bubbleinfo.com

I think we can all agree that the real estate slogfest is likely to continue.

What would it take to ignite the market in 2011?

All we need to do is to increase sales.

Because if the pace of sales increased dramatically, it would give direction to all involved.  More comps would assist sellers in getting their price right, and buyers would have more certainty, and comfort, about the trend in their area, and make decisions accordingly.

Is it possible?  Yes, I think it is – and these are the things to look for that could cause more sales:

1.  Servicers get more proficient at processing short sales. 

Bank of America and Chase, two of the biggest servicers, seem to be getting better.  Our experience of BofA is that they are getting the appraisals/BPOs/valuations done in 30 days, though after that they are still dragging. Other realtors have had Chase closing short sales in 60-90 days, and on the Chase website they say that they’ll have an answer within 30 days after receiving the full package.

If buyers and agents knew that they could close short sales in 60 days, instead of going to a black hole, they’d be more likely to pursue them. 

2.  Servicers pre-approve the prices they would accept on short sales.

In April they said that they were going to start pre-approving the prices, but I haven’t seen or heard of any.  If they smarten up and put a price on them first, and then authorize the listing, it would feel like a regular sale.  We’d even settle for a price range if it were combined with a 60-day process.  It would also help to eliminate the fraud and deceit being committed by realtors.  Sure, some of the prices would be too high, but that could happen to any listing.  Of today’s 12,194 active listings in San Diego County, 2,820 of them, or 23% are marked as short sales.

3.  Servicers should publish the trustee-sale opening bids a week in advance.

They could really move some product if the trustee-sale process was made easier for all to pursue.  It seems like basic common sense that if they wanted to quit taking back so many properties, they should streamline that one simple ingredient.  They have postponed virtually all trustee sales at least once or twice - heck, put the price on them and postpone for an extra week so owner-occupiers can round up the money and make plans to attend.

4.  Lenders and servicers should publicize their intentions clearly.

Nobody knows what to expect next, and maybe it’s asking a lot for banks/servicers to be that organized.  But if the CEOs would step in front of a microphone every week or month for updates on their workload, it would at least bring more certainty.  Look at how BP handled the oil spill – they publicized their intentions so much we got tired of hearing them, and it went away.  The banks should do the same.

5.  NAR, CAR, and the big real estate franchisors should tell sellers to lower their price.

It’s the 900-pound boa constrictor in every office that is strangling sales, profits, and agents’ careers.  The re-education of realtors on how to operate in this environment is close to zero – there is none, until you are just run out of the business. 

We had a case this month where our buyer got within 97% of list price, but the listing agent said that wasn’t good enough.  He and the seller countered that we had to pay for termite and septic work too - but hadn’t bothered to complete reports on either, so the dollar amounts were unknown.  The listing agent has been in the business longer than me, and still hasn’t re-calibrated – he thinks he can demand whatever he wants from buyers.  This type of stuff happens every day.

Instead, our buyer bought a different house a mile away for 90% of list price. 

6.  The government and servicers should set a deadline for loan-mod requests.

If all loan-modification packages had to be received by June 1, 2011, and those that qualify have to close by the end of the year, at least buyers would know that this loan-mod charade would have an ending.  Many will re-default anyway, give them their one chance and then let’s stop insulting the good-paying folks of this country.

7.  Process a borrower’s loan mod and foreclosure together.

The robo-signing settlement is suggesting that all loan mod attempts have to be exhausted before the foreclosure proceedings can begin, but that is hogwash.  Don’t give deadbeats and servicers another opportunity to exploit the system, and delay the inevitable.  Run them both at the same time and light a fire under everyone involved.

Have any other ideas? Leave them in the comment section, and I’ll send them to the powers-that-be.

Alejandro Lazo from the L.A. Times is doing his best to sort through the excuses about why homes aren’t selling, but it’s not easy.  He found the usual psycho-babble was to blame – ‘economic woes’, ‘tax credits’, ‘household formation’, and ‘job creation’.

Except one guy had a thought you rarely hear:

San Diego real estate agent Jim Klinge, who maintains the popular blog Bubbleinfo.com, said the key behind the sales slowdown last month was simple: Prices are just too high.

“Sellers are too optimistic on price. They think the market is better than it is, and they think they deserve more money,” Klinge said. “The buyers are smart. The Internet has leveled the playing field, and buyers are paying attention — they are checking the comps closer than ever, and they are not going to overpay for a house.”

Klinge credited those cautious, well-informed consumers as partially to blame for the October sales slowdown. Escrow closed on only 16,744 properties last month, down 24.3% from the same month last year, for the second-worst October since 1988, when DataQuick began its tracking. Sales of newly built homes posted their worst month on record.

Holy cow – shadash makes an appearance on bubbleinfo!

Listen closely to the 45 seconds, and you’ll hear him talking in the background – just another frustrated homebuyer trying to make sense of it all:

From cnbc.com:

Sources on both sides of the 50-state attorney’s general investigation into so-called “robo-signing” foreclosure practices are nearing a settlement. As Bank of America, JP Morgan Chase, and Iowa Attorney General Tom Miller square off today before the Senate Banking Committee, the framework of a deal is taking shape.

