Garey Teeters Real Estate Blog

Now Is The Time

2012-01-04T15:46:00.000-08:00

2012 is likely the best year you are going to get to obtain a mortgage. Rates are as good as it gets for 10 year/15 year/30 year fixed rates for a home loans.

There are already hints that you could see rates start to rise mid year 2012.

Home prices are said to be under valued by 23% taking in to account historic ratios of disposable income and housing prices. Homes have not been this undervalued since 1975.

Home buyers or investor, it is clear, buy in 2012.

Some Facts / Some Opinions

2011-12-19T12:47:00.000-08:00

There are 117 million households in the U.S.

40.5 Million Rent

52.6 Million own with a loan

23.4 Million own outright

After almost 5 years in this market and a 6 trillion dollar loss in home equity, little has been accomplished by way of a recovery for housing. All of the programs sponsored by the federal government have been largely ineffective.

During the past 5 years more than 3 million families have lost their home. 6.4% of mortgages made between 2004 and 2008 have ended in foreclosure and an additional 8.3% are at immediate risk. On top of that, approximately 18% of Fannie and Freddie loans are underwater, and before I forget, 44% of the loan modifications that were granted are more than 3 months late. Don’t overlook the estimated 4.2 million homes in the shadow inventory that exists.

As we look at 2012, I don’t see great things happening that will revive the market. The political environment seems to be letting the chips fall where they may. Fannie, Freddie, F.H.A are all underwater themselves. The new HARP 2.0 program may help some underwater homeowners, but not before mid March or April 2012. 43% of homes in the Inland Empire are underwater.

What can we look forward to in 2012?

- Low interest rates will continue.
- The idea that if we hang on prices will come back is gone. Sellers that are not underwater and have equity will proceed to the market place.
- We still have lots of people wanting to buy. Remember with 9% unemployment, 91% are still working.
- Buying is now cheaper than renting.
- Investors are very actively buying.
- Prices we haven’t seen in years will attract home buyers and investors.
- Short sales are much easier to complete and getting easier everyday.
- The lenders are now initiating short sales first.
- REO inventory will increase after the 1st of the year.

There are something’s that might be on the horizon. The biggest is principle reductions. They could be implemented by lenders; at the discretion of the Fed; or by bankruptcy judges or some other way. The odds are increasing that principle reductions will find its way into the cards next year. Remember, this will be a Presidential Election year.

One thing is for sure, the shadow inventory will begin to clear out. The banks need the cash and the Feds are through kicking the can down the road because that has not worked either. If it’s in your plan to own rentals, you have about the next 2 years to buy them.

The Feds Need to Take Housing Head On!

2011-10-07T13:32:00.000-07:00

The policies of the Feds are dead in the water and have been from the start.

Seven times new programs have been approved to help solve the national housing issues. Each time the rules kept most homeowners from qualifying. These programs all sounded good at first glance, but were so restrictive that they were dead on arrival.

What we need is a good short sale program in which the systems work and Realtors, Homeowners, and Buyers could have some confidence that a short sale is worth pursuing.

We also need a refinance program to help existing underwater Homeowners refinance into today's low interest rates. Many Homeowners are still making their payments even though they owe more than the home is worth in today's market. If they want to help the economy, allow these folks to refinance based upon credit scores and the mortgage being current; not the current value of the home. Instead, base the refinance on the value system of the Homeowner.

Addressing these two issues would help put some stability into housing. But if they really want to fix things; repeal Dodd-Frank.

Our overall economy can not grow as long as Dodd-Frank exists. If Dodd-Frank is not repealed, you ain't seen nothing yet.

Uncle Sam is Your New Best Friend!

2011-09-23T15:12:00.000-07:00

If you have a job, $7,000 and good credit and are renting, pay close attention.

A typical $200,000 house will rent for something around $2,000 per month, plus or minus.

If you can buy at these low interest rates, check out these numbers.

Sales Price: $200,000, FHA financing

Down Payment: $7,000

Insurance: $72.38 per month

Real Estate Taxes: $208.33 per month

Mortgage Insurance: $184.96 per month

Principal and Interest: $902.75

Total Payment: $1,368.42

And you are renting?? These numbers are based on an interest rate of 3.75%

If your rent is $2,000 a month, you can save over $600 per month if you buy it plus deduct the interest on your taxes!

These numbers are for demonstration purposes only. These numbers are not a quote for lending purposes. See your lender for actual figures.

What this demonstrates is Uncle Sam may be your new best friend!

Increase in Foreclosures

2011-09-19T10:48:00.000-07:00

Large lenders will double their foreclosures on the west coast. They own far too many houses for the health of their own bottom line.

This will also mean that short sale listings will be more prevalent as banks change the rules regarding extended stays for owners not making their payments.

Over the coming months banks will become much more aggressive towards defaults, short sales and foreclosures.

To understand some of the issues banks are facing, think about the fact that B of A paid 2.5 billion for Countrywide. Now their legal fees are over 30 billion regarding those loans.

They need to clear out their inventory and the courts have cleared the way for them to move forward.

Cash is key for banks right now!

It’s About Payment, Not Price!

2011-08-01T14:01:00.000-07:00

For Buyers who are waiting for prices to fall, they should focus on two metrics, price and interest rates.

What the majority of buyers focus on is price and only price.

Consider this:

On a $200,000 mortgage @ 4.5% interest, the monthly payment is $1,013 per month. At 5.5% the payment is $1,136 per months. That’s a 12% increase in monthly payment. At 6.5% interest the payment is $1,265. That’s a 25% increase.

If you are in the market to buy a home consider price, then consider the actual value of today’s interest rates.

