SHORT SALE SPECIALIST AGENTS FOR BANK OF AMERICA, WELLS FARGO, CHASE - The Gusman Group Market News
California Foreclosures Tick Up but Remain Lower Than Last Year
Foreclosures edged up over the month of October in California but continue to remain well below year-ago levels, according to PropertyRadar.
Notices of default rose 15.3 percent, notices of trustee sales increased 4.1 percent, and foreclosure sales grew 3.9 percent over the month of October in California.
However, over the year, notices of default were down 45.2 percent, notices of trustee sale declined 59.2 percent, and foreclosure sales decreased 65.4 percent. Foreclosure sales continue to hover near record lows, according to PropertyRadar.
Foreclosure inventories in California have been “trending mostly sideways since July,” according to PropertyRadar.
“While the low level of foreclosures seems to be good news, the market is ignoring the 1.5 million underwater California homeowners at risk of default that can neither sell an existing home or buy another,” said Madeline Schnapp, PropertyRadar’s director of economic research.“These underwater homeowners are a big drag on the California real estate market recovery and keep much needed inventory off the market,” Schnapp said.
A closer look at foreclosure sales reveals a decline in foreclosures sold to third parties and an increase in REOsales. Third party sales were down 2.1 percent over the month, while REO sales increased 7.6 percent, according to PropertyRadar.
The REO increase can be partly attributed to an adjustment period after a short interim during which banks stalled on foreclosures this summer after the Office of the Comptroller of the Currency “specified minimum standards for handling borrower files subject to foreclosure,” according to PropertyRadar.
PropertyRadar also compared California and four of its Western neighbors – Arizona, Nevada, Oregon, and Washington – in terms of foreclosure starts, sales, and inventories.
California came out ahead by volume in all three categories, and its percentage increase in foreclosure starts over the month of October was also highest at 15.7 percent.
At the other end of the spectrum, Nevada posted an 82.5 percent decline in foreclosure starts over the month.
Washington experienced the greatest increase in foreclosure sales for the month with a 7.1 percent rise, while Nevada posted the most momentous decline.
While posting the greatest declines in foreclosure starts and sales, Nevada posted the highest increase in foreclosure inventory, a 4 percent rise over the month.
Oregon experienced the greatest drop in foreclosure inventory, a 2.5 percent decrease in October.
For more information contact
The Gusman Group
Key federal mortgage foregiveness debt relief tax aid for homeowners in danger of expiration
Congress carved out a special exception for owner-occupied housing for five years, and that exception was later extended through Dec. 31. What happens if it expires? (Paul Sakuma / AP)
WASHINGTON — Haven't we seen this movie before? On Capitol Hill for the second year in a row, key federal tax assistance for homeowners is heading for expiration within weeks. And there's no sign that Congress plans — or has the minimal political will — to do anything about it.
In fact, the prospects for extension of popular mortgage-forgiveness debt relief and deductions for mortgage insurance payments and home energy efficiency improvements appear to be more dire than they were last year at this time, when at least there was a formal bill pending to extend them.
This year there is none at the moment. The House and Senate are trying to figure out a budget but are also considering overhauling the entire federal tax system, which could mean that a long list of special-interest tax preferences — including for housing — might be sucked into the tax overhaul vortex and not revived if they expire as scheduled Dec. 31.
Robert Dietz, vice president for tax policy issues at the National Assn. of Home Builders, says the name of the movie is "Groundhog Day" — the Bill Murray classic about deja vu all over again. Remember last year's New Year's Eve "fiscal cliff" game of chicken that wasn't resolved until the wee hours of Jan. 1? The tax benefits for homeowners were ultimately extended, but only for a year. Whether that's possible again in late December is in doubt.
What's at stake here? Begin with tax treatment of mortgage debt relief. Before Congress changed the law in 2007, any borrower who had a debt canceled by a creditor would have to report the amount forgiven as ordinary income, subject to federal taxation. If a mortgage lender chose to reduce a homeowner's principal balance as part of a loan modification — say by cutting $50,000 off the mortgage balance — theIRS would treat that $50,000 as fully taxable income.
That's despite the fact that the owner never actually received $50,000 in cash, and despite the fact that it was highly likely the owner was already in distress on the loan, facing financial challenges that made payments on the previous balance difficult.
Congress carved out a special exception for owner-occupied housing for five years, and that exception was later extended through Dec. 31. What happens if it expires? It would mean that thousands of people who are in the process of doing short sales on their homes but won't close until 2014 may be subject to income taxes on the amounts their lenders cancel as part of the transaction. Underwater owners who sign up for short sales in 2014 — or owners who receive cancellation of debt as part of loan modifications — would all be subject to harsh taxes on their phantom "income."
