and all of New Hanover County.

Harvard University: Echo Boomers to Drive Recovery

The Joint Center for Housing Studies of Harvard University just released their annual State of the Nation’s Housing 2012. In the report, Harvard explained that, starting this year and continuing over the next twenty years, the echo boomers (born in the late 1970s and early 1980s) will drive the housing market.

“After several false starts, there is reason to believe that 2012 will mark the beginning of a true housing market recovery.”

As we reported in our InfoGraphic on Friday, adults under the age of 35 have decided to stay at home with their parents instead of purchase their own home. As the Harvard report states, it is not because they don’t believe in the value of homeownership:

“Although young households have increasingly opted to rent in recent years, most still aspire to homeownership. The late-2011 Fannie Mae National Housing Survey found that 86 percent of renters aged 18–34 believe they will ultimately own homes. In addition, close to 70 percent of respondents to both the Fannie Mae survey and the University of Michigan Survey of Consumer Attitudes felt that it was a good time to buy. In fact, the monthly mortgage payments for the typical home currently compare more favorably to rents than at any time since the early 1970s.”

The report projected the impact of these echo boomers over the next two decades 

Over the next 10 years…

“… the most important drivers of household growth are the size and age structure of the adult population. Assuming the economic recovery is sustained in the next few years, the growth and aging of the current population alone— including the entrance of the echo boomers into adulthood— should support the addition of about 1.0 million new households per year over the next decade.”

Over the next 20 years…

“Over the next 20 years, the echo boomers have the potential to spur new home demand to an even greater extent than their parents did beginning in the 1970s. The good news for housing production is that this new generation already outnumbers that of the baby boomers at the same ages. With even a modest lift from immigration, the echo-boom generation will grow even larger as its members move into the prime household formation years.”

As housing affordability reaches historic lows, we believe more and more of the echo boomers will take the plunge into homeownership.

Home Prices: Supply & Demand

The real estate market continues to heat up as we head into the summer. Will this increase in demand equate to an increase in home prices? That depends. Remember, the price of any item is determined by the supply of and demand for that item at any point in time. Let’s look at the facts as reported by the National Association of Realtors (NAR) in this month’s Existing Home Sales Report:

§ Demand has strengthened, showing a 10% increase over the same month last year.

§ The supply of homes for sale is down 20.6% from the same time last year.

Because supply is down and demand is up, many believe prices should begin to increase as we finish out 2012 and head into 2013. In some markets, this analysis is correct. However, there are certain states that still need to clear through a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several states, there will be a new supply of discounted inventory coming to market over the next six months. Whether that increase in supply will be fully offset by the increase in demand is still unknown. If not, home prices in those markets will still be under downward pressure.

Locally, we don't expect a great increase in the number of foreclosures or distressed properties in the coming months.  There may be a few but we don't expect them to drastically effect the overall market.  We do have a reduction in the number of properties on the market and have actually seen several properties with multiple offers.  Please visit our website at www.joycebarnwell.com to see what's avaiable in our market.

Are You a Buyer Looking to Purchase a Short Sale?

It seems that there is a significant amount of confusion when it comes to purchasing a short sale. There are many misconceptions when it comes to this type of transaction, so below I have provided some information to potential buyers of short sales. If you are looking to purchase a short sale, understand that it is not the same as a normal sale and the approach is very different.  There could be several parties involved and issues that are unknown to the buyer and buyer’s agent that can affect the transaction. If you are looking to purchase a short sale here is some helpful information.

1. On average, to get a short sale approval, it can take 60-90 days.

There could be mortgage insurance and an end investor on the loan as well as the servicer, which means it has to go through three different processes. Bank of America could be the servicer on the loan but they do not actually own the loan, so, the short sale has to pass their guidelines, then go to the mortgage insurer if there is one, then to the end investor like Fannie Mae and Freddie Mac. If you are a buyer and can’t wait at least 60-90 days for an approval and then another 30 days to go to closing, then you need to look at other houses. The worst thing you can do is tie up a house that is in a short sale with no intention of being patient while waiting for a short sale approval. Approvals can come sooner than 60 days, but industry standard is at least 60 days to get an approval or denial.

2. There is a general assumption that you can purchase a short sale for 40-50% under its listed price.  In a short sale the bank comes out and does a valuation of the property and will expect a slight discount, but will not accept a huge amount under the market value.

Hopefully, if the agent who is handling the sale is experienced, they will have already gotten an approved list price from the bank by the time you are interested in making an offer. The bank will usually be willing to negotiate on that price, but will not, in almost every case, take 40-50% off of that price. To that point, you may be able to get a reasonable deal on a short sale, though it will not be, in most cases, as much of a deal as you may be able to get on an REO (foreclosed property). Also to that point, most short sales will be in better condition than an REO. When you look at the potential repairs a comparable REO needs and the time and expense it can take to do those improvements vs. a short sale being sold at a slight market discount with improvements already made, the investment could even out. There are REO properties that can be picked up for a huge discount, but require massive repairs that a comparable short sale may not require.

3. Short sales are a very difficult process and it takes a qualified person to handle this type of transaction.

With this type of transaction it takes a very experienced agent on the listing side as well as the buying side. Make sure before you move forward on the transaction that the listing agent has ample experience dealing with these types of transactions, or you could be tied up in a contract for months that never goes to settlement. There are several different types of short sale processes and each bank’s process is somewhat different; it takes a professional who has had experience with all of these different types of short sales to help facilitate a successful transaction.

