New federal rules could speed up short-sale process,0,7718386.story
Original Post Date: April 29, 2012

By: June Fletcher

WASHINGTON — If you’re one of the estimated 11 million homeowners burdened with an underwater mortgage, a new federal policy change could be good news: Starting in June, when you want to do a short sale to shed your mortgage and avoid foreclosure, you may not have to wait for months to hear back from your bank when you submit an offer from a potential purchaser.

Instead, if your loan is owned or securitized by either of the dominant conventional mortgage market players — Fannie Mae or Freddie Mac — you can expect a response within 30 business days, with a final decision taking no more than 60 days. If you don’t hear back during the first 30 days, the bank will be required to send you weekly updates telling you precisely where the holdups are and when they are likely to be resolved. None of this is typical of short-sale procedures today. Banks and loan servicers that don’t comply will face monetary and other penalties.

The mandatory timelines, which real estate and mortgage industry experts say should help speed up what traditionally has been a glacial process, are being imposed by the Federal Housing Finance Agency, the regulatory overseer of Fannie and Freddie in conservatorship. Short sales, in which the lender or loan servicer agrees to accept less than the full amount owed by the borrower, represent an important alternative to foreclosure.

Although short sales can be complex and messy, and can take anywhere from several months to more than a year to complete, they are turning into a mainstay of the real estate market. According to a report from the foreclosure data firm RealtyTrac, short sales jumped 33% in January compared with the same month the year before. In 12 states — including California, Arizona, Colorado, Florida, New York and New Jersey — there were more short sales recorded during January than sales of foreclosed properties.

This trend is welcome, regulators say, but the time required to complete short sales is still far too long. The 30-day and 60-day mandates address just one of the key points of delay in the process, but regulators promise a series of additional steps during the coming months designed to speed transactions. They include clearer guidelines on borrower eligibility, property valuations, compensation for lenders holding second liens and mortgage insurance issues. All of these are points of friction that can delay short sales for weeks or months.

Realty agents who specialize in short sales say setting mandatory timelines is a step in the right direction but won’t solve all the problems. The new rules and promises of more “are great if they really happen,” said broker Erik Berry of Erik Berry & Associates in Sacramento. Short sales that his firm handles take an average of “about six months” from start to finish on Fannie-Freddie loans. But FHA transactions, which will not be affected by the new regulations, average much longer, and sometimes drag on for a year.

Berry also is skeptical that banks and servicers will be able to reform their staffing practices quickly enough to meet the compressed timelines — even if penalties are imposed. In some cases, he said, banks switch personnel and negotiators five or six times over the course of a short sale.

“You’re dealing with one person one day and they say, ‘Don’t worry, everything’s fine,’ then suddenly they’re gone and you never hear from them again,” Berry said, leaving the deal stalled for weeks.

Matt Battiata, whose Battiata Real Estate Group in Del Mar, Calif., handles hundreds of short sales a year, said a reliable, 60-day decision deadline for responses to offers will be helpful — 30 days better than the 90-day average he now sees from banks — but the whole process will still take longer than traditional sales. For clients seeking to do short sales today, Battiata estimates five to six months from offer to closing.

Some of the complications inherent in short sales are beyond the control of regulators or banks, he pointed out. For instance, buyers put in offers to purchase but then change their minds, forcing the sellers and brokers to come up with replacement offers and the bank to reset the clock to analyze the new package.

The take-away for potential short sellers: Be aware of the new moves afoot to streamline the process, but don’t expect miracles.

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Is It Time to Buy New?
Original Post Date: April 27, 2012

By: June Fletcher

Is now a good time to buy a newly constructed home?

Most economic signs point to yes, according to three economists at the National Association of Home Builders’ semi-annual construction forecast webinar on April 25.

I’m inclined to agree, but not just because the usual closely watched indicators like employment, GDP, household employment and income growth are generally looking healthier these days. I’m swayed by the fact that builder confidence has risen by more than a third year over year (even though it slipped a bit in April from the month before). While builders tend to be an optimistic lot—otherwise, they wouldn’t be in a business that requires them to make large capital outlays for land, labor and materials months or even years before a potential payoff—this uptick is significant.

