A report released early this week spells out the wider impact of foreclosures. Researchers at the Center for Responsible Lending (CRL) note that almost $2 trillion in property value has or will be lost by residents. It doesn’t even include equity losses due to foreclosures, which have been estimated at $7 trillion.
Foreclosures have brought down property values across the country. Your home has been affected even if there are no foreclosures in your neighborhood (which would be pretty rare, I think). That value reduction means that while you’re paying lower property taxes, your municipality and school system is getting less money, too. If there are many foreclosures in a given area, there can also be blight and crime issues that come into play.
We all know intuitively that foreclosed homes are not a good thing for neighborhoods. Unfortunately, there are still a lot of them sitting out there, many that haven’t even been listed.
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Showing posts with label foreclosure. Show all posts
Showing posts with label foreclosure. Show all posts
Wednesday, October 31, 2012
Friday, December 30, 2011
Study Shows Strategic Default Influenced By Social Circle
Strategic default is defined as walking away from a mortgage that you have the ability to pay. Why do homeowners do this? Or not do this? It can be pretty much broken into two schools of thought.
First, the ethical argument. You agreed to buy your house at a then fair market price with a mortgage at the then market rate. You signed a contract obligating you to keep making payments even if similar houses are now selling for half the value of what you paid. Even if a new mortgage can be obtained at a lower interest rate by another buyer. Even if you can’t refinance.
The other argument is that this is a business deal, plain and simple. If I don’t make the payments, you take the house. I’m not going to make the payments, so feel free to take the house.
The report examines the use of social media and social influence on our decision making. If enough people that you know (or are connected to) are saying its fine to strategically default, you begin to get more receptive to the idea. After all, it worked out great for them, why not me? (A lot like the continual anecdotes I hear about the ‘buddy’ that picked up a $600,000 house for $100,000 as a foreclosure - I can do it, too.)
An industry source, CoreLogic, says that 11 million homes (22 percent of the housing market) are underwater and that another 2.4 million have less than 5% equity, so there’s a lot of potential for more strategic defaults out there.
Banks are also part of the problem. People looking for refinance options often get the runaround or can’t qualify with the current stringent requirements. I know mortgage reps that can’t refi their own homes, what chance does a regular consumer have? It may be easier for some people to opt into strategic default as a result of feeling helpless, or because they think the big corporations don’t care about them.
A single strategic default (which ends up as a foreclosure home) won’t kill the value in a neighborhood. But think about the areas where there are a lot of strategic defaults in addition to the short sales and foreclosures due to hardship – loss of a spouse, losing a job, illness. Distressed sales do, in fact, bring down property values and are not good for neighborhoods. Strategic default is only a part of the overall problem.
First, the ethical argument. You agreed to buy your house at a then fair market price with a mortgage at the then market rate. You signed a contract obligating you to keep making payments even if similar houses are now selling for half the value of what you paid. Even if a new mortgage can be obtained at a lower interest rate by another buyer. Even if you can’t refinance.
The other argument is that this is a business deal, plain and simple. If I don’t make the payments, you take the house. I’m not going to make the payments, so feel free to take the house.
The report examines the use of social media and social influence on our decision making. If enough people that you know (or are connected to) are saying its fine to strategically default, you begin to get more receptive to the idea. After all, it worked out great for them, why not me? (A lot like the continual anecdotes I hear about the ‘buddy’ that picked up a $600,000 house for $100,000 as a foreclosure - I can do it, too.)
An industry source, CoreLogic, says that 11 million homes (22 percent of the housing market) are underwater and that another 2.4 million have less than 5% equity, so there’s a lot of potential for more strategic defaults out there.
Banks are also part of the problem. People looking for refinance options often get the runaround or can’t qualify with the current stringent requirements. I know mortgage reps that can’t refi their own homes, what chance does a regular consumer have? It may be easier for some people to opt into strategic default as a result of feeling helpless, or because they think the big corporations don’t care about them.
A single strategic default (which ends up as a foreclosure home) won’t kill the value in a neighborhood. But think about the areas where there are a lot of strategic defaults in addition to the short sales and foreclosures due to hardship – loss of a spouse, losing a job, illness. Distressed sales do, in fact, bring down property values and are not good for neighborhoods. Strategic default is only a part of the overall problem.
