Redding Real Estate Blog – Page 419

Existing-Home Sales Jump 6.5%

Some good news from the housing market.

Existing-home sales rose unexpectedly while inventory declined, led by a surge of sales in the West, according to the National Association of Realtors^®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate¹ of 4.74 million units in December from a downwardly revised pace of 4.45 million units in November, but are 3.5 percent below the 4.91 million-unit pace in December 2007.

For all of 2008 there were 4,912,000 existing-home sales, which was 13.1 percent below the 5,652,000 transactions recorded in 2007. This is the lowest volume since 1997 when there were 4,371,000 sales.

Lawrence Yun, NAR chief economist, said home prices continue to fall significantly. “It appears some buyers are taking advantage of much lower home prices,” he said. “The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions. Buyers will continue to have an edge over sellers for the foreseeable future.”

Total housing inventory at the end of December fell 11.7 percent to 3.68 million existing homes available for sale, which represents a 9.3-month supply² at the current sales pace, down from a 11.2-month supply in November.

Yun said the market is underperforming and hurting the broader economy. “We’ve added 25 million people to our population over the past decade and housing affordability conditions are the best we’ve seen since 1973, but household formation is much lower than expected,” he said. “Consequently, there is a pent-up demand which could be unleashed with the right stimulus, including a non-repayable home buyer tax credit. The Obama administration and Congress need to move fast to stimulate a spring sales upturn which will help to stabilize home prices and set the foundation for a sustainable economic recovery.”

The national median existing-home price³ for all housing types was $175,400 in December, which is 15.3 percent below December 2007 when the median was $207,000. There remains a significant downward distortion in the current median from a large number of distress sales at discounted prices, currently 45 percent of transactions; the median is where half of the homes sold for more and half sold for less. For all of 2008, the median price was $198,600, down 9.3 percent from $219,000 in 2007.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said it’s an excellent time for first-time home buyers with good jobs. “The typical buyer plans to stay in their home for 10 years, which is the correct approach in today’s market,” he said. “With historically low mortgage interest rates, flexible sellers, a large inventory, and homes that are selling for less than replacement construction costs in much of the country, buyers who’ve been on the fence should take a closer look at today’s market.”

McMillan added that first-time buyers may want to consider an FHA loan, which offers downpayments of 3.5 percent on a safe 30-year fixed-rate mortgage.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.29 percent in December from 6.09 percent in November; the rate was 6.10 percent in December 2007. Last week, Freddie Mac reported the 30-year rate was 5.12 percent.

Single-family home sales rose 7.0 percent to a seasonally adjusted annual rate of 4.26 million in December from a level of 3.98 million in November, but are 1.4 percent below a 4.32 million-unit pace in December 2007. For all of 2008, single-family sales fell 11.9 percent to 4,349,000.

The median existing single-family home price was $174,700 in December, down 14.8 percent from a year ago. For all of 2008, the single-family median was $197,100, which is 9.5 percent below 2007.

Existing condominium and co-op sales increased 2.1 percent to a seasonally adjusted annual rate of 480,000 units in December from 470,000 in November, but are 18.4 percent below the 588,000-unit level a year ago. For all of 2008, condo sales dropped 21.0 percent to 563,000 units.

The median existing condo price⁴ was $181,400 in December, down 18.3 percent from December 2007. For all of 2008, the median condo price was $210,000, which is 7.2 percent below 2007.

Regionally, existing-home sales in the Northeast slipped 1.4 percent to an annual pace of 720,000 in December, and are 14.3 percent below December 2007. The median price in the Northeast was $235,000, which is 7.8 percent lower than a year ago.

Existing-home sales in the Midwest increased 4.0 percent in December to a level of 1.04 million but are 10.3 percent below a year ago. The median price in the Midwest was $140,800, down 11.4 percent from December 2007.

In the South, existing-home sales rose 7.4 percent to an annual pace of 1.74 million in December, but are 11.2 percent lower than December 2007. The median price in the South was $158,600, which is down 8.0 percent from a year ago.

Existing-home sales in the West jumped 13.6 percent to an annual rate of 1.25 million in December and are 31.6 percent higher than a year ago. The median price in the West was $213,100, down 31.5 percent from December 2007.

Fannie & Freddie To Help Renters Of Foreclosed Homes

Freddie Mac & Fannie Mae are preparing a plan that will allow renters who live in bank repossessed properties to stay in their homes. They expect to have the plan completed before their self imposed moratorium on foreclosures expires on January 31^st.

The plans were revealed in the letter Federal Finance Housing Agency (FHFA) Director James Lockhart sent to Senator Christopher Dodd, chairman of the Committee on Banking, Housing, and Urban Affairs, accompanying the FHFA’s Foreclosure Prevention Report.