In California, however, owners waiting for short sales to close appear to be in the clear.
A recent advice letter from the IRS clarified that California homeowners who sell their houses in lender-approved short sales won't be subject to a tax bill on the canceled mortgage debt even after the Congressional exemption ends. That's because of a 2011 California law that exempts forgiven mortgage debt in a short sale from being counted as income in the state.
But mortgage debt relief is hardly the only real estate tax benefit set to disappear at the end of December. Also scheduled to terminate unless extended:
•The 10% credit currently allowable for energy-saving improvements you make to your house, including qualified insulation, high-performance windows, doors and roofs. The credits have a lifetime cap of $500.
•The $2,000 credit for newly constructed homes that meet federal standards for energy efficiency.
•The mortgage insurance premium write-off for anyone who takes out a home loan with a down payment below 20%. This includes conventional Fannie Mae-Freddie Mac loans, Federal Housing Administration-insured loans and VA guaranty fees. This may be particularly important next year for new buyers who use FHA loans because that agency has recently raised its insurance premiums significantly and withdrawn its previous rule that allowed borrowers to cancel their insurance premiums, as is standard in private mortgage insurance.
Best advice for anyone counting on one or more of these tax benefits in early 2014: Don't. This time around, it's possible that some of them may not come back.
Distressed California Homeowners May Qualify for California's Keep Your Home California Transition Assistance Program (TAP)
If your financially distressed California clients can no longer afford their homes and are pursuing a short sale or a deed in lieu of foreclosure, they may be eligible for financial help with their relocation to alternative housing.
The funds come from the Transition Assistance Program (TAP), part of the Keep Your Home California Program.
The state of California is providing up to $5,000 in transition assistance to qualified homeowners who can no longer afford to stay in their homes. You can help by advising your distressed clients that they must:
- Apply for the funds through their state's website or by calling 1.888.954.5337.
- Maintain their property until their house is sold or returned to the lender via a negotiated deed in lieu of foreclosure.
Number of U.S. Mortgages Going Unpaid = 4,594,000
Lender Processing Services provided the media with a “first look” at the company’s mortgage performance statistics for the month of September.
The industry’s foreclosure inventory continued its downward trend, and while delinquencies were up slightly from the previous month, they were down when comparing the numbers year-over-year.
LPS counts a total of 3,266,000 mortgages nationwide that are 30 or more days past due but not yet in foreclosure. That tally represents 6.46 percent of all outstanding mortgages.
September’s delinquency rate is 4.23 percent higher than the rate reported for August, but remains 12.63 percent below September 2012’s rate. Of the more than 3 million delinquent loans, LPS says 1,331,000 have missed at least three payments but haven’t started the foreclosure process.
Another 1,328,000 mortgages are currently winding their way through foreclosure pipelines, according to LPS’ data. That total puts the nation’s pre-sale foreclosure inventory at 2.63 percent in September, down 1.29 percent from the month prior and down 32.18 percent from last year.
All-in-all, there are 4,594,000 mortgages going unpaid in the United States. Comparatively speaking, the nation’s non-current total stood at 5,640,000 in September 2012.
LPS reports the states with the highest percentage of non-current loans (non-current combines foreclosures and delinquencies as a percentage of all active loans in the state) include: Florida, Mississippi, New Jersey, New York, and Maine.
North Dakota has the lowest percentage of non-current loans among states, followed by South Dakota, Alaska, Montana, and Wyoming.
LPS’ findings are derived from its loan-level database representing approximately 70 percent of the overall mortgage market. The company will provide a more in-depth review of this data in its monthly Mortgage Monitor report, which is scheduled for release in early November.
HUD Announces New Short Sale Requirements
Effective October 1, 2013, HUD has announced the following changes to their Federal Housing Administration (FHA) short sale requirements.
To be eligible, one must successfully complete a short sale under the FHA short sale program. The borrowers must meet the following requirements:
1) They cannot list the property with or sell it to anyone with whom they are related or have a close personal or business relationship. In legal terms, it must be an “arm’s-length” transaction. 2) Any knowing violation of the arm’s-length requirement may be a violation of federal law. 3)
Your mortgage must be in default, on the date the short sale transaction closes.
Before closing, any additional liens against the property must be released. A lien holder who demands a payment to release its lien must submit a written statement, and an agreement to release the lien if that amount is paid.
For a standard preforeclosure sale, servicers must use a Deficit Income Test (DIT) to determine a homeowner’s financial hardship. The IRS Collection Financial Standards is used to verify homeowners expenses not reflected in their credit report. Only owner-occupied properties are eligible for the standard preforeclosure sale.
