bubbleinfo.com

From HW:

Four years after the housing bust, researchers at the Federal Reserve Bank of New York are putting some of the blame on real estate speculators, saying they played a key role in blowing up the housing bubble that eventually popped, causing home prices to tumble nationwide.

In a report titled  “Flip This House: Investor Speculation and the Housing Bubble,” four researchers claim borrowers who owned multiple homes for investment purposes played a key role in running up national home values right before the 2007 housing meltdown.

In fact, the report found a third of U.S. home purchase lending in 2006  was issued to borrowers who already owned property. In California, Florida, Arizona and Nevada, investors made up 45% of the 2006 transactions, suggesting the deep pain in these markets was rooted in excessive levels of real estate speculation.

“In 2006, Arizona, California, Florida, and Nevada investors owning three or more properties were responsible for nearly 20% of originations, almost triple their share in 2000,” the study said.

The report describes these investors as over-leveraged borrowers, consuming large doses of non-prime debt with high interest rates and low-down payments to fuel their appetites for quick acquisitions that could be flipped for profit.

What these investors created was an insidious cycle, where their excessive buys pushed prices higher for all buyers. When the bust came, these overleveraged house flippers escaped by abandoning their second liens, while innocent homeowners ended up underwater on their mortgages.

The report – which was filed by Andrew Haughwout, Donghoon Lee, Joseph Tracy and Wilbert van der Klaauw with the New York Fed Bank – puts the blame mostly on speculators operating in the 2004-to-2006 time span.

The authors of the report claim many of the investors may have falsely stated an intention to live in the homes while applying for cheap credit.

Either way, the report’s authors see a need for housing policy to address the issue of excessive leverage and speculation to curtail similar trends in the future.

“In the 2000s, securitized nonprime credit emerged to allow leverage to increase, with effects that extended far beyond this sector, including spillovers from defaulted mortgages to the value of other properties. Effective regulation of speculative borrowing, like what is being attempted in China today, may be needed to prevent this kind of crisis from recurring,” the report concluded.

Now that the barn door has been left open for several years, our local MLS provider, Sandicor, has finally developed a website that will allow the consumer to access the MLS directly:

http://consumer.sandicor.com

They don’t ask us for ideas about what it wanted and needed, they just roll this out and hope it works.  They say they’d like feedback, but they probably think that people will be gushing with praise.  

Here is their introductory pitch below:

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

San Diego’s four Association of REALTORS® and Sandicor are excited to announce the release of a new consumer website! This website is designed to turn the consumer’s focus back to Brokers and Agents and away from third party sites such as Zillow and Trulia that rank among the top 20 websites in the category of San Diego real estate.  In addition to the Sandicor MLS site, there will be four additional websites branded to each of the four Shareholder REALTOR® Associations that own Sandicor.  The goal is simply to reverse the trend of consumers going out to and staying on third party sites and to drive consumer traffic back to our member’s websites.

Developed around a powerful and flexible search engine, the websites provide the following benefits for brokers and agents:
 
–Deliver leads to brokers and agents
–Drive traffic back to brokers and agents and away from third party sites like Trulia and Zillow
–Facilitate a consumer’s search for San Diego County real estate information and properties.
–Provide consumers with unbiased, timely (updated every 10 minutes) and comprehensive data – all of which are valued and preferred by the consumer
–Allow the consumer to find an agent using a name, affiliated office or location
–Permit county-wide Open House searches
–Provide valuable Community Data
–Provide links to helpful information such as Population Statistics, School Systems, and Government Resources
–Offers a variety of reports for both Brokers and Agents on their listings such as the number of views of their listings in a search, the number of times the listing was displayed and emailed and more.
–Lead to a reduction in the fees paid by Brokers for participation in national third party sites.
 
There is no additional fee to provide this tremendous benefit.  Sandicor can leverage the consumer view that the MLS is the trusted source for real estate information provided by and for the real estate professionals in San Diego County. The consumer knows MLS data is unbiased, timely and comprehensive.
 
Please watch for future emails informing you of what reports will be available to you and how to update your contact information.  We look forward to making the sites a success and to help bring the business back to you! Go ahead, click on the link and take a test drive now!

A month ago, the president of NAR asked for ideas on solving the housing crisis here.  The national convention starts this weekend in Anaheim, and hopefully during the session, he’ll be reviewing thoughts from realtors around the country. 

He can start solving the housing problems by changing what it is under his control.  My ideas:

As president, don’t just be a figurehead, get something done.  Have a real agenda of items that will forward the realtor community, and push to have them implemented.  And don’t do what Dick Gaylord did. He was NAR President, accomplished nothing, and now he is bugging realtors to use his lender services. You shouldn’t get to use the office of NAR president as a soliciting tool.

Make our website, realtor.com, the best real estate portal.  According to my clients, Redfin’s website is much better.  Stop allowing move.com to run a lousy website on our behalf, and then let them pillage us for ridiculously high fees to advertise our own listings.

Develop a specific set of procedures on how every realtor will handle short sales.  There is rampant short-sale fraud being inflicted by realtors, because nobody is doing anything to stop it.  Realtors won’t play by the rules if there aren’t any.