In addition to Freddie Mac’s proposed policy, the letter said Fannie Mae will offer monetary support for tenants that do not want to sign a new lease with the Government Sponsored Entity.

The report, which covers both Fannie Mae and Freddie Mac’s combined 30.6 million residential mortgages it secures, was filed last week, but covers last year through the month of October. It said:

– Loans 60+ days delinquent as a percent of all loans increased from 1.46 percent as of March 31 to 1.73 percent as of June 30 to 2.21 percent as of September 30 and to 2.39 percent as of October 31.

– Loans for which foreclosure was started as a percent of loans 60+ days delinquent declined from 8.29 for the first quarter, 7.81 percent for the second quarter and 7.12 percent for the third quarter to 6.44 percent for October

– Loan modifications completed increased to 5,639 for October from a monthly average of 4,475 for the third quarter – an increase of 26 percent.

– For modifications completed in October, 57.8 percent were modified with an interest rate reduction, and 43.2 percent were completed with a change to another term.

– The loss mitigation ratio for October was 52.6 percent versus a year-to-date monthly average of 54.4 percent. The ration is calculated at the total mitigation activities (payment plans, HomeSaver Advances, loan modifications, short sales, deeds in lieu, assumptions, and charge-offs) divided by the total of loss mitigation activities plus foreclosures completed and third-party sales.

Under the Economic Stabilization Act of 2008, Federal Property Managers, like the FHFA as GSE conservator, are required to report to Congress about the number and type of loan modifications and the number of foreclosures during the reporting period.

Foreclosures Increase 81% In 2008

RealtyTrac an online marketplace for foreclosure properties released its 2008 Foreclosure Market Report, which shows a total of 3,157,806 foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 2,330,483 U.S. properties during the year, this represents an 81 percent increase in total properties from 2007 and a 225 percent increase in total properties from 2006. The report also shows that 1.84 percent of all U.S. housing units (one in 54) received at least one foreclosure filing during the year, up from 1.03 percent in 2007.

Foreclosure filings were reported on 303,410 U.S. properties in December, up 17 percent from the previous month and up nearly 41 percent from December 2007. Despite the spike in December, foreclosure activity for the fourth quarter was down nearly 4 percent from the previous quarter but still up nearly 40 percent from the fourth quarter of 2007.

RealtyTrac publishes the largest and most comprehensive national database of foreclosure and bank-owned properties, with over 1.5 million properties from over 2,200 counties across the country, and is the foreclosure data provider to MSN Real Estate, Yahoo! Real Estate and The Wall Street Journal’s Real Estate Journal.

“State legislation that slowed down the onset of new foreclosure activity clearly had an effect on fourth quarter numbers overall, but that effect appears to have worn off by December,” said James J. Saccacio, chief executive officer of RealtyTrac. “The big jump in December foreclosure activity was somewhat surprising given the moratoria enacted by both Freddie Mac and Fannie Mae, along with programs from some of the major lenders and loan servicers aimed at delaying foreclosure actions against distressed homeowners.

“Clearly the foreclosure prevention programs implemented to-date have not had any real success in slowing down this foreclosure tsunami. And the recent California law, much like its predecessors in Massachusetts and Maryland, appears to have done little more than delay the inevitable foreclosure proceedings for thousands of homeowners.”

The California law (SB1137), which required lenders to provide written notice of their intent to initiate foreclosure proceedings 30 days prior to issuing a notice of default (NOD), resulted in a reduction of NODs from 44,278 in August to 21,665 in September. Notice of Default filings then surged by 122 percent, to over 42,000, in December. Similar patterns have occurred in other states, such as Massachusetts and Maryland, where similar types of foreclosure prevention legislation has been enacted.

30% of U.S. Homebuyers Expect At Least A 50% Discount When Purchasing Foreclosure Properties.

Trulia & RealtyTrac released the results of a new study conducted on their behalf by Harris Interactive ® showing notable decreases from their previous survey in the willingness to buy foreclosed properties with three-quarters of respondents expecting a discount of at least 25 percent on a foreclosure purchase. In the previous survey conducted seven months ago, 54 percent of all U.S. adults surveyed said they would consider purchasing a foreclosed home, whereas now 47 percent of U.S. adults would consider purchasing a foreclosure, a drop of seven percentage points in only seven months. These findings are part of a regular series of surveys conducted by Trulia to better understand consumer sentiment around housing issues.

