Notice of Defaults down in Q2 In the Bay Area to a 3 year low
CA Notice of Defaults Chart From DataQuick
Robert Selna of the SF Chronicle reported that the number of CA homeowners headed to foreclosure dropped in the second quarter of the lowest level in 3 years.
Moderately priced areas seemed to have seen the lowest level of foreclosures. Many of the moderatly priced areas were the first to be hit hard with the wave of foreclosures, so it is not terribly shocking to see that these areas would also see the first slow down of the rate of foreclosures.
According to Data Quick, a San Diego research firm following the real estate trends, indicates that the Bay Area did not see the precipitous reduction in defaults as other parts of the state, but they have declined significantly from a year ago.
The findings seem to indciate that some of the efforts of the fedearl government and an increasing number of lenders are willing to work with distressed homeowners on loan modifications and short sales. This in turn helps to reduce the number of foreclosures.
A slight increase in Bay Area housing price over the past several month is also helping. According Andrew LePage, analyst with DataQuick, “The market does seem to be playing some role in this,” LePage said. “It seems to be stabilizing, and if it keeps creeping up, even a little bit, more and more people no longer will be underwater, giving them incentive to hang on or do a short sale.”
In the Bay Area the notice of defaults declined 38.80% from the same time last year. In San Francisco County the notice of defaults decreased by 26.80% with 431 notice of defaults filed down from 589 from a year ago. In Alameda County the notice of defaults declined by 43.3% with 2,615 notice of defaults filed down from 4,616 a year ago.
Although moderately priced areas are seeing a reduction in the number of defaults, the higher end market seems to be taking more of a hit. Many of the higher priced area codes are starting to see and increase in the number of defaults.
Biggest defaulters on mortgages are the rich
Default of mortgage greater than 1 million. From NY Times Article
The New York Times reports that the housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves.
Wealthier Americans are stopping to pay their mortgages at a rate that exceeds the rest of the population. This includes not only primary residences, but second homes and/or investment properties as well.
CoreLogic, a company providing information and analytic information for different industries, has data suggesting that many of the well-to-do are dumping their financially draining properties, just as they would any bad investment.
“The rich are different: they are more ruthless,” say Sam Khater, CoreLogic’s senior economist.
Many lenders are concerned that many of the 11 million or so homeowners who owe more than their house is worth will just walk away. This idea of a “strategic default” is not a new idea and under some serious debate at the moment.
Freddie Mac’s executive vice president Don Disenius recently wrote a recent column on Freddi Mac’s website that while walking away “might well be a good decision for certain borrowers” but argues that by doing so, these strategic defaulters are trashing their communities.
“Those with high net worth have other resources to lean on if they get in trouble,” said Sam Kahter from CoreLogic. “If they’re going delinquent faster than anyone else, that tells me they are doing so willingly.”
In the current climate however, there are fewer notice of defaults for all loan types as some lenders work with owners in various modification programs.
While the vast majority of owners in these upscale neighborhoods such as Los Altos, are still paying their mortgages, homeowners are finding others ways to cut costs.
Personally I feel that if lenders actually did princpal reductions for homeowners, along with loan modification, we might actually see an end to the housing crises. Loan modifications have helped and the reduction of foreclosed homes has also made significant in roads into help to stop the bleeding, we are not completely out of the woods yet.
San Francisco East Bay Down from Last Year
East Bay Foreclosure Information From Realty Trac
In an article in the Conta Costa Time yesterday, Eve Mitchell reports what many of us in the business have recognized… Foreclosures in the East Bay have declined. According to RealtyTrac’s data, the number of default notices sent to homeowner decreased 51.6% from last year and 5.8% from May. The number of homes that became bank owned, declined 44% from a year ago and 26.2 since May of this year. Things are also looking better state wide.
With the good news, there is some hesitation to celebrate too soon. With unemployment still high, and failed loan modifications the number of foreclosures may creep back up.
From November to June, California saw a year-to year decline in notices of defaults and notices of trustee sales, which clears the way for a home to be sold at auction, but in most cases the home ends up being taken back by the bank. Last month, the category of bank-owned properties also saw a year-to- year decline, a sign that lenders are clearing up a backlog of foreclosures, Daren Blomquist of RealtyTrac said.
It will be interesting to see how things progress in the next few months. Loan modifications and short sales do seem to be affecting the foreclosure rate, but the jury is still out if the loan modifications will actually be significant enough to help homeowners.
Freddie Mac Reports Short Sales Up 600%
This week Jon Prior wrote an article on Housing Wire discussing the increase in short sales for Freddie Mac. CEO Ed Haldeman indicated that the number of short sales has increased 600% from 2008 as lenders look to minimize the impact of foreclosures.
Haldeman stated Freddie Mac is doing everything it can to prevent more foreclosures. Short sale are becoming an alternative, especially in situation where foreclosure is imminent and modifications have failed.