Wednesday, July 13, 2011
Wells Fargo Session
First, (and no surprise to readers of my blog) is that time on the market has dropped dramatically for WF foreclosure listings. In 2009, the average time on market was 126 days, in 2010 it was 86 days, and so far in 2011 it is 47 days.
WF has only 566 foreclosure homes for sale in Michigan at this time. I thought that was a low number. Part of it may be due to the fact that their loan modifications are up, and over 80% of loan mods are classified as ‘non-HAMP’. HAMP = Home Affordable Modification Program, run by the U.S. Department of Treasury. It is the program that’s been getting bad press for low success rate in helping consumers. Hmm, high number of non-HAMP loan mods and lower foreclosure inventory. Compare that to some other banks’ figures.
Wells Fargo sells its own foreclosures, but acts as a servicer for other investment groups, too. In fact, over 70% of properties they handle are loans from other grouops.
I am impressed by their willingness to do things to make homes more marketable, even when it doesn’t get them more money. They seem to have a genuine interest in getting owner-occupants (not investors) into their properties and in helping to re-stabilize neighborhoods.
Wells Fargo and their Premiere Asset Services division won big last month at HousingWire’s awards for Real Estate management firms and corporate Real Estate departments. It was the second year of the awards.
Wednesday, May 25, 2011
Average Down Payments Reported; Rents Are Increasing
The National Association of Realtors (NAR) recently released a number of economic reports. One summarized the average down payments provided by home buyers for different parts of the country. (We’re in the East South Central, along with WI, IL, IN and OH.) Our area works out to be in the 5% zone (lowest in the country), but the figures vary greatly and the national average is 8% down payment. Middle Atlantic States (NY, PA, NJ) led the crowd with an average 12% down payment amount.
I know from working with local lenders that even the ‘affordable’ housing purchase programs are now requiring some form of down payment or increasing the percentage needed to purchase. 100% financing may be on the way out, and that is probably a good thing.
Another recent report highlights the fact that nationwide rents are increasing. The report does not specify amounts, but merely indicates that monthly rentals are getting more expensive. With the foreclosures that are still occurring, this is not a surprise. Those folks will have a short term reality of renting for the most part.
I know from working with local lenders that even the ‘affordable’ housing purchase programs are now requiring some form of down payment or increasing the percentage needed to purchase. 100% financing may be on the way out, and that is probably a good thing.
Another recent report highlights the fact that nationwide rents are increasing. The report does not specify amounts, but merely indicates that monthly rentals are getting more expensive. With the foreclosures that are still occurring, this is not a surprise. Those folks will have a short term reality of renting for the most part.
Tuesday, April 29, 2008
Buyer Activity On The Rise?
It's not just me. Talking with agents from other firms and to agents within my company, there seems to be a real spike in buyer activity.
I am getting regular calls on my listings and frequent email inquiries from my various web sites and blogs. Most of the activity is coming from two groups - first time buyers who are generally in the $175,000 and below range, and move-up buyers looking higher. There are a lot of great values in the $225,000 to $300,000 range. Larger, newer homes with a lot of space and upgraded amenities seem to be the ticket.
This is great for the move-up buyers that have been able to save some money, retire debt, or both. They are in a wonderful position to get bargains right now.
A recent short sale in which I worked as a buyer agent gained the buyers $40,000 in equity. This is no joke. The sale price was $240,0000 and the appraisal came in at $280,000. A recent foreclosed home that I had listed sold for $210,000 and appraised at $240,000. Believe me, appraisers and banks are looking critically at comparable properties and have tightened up on the appraised values significantly, but these types of gains are still fairly common in my market areas.
Sellers, I still recommend that you don't put your home on the market unless you absolutely, positively have to sell. If you do market your home, accept that its value will be less than it was just two years ago. Unless it's priced properly you won't even get people to look at it to see how great it is.
Buyers, get pre-approved, Not just a pre-approval letter, but have your lender run the credit, put you through desktop underwriting and really see what (or if) you can afford to buy. If you're looking at foreclosures as a possibility, you may even have to get pre-approved by a representative of that particular bank, although they won't require you to use them for the actual transaction. They're simply trying to reduce the number of transactions that fail to close.