If prices fall another 10%, but interest rates rise 1%, fewer home buyers will be able to qualify to buy a home.

My advice, buy now and more importantly, lock your loan.

Garey
gteeters@coldwellbanker.com

What’s Up – What’s Down - In the Inland Empire Real Estate Market

2011-07-05T14:17:00.000-07:00

What’s Up-        Pending Sales - June 2010 vs. June 2011

                          Pending Sales up 41% in Riverside County - 29%
                          increase in San Bernardino County.

What’s Down -   Inventory for Sale - June 2010 vs. June 2011

                          Homes for sale in Riverside County down51%, in San Bernardino County the available homes for sale fell 57%

The Fed’s are in control of the banks; the banks are in control of so called shadow inventory of homes that currently exist. Perhaps just as important, the banks are now moving to a faster, more simplified short sale process while slowing the supply of foreclosed homes going on the market.

Demand is high; buyers are actively looking to buy a home while interest rates are low.

Is this the end of the home price decline? The banks are in control.

Questions or comments are welcome. gteeters@coldwellbanker.com

Trulia

2011-06-14T16:11:00.000-07:00

Trulia announced the launce of a crime mapping system for 40 metro areas in the U.S.

Trulia crime search will allow users to view crimes in specific areas, toggle between multiple neighborhoods and add their own insights using Facebook’s social contest plug in.

WOW!

Home Prices

2011-06-03T12:18:00.000-07:00

All the news media is full of the decline in housing prices. What’s up with that?

Remember, a year ago the federal government would pay first time home buyers $8,000 to buy a home. So what you have is the market readjusting from governmental interference in the marketplace. It took a few months for the market to adjust to the government taking away the tax incentives.

Many people thought the recession was over around the 2nd quarter of 2010, but the feds interference in the housing market has resulted in a situation much like the Cash for Clunkers program.

The market will find itself! Lower interest rates and these extremely good prices on homes won’t last forever.

Remember, the Cash for Clunkers impacts on the auto industry didn’t last long either.

Got a question on Real Estate in the Inland Empire? E-mail me at gteeters@coldwellbanker.com or leave a comment.

The Scoop on Housing

2011-06-02T14:00:00.000-07:00

Rental prices are rising. The national average is $1,360 per month and experts predict rents will continue to rise. From 2006 to 2009, rental rates on average increased more than 15%.

With prices to purchase a home at the lowest level they have been in years, these depressed prices, combined with the availability of very low fixed rate mortgages, the “Buy Now” signals coming from the market are very strong.

If you are thinking of buying a home my advice is, do it now. We certainly are at the beginning of bottom for housing prices and interest rates.

The best buy for a mortgage is a fixed rate, 15 year amortization. You will save about the cost of the house. Check it out.

What’s up with Banks?

2010-10-19T10:00:00.000-07:00

All the news about stopping foreclosures is confusing home buyers. How long is it going to last? Until the election is over. Then it will be back to normal. The bank foreclosure procedures will have had a review, the election results will be in and foreclosures will resume.

What buyers should be looking at right now are prices and interests rates! Interest rates are the best bargain ever and potential home buyers should really look at the 15 year amortization payments. Rates are in the mid 3’s; you can’t go wrong!

Don’t buy a home without comparing the benefits of a 15 year mortgage payment with the 30 year payment.

Double Dip

2010-09-29T12:09:00.000-07:00

You are hearing about a possible double dip in the housing market, some talk of further price declines due to the lenders being more aggressive about foreclosures coming on the market.

This chatter is from the national news media. While this may be true on a national level, here in the Inland Empire (San Bernardino / Riverside Counties) the inventory of homes for sale is very low.

Riverside County shows homes for sale in the MLS are down 46% year over year.

August 2009: 9,162 homes for sale.

August 2010: 5,621 homes for sale.

Median sold price was up 11% in that same period.

San Bernardino County shows homes for sale down 35% year over year.

August 2009: 7,594 homes for sale.

August 2010: 5,324 homes for sale.

Median sold price was also up 11% in San Bernardino County.

With Riverside only having a 2.2 month inventory supply of housing and San Bernardino County 2.9 months supply, it is difficult to see prices falling in the near future.

With today’s low prices and low interest rates, this a great time to buy a home. The Inland Empire appears to be exempt from the chatter at this time.

Market Conditions

2010-08-03T12:26:00.000-07:00

Properties sold in June of 2010 that were bank owned made up 65% of the residential sales. That’s down from 82% in June of 2009.

This is a result of more Short Sales as a larger force in the residential market.

There was also a 26% drop in Closed Sales for June 2010 versus June 2009 in San Bernardino County. Properties going under contract were off 20% in the same period.

Bank Owned properties for sale were down 11% during that period.

Want more detailed market information? Send me the area of your interest.

One Bullet Left!

2010-06-30T14:45:00.000-07:00

Want to save the housing market from a second dip?

Get a good Short Refinance Program going. I said “a good program”, one that really makes sense. It would work just like a short sale, only you keep the house.

For the last 3 years the attempts have been loan modifications, a program that we knew from the get go was just a foreclosure or a short sale in waiting. The facts now support the re-default rate of 75% on loan modifications. I don’t know if it’s billions or trillions but it’s a total waste.

We need the U.S. Treasury Department to get behind Short Refinancing today. With mortgage rates as low as they are, it could be the one bullet left in the Fed’s arsenal.

Be Careful

2010-06-21T16:01:00.000-07:00

I have been watching many people get involved in short sales and have observed that many sellers don’t understand where they stand with the banks.

Unless you are a purchase money borrower you can find problems down the road for a long time. Purchase money loans are safe in California (no deficiency judgments are allowed).