Homeowners eligible for a streamlined short sale may not be required to submit financial information or have a financial hardship. Principal residences, second homes, investment properties, and service members who have received Permanent Change of Station (PCS) Orders are potentially eligible.
The appraisal of one’s property should be completed within approximately ten business days. After the appraisal, the short sale file will be updated and prepared for review. In some cases, approval may be required by the investor and/or FHA, which may take more time.
As a new condition, one might be required to make a final payment (sometimes called a cash contribution) before closing. This payment will reduce the deficiency balance.
If one is an owner-occupant, acting in good faith, and successfully selling one’s property, one may be eligible for an incentive of up to $3,000.
The revised FHA short sale addendum must be signed and dated by all parties. Under this addendum, all parties agree that the subject property must be sold through an arm’s-length transaction. An arm’s-length transaction is defined as a short sale between two unrelated parties that is characterized by a selling price and other conditions that would prevail in an open market environment. Also, no hidden terms or special understandings can exist between any of the parties (e.g., buyer, seller, appraiser, sales agent, closing agent, and mortgagee) involved in the transaction.
FHA financing 1 year after Short Sale
The Federal Housing Administration (FHA) recently announced a significant mortgage rule change that will allow some borrowers to get a new FHA loan just one year after a foreclosure, short sale, deed-in-lieu or bankruptcy as part of the new "Back to Work - Extenuating Circumstances" program.
To be eligible for the program, borrowers must be able to prove that a major economic event such as a job loss or severe reduction in income (20 percent for at least six months) was the main catalyst in losing their home. In addition, borrowers will need to show that their income has since fully recovered, and their credit score must be satisfactory. Finally, potential borrowers will need to complete a one-hour one-on-one housing counseling session. Borrowers will need to meet all other FHA eligibility criteria.
To be deemed with "satisfactory credit," borrowers will need to meet the following guidelines for a minimum of 12 months:
- No history of delinquency on rental housing payment.
- No more than one 30-day late payment due to other creditors.
- No collection accounts/court records reporting (other than medical and/or identity theft).
Prior to the major economic event, the borrower's credit must have been satisfactory and in good standing.
However, even with the new rules, whether a particular borrower actually gets financing is ultimately at the discretion of individual lenders - even if the FHA rules say they can lend, individual lender rules could be significantly tighter, prohibiting them from lending below certain preset standards.
Today's Residential Real Estate market is challenging. While values have risen dramatically in 2013, most would be sellers are sitting on that bubble of equity. Their values have gone up but not quite enough to allow sellers to cash out as much as they hoped or would like. Therefore, many would be sellers are contemplating selling their homes themselves.
Selling your home yourself sounds beneficial if you are one of the sellers sitting on that bubble mentioned. Saving the 6% commission that agents normally charge to sell a property sounds like a good deal and makes the sellers feel they are closer to their magic number they wanted to net in the sale. But today the market has changed and is moving back towards a buyers market. Meaning there are more properties available due to the interest rates rising close to the 5% mark from 3.5% a couple months ago. This change in the interest rates took many of the potential buyers out of the market due to now payments are not as affordable as before. Thus, turning the market around and back towards a buyers market, meaaning there are not as many buyers so sellers are having to make more concessions and are no longer experiencing multiple above asking price offers as they did a few months ago.
When the market is hot for sellers with lots of buyers drooling over the chance to buy, selling your home yourself is much easier. But when buyers are fewer, sellers need as much exposure as possible to their property. This is true in any market but more so in this one. Your home is only worth what someone is willing to pay for it! And, if you are trying to get top dollar for your home you need to expose and market your home to as many potential buyers as possible to find that one buyer that just falls in love with your property and is willing to pay your price. You cannot get this kind of exposure yourself posting on free websites.
Especially in this market, you should utilize a licensed agent. By using an agent, if the agent is good they will give your home 10 times the exposure you can. For example, when we market a property. At The Gusman Group we send your property to over 250 real estate websites nationally and internationally. We send property information to our over 300 investors. And if you pick the right agent that specializes in listing and marketing homes most likely like we have many buyers waiting to purchase that came from the other properties we had listed that they did not get. You also cannot overlook the power of the MLS Multiple Listing Service that agents are part of and utilize. Listing your property on the MLS exposes your home to tens of thousands of other agents that have qualified buyers also ready to purchase. With all this exposure you are more certain to secure a buyer than if you undertake the sale yourself.