I regularly work with buyers and sellers, have a good listing inventory mix of traditional (homeowner or retail) and bank-owned properties. I'm experienced at short sales and have undergone loss mitigation training, too. If you're feeling the pinch and think you might be on the road to losing your home, call me for a short consultation. There may be other avenues you can take with your lender to keep you in your home.
I am getting regular calls on my listings and frequent email inquiries from my various web sites and blogs. Most of the activity is coming from two groups - first time buyers who are generally in the $175,000 and below range, and move-up buyers looking higher. There are a lot of great values in the $225,000 to $300,000 range. Larger, newer homes with a lot of space and upgraded amenities seem to be the ticket.
This is great for the move-up buyers that have been able to save some money, retire debt, or both. They are in a wonderful position to get bargains right now.
A recent short sale in which I worked as a buyer agent gained the buyers $40,000 in equity. This is no joke. The sale price was $240,0000 and the appraisal came in at $280,000. A recent foreclosed home that I had listed sold for $210,000 and appraised at $240,000. Believe me, appraisers and banks are looking critically at comparable properties and have tightened up on the appraised values significantly, but these types of gains are still fairly common in my market areas.
Sellers, I still recommend that you don't put your home on the market unless you absolutely, positively have to sell. If you do market your home, accept that its value will be less than it was just two years ago. Unless it's priced properly you won't even get people to look at it to see how great it is.
Buyers, get pre-approved, Not just a pre-approval letter, but have your lender run the credit, put you through desktop underwriting and really see what (or if) you can afford to buy. If you're looking at foreclosures as a possibility, you may even have to get pre-approved by a representative of that particular bank, although they won't require you to use them for the actual transaction. They're simply trying to reduce the number of transactions that fail to close.
I regularly work with buyers and sellers, have a good listing inventory mix of traditional (homeowner or retail) and bank-owned properties. I'm experienced at short sales and have undergone loss mitigation training, too. If you're feeling the pinch and think you might be on the road to losing your home, call me for a short consultation. There may be other avenues you can take with your lender to keep you in your home.
Wednesday, December 26, 2007
Mortgage Forgiveness Debt Relief Act Signed by President Bush
On December 20, 2007, President George Bush signed the Mortgage Forgiveness Debt Relief Act of 2007. For homeowners in financial trouble, this is good news.
Under the system before this act was signed, homeowers that sold their homes for less than what was owed (a 'short sale'), or who had debt forgiven due to a foreclosure, deed in lieu or other loan modification arrangement, were taxed on that forgiven amount, often called 'phantom income'. Internal Revenue Service (IRS) guidelines considered that amount a gift, and therefore taxable income. Talk about kicking you when you're down!
The act is retroactive to January 1, 2007 and runs through December 31, 2009. It's capped at a $2 million figure for tax relief and is limited to situations where debt is forgiven because of a decrease in home value or financial hardship of the borrower. It also excludes second homes from tax relief, so it works only with your principal residence.
It also calls for the extension of mortgage insurance premium deductions on your tax return through 2010.
The bill is considered responsible and fair because it will be paid for by increasing penalties for S corporations and partnerships that fail to file taxes.
Under the system before this act was signed, homeowers that sold their homes for less than what was owed (a 'short sale'), or who had debt forgiven due to a foreclosure, deed in lieu or other loan modification arrangement, were taxed on that forgiven amount, often called 'phantom income'. Internal Revenue Service (IRS) guidelines considered that amount a gift, and therefore taxable income. Talk about kicking you when you're down!
The act is retroactive to January 1, 2007 and runs through December 31, 2009. It's capped at a $2 million figure for tax relief and is limited to situations where debt is forgiven because of a decrease in home value or financial hardship of the borrower. It also excludes second homes from tax relief, so it works only with your principal residence.
It also calls for the extension of mortgage insurance premium deductions on your tax return through 2010.
The bill is considered responsible and fair because it will be paid for by increasing penalties for S corporations and partnerships that fail to file taxes.
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