The HAFA (Home Affordable Foreclosure Alternative) program has also helped to encourage lenders to consider short sales instead of foreclosure. Through HAFA, launched in April 2010 by the Treasury Department, provides cash incentives to servicers for conducting short sales and deeds-in-liew of foreclosure.
“Foreclosure alternatives like short sales and deeds-in-lieu help borrowers to avoid the stigma of foreclosure, shorten the waiting period before they can buy a new home, and may inflict less damage on their credit reports,” Haldeman said.
Halderman also pointed out that short sales help lenders and insurers. Citing several independent studies, Haldeman said banks lose more than $50,000 per foreclosed home or as much as 30-to-60% of the outstanding mortgage.
There are other advantages to short sales. Homes sold as short sales tend to be in better physical condition when compared to foreclosed homes that often times show signs of damage. When properties are in better condition, they tend to sell at at the market value. When neighborhoods are fraught with foreclosures, property values tend to plummet and negatively affects the neighbors who are may be trying to refinance their home for a lower interest rate or who are trying to sell their own home.
Haldeman said Freddie has helped more than 350,000 homeowners avoid foreclosure since the housing crisis began.
Some signs of recovery: Local housing market showing signs of strength
Both the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) and the NATIONAL ASSOCIATION OF REALTORS® (NAR) released monthly housing reports this week. However, each report told a different story about the housing market. Nationally, home sales declined but in California home sales rose 14.1 percent in May compared with April and 1.2 percent compared with April 2009.
KEEP THIS IN MIND
• The median price of existing single-family homes in California in May was $324,430, a 23.2 percent increase compared with a median price of $263,440 in May 2009, C.A.R. reported. The May 2010 median price increased 5.9 percent compared with April’s $306,230 median price.
• While home prices are rising month-over-month and year-over-year, affordability continues to remain at near-record highs. In the first quarter of 2010, 66 percent of first-time home buyers in California could afford to purchase an entry-level home in the state, according to C.A.R.’s First-time Buyer Housing Affordability Index.
• Many first-time home buyers timed the opening and closing of escrow to capitalize on both the federal and state tax credits, resulting in a rise in home sales in May. Although home sales rose, the number of home buyers signing sales contracts declined nearly 17 percent compared with April, which C.A.R. Chief Economist Leslie Appleton-Young attributes to the ending of the federal tax credit. “Although there may be a lessening of demand compared with the first half of this year, the number of escrows opened on a year-to-date basis is about the same as last year, and sales for all of 2010 will be on a par or slightly below last year,” said Appleton-Young.
• Despite the number of foreclosures listed for sale, the inventory of homes for sale still is below the long-run average of 7-months, according to C.A.R. In May, C.A.R.’s Unsold Inventory Index for existing, single-family detached homes was 4.6 months, unchanged from the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
To read the full story, please click here:
http://www.sgvtribune.com/ci_15353779#ixzz0rht9SqsU
California’s economy to see sluggish recovery this year, according to UCLA economists
California’s unemployment rate, currently at 12.4 percent, will not return to single-digit levels until 2012 and the state’s inland areas will continue to be impaired by excess housing inventory and state budget cuts, according to a forecast released Tuesday by UCLA’s Anderson School of Business.
KEEP THIS IN MIND
• California’s economic recovery is contingent on consumer shopping behavior nationwide, as retail spending drives traffic at California’s ports and logistics centers, which are both substantial employers throughout the state, the report said. However, consumers are unlikely to increase spending until businesses begin hiring again, which many economists believe will only happen gradually over time.
• The coastal areas of the state will benefit from growth in health care, education, and technology, while inland areas will be constrained by excess housing inventory and state budget cuts, impacting rural inland areas where government workers account for a significant percentage of the workforce, according to the forecast.
• The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) recently issued its mid-year housing market forecast. Based on C.A.R.’s forecast, the median home price in California is expected to rise 9.1 percent this year compared with last year, while sales of existing, single-family homes will decline 4.7 percent. Rates on 30-year, fixed-rate mortgages will rise to 5.3 percent compared with 5.1 percent in 2009 and 15-year mortgages will average 4.2 percent compared with 4.7 percent last year, according to the forecast
To read the full story, please click here:
http://www.latimes.com/business/la-fi-ucla-forecast-20100615,0,6824904.story
Median Home Prices in San Francisco Bay Area Up to $400,000
In an article in the San Francisco Chronicle by Robert Selna reports the median home sales in May of this year reached $400,000 for the first time in about two years.
Sales of resale of existing single family homes also rose to $434,000 up 8% from April according to Data Quick.
As lenders have started freeing up jumbo money, the sale of homes at $500,000 and above jumped about 34% from a year ago.
By contrast, May sales of homes priced below $300,000 fell nearly 23 percent below last year’s level, when lower-end transactions and foreclosures were more robust.
The decline in foreclosures follows a trend over the past few months and, to some degree, may reflect the impact of federal government programs that have encouraged lenders to modify loans and facilitate short sales – in which banks allow houses to be sold for less than, or short of, what is owed on the mortgage.