Also consider this. A good agent will make the sale as easy and effortless as possible. They are there to protect your interests. They make sure the buyer is fully qualified so that your time is not wasted or your property is not tied up with a bogus buyer. This agent will make sure your home is properly priced for your market to insure you attract many buyers. Remember that commissions are negotiable. We recognize that sellers are sitting on that bubble of equity and we are making adjustments to lower commissions in this market to allow the sellers to be able to sell. This is something no agent wants to do ever! But the market is demanding an adjustment.
So is it worth it for you to sell your home yourself? NO, not in this market. Not if you really want to sell your home. I see the same ads on sites of the same homes for months still trying to attract a buyer. Contact an agent discuss your needs and make a deal that fits and is fair to both parties, and sell your property for REAL.
Remember this also....."There is no bad time to sell your home, only a bad marketing plan!"
For more information Contact:
The Gusman Group
Redfin Predicts Volatile Housing Market
The housing market has lost some of its momentum recently according to a new study by the Redfin Research Center. Pent-up demand and low mortgage rates contributed to a robust real estate market since the beginning of the year, but higher prices and higher rates have diminished demand in recent months.
“In August, 26.4 percent of active listings had their prices lowered, the highest in four years,” said Tommy Unger, the report’s author. “With buzz of a strong housing market and home prices on the rise, sellers had unrealistic expectations about the price they could get for their home. With the relatively sudden softening in buyer demand, many sellers had to ultimately reduce their prices.”
Unger predicts that mortgage rates will play the central role in determining housing prices moving forward.
“We expect mortgage rates may show volatility this autumn as the Federal Reserve weighs whether to begin tapering its stimulus program,” Unger said. “If rates do rise sharply in September and October, buyers are likely to temporarily step out of the market. This probably would lead prices and sales to dip sharply around the holiday season. If rates remain stable, however, we would expect prices to flatten this autumn and sales to wind down slowly as the holiday season nears. Inventory, on the other hand, is likely to slowly drop in line with seasonal trends.”
Foreclosure Crisis Near Its End?
Foreclosure inventories nationwide fell 32 percent in July compared to a year ago, another sign that the foreclosure crisis may finally be over, according to CoreLogic's latest foreclosure report released Thursday.
In July, 949,000 homes were in some stage of foreclosure, down from 1.4 million a year ago. That represents a decrease in foreclosure inventory from 3.4 percent of all homes with a mortgage in July 2012 to 2.4 percent in July 2013.
Completed foreclosures — which is a measure of all homes actually lost to foreclosure — were also down. In July, there were 49,000 completed foreclosures, down from 65,000 a year ago. That's a drop of 25 percent year-over-year. Prior to the housing crisis, completed foreclosures were averaging 21,000 a month. That means the number of foreclosures up for sale nationwide is gradually shrinking.
“Completed foreclosures and delinquency rates continue their rapid descent in July,” says Anand Nallathambi, president and CEO of CoreLogic. “Every state posted a year-over-year decline in foreclosures, and serious delinquencies fell to the lowest level since December 2008. Not surprisingly, non-judicial states have come the farthest the fastest in reducing the shadow inventory and lowering delinquency rates.”
The following five states had the highest foreclosure inventory (as a percentage of all homes with a mortgage), according to CoreLogic:
- New Jersey
- New York
Meanwhile, the following five states had the lowest foreclosure inventory:
- North Dakota
FHA Trims Waiting Period for Borrowers Who Experienced Foreclosure To Qualify For A New Loan
The Federal Housing Administration (FHA) is allowing borrowers who went through a bankruptcy, foreclosure, deed-in-lieu, or short sale to reenter the market in as little as 12 months, according to a mortgage letter released Friday.
Borrowers who experienced a foreclosure must wait at least three years before getting a chance to get approved for an FHA loan, but with the new guideline, certain borrowers who lost their home as a result of an economic hardship may be considered even earlier.
For borrowers who went through a recession-related financial event, FHA stated it realizes “their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”
In order to be eligible for the more lenient approval process, provided documents must show “certain credit impairments” were from loss of employment or loss of income that was beyond the borrower’s control. The lender also needs to verify the income loss was at least 20 percent for a period lasting for at least six months.
Additionally, borrowers must demonstrate they have fully recovered from the event that caused the hardship and complete housing counseling.
According to the letter, recovery from an economic event involves reestablishing “satisfactory credit” for at least 12 months. Criteria for satisfactory credit include 12 months of good payment history on payments such as a mortgage, rent, or credit account.
The new guidance is for case numbers assigned on or after August 15, 2013, and is effective through September 30, 2016.
One-Third of California Homeowners Locked Out of Market
The California real estate market continued to experience rising home prices and strong sales in July, but negative equity still remains a significant challenge, according to a report from PropertyRadar.
