buying

Home values rise for first time in 5 years


Here’s a great CNN article I just read that does a good job spelling out what is happening in the market. Home prices hit a bottom and are finally bouncing back, according to an industry report released Tuesday. Nationwide, home values rose 0.2% year-over-year to a median $149,300 during the second quarter…

Click here to read full article

Real Estate Year at a Glance

Condo graphic for newsletter

A homeowner in my Lake Forest Tierra Vista condominium community asked me to come over and talk to him about the idea of selling his condo and purchasing a single family residence.  I spent about 20 hours putting together all of the data to give them the most accurate picture of the market so they could make a very well-informed decision.  This first chart shows what has happened in 2009 to the condo market I their area.  Inventory declined by 64%.  That is indicated by the green bars.  Buying activity (red bars) remained constant until October.  I placed a red circle over the months that the first $8,000 Federal Tax Program was in effect.  What is interesting to note is that buying activity did NOT increase in this segment of the market place.  It would be natural to wonder what the Realtors and Media were talking about.  Here is my analysis.  During these summer months there was only about a 2-3 month inventory of condos.  That is considered a seller’s market. It would have been normal for sales activity to have decreased simply because there was not enough attractive homes to meet the demand.  Instead of dropping, the $8K program caused buyers to buy up the less desirable homes and keep the buying activity steady.  There was also something that was going on.  Look at the chart and analysis below:  

SFR graphic for newsletter

This chart represents the activity of entry level single family residences during this same period of time.  Can you see what happened ruing the summer months?  Stead buying activity increased during the same months of the first Federal Tax Credit program.  What happened is that not only did condo owners move up to single family residences, but renters were able to skip the condo stage altogether and move right into a single family residence.  There is now less than a 2 month inventory of single family residences under $500,000.

 What does this mean?  Low inventory has moved entry level SFR pricing upwards.  It may not be as easy for a renter to move straight into a SFR.  I anticipate that condo prices will continue to climb as they will be the best options for first time buyers.  We all know that the end-of-the-falling-market bell rang earlier this year.  If you are extremely happy where you are and can live there for an indefinite period of time, I recommend that you enjoy your home.  What a great place to be. On the other hand, if you know that you want to be in a new housing scenario sometime in the next few years, it is imperative that you get on track immediately so that you can get in just after year that home prices turned back around.

The new government standardized short-sale plan could help troubled homeowners

Help ButtonThe U.S. Dept. of the Treasury recently announced the Home Affordable Foreclosure Alternatives Program (HAFA), which provides instructions for lenders and servicers participating in the Making Home Affordable Program and Home Affordable Modification Program (HAMP).  The purpose of HAFA is to create an alternative to foreclosures for homeowners unable to successfully modify their troubled mortgage under HAMP, and to streamline the short-sale process.

MAKING SENSE OF THE STORY:

  • A short sale is when the lender agrees to accept less than the amount owed on the mortgage instead of foreclosing.  Many homeowners and REALTORS® have expressed their frustrations in the short-sale process, criticizing lenders for the amount of time it takes to process and approve a short sale.  The CALIFORNIA ASSOCIATION OF REALTORS® listened to members’ concerns, worked with other industry groups, and responded by helping to create provisions to streamline the short-sale process.
  • The HAFA program simplifies and encourages short sales and deeds in lieu of foreclosure.  It will permit pre-approved short sale terms before a property is listed; release borrowers from future liability for the debt; and provide financial incentives to borrowers, servicers, and investors.
  •  Under terms of the program, the borrower and/or listing broker have three business days to submit an executed purchase offer and related documents to the servicer on a short sale, and the servicer has 10 business days to respond to an executed purchase offer.
  • The servicer also will determine the minimum net proceeds for a short sale.  If an offer presented to the servicer by the borrower or listing broker meets the net proceeds requirement, then the servicer must accept it.

The program currently is available only for non-Fannie Mae- or Freddie Mac-owned loans up to $729,750 and is scheduled to take effect April 5, 2010.  However, the California Association of Realtors expects that many lenders will choose to implement it before the deadline.

 What this means is that sellers will have less scary ‘unknowns’ during the short sale process and no future liability.  It will also give buyers more hope that their short sale purchase transactions will go more smoothly and they will be in their home sooner.

If you, like so many others have experienced a hardship this year and need to sell your home, please give me a call at (949) 583-1331.  I have a system that takes some of  the pain out of short sales whether you are occupying it or if it is a rental.

Recent Market Updates

Staying on top of the real estate market can be difficult, there are so many articles and so much information that it can be confusing where to go for the best facts. One of the best things about a good REALTOR® is that we always have the most recent updates and are happy to provide you with all the information you need to make the best decision when buying or selling a home.

In the last few weeks, there are have been some great articles out and I wanted to share them with you:

According to most recent research from Marilyn Kalfus, 2 of the areas with the top home price jumps in the state were in Orange County!

In addition, the median home prices for Orange County are going up again, although still down overall, they have improved drastically from where they were, showing the market to be recovering well.

We also need to take a look at the tax breaks coming for home buyers, a tax break that just may allow you to get into that perfect home this year by saving you money in places you never expected!

And,  the good news is, those tax credits may be extended. There are talks to add another 12 months to the program instead of just the 14 weeks it currently has left.

Lastly, here is a great chart that shows how the interest rates have changed over the years, aptly named: Historical Interest Rates

I hope that some of these articles will help you to answer some of the questions about recent market changes. If you have other questions, feel free to give me a call – 949-583-1331!

Which is best for the borrower?

A couple weeks ago, I shared an article from Bob Hunt about the bottom of the market. Recently, he published another great article that posed the question: Short sale, Foreclosure or Deed in Lieu: Which is best for the borrower?