Builders keep a close eye on both the national economy and local market conditions. While they sometimes get caught up in irrational exuberance (or simply greed) and overbuild, last year they were exceptionally cautious, building only about 433,000 single-family houses and about 177,000 multifamily units. While that’s not as bad as 2009, when home building hit a trough, it’s still far below the average 1.3 million total units constructed annually since 1990, according to Robert Denk, NAHB’s assistant vice president for forecasting and analysis.

NAHB chief economist David Crowe expects the pace will pick up quickly this year. He predicts single-family starts will jump 17% and multifamily 22%. The jump will be partly in response to a gap of at least a million units between the current level of production and looming demand, particularly from Millennials who are just entering the job market and are yearning for their own place. “You can’t live in mom’s basement forever,” he said.

And this gap will grow greater as the number of distressed properties is absorbed. Mr. Crowe noted that while six states still have more than a year’s worth of distressed properties to sell, 24 have less than a six month’s supply; the national average is 8.4 months.

If you’re a seller, more new homes and fewer foreclosures will be a mixed blessing. On the one hand, your home’s price won’t be dragged down by cut-rate foreclosures; on the other, you’ll have to compete with hungry builders offering the latest plans and amenities.

If you’re a buyer, the outlook is more promising. Since 2006, home prices have fallen and incomes have risen to the point where the ratio is back to 3.2, the historic norm. That’s not expected to change, at least in the near term. And Chris Varvares, senior managing director of Macroeconomic Advisers, predicts that housing prices will stay flat this year then grow slightly, by 1.5%, in 2013.

But if you’re looking to buy a new home, don’t get too complacent or wait too long. Mr. Varvares ventured that his price forecast might actually prove too conservative, should sidelined consumers suddenly decide that the time is finally right to buy. “I’m betting on a surprise to the upside,” he said. Barring some major economic shock or setback, so am I.

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Stunned Home Buyers Find the Bidding Wars Are Back
Original Post Date: April 27, 2012

By: Nick Timiraos

A new development is catching home buyers off guard as the spring sales season gets under way:
Bidding wars are back.

From California to Florida, many buyers are increasingly competing for the same house. Unlike the bidding wars that typified the go-go years and largely reflected surging sales, today’s are a result of supply shortages.

“It’s a little surprising because we thought bidding wars were done with,” said Andy Aley, who is looking to buy his first home in Seattle’s Beacon Hill neighborhood. The 31-year-old attorney was outbid this year when he offered up to $23,000 above the $357,000 listing price and agreed to waive inspections and other closing conditions.

Competitive bidding in the current environment isn’t producing huge price increases or leaving sellers with hefty profits, as occurred during the housing boom. Still, the bidding wars caused by tight inventory provide the latest evidence that housing demand is starting to pick up after a six-year-long slump.

An index that measures the number of contracts signed to purchase previously owned homes rose in March to its highest level in nearly two years, up 12.8% from a year ago and 4.1% from February, the National Association of Realtors reported on Thursday.

“We very much believe we’ve hit bottom,” said Ivy Zelman, chief executive of a research firm, who was among the first to warn of a downturn seven years ago. Earlier this week, she raised her home-price forecast for the year, calling for a 1% annual gain, up from a 1% decline.

The Wall Street Journal’s quarterly survey found that the inventory of homes listed for sale declined sharply in all 28 markets tracked. Real-estate agents consider a market balanced when there is a six-month supply of homes for sale. At the height of the housing crisis, in 2008, there was an 11.1-months’ supply. In March, there was a 6.3-months’ supply.

Inventory levels in many markets were at the lowest level in years. At the current pace of sales, it would take just 1.5 months to sell all the homes listed in Sacramento, Calif., and 2.4 months to sell all the homes listed in Phoenix. San Francisco and Washington, D.C., each have 3.4 months of supply, while Miami has 4.1 months of supply.

Other markets have plenty of homes. Chicago, for example, has 9.4 months of supply, while New York’s Long Island has 16.1 months of supply. Even in those markets, the number of houses for sale is edging down.