The optimistic numbers for May may be influenced by the first time home buyers tax credit and low interest rates. Granted the state first time home buyers credit is at the moment still available, but it has a finite amount of money. Interest rates have stayed favorable, but as we know rates can and will change.
“For now, at least, we’re seeing a more normal mix of sales across the region and across price categories, thanks in large part to the state and federal tax credits coupled with incredibly low mortgage rates,” said DataQuick President John Walsh. “It also appears that high-end financing is gradually loosening up.”
Walsh said a stronger job market and low mortgage rates were the two things that could ensure demand for homes. And, while May’s median price showed a significant bump upward, it still was nearly 40 percent below the $665,000 Bay Area median peak in June 2007.
While jumbo loans have become more available, buyers are still often required to have more liquid assests and well as good credit scores
First time purchases continue to be driven by Federal Housing Administration loans. With down-payment requirements as low as 3.5 percent, they accounted for nearly 25 percent of Bay Area home purchases last month, according to DataQuick.
After foreclosure: How long until you can buy again?
Financing a home after foreclosure is possible for most homeowners. Those who default on their mortgages due to economic hardships, such as job loss, may receive approval for another mortgage in as little as two years, while it may take more than seven years for strategic defaulters to be approved.
KEEP THIS IN MIND
• Lenders utilize several methods in determining whether to grant mortgages, including the amount of money borrowers have saved; employment histories; and payment history.
• According to the chief economist with the Mortgage Bankers Association, lenders may be more willing to finance a mortgage for a borrower who defaulted on their mortgage as a result of factors beyond their control.
• Some homeowners who strategically default—intentionally not meet their mortgage obligations although they have the financial means to do so—assume they can raise their FICO scores by paying their others bills on time. However, most future loan underwriters will scrutinize their records very closely, and if they determine the borrower strategically defaulted on their previous mortgage, the repaired credit score will not overshadow the walkaway.
• Although not impossible for strategic defaulters to finance another home purchase, it likely will be more difficult. Lenders may ask for down payments of 30 percent or more to provide sufficient collateral to enable the bank to recoup most of its money in a foreclosure. These borrowers also may be charged higher interest rates, even above the levels other borrowers with similar credit scores would receive.
To read the full story, please click here:
http://money.cnn.com/2010/05/28/real_estate/homebuying_after_foreclosure/index.htmhttp://money.cnn.com/2010/05/28/real_estate/homebuying_after_foreclosure/index.htm
Luxury home prices drop 6.1% in Bay Area
In an article in the San Francisco Business Times Mark Calvey writes about the decline in prices for the Bay Area Luxury real estate market. Prices fell 6.1 percent in the first quarter from a year ago, but rose 1.1 percent from last year’s fourth quarter, according to the latest First Republic Prestige Home Index.
The average luxury home in the Bay Area is now $2.54 million. The first quarter gain was the first increase in seven quarters.
“Luxury homes did not fall as far in the housing downturn, and the recovery has been more modest,” said Katherine August-deWilde, president and chief operating officer of First Republic Bank. “Prices have risen faster in the broader market because the discounts were deeper, but real estate professionals say stabilizing values in the luxury market have resulted in significant market activity.”
“Recent stock market volatility and uncertainty in Europe could impact activity in coming months, but very low interest rates will continue to have a positive impact,” August-deWilde said. Rates have been hovering near half-century lows as global investors flock to the safety of U.S. Treasury securities in the wake Europe’s woes and the falling euro.
First Republic produces the Prestige Home Index with Fiserv CSW, (NASDAQ: FISV) a provider of automated property valuation services and home-price data to lenders. Luxury homes are those valued at more than $1 million, generally with 3,000 to 6,000 square feet and three to six bedrooms. The survey included luxury homes throughout the greater Bay Area.
In San Francisco, one agent took note of a property selling for more than $10 million.
“We haven’t seen those prices in at least a couple of years,” said Tom Biss, an agent with Sotheby’s International in San Francisco. “There have always been buyers, but they just weren’t comfortable making offers because they didn’t know where the market was going.
“The rising stock market is having a positive impact,” Biss said of first quarter sales activity.
In Palo Alto, agents say sales are up and, in some cases, sellers are getting multiple offers.
Those in Marin County were also optimistic in assessing first quarter luxury home sales.
“The combination of better consumer expectations, a rising stock market and liquidity in the lower end of the market have all led to higher demand,” said Dave DuPont with Decker Bullock Sotheby’s International Realty in Mill Valley. “However, the strength of the upper end of the real estate market will continue to depend on the strength of the stock market.”
It will be interesting to see how the upper end of the market will do over the next year.
Foreclosures plateau—finally. Repossessions soar.
The foreclosure plague may have finally reached its peak in April 2010—but don’t expect delinquency statistics to plummet anytime soon.
To read the full story, please click here:
http://money.cnn.com/2010/05/13/real_estate/april_foreclosures/index.htm?hpt=T2
Lisa Cartolano
chrishudson
Nicole Westmoreland