Out of the 6.8 million California homeowners with a mortgage, 26 percent, or 1.8 million, were underwater as of July.
Another 500,000 are barely managing to stay above water, with no more than 10 percent of equity in their home. When factoring in closing costs for these homeowners, they would still “effectively” be underwater, according to PropertyRadar.
This means about one third, or 2.3 million homeowners, are still unable to sell due to lack of equity.
Even though millions of California homeowners are unable to sell, sales for single-family homes and condominiums saw monthly and yearly increases of 12.1 percent and 12.9 percent, respectively.
“With the exception of the temporary bounce in July 2009 sales from the First-Time Homebuyer Tax Credit, July 2013 sales were the highest since July 2006,” noted Madeline Schnapp, director of economic research for PropertyRadar.
According to the report, a jump in non-distressed sales led to the sharp increase in sales. Over the last year, non-distressed sales increased 63.7 percent, while distressed sales decreased by 39.4 percent.
Even with the sharp drop, distressed sales still remained high, accounting for 26.4 percent of sales in July.
Meanwhile, median prices surged 29.1 percent year-over-year in July, but fell 1.4 percent over the last month.
“Rising prices and rising interest rates have delivered a one-two punch to the California real estate market that I’m surprised hasn’t resulted in more damage,” said Sean O’Toole, founder and CEO of PropertyRadar.
Investors remained active in the California market, with cash sales
representing 26.1 percent of sales in July. Property flipping, defined
as reselling a property within six months, rose to the highest level
since September 2005. The report explained flipping has been on the rise
since January 2012 as the potential for profits increased with rising
Investor purchases in July were up 5 percent compared to the prior month, while investor-third party transactions inched up by 0.8 percent.
Court Rules Borrowers Can Fight Bank's Decision to Deny Modification
Homeowners who are denied a modification under the Home Affordable Modification Program (HAMP) even after completing a trial period plan (TPP) have legal standing to sue their lender, the 9th U.S. Circuit Court of Appeals in San Francisco ruled Thursday.
The ruling reversed a lower district court dismissal that concluded Wells Fargo was not required to offer borrowers a modification if the bank did not send a signed modification agreement.
The federal appeals court decision, however, ruled that Wells Fargo actually was contractually required to offer the plaintiffs a permanent mortgage modification since the plaintiffs submitted accurate financial documents and completed their trial period plan.
“The panel held that the district court should not have dismissed the plaintiffs’ complaints when the record before it showed that the bank had accepted and retained the payments demanded by the TPP,” the court opinion stated.
The ruling was based on two lawsuits from borrowers who filed separate actions against Wells Fargo. In Corvello v. Wells Fargo Bank, NA and Lucia v. Wells Fargo Bank, NA, the plaintiffs alleged that the bank offered them a trial period plan with the promise of a permanent modification, but after they completed the trial, the bank did not offer them a permanent modification or send them a notification of ineligibility.
The panel in the federal appeals court also cited a prior case, Wigod v. Wells Fargo Bank, NA, in its ruling. In Wigod, the 7th Circuit Court of Appeals found Wells Fargo’s interpretation of the trial period plan could allow banks to avoid obligations to modify borrowers simply by deciding not to send a signed modification agreement even if the borrower submitted accurate financial documents and the required trial payments.
California Dominates Turnaround Towns List; Detroit Claims Top Spot
While California may take the most spots on the top 10 list, Realtor.com says Detroit’s presence on the list is “most noteworthy.”
“Though the city recently filed for bankruptcy, the market nonetheless posted strong improvement in the second quarter,” according to Realtor.com.
In fact, Detroit may soon be “one of the most balanced markets in the nation,” according to Steve Berkowitz, CEO of Move, an online real estate network.
The top 10 “Turnaround Towns” are determined by an algorithm that relies on data including inventory levels, median list prices, median number of days on market, and search and listing activity on Realtor.com.
Detroit claimed the No. 7 spot on the list after its inventory age fell to the second-lowest in the nation at 45 days on market. The city’s list price increased 37.8 percent from the second quarter of last year to the second quarter of this year, and its inventory declined 26.5 percent.
The No. 1 spot went to Oakland, California, where the median number of days a home spends on the market is just 15—the lowest in the nation.
Oakland also claimed the greatest increase in list price across the nation in the second quarter on an annual basis. The median list price in the second quarter of this year was $479,000, up from $339,000 in the same quarter last year.
Oakland’s inventory declined more than 34 percent over the same period.
Orange County, California, took the No. 2 spot on the list, while also staking claim to the country’s greatest decline in inventory over the year ending in the second quarter of this year – a 36.6 percent decline.