However, if you have refinanced or have an equity line of credit, beware. In the middle of escrow the bank may only approve your short sale if you sign a promissory note for some amount of money.

My advice — sign the note if the bank agrees to forgo the deficiency on the balance of the short sale. These notes are rarely for the full amount you owe & sometimes interest is free. TAKE the offer and be done with it.

Upside down home owners are frustrated and don’t always think clearly about this. They just say, “Ok, let the bank have it.” The truth is, the collectors are going to come and a foreclosure won’t stop them. You will still owe the money even after foreclosure.

From the banks position, there is way too much money there to not take action and collect.

Remember, you can only walk away with out any recourse if the loan is the original loan at the time of purchase

Where is the housing recovery?

2010-05-27T16:56:00.000-07:00

Only the Government knows. Consider this. The government supports 95% of all mortgages thru Fannie Mae, Freddie Mac, and FHA. These lenders are and have been on life support for years. A home loan is about to become harder to get. The Federal government’s 1.25 Trillion Dollar mortgage support fund is expired.

10% of all mortgages are fixed rate prime loans. According to CNN, Moody’s forecast is about 1.9 million homes will go back to the banks this year. These can be added to the 6.3 million vacant homes in the nation.

Many of these defaults are not yet in the housing market. Banks are sitting on them or they are held up by other federal programs. Estimates are that banks have about 1.1 million homes in their inventory and another 4.8 million will end up in foreclosure.

Now consider the low, low interest rates we currently have. With the housing market priced like it currently is, and fixed rate 30 year loans below 5%, the story is buy now.

The recovery is some time away. Interest rates say Buy Now!

Engineering the Market

2010-04-29T11:40:00.000-07:00

The banks and the federal government are both doing the same things to make you think the market is improving. Notices of Default are at 47%, so I’ve read. The number of Bank Owned properties on the market is down. Average sales prices are up. We’ve bottomed out the Market!

Look around before you buy into that media hype. They are doing what they should have done 3 years ago. They are finally going into short sales. The short sale move will drive prices down at a much slower pace and should help avert another massive price decline.

The pace of homeowners not able to make their house payments won’t change but the way it is reflected on public records will. This will continue to bring good news as the media reports over the next several months. It’s much harder to track short sales and loan modifications. Defaults and foreclosures are public record and easy to track.

For a true picture of the conditions in the Market Place, watch unemployment rates (now at 15.1% in the Inland Empire), watch for layoffs in the public sector- government workers, teachers and the like. Also, watch the Public Pensions for new developments; they have big problems to deal with.

Watch the “walk aways.” This new term is for people who have good jobs, money in the bank, and can’t qualify for a short sale. They just make a business decision to walk away from the home and the mortgage. This can only work where they have a purchase money mortgage (no home equity line of credit, no cash out refinance).

Let me say, I like short sales as the best effort to help solve the housing crisis. It is our best hope.

It’s time for some Smart Engineering.

Swift Changes Could Occur

2010-04-02T09:08:00.000-07:00

Change is about to happen again in the Real Estate Market. We have seen our 3rd or 4th attempt at Obama’s Loan Modification efforts and they were absolute failures. Now they are finally going for Short Sales under the new “Home Affordable Foreclosure Alternatives Program” (HAFA).

This type of program, had it been implemented 3 years ago, would have cut the damage brought on by foreclosures by half. That’s right! The decline in home prices would have been half of the losses incurred.

Will the new HAFA Short Sale Program work now? It’s the best of all the alternatives available.

But new changes in how people look at home ownership have emerged. Approximately 25% of homeowners, 60 days late or more, can afford the payment but choose not to make the payment because they figure it’s a bad economic decision. These people make that decision based on the value of the home being so upside down in comparison to the amount owed on the home. If that concept gets legs, we could see another new wave of foreclosures and short sales that many have yet to recognize as a real possibility.

The banks made bad economic decisions in the “Boom” times and the government bailed them out. Now the home owner is holding the payment book and the only bail out they see is having their life disrupted by having to relocate, plus, deal with their new lower credit score as they try to start anew.

Housing prices appear to be finding some stability at the moment.

My advice is watch closely for indicators in the market place. Interest rates, unemployment, the number of short sales, foreclosures, and the loss of Tax Credits and a new way of thinking about home ownership could cause a swift change in housing.

Where Is The Housing Market Going?

2010-03-12T13:19:00.000-08:00

It’s hard to tell. Here are the issues that will determine the direction it heads. The better question is, “How is the government going to handle these issues?”

1. The Tax Credits for First Time Buyers and Move Up Buyers is gone on April 30th.
2. The government will stop buying mortgage back securities shortly. They have already spent 1.3 trillion dollars buying Fannie Mae & Freddie Mac mortgages. When the mortgage market goes to private money the mortgage interest rates will go up.
3. There are 9 million homes in the U.S. in some form of default at this time.
4. All of the adjustable loans will begin to adjust the monthly payments upward starting in April. Most of these ARM Loans will default.
5. For whatever reason, bank owned properties are not being placed on the market; thus the number of homes for sale is down. In February 2009, there was an 11 month supply of homes for sale in the Inland Empire. In February 2010, it was only about a 3 month supply. Houses currently on the market that are priced right get 8-10 offers from buyers wanting to buy now.
6. Lenders are moving away from foreclosures and going to Short Sales. Short Sales are accomplished faster, plus they lose about 1/3 less money than foreclosing on a property.

Where is the market going? Who knows!

Cross Your Fingers

2010-02-25T16:17:00.000-08:00

The government is about to pull the plug on Fannie Mae and Freddie Mac.