While sources say there is no universal solution to shoddy foreclosure practices at some of the nation’s largest mortgage banks/servicers, the three largest, BofA, JPM, and Wells Fargo, may be agreeing to the same solution.

First, banks would pay into a fund used to compensate borrowers who have claims after their home has been sold in foreclosure. The borrowers would have to prove they were wronged in the process, and the attorney’s general would allocate the funds. In other words, the AGs would be the administrators. The amount of said fund is still undetermined, and likely still in negotiation. Each bank could settle on its own amount, or there could be a joint agreement.

Secondly, the banks would do away with the dual track of modifications and foreclosures. That means that only after all options of modification are exhausted can a bank begin foreclosure proceedings. Many borrowers currently complain that they are in the midst of the modification process when they get a notice of foreclosure sale. The drawback to eliminating the dual track is even greater extended timelines to foreclosure for borrowers. As it is, borrowers on average can be in their homes for a year and a half without making mortgage payments before eviction.

Finally, there would be some kind of agreement to third party mediation for review of all the cases in the first part of the agreement where borrowers are seeking compensation from the AG fund.

There has also been talk of principal write down as part of settlements, perhaps with some banks and not others. “It’s been on the table,” says one source.

Click here for Dataquick’s latest press release – some excerpts:

La Jolla, CA—Southern California home sales dropped in October to their lowest level in three years amid doubts about the drawn-out market recovery, tight mortgage lending policies and expired government incentives. The median price paid for a home rose on a year-over-year basis for the 11th consecutive month, but at this year’s slowest pace, a real estate information service reported.

“In addition to a lousy economy, the housing market still has a couple of nasty bottlenecks it has to contend with. First, sales of newly-built homes are at a low, mostly because builders can’t build at a low enough price to compete with the inventory of resale homes, many of which are short sales or foreclosures,” said John Walsh, MDA DataQuick president.

“Also, lenders still haven’t opened the mortgage money spigot for buying move-up and prestige properties. These properties have come down in value by about half as much as entry-level homes. But trying to finance a higher-end purchase can be a real grind, even for well-qualified buyers with a 20 percent down payment,” he said. 

High-end sales would be stronger if adjustable-rate mortgages (ARMs) and “jumbo” loans were easier to obtain. Both have become much more difficult to get since the the credit crunch hit three years ago.

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Hopefully some day it will occur to these ivory-tower types that the main problem today is that the current home sellers are asking too much – that’s why sales are lagging.  As long as you qualify, banks are happy to give you a mortgage, although, yes, they may put you through a bit of a “grind”.  But what do you expect? Mortgage underwriters are running scared, and they are double-checking every file.

The banks have money – if the list prices were closer to recent comps, there would be more sales.

The data backs me up, but it’s the numerous stories heard here and elsewhere about how ridiculous elective-sellers are being about their pricing.  They insist on tacking on the extra 10% to 20% to their list prices with no justification or comps to back them up – and the listing agents go along. 

Today’s data tidbit:

Active SD detached and attached listings: 12,157, with list prices averaging $332/sf.

October SD detached and attached solds: 2,412, averaging $238/sf. 

A pricing difference of 39% between actives and solds!

Another newer-tract-house REO in Calaveras Hills in Carlsbad, where they’ve had their share of foreclosure activity. But the market seems to firm up around the $200-per-sf level:

Mortgage rates spiked up in the last two days, here’s an excerpt from Adam at MND:

Tensions remain high in the primary mortgage market as mortgage rates have extended their losing streak.  We’re in a tough spot here…

The best conventional/FHA/VA 30 year fixed mortgage rates have risen into the 4.25% to 4.50% range for well-qualified borrowers.  The best conventional/FHA/VA  15 year fixed mortgage rates have risen into a range between 3.500% and 3.875%.

This liquidation of long trading positions is a necessary evil in the recovery process. That cleansing process was once again evident today in the bond market and it might continue to play out over the next few days, but once it’s washed out, I think we’ll at least see 4.25% no cost loans on the board again. When that occurs we’ll revisit the notion of mortgage rates moving back below 4.00% again…until then we’re stuck in a waiting game…

What’s the difference?  Here are the P&I payments for a 30-year mortgage:

Regardless of the situation, homebuyers always have the option to buy down their interest rate – and the seller can contribute too.  But if you think that you can comfortably afford your mortgage payment at 4%, but the thought of 5% is unaffordable, you should re-evaluate your house-buying plans.  Homeownership is expensive - there are repairs, improvements, utilities, furniture, etc. to consider, and if a couple of hundred dollars per month can make or break you, then proceed with extreme caution.

Will home prices come down if rates go up? Only with regards to the long-term trend. Sellers are already extremely resistant to lowering their price, and if you find the perfect house, don’t be surprised if the competition from other buyers erodes your ability to get a discount.