Orange County’s home prices were up 29.4 percent, and the median number of days a home spent on the market in the second quarter was 51.
The third and fourth spots on the list went to Santa Barbara-Santa Maria-Lompoc, California, and San Jose, California, respectively.
Santa Barbara’s median list price rose 34.3 percent to a notable $685,000 over the year.
Seattle, Washington; Los Angeles, Calfornia; Portland, Oregon; San Diego, California; and Reno Nevada also made it onto the second quarter list of top 10 “Turnaround Towns.”
Report: Price Gains to Moderate in 2nd Half of 2013
In July, national home prices jumped 9.3 percent year-over-year, led by gains in the West, according to Clear Capital’s latest housing report.
When broken down by region, prices in the West showed the most improvement, surging 17.8 percent over the last year, followed by the South (+7.6 percent), the Midwest (7.5 percent), and the Northeast (+4.8 percent).
Despite the recent streak of impressive home price gains, Clear Capital expects the market to experience more moderate and sustainable increases in the last half of 2013 as homebuyers transition into the “new normal” the report explained.
“A rising price floor will dampen some potential homebuyers’ appetites, particularly as recent gains bring many markets back into pre-bubble equilibrium. In other
words, homebuyers are starting to adjust to the new normal, where steep discounts from the peak are not as attractive as they once were,” said Dr. Alex Villacorta, VP of research and analytics at Clear Capital.
Furthermore, rising inventory should also ease recent pressure on prices, according to the report.
Among metro areas, price gains were especially strong in Las Vegas, where home values spiked 31.2 percent from last year.
However, Clear Capital explained the lower median price of $145,000 in Las Vegas may, in part, explain the acceleration in prices. On the other hand, San Jose has a median price of $710,000, but prices rose 26 percent year-over-year, indicating demand is “fueled by a strong local economy,” the report stated.
Meanwhile, quarterly growth rates for metro areas were much more moderate, at or around 4 percent for the three leading markets—Las Vegas, Milwaukee, and San Francisco.
“We expect most of the major markets across the country to follow the path of sharp upward corrections in the short term, followed by moderating gains as markets fall back in line with their long run levels,” said Villacorta. “Phoenix, for example, is now seeing quarterly growth that supports a yearly growth rate more in line with 10.0%, as opposed to the current yearly gains of 23.3.”
Report: Asking Prices Slip in July for First Time Since November 2012
For the first time since November 2012, asking home prices decreased month-over-month, slipping 0.3 percent from June to July, Trulia reported.
“If you were worried about a housing bubble, July’s asking-price slowdown will probably be the best news you’ve heard this year,” said Jed Kolko, Trulia’s chief economist.
Factors such as rising mortgage rates, growing inventory, and declining investor demand led to the dip in asking prices, according to Trulia.
While monthly changes can be volatile, Trulia explained the quarter-over-quarter change in asking prices confirms
the slowdown, with July asking prices improving just 3.3 percent over the last quarter compared to the peak of 4.2 percent in April.
Over the last year, asking prices were still strong, rising 11 percent, though Trulia noted the change won’t be as apparent since the annual average is based on a longer time period.
At the same time, 98 out of 100 metros saw prices appreciate compared to a year ago, but on a quarterly basis, prices declined in 64 metros.
“The biggest price slowdowns have come to some of the hottest local markets,” added Kolko. “California and Nevada remain the Wild West for asking home prices, with some of the sharpest drops during the bust, strongest rebounds over the past year, and now biggest slowdowns in the past quarter.”
Las Vegas saw asking prices slip 5.2 percent quarter-over-quarter, while three California metros—Oakland, San Francisco, and Sacramento—experienced decreases between 3.3 and 3.6 percent.
After tracking rent for July, Trulia reported an increase of 3.9 percent year-over-year. Even though asking prices weakened, growth was still much stronger compared to rents. In the 25 largest rental markets, asking prices actually outpaced gains in rent, a first since Trulia started tracking rent trends in March 2011.
Southern Nevada home prices up 35%
Home prices rise for 18 consecutive months
Home prices in Southern Nevada have been going up for 18 straight months and are now 35.3% higher than they were one year ago, data from the Greater Las Vegas Association of Realtors revealed.
Showing no signs of slowing down, the median price of an existing single-family home sold in Southern Nevada during July was $180,000, a 2.9% increase from $175,000 in June. July’s number was also up 35.3% from $133,000 one year ago.
“Local home prices have been going up since February of 2012 and are now rising faster than anyplace else in the country,” said GLVAR President Dave Tina.