The Fed has been purchasing their mortgage back securities and keeping interest rates in the area of 5%. Remember, Fannie and Freddie underwrite about 75% of all U.S. mortgages. The federal government has spent billions and billions of dollars with mortgage purchases in the current recession.

If the government stops buying mortgages, leaving those purchases to the private market place, mortgage rates will certainly rise. In addition, FHA loans will become more difficult for a buyer to qualify for.

FHA is also increasing the cost of its mortgage insurance programs. There is even talk of increasing FHA down payments and restricting closing costs that currently sellers are allowed to pay for the buyers.

Take all of these things, plus stop the Tax Credit currently allowed for buyers, and do it all in the 2nd quarter of this year, you could have a real housing downturn.

Keep your fingers crossed, and hope the housing market will not crash again in the 3rd quarter of this year.

Watch This Video

2010-02-09T08:22:00.000-08:00

If this is true, and I assume it is, It will make you mad as hell!!

Watch Video Here

Better Hurry

2010-01-20T15:44:00.000-08:00

Mortgage rates around the 5% 30 year fixed rates are about to disappear. The federal government has spent roughly 1.3 trillion dollars keeping interest rates low as part of its efforts to stimulate the housing market. That program is set to expire on March 31st of this year.

Watch the ten year bond rates to get a handle on mortgage rates. The two do not exactly go together but they do mirror each other.

In the past few weeks, the ten year bond yield went up 20%, from 3.2% to 3.84%. Remember, mortgage rates will mirror that upward trend. A rule of thumb is to add about 1.75% to the ten year treasured bond yield and you would have a good idea as to the mortgage rate.

Buying your home before the end of March makes a lot of good sense:

• A 30 year fixed rate mortgage at 5% to 5.5% interest.
• First Time Home Buyer Tax Credit.
• More Tax Credits for “Move Up” Buyers.
• California Association of Realtors Job Loss Protection program. (It’s Free!)
• On top of that- The lowest prices in many years.

Better Hurry - Time will cost you Big Bucks!

2010 Market

2009-12-23T10:01:00.000-08:00

The market manipulations that the Fed’s have used this year were about everything they could think of to avert a total collapse.

First, the first time home buyer tax credit. The effect on the market was huge, resulting in almost half of the buyers being first time buyers.

Next was the almost non-stop, on-again, off-again rate of bank owned properties coming on the market for sale. Here in the Inland Empire, we even have a shortage of homes for sale. The biggest cause of a lack of bank owned homes for sale was the loan modification programs and the requirements for banks to pick up their efforts in loan modifications.

Perhaps most importantly was the Fed’s purchases of mortgages. About a trillion dollars of mortgages were purchased by the Fed’s, thereby, keeping mortgage interest rates artificially low all year.

So, where are we going now? The First Time Home Buyer and its new expanded version to include “Move Up” Buyers are set to expire April 30th of 2010 and escrow must close by June 30th of 2010.

Next, the loan modification efforts may continue but the re-defaults may start to show next year. The re-defaults will, for the most part, result in Short Sales not Foreclosures, due to the newly launched efforts by the Fed’s to streamline Short Sales. A move to Short Sales will save banks from even larger losses by foreclosures and perhaps change the psych of the public because Short Sales are not traceable like foreclosures are. So the head lines in the news media will expand on how much the foreclosure rates have fallen, and that the market is improving.

As for interest rates, the Fed, having already spent about a trillion dollars on mortgages, is about to stop those mortgage purchases. This will leave interest rates no where to go but up. My guess, at the very least, is 1%; perhaps a bit more by years end 2010.

Then there is what’s called the shadow inventory. These homes are owned by the bank and have not been placed on the market for sale and they include the mortgages that are 90 days or more late. Nationally those numbers are in the area of 7 million. Now that’s a force in the market to contend with.

Now add in the current trend of more difficulty qualifying for a home loan. These new qualifying guidelines and the new rules on appraisers will cause escrow cancellation rates to increase significantly.

The bottom line is, can the Fed Policy Makers find a balance with the Fed Regulators? Thus far they appear to be at odds with each other. We have all these programs to subsidize housing value and increase sales, then we have the Regulators who want to increase the loan qualification guidelines making it difficult to get a loan.

My opinion is housing prices are stable in the first quarter, then fall in the second quarter. The third and fourth quarters will depend on the unemployment rates and whether or not the banks find a balance of inventory for sale versus the demand for purchases, at the same time, Policy Makers must find a balance with Regulators.

Balance is the key to 2010.

New Cards Please

2009-12-11T16:01:00.000-08:00

When are the Fed’s and lenders going to learn they are on the wrong path?

Obama said the Loan Modification Program would help 4 million people at a cost of $75billion. That was back around April. The L.A. Times “Report Today”, December 11th, reports 31,382 homeowners were successful in obtaining permanent loan modifications. That 31,382, is the total from 700,000 applications. The Banks are really taking the heat for the poor success rate.

What the Fed’s don’t understand is most borrowers that are delinquent with their payments don’t want anything to do with the fussy math of a loan modification. The concept is NUTS!

The Obama Solution for the housing crisis has taken away the Pride of Home Ownership for many Americans. Gone is the concept that home ownership should equal home equity and financial security for your future.

The truth is, a full 25% of those who are granted a 3 month loan modification trial don’t even make the 1st payment.

The only possible solution is Short Sales. The lender loss on a foreclosure is about half of the value of the note in a foreclosure, 30% on a short sale, and when the lender losses are finally tallied on this massive loan modification program, no one is going to believe it or understand it.

We need a whole new deck of cards.

Just a Grin!

2009-12-08T14:42:00.000-08:00

Dr. “T”

If you have a question for Dr. “T”, send it in. The opinions offered are sometimes real and sometimes not.