Increased competition is frustrating buyers and their agents. “We’re writing a record number of offers, but we’re not seeing a record number of closings and that’s because it’s so competitive,” said Glenn Kelman, chief executive of real-estate brokerage Redfin Corp. in Seattle with offices in 14 states.

Nearly 83% of offers that Redfin agents have made on behalf of clients in the San Francisco Bay area this year and 71% in Southern California have had competing bids. Redfin represented a buyer that made the winning bid on a Gaithersburg, Md., home earlier this month after agreeing to adopt the dog of the seller, who was relocating and looking to find a new home for “Buddy,” a white toy poodle.

Inventories are declining for a number of reasons. Some sellers, unwilling to accept prices that are still down from their peak by one-third, are taking their homes off the market in anticipation of higher prices down the road. Meanwhile, investors have been outmaneuvering consumers for the best properties, often making cash offers that are quickly accepted by sellers.

In addition, some economists say that inventory levels are being held artificially low because Fannie Mae, Freddie Mac and the nation’s biggest banks have been slow to list for sale hundreds of thousands of foreclosed homes they currently own. The lenders slowed down foreclosure sales and repossessions after record-keeping abuses surfaced 18 months ago.

Banks and other mortgage investors owned nearly 450,000 foreclosed properties at the end of March, and another two million mortgages were in some stage of foreclosure.

Inventories could rise, putting more pressure on prices, if the banks and other lenders step up their efforts to sell their properties. Real-estate agents say they aren’t concerned. “There’s an enormous appetite for foreclosures. Release the inventory. It will sell,” said Richard Smith, chief executive of Realogy Corp., which owns the Coldwell Banker and Century 21 real-estate brands.

The declining inventory of older homes is spurring sales of new homes. New home sales are up 16% so far this year, compared with a year ago, while inventories of new homes fell in March to their lowest level since record keeping began in 1963.

Meritage Homes Corp., a builder based in Scottsdale, Ariz., reported Thursday a 36% increase in orders for the quarter ending in March versus the previous-year period.

Even though bidding wars are pushing prices higher, many homes are still selling for prices far lower than a few years ago. Increased demand is “entirely affordability driven, which tells me there will be strong resistance to price increases” by buyers, says Jeffrey Otteau, president of Otteau Valuation Group, an East Brunswick, N.J., appraisal firm.

Rents are rising at a time when mortgage rates have fallen to very low levels. The result is that the monthly mortgage payment on a median-priced home is lower than any time since the 1990s. Freddie Mac reported on Thursday that mortgage rates fell to 3.88% for the average 30-year fixed rate mortgage, near its lowest recorded level.

Rates are “so low that we can afford a house that was out of our price range before,” said Aarthi Srinivasan, who is looking with her husband for a home around Palo Alto, Calif., one of the country’s hottest real-estate markets.

Ms. Srinivasan says she fears that prices are being bid up too quickly. She says she had her “aha moment” earlier this year while touring a 50-year-old house that needed extensive remodeling. The home, listed at $1.1 million, received nearly 10 offers and eventually went under contract for more than $1.3 million to a buyer who hadn’t even viewed the property.

“There are only so many buyers who are going to be in such a hurry, so we’re hoping it’ll top off soon,” she says. On Monday, they offered to pay more than the $1.2 million list price for a four-bedroom, bank-owned foreclosure. They haven’t found out if they made the top bid.

On the other side of those transactions are sellers like Debbie and Bill Wetherell, who had 17 offers in four days for their four-bedroom home in Danville, Calif. “I was floored. It was so fast, it was surreal,” says Ms. Wetherell. The home sold on Wednesday for $796,000, more than $50,000 above the asking price.

Still, the sale is for nearly $180,000 less than what they paid for the house in 2005. Ms. Wetherell’s husband has commuted to Reno, Nev., for five years and they have decided to relocate.

Housing markets face other headwinds. More than 11 million homeowners owe more than their home is worth. It is a big reason that the “trade-up” market has been stalled. These homeowners can’t sell their current homes, let alone come up with the down payment for their next home.

Mortgage-lending standards remain tough. Real-estate agents say an unusually high share of deals are falling apart because homes won’t appraise at the price that buyers have agreed to pay sellers.