“Looking back, the median price of an existing single-family home sold here in Southern Nevada bottomed out at $118,000 in January of 2012. Now it’s up to $180,000. We keep expecting these price increases to slow down at some point, but it hasn’t happened yet,” Tina added.
However, even with this recent appreciation, home prices still have a long way to go to catch up to their peak point. In 2006, the median local home price hit $315,000 in June 2006.
The median price of local condominiums and townhomes in July was $91,500, a 6.4% jump from $86,000 in June and up 37.6% from $66,500 one year ago.
While supply has started to level out in the Southern Nevada market, inventory is still too tight to meet demand. According to GLVAR, there is an increased number of homes being sold by “traditional” sellers as opposed to lenders, who are responsible for the short sales and foreclosures that dominated the market just a few months back.
In July, traditional sales made up 64% of all local home sales. GLVAR has also reported fewer foreclosures and short sales in the past few months.
Dropping from 31% in June, 28% of all existing-home sales were short sales in July. Another 8% of all July sales were bank-owned properties, down from 9% of all sales in June. Traditional sales made up the remaining 64% of all sales, up from 60% in June.
According to Tina, short sales will likely continue to be a factor in the local housing market throughout this year, mostly because the federal Mortgage Forgiveness Debt Relief Act is set to expire on Dec. 31, 2013. Any amount of money a bank writes off in agreeing to sell a home as part of a short sale starting in 2014 may become taxable when sellers file their income taxes, barring any further extensions.
The total number of existing local homes, condominiums and townhomes sold in July was 3,633, according to GLVAR. That’s a slight dip from 3,642 in June, but ultimately up from 3,572 total sales in July 2012.
According to GLVAR, the total number of properties listed for sale on its MLS increased in July, with 14,133 single-family homes listed for sale at the end of the month. This number is up 2.8% from June’s 13,750 single-family homes.
Freddie Mac: Apartments still good investment
Entity releases Multifamily Investment Index
Freddie Mac released its mid-year multifamily outlook for 2013 on Thursday, which included a new Freddie Mac Multifamily Investment Index that measures the attractiveness for investing in apartment properties.
According to the index, apartments are still a good investment in most metropolitan markets it tracks.
“As markets move it is important to have an objective measure of current conditions. Although the multifamily market has slowed, it remains an attractive investment across the majority of the metro areas for equity and debt investors,” said Victor Pa, vice president of multifamily investments and advisory.
Increased supply is a key risk for some metropolitan markets, while market fundamentals such as rents and vacancies are improving. Although recovery of the job market and strengthening in the single-family market is likely to shift some demand away from the multifamily market, renter-occupied units will remain strong, the outlook claimed.
Permit numbers for new multifamily housing has slowed while delivery of new supply is still on the rise. However, the appetite of investors for this sector could be cooling down some. With that being said, future construction levels may remain close to pre-recession levels.
Among the top 10 growing markets are New York, San Francisco, Denver, Seattle and Los Angeles, while Jacksonville, Norfolk and Washington, D.C. aren’t fairing quite as well.
Freddie claimed that cap rates may rise as interest rates continue to increase. A 1% higher growth in employment could lower cap rate spread by 20-30 basis points.
The brand new investment index, which measures the relative attractiveness of investing in multifamily properties over time, looked attractive when there are relatively strong cash flows for each dollar of equity invested because multifamily property returns are driven by property cash flows.
While the index does not forecast future conditions, it does provide a glimpse over time of the national picture, as well as one for Atlanta, Chicago, Dallas, Los Angeles, New York, Washington, D.C. and Seattle.
In the years that led up to the recession, the index shows that investing in apartments was becoming less attractive and hit a floor in 2007, with property prices at their peak. After the recession, the index rebounded due to growth in property income and lower rates.
Is Your Loan Modification Going Nowhere?
With the recent passing of the California Homeowners Bill Of Rights, mortgage lenders in California were mandated to offer distressed homeowners an alternative to foreclosure as part of the banks restitution in the lawsuit by the state.
Many distressed homeowners were given loan modifications in lieu of foreclosure even if they did not qualify previously. These homeowners had already applied for a loan mod and were declined by the same litigators. So why would they allow the loan mod again? The answer is because the state mandated they do. If a homeowner could not afford to pay a loan modification prior, how would they be able to now? Well, they can’t. And that’s why over 56% of these loan mods and homeowners have already re defaulted on their mortgage again.
In trying to help these distressed homeowners, the state has actually just prolonged the agony and inevitable of foreclosure for these families. Now these families will have to again seek alternatives to foreclosure. After exercising a loan mod, there are not many options left and should elect to short sale their home. An alternative that should have been done much sooner but wasn’t due to this mandate.