Question: Is the $8,000 Tax Credit the same as a no down loan?
-Susan, San Bernardino

Answer: No, of course not, because with the Tax Credit you must close the escrow before the government gives the down payment back.

Question: If I agree to modify my loan, can I stay here through the Holidays at no cost?
-John, Yucaipa

Answer: Yes you can.

Question: How long can I stay in my house after I quit making the payment?
-Peter, Beaumont

Answer: No telling, a couple years is possible at this time.

Question: If the Bank repossesses my home, how much money will they give me?
-Linda, Calimesa

Answer: There is no set amount, but up to $5,000 is possible.

Question: What is the best & cheapest way to delay eviction after foreclosure for a few days?
-Sam, Hemet

Answer: Change the address numbers on the house.

Question: I took out a LIAR loan, than lost the house. Should I still feel guilty for lying?
-Heather, Redlands

Answer: Not if you took out the LIAR Loan before the lenders guidelines changed in April of 2006.

Question: How long can I drag out the loan modification process and continue living here for free?
-Rick, Highland

Answer: A long time right now.

Question: If I have a LIAR loan, can I get a LIAR Loan Modification?
-Mary, Banning

Answer: Yes you can because it’s not your fault.

Looking for answers? Send in your questions today…

It's Worth A Try

2009-11-05T16:08:00.000-08:00

With almost one million home owners receiving Notices of Pending Foreclosure filings in the 3rd quarter, the government led and lender supported efforts to prevent foreclosures are not working. With 1 in every 136 U.S. homes in foreclosure, the entire issue needs a fresh look.

Banks are postponing the actual foreclosure sales by the hundreds. Here in California, when the Notice of Default filing occurs, there is a 120 day wait before it is sold at auction. The lender can postpone the auction for up to 1 year without losing their position in the foreclosure process. Banks are postponing these auctions to give the Obama Plan, that being the loan modification program, time to work.

This morning on MSNBC they reported on another effort by the Fed’s wherein the defaulting homeowner is offered a rent back option to stay in the home, provided the homeowner signs a deed in lieu of foreclosure and the rental agreement. The Fed’s and the lenders are trying to do most anything to keep those houses occupied and off the market.

We know that a Short Sale affects a credit score (FICA score) about half as much as a foreclosure. How will a deed in lieu of foreclosure with a rent back affect their FICA score? I guess it depends upon how the lender reports it. And, I would look for some kind of favorable rating to come about to help insure that homeowners will be willing to rent the home that they formerly owned.

We know loan modifications don’t work, with 70% re-defaulting rates. We know foreclosures won’t work at the rate they are being filed.

Maybe renting homes back to the former owners will help keep prices from a further decline. It’s worth a try.

Think About It

2009-11-02T16:36:00.000-08:00

It’s been 80 years since The Great Depression of 1929. Makes you want to think about where we are today.

October 27, 1929, was just the start. By 1933 unemployment was roughly 1/3 of the non farm work force. On the day of FDR’s inauguration in 1932, the depression was world wide. Harlem’s unemployment rate was 50%. 40% of the farms in Mississippi were on the auction block. Farmers in the Midwest were hit by the Dust Bowl. This depression lasted more than a decade. It did not end until World War II, when the federal government recruited 6 million civil defense workers, drafted 6 million soldiers, and imposed rationing. This all required massive spending resulting in massive federal deficits to end The Great Depression.

Today, we have seen again massive deficits come into play as a result of the reckless lending and building that occurred in the first half of this decade.

Today, 18.7 million houses sit empty. These include foreclosures, homes for sale, and vacation homes. That figure comes from the second quarter of 2009. 937,800 homes received default notices in that period.

A little prospective is in order here:

• If you have $1,000,000 today, its value in 1929 was about $4,500.
• Price of gasoline in 1929 was 19 cents a gallon.
• Milk was 25 cents a gallon.
• Gold was $20.67 an ounce in 1929 and went to $35 an ounce in 1935.
• A pre-fabricated home from Sears was $495.

As you can see we have had inflation before. Prices are higher and will continue to climb because of our new and increased federal deficit. As always, there will be winners and losers as we go through the process of adjustments, whatever that ends up being.

My advice, buy a house, or two. We are at the bottom or at the very least near the bottom. Low 30 year fixed interest rates will insure that you win!

The Real Housing Story

2009-10-28T16:23:00.000-07:00

Estimates are that there are 7.2 million homes that make up the Shadow Inventory. Shadow Inventory means homes that are delinquent, homes currently owned by the lenders, and homes in which the actual foreclosure auction has been postponed. These homes are not yet on the market for sale but at some point will be sold. To put some prospective to the shadow inventory number, home sales nationally run about 5.5 million annually.

Obama’s answer is loan modifications. So far, they have completed over half a million loan modifications. The problem with this solution is that 70% of those modifications will re-default within 12 months because of the “Non Equity Position” the borrower is left with after the loan modification is completed. The home owner is still at a loss.

There are about 55.5 million homes with mortgages in the U.S. and about 12.5% of those are delinquent. There are another almost 7 million home owners who are in trouble. The cure rate on delinquent loans is very small these days. Add to that the best estimates are that another 200,000+ mortgages are going delinquent every month.

Enough already! The facts are holding inventory off the market, and modifying loans the way it is currently being done won’t work. The problem is getting bigger and bigger while the number of homes for sale keeps getting smaller. We are also moving closer the interest rate hikes and stricter rules for appraising and qualifying for a new loan.

The answer may lie in using the information available in each of the 381 known market areas. A solution might be to provide incentives based on each geographic areas particular needs such as unemployment, lack of available inventory and other factors.