Be an advocate of foreclosure.  You are on the wrong side of this issue.  The majority of Americans pay their bills, and are tired of the deadbeats being coddled.  Promote foreclosure as the way to solve the housing crisis, because it is.

Support agent scorecards/feedback sites.  Realtor.com should promote agent rankings and client feedback systems. Use a system like the one used at ebay, where clients can leave public comments on performance, and agents can rebut those that are negative.  Realtor.com should also list how many sales each agent has closed in the last 12 months as an indicator of their proficiency – and no team counts.

Promote open house as a sales tool.  Buyers want convenience.  Promote broker preview day as a public event, and educate agents on effective open house techniques.  And counter the argument that the only thing open houses are good for is to generate leads.  Open houses will sell the house - if they have the right price on them.

Ditch the value-range marketing.  It sends the wrong message (we don’t know what it’s worth so you figure it out), and is a gimmick that furthers our slimy reputation.

Promote real estate classes as general education in schools.

Teach real estate principals to agents.  A broad category, so I’ll give just one example.  Recently I had a prominent listing agent tell me when I questioned her price, “The average market time is 115 days in this area, and we’ve only been on the market two months”.  But you don’t wake up on that 115th day and find the purchase offer on your fax machine.  Teach agents that your best chance of getting top dollar is in the more-urgent first 30 days, and to price accordingly – instead of pricing high and getting stale quickly, resulting in chasing the market down.

Teach real estate salesmanship to agents.  When the MLS was founded in the 1960′s, the intent was broker cooperation – that agents work together to help buyers and sellers.  These days agents think their job is to fight the other agent. 

Enforce the rules and ethics.  You don’t have the power to revoke their license, but you can kick them out of the club.  If agents saw a few bad apples lose their MLS privileges, everyone would straighten up.

From Nick at the wsj.com:

The reeling housing market has come to this: To shore it up, two Senators are preparing to introduce a bipartisan bill Thursday that would give residence visas to foreigners who spend at least $500,000 to buy houses in the U.S.

The provision is part of a larger package of immigration measures, co-authored by Sens. Charles Schumer (D., N.Y.) and Mike Lee (R., Utah), designed to spur more foreign investment in the U.S.

Foreigners have accounted for a growing share of home purchases in South Florida, Southern California, Arizona and other hard-hit markets. Chinese and Canadian buyers, among others, are taking advantage not only of big declines in U.S. home prices and reduced competition from Americans but also of favorable foreign exchange rates.

To fuel this demand, the proposed measure would offer visas to any foreigner making a cash investment of at least $500,000 on residential real-estate—a single-family house, condo or townhouse. Applicants can spend the entire amount on one house or spend as little as $250,000 on a residence and invest the rest in other residential real estate, which can be rented out.

The measure would complement existing visa programs that allow foreigners to enter the U.S. if they invest in new businesses that create jobs. Backers believe the initiative would help soak up an excess supply of inventory when many would-be American home buyers are holding back because they’re concerned about their jobs or because they would have to take a big loss to sell their current house.

“This is a way to create more demand without costing the federal government a nickel,” Sen. Schumer said in an interview.

International buyers accounted for around $82 billion in U.S. residential real-estate sales for the year ending in March, up from $66 billion during the previous year period, according to data from the National Association of Realtors. Foreign buyers accounted for at least 5.5% of all home sales in Miami and 4.3% of Phoenix home sales during the month of July, according to MDA DataQuick.

Foreigners immigrating to the U.S. with the new visa wouldn’t be able to work here unless they obtained a regular work visa through the normal process. They’d be allowed to bring a spouse and any children under the age of 18 but they wouldn’t be able to stay in the country legally on the new visa once they sold their properties.

The provision would create visas that are separate from current programs so as to not displace anyone waiting for other visas. There would be no cap on the home-buyer visa program.

Over the past year, Canadians accounted for one quarter of foreign home buyers, and buyers from China, Mexico, Great Britain, and India accounted for another quarter, according to the National Association of Realtors. For buyers from some countries, restrictive immigration rules are “a deterrent to purchase here, for sure,” says Sally Daley, a real-estate agent in Vero Beach, Fla. She estimates that around one-third of her sales this year have gone to foreigners, an all-time high.

“Without them, we would be stagnant,” says Ms. Daley. “They’re hiring contractors, buying furniture, and they’re also helping the market correct by getting inventory whittled down.”

In March, Ms. Daley sold a four-bedroom vacation home in a gated community to Harry Morrison, a Canadian from Lakefield, Ontario. “House prices were going down, and you could still make a lot of money on the exchange rate,” said Mr. Morrison, who first bought a home in Vero Beach four years ago.

While a special visa would allow Canadian buyers like Mr. Morrison to spend more time in the U.S., he said he’s not sure “what other benefit a visa would give me.”

The idea has some high-profile supporters, including Warren Buffett, who this summer floated the idea of encouraging more “rich immigrants” to buy homes. “If you wanted to change your immigration policy so that you let 500,000 families in but they have to have a significant net worth and everything, you’d solve things very quickly,” Mr. Buffett said in an August interview with PBS’s Charlie Rose.