During the last seven months, negative sentiment around buying a foreclosure rose. In April of 2008, 69 percent of U.S. adults originally felt that there were negative aspects to purchasing a foreclosed home (www.trulia.com). In this recent study, conducted during a three-day period in November, 80 percent of U.S. adults are now concerned with negative aspects, citing hidden costs, risky process, home losing value and personal connection with foreclosure as the core concerns. To compensate for perceived risks, consumers expect hefty discounts on foreclosed homes. More than 75 percent of consumers think they should pay at least 25 percent less for a foreclosed home, with three in ten consumers expecting a major discount of at least 50 percent less than a comparable home not in foreclosure.

“What’s significant about our findings is that just as the market is being flooded with more foreclosures, homebuyers are more hesitant to buy them. Misinformation around foreclosures abounds and that’s dangerous for the market and for homebuyers,” said Pete Flint, co-founder and CEO of Trulia. “Information is power and at Trulia we are giving homebuyers the information they need to make a fully informed decision about whether a foreclosed property is a good buy or investment for them.”

“The results of this study are eye-opening and highlight the need for consumer education about foreclosures. Being that the sale of foreclosed properties has been on the rise due to the increased inventory and discounts available on foreclosed homes, it is somewhat counterintuitive — although not totally unexpected — that consumers are more hesitant to purchase a foreclosed property,” said Rick Sharga, senior vice president of RealtyTrac. “We expect that foreclosures will continue to dominate the market in 2009, and well-educated consumers will be able to find great deals on these properties.”

Some Groups Now Less Inclined to Consider Purchase
The results of the most recent Harris Interactive ® survey provide nuanced insight into the shift in confidence for consumers looking to purchase a foreclosed home. In particular:

56 percent of single/never married adults were at least somewhat likely to consider purchasing a foreclosed home, down from 60 % in April.

43 percent of married adults were at least somewhat likely to consider purchasing a foreclosed home, down from 50% in April.

42 percent of divorced/separated/widowed adults were at least somewhat likely to consider purchasing a foreclosed home, down from 50% from April.

Foreclosures Decrease 7% In November

RealtyTrack released its November 2008 Foreclosure Market Report which shows foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 259,085 U.S. properties during the month, a 7 percent decrease from the previous month but still up 28 percent from November 2007. The report also shows one in every 488 U.S. housing units received a foreclosure filing in November.

“Foreclosure activity in November hit the lowest level we’ve seen since June thanks in part to recently enacted laws that have extended the foreclosure process in some states, along with more aggressive loan modification programs and self-imposed holiday foreclosure moratoriums introduced by some lenders,” said James J. Saccacio, chief executive officer of RealtyTrac. “There are several indications, however, that this lower activity is simply a temporary lull before another foreclosure storm hits in the coming months.

“Delinquencies on loans not yet in the foreclosure process jumped to nearly 7 percent in the third quarter, a record high, according to the Mortgage Bankers Association,” Saccacio continued. ”And more than half of the homeowners who received loan modifications to reduce monthly mortgage payments in the first half of 2008 are already delinquent on their loans again, according to the U.S. Office of Thrift Supervision. Many of these delinquencies could turn into foreclosures next year.”

California, Florida, Michigan post highest foreclosure totals

Foreclosure filings were reported on 60,491 California properties in November, the most of any state and a 6 percent increase from the previous month following two consecutive monthly decreases. The state’s foreclosure activity was up 51 percent from November 2007, and one in every 218 housing units received a foreclosure filing during the month — more than twice the national average.

See the full report at RealtyTracks website.

Recourse Loan or Nonrecourse Loan?

Knowing whether or not a loan is recourse or nonrecourse debt is critical when borrowers are facing foreclosure. Depending on the type of debt there could be tax consequences for a foreclosure or a short sale.

The main difference in a recourse loan and a nonrecourse loan is the liability. With a nonrecourse loan the lenders only way of recovering their loan is the security, in this case the property. With a recourse loan the lender is able to go after the borrowers assets if they do not receive enough from the secured asset to pay the loan off in full.

Whether or not a loan is a nonrecourse or recourse depends on the type of loan.

Notes secured by real estate are nonrecourse when the note is:

· The original purchase money loan on an owner occupied one-to-four unit residential property;

· A seller carry back note secured by the real estate sold; or

· A note containing an exculpatory clause, relieving the borrower of liability.

Examples of recourse loans are refinances of existing mortgages, home improvement loans, equity lines of credit, and loans, other than seller financing, securing a debt for purchase of property that is not an owner-occupied one-to-four unit property.

With recourse debt the lender is not limited to taking the property back and the borrower may be personally liable on the debt.

Here is a handout from the California Association of REALTOR’s that explains more about recourse and nonrecourse debt.

https://www.parsonsrealty.com/parsons_realty/taxes/car_faq.pdf