Bottom line, the housing issue needs new and different programs if we are going to throw a life line to the housing crisis.

Who the Real Buyers Are

2009-10-14T16:11:00.001-07:00

Top 10 last names of Home Buyers in Southern California:

1. Garcia
2. Lee
3. Nguyen
4. Kim
5. Hernandez
6. Lopez
7. Smith
8. Rodriguez
9. Martinez
10. Gonzalez

You need to know this stuff

Frustrated

2009-10-09T17:35:00.000-07:00

There are only two types of buyers in the real estate market today. There is the first time buyer and the investor buyer. The majority of first time home buyers are going to purchase a home using FHA financing. Most investors are cash buyers, with a quick closing.

The bank will accept a cash offer when they come because they are so much easier to close. This leaves agents and first time home buyers making offer after offer while frustrations over a lack of success mount. It is not uncommon to see buyers make 12 to 20 offers before a bank accepts their offer.

If you are a frustrated agent or a frustrated home buyer, click the link below.

http://www.youtube.com/watch?v=SM7oWKgCVo4

You Don't Know

2009-09-29T16:02:00.000-07:00

Everywhere I go, people ask me about the Real Estate Business. How’s the market? Have prices bottomed out? When will they bottom out?

You’re about to see a change in the market alright. Watch for headlines of how much foreclosures have declined next year. Foreclosures will decline, and hugely I might add.

Why? Because the loan modification program from the Fed’s is in full swing now, and within the next few weeks the Fed’s short sale program will be in full swing as well. I’ve blogged about both programs and have said for almost two years that Short Sales were the best answer to the housing mess.

The questions about when we will bottom out in the housing industry are contingent upon a few other things. The most obvious is the percentage of re-defaults on the loans that are modified. No one knows how many will re-default, or how fast homeowners with modified loans will do the math.

An interesting study I read over the weekend was about the growing number of homeowners with high incomes and high credit scores that are walking away from their homes and mortgages just because their evaluation of the cost benefit of staying in their homes is upside down.

Another question I don’t know the answer to is, what will the interest rates do over time? I’d say they will go up, how far up is anybody’s guess.

In the Inland Empire, the big question is unemployment. How high will that go? All of our local county and state governments are in the straights for cash and income. All public agencies in California have no clue about cutting back. They can only think of ways to increase income (that’s another topic for another day).

I think the Fed’s should look at regionalization in the Housing Stimulus area. If California, Florida, and perhaps a few other places like Las Vegas, Phoenix, and Detroit are the real problem, then take a look at regional incentives in lieu of a one size fits all.

My Grandfather, who was my male influence as a youngster, taught me the answer to such things. He always said, “YOU DON’T KNOW ----- WHAT YOU DON’T KNOW.” I think Grandpa is right again.

FHA is Changing

2009-09-25T14:34:00.000-07:00

FHA had a market chare of just 2% in 2006. Today, that market share is 23%. Most importantly, FHA is the source for First Time Home Buyers. FHA currently finances 80% of First Time Home Buyers.

September 30th marks the new efforts of FHA to find stronger buyers in it’s portfolio of Mortgages that it insures.

FHA has already began to tighten its requirements for loans. Two years ago, the minimum credit score was 560. Today, the minimum credit score is 620.

Bottom line here is if you are a homebuyer, don’t procrastinate. Find the right home today. Even if you find you can’t make the First Time Home Buyer Tax Credit, you can still get the lowest interest rates in a life time. You likely will see interest rates climb by spring of 2010. These low fixed rates are not forever. Act NOW! Low interest rates and low prices will prove to make you a winner!

The Market is “HAMP”ered

2009-09-16T17:12:00.000-07:00

Inventories are down 65% from one year ago. Agents working buyers are frustrated with 8-10 or 12 offers on every listing that is “priced to sell.” What’s happening here?

The answer is the “Home Affordable Modification Program” (HAMP). It’s Obama’s financial stability plan. It was released back in March of this year. The program is designed to reduce mortgage payments for up to 3-4 million homeowners.

Check this out. The program will lower the interest rates to as low as 2%, extend the amortization period to 40 years. Perhaps most importantly, a Forbearing of a Portion of Principal, interest free, until such time the payment reaches a 31% debt to income ratio for the Borrower. The program requires participation on loans owned or insured by Fannie Mae and Freddie Mac. Through August 2009, over 360,000 trial loan modifications have been started.

Under this program, loan servicers are paid to participate and so are the investors that hold the mortgage. One of the key features of the Program is a 3 month trial period, during which, foreclosures are postponed to see whether or not the homeowner makes the new, reduced payment as agreed.

The result is a large increase in the number of foreclosure sales that are and have been postponed. You could say they have “HAMP”ered the marketplace. Many agents are not aware that a foreclosure sale can be postponed for up to one year without re-filing the Notice of Default.

If the program works, foreclosures will begin to cancel in HUGE numbers. If the program fails, foreclosure sales should increase. Neither has happened as of yet, but we should see some results before long.

This program has created a much diminished inventory of homes for sale. With inventories this low, as low as 1 ½ months supply, we would see an increase in sale prices. But I wouldn’t look for that to happen soon. The new appraisal rules will temper the amount or speed of increase in values.

Short Sales will result in this approach in 2010. Even if you accept all of the breaks offered in the loan modification program, the facts are, at some point, you are going to want to get out from under this mortgage. The payment may be manageable, but the idea of even paying the modified mortgage off before you need to relocate is doubtful.

The ultimate answer is a Short Sale at some point in the future.

In the mean time, we will just have to deal with the “HAMP”ered Real Estate Market.