4. In most short sale transactions the properties are sold “as-is” and no repairs will be made.

Although there are some exceptions to this rule, speaking in general, short sales are sold “as-is” and no repairs will be made even if they are found during a home inspection. In most short sale transactions the bank will require both the buyer and the seller to sign an addendum that states the property is being sold “As-is” and no repairs will be made.

These are just a few short pointers for buyers who are looking to purchase a short sale as they are a reality in every market, and if you have the patience you may be able to get the home you are looking for at a discount!

Yet Another Housing Bear Turns Bull

Every day there seems to be more positive news about the real estate recovery. We attempt to give you two things in this blog:

1.      The actual data that indicates where the housing market is headed

2.      Quotes from analysts who have scrutinized this data

Today, we want to give you a quote by Ivy Zelman which appeared last week in a Wall Street Journal article Stunned Home Buyers Find the Bidding Wars Are Back.

“We very much believe we’ve hit bottom.”

Why is the quote from Zelman important? She is an industry expert consistently recognized by Institutional Investor, Greenwich Associates, StarMine and The Wall Street Journal as an industry-leading analyst. She has been nicknamed ‘Poison Ivy’ for her harsh positions on housing over the last several years. Now, Zelman is calling a bottom and projecting prices to moderately increase in the next twelve months.

Again, another expert on housing is calling a bottom; another bear turns bull.

Correct Planning for Your Mortgage Application

With good preparation, most things are easier. That works in mortgages too! Today, I want to give you some ideas that can make your mortgage experience less painful.

Income Items:

1.       Gather your documents. Today, many people will have to produce 2 years’ complete tax returns, including W2′s, 1099′s, K1′s, and all the schedules, as well as a month’s worth of pay stubs.

2.      Be prepared to explain them. Deductions in your returns and your pay stubs may impact the income your lender will use to qualify you which, in turn, has a big impact on the loan you will get.

3.      Have a breakdown of base pay versus overtime for both your pay stubs and 2 years’ W2′s. Lenders treat overtime (and bonus income) differently than your base pay. Be prepared to explain any changes over the last few years because your loan officer will ask you about it.

Asset Items:

1.      Start accumulating your bank statements. Lenders look back 3 months from when you sign your contract of sale.

2.      You will have to explain any and all large deposits (which are defined as deposits greater than your regular pay check) because lenders want to make sure you haven’t taken out any new loans that aren’t on your credit report.

3.      Avoid any significant cash deposits. However, if you did have a cash deposit, understand that the lender will have you source it (a bill of sale and DMV receipt for that motorcycle, for example).

4.      If you will be receiving a gift, consult your loan officer on how to document it (from the donor’s ability to how you deposit it).

Credit Items:

1.       Ask your loan officer to run your credit and go over it with them. Believe it or not, most credit reports contain errors. Best to identify them and get working on correcting them as early as possible.

2.      Do what you can to pay down your balances to under 30% of available credit to help you get the best score possible.

3.      Do NOT close accounts or pay off collection accounts without discussing it with your loan officer. Either one of these logical moves can actually have a negative impact on your score.

When buying a home, remember the Boy Scout motto, “Be prepared”. Following these suggestions will make your loan approval easier and less stressful.

Please Calm Down – The Market IS Recovering

It didn’t take long for the naysayers in real estate to jump all over the National Association of Realtors’ Existing Sales Report which was released last week. It is true that sales were down 2.6% from the previous month. However, monthly variations should not be the determining factor in deciding where the market is going. For example, in the same report, NAR explained that sales WERE UP 5.2% over last March’s numbers.

The experts should look at the key underlying data that truly determines where the market will be heading. Here is what leading economists in the housing industry are saying:

Paul Diggle, property economist, Capital Economics

“March’s decline in existing home sales probably reflects the normal month by month volatility rather than renewed underlying weakness. The increase in households’ confidence in the outlook for the housing market, coupled with a gradual improvement in the pace of the economic recovery, should drive a rise in home sales later this year….It is possible that the pattern within the quarter has been driven by the weather, with falls in the most recent two months reflecting a degree of payback after January’s gain.” 

Doug Duncan, chief economist, Fannie Mae

“Conditions are coming together to encourage people to want to buy homes. Americans’ rental price expectations for the next year continue to rise, reaching their record high level for our survey this month. With an increasing share of consumers expecting higher mortgage rates and home prices over the next 12 months, some may feel that renting is becoming more costly and that homeownership is a more compelling housing choice.”

Celia Chen, senior director of housing economics, Moody’s

“The residential property market is recovering, as the factors underlying demand and supply strengthen. Even after accounting for unusual seasonal patterns brought on by the unusually warm winter, conditions have not been this strong since the government ended homebuyer tax credits in 2010.”

Mark Vitner, senior economist, Wells Fargo

“Existing home sales dropped 2.6 percent, but are up 5.2 percent from a year ago. While existing sales are down for the second consecutive month, we are likely continuing to see payback from increases earlier this year. That said, we could see one more month of disappointing data, but we still contend the recent declines are not indicative of the trend. Stabilization will become more apparent once we return to normal weather.”

Mark Fleming, chief economist, CoreLogic

“Since the peak in home prices, mortgages rates have declined and affordability has risen dramatically. Housing affordability is at levels not seen since prior to the early 1990s …While real estate professionals often say that “now is a good time to buy,” it is clear today that April 2006 was probably not a good time to buy, while now may well be the time.”