Still, borrowers with stable jobs are looking to make deals. Kelly Pajela-Fu and her husband offered to pay the asking price of $600,000 for a four-bedroom home in Marblehead, Mass., within a day of the property hitting the market.

“We just knew this house would go quickly,” says Ms. Pajela-Fu, a 31-year-old doctor who had lost out on an earlier offer. Their strategy to avoid a bidding war paid off: The sellers accepted their offer before having an open house.

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Home sales in Southern California climb, price declines slow,0,4270250.story
By: Alejandro Lazo

Original Post Date: April 18, 2012

More Southern California homes sold in March than did a year earlier, and price declines slowed as the spring selling season got underway and more traditional home buyers entered a market that has seen record numbers of investors.

The Southland’s median home price of $280,000 was essentially flat, down just 0.2% from March 2011. Compared with February, the median price rose 5.8% for a second consecutive monthly increase, real estate research firm DataQuick reported Tuesday.

Recent home price data have shown a broad deceleration in price declines in California and the nation’s biggest metro areas. While a slowing decline may not be the most comforting news for average buyers looking to plop down their savings on a fixer-upper, it has led several economists and other observers to make hopeful calls that a bottom is approaching.

DataQuick President John Walsh doesn’t expect a sharp turnaround in the housing market soon, given the recent weak numbers. Although March’s sales statistics improved, they remain well below the historical average for the month dating to 1988.

“The results from the first big sales month of 2012 suggest the market is stuck in low gear,” Walsh said. “This remains a very gradual — not to mention fragile — recovery.”

Sales increased 2.8% year over year to 19,953 homes in the six-county region, DataQuick reported. Sales improved the most in Orange, Ventura and San Diego counties.

As is normal with the start of the spring shopping season, home sales from February to March jumped, this time 28.1%. Historically, sales have surged 37% between those two months, DataQuick said.

Sales have shown improvement recently, increasing for the last three months and for seven of the last eight months. Foreclosed homes and short sales — in which a home is sold for less than the outstanding debt on the property — accounted for about half of all sales last month.

Whether the housing market will turn around this year remains a key question among economists and policymakers. Economists see several factors working in favor of a real estate turnaround. Rents are quickly rising as prices are falling, making homeownership potentially more attractive to tenants who have steady work, can afford a down payment and have retained good credit.

In addition, while prices have trended down, they aren’t in the same free-fall that emerged after the subprime mortgage crisis and credit crunch of 2007, experts have said. The drop in prices is largely due to foreclosures, which continue to ravage certain hard-hit neighborhoods.

Other broad indicators that support a housing recovery include a growing number of households, low interest rates and a tighter supply of homes on the market. The California Assn. of Realtors reported Monday that the state’s housing inventory in March shrank to just over four months’ worth. Economists generally consider a six-month supply of homes for sale a healthy market.

“Inventory is low, and there is just a lot of stuff that is overpriced,” said Syd Leibovitch, president of Rodeo Realty. “But the stuff that is priced right is selling for much more than it would in October and November.”

Activity by speculators continued at a strong clip last month, boosting the low end of the market. Investor activity nearly hit a record for the month and cash purchases were double their historical average, DataQuick said. Absentee buyers bought 27.9% of all homes last month, while cash buyers accounted for 31.7% of homes sold.

But as long as the share of investors in the real estate market remains high, prices are likely to remain depressed, as many of these cash-rich bargain-hunters buy homes at a discount. Housing also remains stymied by persistent unemployment and the threat of more foreclosures. The difficulties buyers are having securing mortgages is also slowing down the market, real estate agents have said, and the large share of homes in the state that are underwater is keeping prospective sellers from listing their homes.

Richard Green, director of USC’s Lusk Center for Real Estate, said he is most concerned about the weak job market.

The high number of investors buying discounted homes is probably masking a recovery in values for properties purchased by people who buy homes to live in them, said Richard Green, director of USC’s Lusk Center for Real Estate. The real concern is the job weak job market, he said.

“Things are probably a little better than they appear,” Green said. “The only downside is the job numbers for January and February. If it weren’t for that, I think we would be on a verge of a turnaround.”

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