Lemons to Lemonade

2009-09-11T13:41:00.000-07:00

The Federal Government has really come through for the banks, at least the large banks.

Now the banks are in almost total control of the housing market. They own almost the entire saleable inventory and they are about to really capitalize on that.

Banks are now making a statement to Real Estate Agents and Home Buyers. “If you want to buy this house, you can, if you get your new home loan from here. If you want to get your home loan elsewhere, find another house.”

The fact is, it’s smart for a bank to do this. It’s almost instant cash flow for the bank. It’s lemons to lemonade.

While these types of approaches to today’s Real Estate Market aren’t real palatable, it’s just the way things are.

If you are a Real Estate Agent or a Home Buyer needing a loan, how do you like your lemonade? A little sugar??

What is One Trillion Dollars?

2009-09-04T16:11:00.000-07:00

I’ve been trying to find something to equate a Trillion Dollars to, but haven’t had much luck.

Then I heard on the radio that the total assessed value of all the real estate in California is 4.2 Trillion Dollars.

Think that through!

Short Sale Information

2009-08-31T12:18:00.000-07:00

Buyers:
The new short sale issue is a 1% administration fee. When buying a short sale listing you may now have to pay a 1% (of the purchase price) administration fee in addition to the sales price. The fee cannot be part of the sales price and the fee caps out at $5,000.

This is just like properties sold at auction, where in most instances, there is a 5% buyer premium in addition to the auction price. The only difference is the total purchase price at an auction includes the 5% buyer’s premium. On a Short Sale, the administration of 1% is in addition to the sales price and cannot be part of the loan amount.

On a typical sale in the Inland Empire, you might have a FHA loan with 3.5% down payment, plus impounds for taxes and insurance, and your share of closing costs for such things as escrow fees, title fees, pre-paid interest, etc. Now, possibly a 1% administration fee, if it is a Short Sale.

Sellers:
Short sales work best when the existing loans were at the time of purchase. These loans are seller protected in California. The lender agrees that the only security for the loan is the property. However, once you refinance, you lose your “purchase money” status and in some instances the lender can collect moneys as a result of the non “purchase money” loan.

On another note, if you are a seller in a short sale with an equity line of credit or a cash out second loan that was taken out after the original purchase loan was completed. The lender may require that you pay or make arrangements to pay on the 2nd. It is important that you read and understand the agreement between the servicing company and yourself.

If you have more questions about Short Sales, consult your tax or legal advisor.

Rabbit in a Hat

2009-08-18T16:29:00.000-07:00

With banks holding back on selling homes they have repossessed, the housing prices appear to have hit bottom.

However, the current inventory of Bank Owned homes not coming on the market continues to grow. We call those houses not listed for sale but owned by the banks, Shadow Inventory.

The supply of homes for sale in July of 2008 was about an 11 month supply. Now in July of 2009 we have about a 3.5 month supply. It appears that the number of buyers is greater than the number of sellers.

The difference is the Shadow Inventory, homes owned by the banks but being held off the market. In the Inland Empire the best number I can come up with is 13,000 to 14,000 homes that make up the Shadow Inventory. When will they be released and placed on the market? I think they’ll start coming on the market in October, perhaps at a measured release rate to help insure we try to avoid a return to the 2% per month price decline like we had for almost 2.5 years. You can only have a 2% monthly decline for so long.

There are 3 things to watch as we get close to 2010. First: The Number of Foreclosures. But more importantly, the rate the banks place them for sale. Second: Interest Rates. I would not be surprised to see home buyers paying 1% or more for a mortgage. 1% on a $200,000 mortgage is another $166 per month. The third thing to watch: The Unemployment Rate. An unemployment above 15% or even 20% is not out of the question for the Inland Empire. If all three of these come together (numerous bank owned properties on the market, high interest rates, high unemployment rates), the prices will continue to fall.

The question is, “Can the Fed’s pull a better rabbit out of the hat??”

We need a better solution than loan modifications. Loan modifications will not work. The re-defaults will be almost as many as the original number of loan modifications.

The only answer I can see is Short Sales. Lenders need to take it on the chin and streamline Short Sales, maybe for a long time. It’s the only Rabbit left in any Hat!!

Easy to read charts for Yucaipa / Calimesa Market Data

2009-08-11T16:20:00.000-07:00

Click on the image to make it larger.

Click on the image to make it larger.

Click on the image to make it larger.

Click on the image to make it larger.

Click on the image to make it larger.

Click on the image to make it larger.

$8,000 Tax Credit

2009-08-07T12:52:00.000-07:00

Hurry! Without any extension being granted, the $8,000 tax credit for 1st time home buyers ends November 30, 2009. (That’s a closed date)

That’s not the only reason to buy now. Because of low prices and low interest rates, a typical house payment last month was about $1100, a year ago a typical house payment was $1625. Lock in these savings for 30 years.

This is the time to buy! If you’re worried about losing your job, have your Realtor get you registered with the California Association of Realtors Job Loss Protection Program, it’s free!

It’s Not My Fault

2009-08-05T16:30:00.000-07:00

It seems as though the rule makers today are trying to insure that the foreclosure issues of today never happen again.

The complexity of getting a new home loan just got much more complex as of August 1st 2009. The problem is the rule makers have forgotten that prior to the Clinton/Greenspan Era, the rules worked fine for lenders, home owners and retiree’s. Many retiree’s invested their money in Fannie Mae because nothing was more sacred than home loans. The return on investment was good and there was safety of the retirement money, nothing was more secure than U.S. mortgages.