A short sale should be used in lieu of foreclosure all the time. The short sale option will salvage your credit and give you a much quicker recovery from your misfortune. In most cases if you short sale your home and continue to pay on time your other creditors, in 18-24 months you should be able to buy another home. With foreclosure a family is looking at 5 years to recover and the foreclosure can haunt them and remain on their credit report for up to 10 years.
If you are a distressed homeowner and have been considering a short sale or are in the middle of the process and your bank offers you a chance to get a loan mod even when they turned you down in the past. Make sure you weigh all the possibilities. If you know you will not be able to make the payments you may not want to prolong the inevitable. Your recovery starts as soon as you take the steps towards a recovery option such as a short sale.
There are many benefits to a short sale; especially tax wise, such as the debt relief act extended to 2014 insures you will not have to pay taxes on the amount forgiven. There are qualifications for this, but most will take advantage of this. Always discuss all the aspects of a short sale with your agent before you agree to enter into the agreement.
Make the right choice for your future. Too many distressed homeowners have blinders on and only look at the short term. Loan mods last 3-7 years, you must look at your future past 7 years and base your decision on where you want to be in 3-7 years. That is the real deciding factor!
Las Vegas Area Home Prices Up 35%, but Still Far from Peak
Home prices in the Las Vegas area soared to the highest point in nearly five years while cash sales also reached record levels, according to DataQuick.
New and existing homes and condos in Clark County sold for a median price of $169,100 in June, representing an increase of 3.7 percent from May and a 35.3 percent jump from a year ago. Prices in the Las Vegas region have not been that high since December 2008, and the gain marks the 15th straight month of increases.
According to DataQuick, the increase is the “result of demand outweighing supply, a sharp drop in foreclosure resales and a big increase in mid- to high-end activity.”
In fact, foreclosure resales in June accounted for just 10.6 percent of resales, down from 31.9 percent a year ago, the data provide reported.
Meanwhile, lower-priced homes below $100,000 plunged 45.2 percent over the last year, while sales for homes priced between $200,000 and $500,000 shot up by 83.8 percent during the same time period.
Despite the significant improvement in prices, Las Vegas still has a long way from to go when compared to its November 2006 peak of $312,000.
Home sales were mixed for the month, falling 4.7 percent from May to June, but increasing 5.5 percent over the last year.
DataQuick also found the share of homes purchased with cash
represented 60.1 percent of all purchases, up from 51.5 percent in June
The median price paid by cash buyers was $150,000 last month, up by 50 percent from $100,000 a year ago.
Flipping activity also increased, with 7.1 percent of sales representing flips in June, down from 5.8 percent last year.
Several Markets Experiencing Strong Price Growth, High Unemployment
For several markets across the country, strong home price growth is also attached a double-digit unemployment rate, leading Fitch Ratings to view the strong price appreciation as unsustainable.
In a recent report, Fitch highlighted seven metro areas where high unemployment rates were in the backdrop of annual double-digit home price gains.
The top two were Detroit and Las Vegas, while the remaining five were in California: Sacramento, Stockton, Los Angeles, Bakersfield, and Riverside.
As of the fourth quarter of 2012, Detroit has seen prices skyrocket by 17 percent year-over-year, but the unemployment rate is at 11.2 percent compared to the national rate of 7.6 percent of June.
Las Vegas and Sacramento both posted annual gains of 13 percent, but their unemployment rates are each at 10 percent, according to the report.
Stockton had an unemployment rate of 14.4 percent, yet home prices surged 11 percent over the last year.
“Housing markets in Detroit and Las Vegas experienced huge drops in prices during the crisis, so the abrupt rise is worth keeping an eye on given the still-languid state of their respective economies,” said Stefan Hilts, director at Fitch.
On a broader level, Fitch concluded national home prices, which rose 6 percent in 2012, are overvalued by about 12 percent.
However, the rating agency expects the difference to narrow over time.
“As markets stabilize and improvement in localized economies is more pronounced, the gap between actual and sustainable home prices should narrow,” explained Hilts.
According to Fitch, “several unique aspects” of the market have pushed prices up.
For one, housing supply has remained limited due to extended foreclosure timelines as a result of legislation that has slowed the pace of foreclosures sales, as well underwater borrowers who are reluctant to sell, the report explained.
Overall, the combination of limited supply and demand from purchase borrowers and investors is causing the rapid gain in prices.
“It remains to be seen if these trends can continue as residential housing markets stabilize, with a higher volume of listed properties and sales. Nonetheless, the current growth is a positive sign of the housing market recovery,” the report stated.