With a large percentage of the homes in Orange County still falling into these 3 categories, I thought it was an important topic to cover.

Here are Bob’s thoughts:

If only the President’s foreclosure-prevention plan worked as well as “cash for clunkers”. But it hasn’t. When the Administration announced the Making Homes Affordable plan in February of 2009, officials said they hoped it would help 4 million distressed homeowners to stay in their homes. As of [the beginning of August], the Administration has acknowledged that there are only 200,000 trial loan modifications under way.

Clearly, lenders have been reluctant to modify loans. (Moreover, there are good reasons for their reluctance according to a recent study by the Boston Federal Reserve.) Also, many borrowers have turned out to be ineligible for the programs or – because they are so far ‘under water’ – uninterested. Whatever the cause, the result is the same: a distressed borrower typically needs to choose between (1) a short sale (where the lender agrees to take less than the amount owed) in which, among other things, a commission (paid by the lender) is generated. (2) a foreclosure, or (3) a deed in lieu of foreclosure (where the borrower ‘gives back’ the property to the lender without a foreclosure proceeding). Which is better for the borrower?

Many real estate agents will say and advertise that a short sale is clearly preferable. In support of this view, two claims are usually asserted. (1) A short sale is less damaging to the borrower’s credit than a foreclosure. (2) A short sale provides the borrower with a shorter ‘waiting period’ until the borrower will be able to purchase a home again.

It is important to note that these are two different claims. For example, in a period of time a borrower could become eligible for a purchase loan under Fannie Mae/Freddie Mac guidelines, but he or she might still not have sufficient credit or income to qualify for the loan.

While many say that a short sale is less damaging to one’s credit than is a foreclosure, documenting that claim is another story. This writer has looked hard, but can’t find any verification from Fair Issac (the developer of the FICO scoring system) or any of the major credit providers. That is probably no surprise, because their systems are proprietary. Nonetheless, one wonders what might be the source of the claim.

On the other hand, people who apparently should know deny that there is any difference. Greta Guest of the Free Press (Freep.com) quotes John Ulzheimer, president of consumer education for Atlanta-based Credit.com. Ulzheimer spent seven years at Fair Issac. “The credit bureau sees those all as equal,” Ulzheimer said. “They are all essentially in the eyes of FICO a major delinquency.” Elizabeth Razzi wrote in the Washington Post (July 20, 2008), “A foreclosure and short sale inflict equal damage to your FICO score, according to Fair Issac…” though she provides no specific citation.

Moving on from the credit score issue, there is the question of being again eligible to buy. More precisely, it is a question of when, in the future, the defaulting borrower could get a loan that would be purchased by Fannie Mae or Freddie Mac. The issue is dealt with in Fannie Mae Announcement 08-16, released June 25, 2008.

When it comes to foreclosures and deeds in lieu of foreclosure, the policy distinguishes between events that were precipitated by extenuating circumstances (e.g. job loss, major illness) and those that were not (e.g. financial mismanagement). If you’ve had a foreclosure without extenuating circumstances, you can’t purchase with a Fannie Mae – backed loan for five years. However, if there were extenuating circumstances, it drops to three years. Suppose you chose the deed in lieu of foreclosure option. If there were no extenuating circumstances, the period would be four years, but with such circumstances, it drops to two. Fannie Mae doesn’t draw the distinction when it comes to short sales: the period is two years, the same as doing a deed in lieu with extenuating circumstances.

May 15, 2009, the Treasury Department issued an update to the Making Home Affordable plan. Among other things, it provides for financial incentives (e.g. a $1,500 moving allowance) to distressed borrowers who meet the general eligibility requirements for a loan modification and who will engage in an approved short sale or who will give a deed in lieu of foreclosure.

Distressed and underwater borrowers face a minefield of options for resolving their problems. Not the least of their problems is the vast amount of misinformation floating around. They need to step very carefully.

I think that Bob makes some extremely valid points, and the key being whichever you choose, to make sure that you go with a REALTOR® that you trust to ensure the best results.

Are your offers not getting accepted?

Mammoth Highest Price in over a yearAre you new to the market? Are you having trouble getting your offers accepted? Take a look at the email exchange I had a couple days ago with a potential client of mine.

Dear Jenean,

I watched you closely on the Mammoth house and how you successfully sold it. Your sales technique is impressive. If I ever want to sell my house, you are definitely on top of my list. Now, I am in the market to buy a home – but I don’t want to compete. I bought 2 houses from agents who sold me the houses before hitting the MLS. Remember me if you ever come across on opportunity like this (usually: owner lives far away). I am prequalified, ready with 20% down. Take care.

Dear Cleo,

Thanks for your very nice message. When it comes time to sell one of your houses, I would be happy to talk to you about it. We actually had 13 offers (I miscounted). 11 of them were from people who didn’t want to compete. They lost out on a big house in a very desirable neighborhood. The next home that sells in this neighborhood will sell for even more. In the past 2 years when prices were heading downward, sellers sold them to the first buyer who was willing to take the gamble. Those days are over as sellers have heard that there are tons of buyers for each home. Every buyer I have represented this year was up against a lot of other buyers wanting the same house. My buyers won on each offer because I know how to write acceptable offers and because they are well trained about the current dynamics of the market and willing to work within the new reality. Because I only take on 2 clients a month, I have to carefully select buyers who want a ‘house’. Unfortunately, those who are wanting a ‘deal’ have a slim chance these days on securing an attractive house and a smooth escrow.

Well, I am off for Montana. I’ll be back later in the month.

My best to you.

Jenean Hill