We are now creating a Nation of “it’s not my fault.” Whatever it is, someone else must be responsible for me and my decisions. The truth is, the mortgage problem is so big, in terms of dollars, no one knows how to deal with it. So far the priority is on lenders to modify loans. Facts are the re-default rate on loan modifications are about 75%. It appears that the fed’s only course of action is to just “kick the can down the road” and hope we can spread the foreclosure issue out over time. It’s simply too big a dollar amount to tackle head on.

How many times can you modify some one’s loan? I am not aware of a maximum number, however some have gotten loan modifications 3 times already. One study showed that 1 in 5 owners in default were filing for bankruptcy to stall or stop foreclosure.

I’ve always thought allowing Judges to modify home loans was a terrible idea. However, if clear guidelines existed for Judges and every one understood the rules, maybe it’s time. I never thought I would say that, but we now know that a contract is no longer sacred in America, and if an agreement does not work for me it must be someone else’s fault.

New Mortgage Rules

2009-07-29T10:59:00.000-07:00

Now that we have found out that the new rules regarding appraisals didn’t work, we are getting new rules for loan originations that won’t work either.

More rules is not the answer for consumer protection, loan fraud, and other ills. These rules are going to frustrate buyers, sellers and anyone else who is trying to comply.

The concept that any loan officer can comply with the new lending rules without at least a 10 day extension to the closing date will be the exception, not the rule.

So be sure your buyers and sellers are aware that the closing date on the contract, most likely will not be the closing date.

Los Angeles Times Article:

http://www.latimes.com/classified/realestate/news/la-fi-harney19-2009jul19,0,1179820.story

California announces a 90 day Moratorium on Foreclosures

2009-07-13T11:29:00.000-07:00

MY OPINION
The market is about to change and it’s about time. I have been saying for the last two and a half years that foreclosures beget foreclosures in the current market. One dead lawn makes another dead lawn and with each dead lawn with a bank owned sign reduces the neighborhood value another 6%.
They finally get it. The 90 day moratorium that started yesterday will serve to implement the new federal policy called “The Foreclosure Alternative Plan.” The plan outlines the Fed’s Streamline Short Sale Plan. It offers several incentives for loan servicers and asset managers that will stop the foreclosure madness and implement a short sale program that will help stop the price decline and lose the term Bank Owned.
Look for change early in 2010, foreclosure, bank owned, auction, REO and dead lawns will be gone!

First let’s understand the foreclosure process here in California. The Buyer is likely 90 days late on their mortgage payment. The state requires 90 days to try to work out a loan modification. In the event the home owner cannot qualify for a loan modification the lender files a notice of default which requires another 120 days. That’s 300 days then add say another 60 to 90 days for the lender to put the repossession thru their process, arrive at a value and proceed to sell the property, round figure that to about 1 year.

During that year here in the Inland Empire the investor has lost about 30% of the value of the asset and had $5000+ in legal cost to accomplish the foreclosure. Now they need to evict the owner, re-key the property, do a trash out and clean it up. Someone stole the carpet and it needs to be painted. The lawn is dead and the city fined the lender $300 for not keeping the lawn green and repairing the broken window. The Home Owner Association dues are past due, the outstanding water bill is $800 and the trash bill also went unpaid. Now all that’s left to do is announce that there is another bank owned property is for sale.

Now, lenders and the Fed are beginning to understand this problem is too big to handle in traditional ways, and understanding that loan modifications don’t work over the long haul (at least 50% of loan modifications re-default within the first year. I am aware of home loans being modified 3 times and still re-default).

Here’s the only program that is going to work. Streamlined Short Sales with the homeowner staying in the property until it is sold. Lenders are paying up to $4000 to get occupants out of foreclosed homes, it’s called cash-for-keys. So, let the lender arrive at a price up front, they now have 90 days to do that in California. Before the property is placed on the market, have the seller continue to stay in the home, keep the lawn mowed and everything else in good condition. The property is listed and sold as if nothing is wrong. Yes it’s a short sale, so what, the lender is saving about a year in getting the property on the market. No bank owned signs, no auction signs (nothing drives prices down like the word auction). Give the owner $4000 cash-for-keys money to insure the co-operation with the entire selling process. With in about 6 months, bank owned, foreclosures, distressed sales will be gone and housing prices will stabilize.

I think they get it. I hope they get it!

Streamlined Short Sales the only real answer to falling home prices.

Why You Should Buy Now

2009-06-19T10:14:00.000-07:00

Why you Should Buy Now

First, the California Association of Realtors has an unbelievable offer for job loss payment protection. The payment protection is up to $1,500 per month for first time home Buyers.

Here’s how to qualify:

1. Be a first time home buyer. (Someone who has not owned a home in the last 3 years.)

2. Open escrow after April 2, 2009 or later and close escrow before December 31st, 2009.

3. Use a California Realtor in the transaction.

4. Be a W-2 employee ( can not be self employed or paid on a 1099)

Tell your real estate agent you want to apply. The program also includes coverage for accidental disability and a $10,000 death benefit. Realtors and their immediate family do not qualify.

Other rules apply. For complete information click Here

Economy and Perspective

2009-06-19T10:01:00.000-07:00

You may want to consider buying a house or two this year. The market is weak, and great buys are abundant. Add the very low interest rates that are available now and you have got an opportunity that has not been seen in years.

Consider this;

$1 in 1929 is equal to $220 today

$1,000 in 1929 is equal to $220,000 today

$10,000 in 1929 is equal to $2,200,000 today

$100,000 in 1929 is equal to $22,000,000 today

So if you have $1,000,000 in the bank today, in 1929 the real value was $4,545!

Couple the low interest rates available today with the discounted prices of a home and you’ve got a great investment that will give you certain tax advantages and a great hedge against the inflation that is sure to come.