The measure could also help turn around buyer psychology, said mortgage-bond pioneer Lewis Ranieri. He said the program represented “triage” for a housing market that needs more fixes, even modest ones.

But other industry executives greeted the proposal with skepticism. Foreign buyers “don’t need an incentive” to buy homes, said Richard Smith, chief executive of Realogy Corp., which owns the Coldwell Banker and Century 21 real-estate brands. “We have a lot of Americans who are willing to buy. We just have to fix the economy.”

The measure may have a more targeted effect in exclusive markets like San Marino, Calif., that have become popular with foreigners. Easier immigration rules could be “tremendous” because of the difficulty many Chinese buyers have in obtaining visas, says Maggie Navarro, a local real-estate agent.

Ms. Navarro recently sold a home for $1.67 million, around 8% above the asking price, to a Chinese national who works in the mining industry. She says nearly every listing she’s put on the market in San Marino “has had at least one full price cash offer from a buyer from mainland China.”

This is not a political endorsement – I hope all the politicians jump on board!  From HW:

Republican Presidential candidate Mitt Romney says the government should let the foreclosure process run its course, so the housing market can reach its bottom.

Romney made those statements in an interview recorded by the Las Vegas Review Journal this week.

The state of Nevada — Las Vegas in particular — has been hit hard by the foreclosure crisis.  When asked how he’d fix housing, Romney told the Las Vegas paper, he would let the foreclosure process go forward to clean up the process.

“Let it run its course and hit the bottom,” he said. “Allow investors to buy homes, put renters in them, fix them up and turn them around.”

Romney took shots at the Obama administration, saying the president “has slow walked the foreclosure processes that have long existed and, as a result, we still have a foreclosure overhang.”

Romney also pushed back at the credit given to first-time homebuyers in the wake of the housing meltdown, calling it “insufficient and inadequate to turn around the housing market.”  “It was like cash-for-clunkers,” he said. “Throwing money at something which is not market-oriented.”

Romney did say the idea of helping certain homeowners refinance their mortgages is worth further consideration. But he added, “I am not signing on until I find out who is going to pay and who is going to get bailed out.”

Fellow presidential candidate Ron Paul also announced a fiscal plan that included a housing reference this week. The congressman said he would end funding for the Department of Housing and Urban Development as part of an aggressive plan to tackle the nation’s deficit.

They keep nibbling around the edges, let’s just throw them on the market and see what happens! From HW:

The federal government can get rid of the more than 280,000 foreclosed homes on its books without having to sell them at massive discounts, according to a coalition of companies proposing to manage the disposition process.

The key is to provide a form of insurance against home price declines, says the Coalition for Recovery of Real Estate, a consortium of firms that responded to a request for information issued by the Federal Housing Finance Agency, the Treasury Department and the Department of Housing and Urban Development seeking ideas on how best to dispose of the federal inventory of real estate owned properties. The government owns roughly half of the REO inventory in the U.S. through HUD, Fannie Mae and Freddie Mac.

High-level executives at FHFA have expressed interest in the proposal, and recently requested clarification on some details of the plan, said Howard Blum, a spokesman for the group.

“It is clear that current housing market economics are severely impaired by buyer fear, which leaves sellers with no real options other than to drastically reduce prices, thereby creating economic loss for the seller,” says the coalition in its confidential RFI response, a copy of which was provided to HousingWire.

That buyer fear, along with a lack of creative tools to adequately re-market REO property, is one of the two biggest issues with the current state of the housing market, the document says.

“CORRE believes that home price protection is a solution to both of these issues and central to the CORRE strategy,” says the group, which includes two nationwide real estate brokerages, a mortgage lender, a mortgage insurer, a major servicer of distressed loans and a large law firm.

That’s in addition to investment bank Gleacher & Co. Securities Inc., which would handle property-level analysis and administration, plus securitization, and EquityLock Solutions, a Greenwood, Colo.-based company that would provide the home price protection plans. Blum requested that other partners remain unidentified.

EquityLock, which has been in business for about three years, launched the HPP products earlier this year. The risk it takes on those contracts is sold to Equity Assurance, a wholly owned insurance subsidiary.

The HPP plans essentially insure home buyers against price declines by guaranteeing REO purchasers a refund of up to 20% of their purchase price if an FHFA index of area home prices declines between the time of purchase and an eventual resale.

The guarantee applies to properties held for a minimum of two years and resold up to 15 years later, and would be included on properties that were pooled and/or securitized.

The CORRE group proposes analyzing the government’s REO inventory to determine the best possible exit strategy for each property — including sales to owner-occupants, sales to investors, securitization of the REO assets, and demolition of severely dilapidated property.

Rentals could also be part of the mix. In extremely weak markets, “some of the REO properties will have to be sold to investors to place into rental stock until those markets recover with time,” says the proposal. “As a very last resort, the CORRE process would place these REO properties into rental or rent-to-own portfolios with no further recourse to the enterprises post-sale.”

The coalition says by eliminating the need for drastic price cuts and encouraging homeownership, its plan would liquidate the government’s REO portfolios in a cost-effective manner, lessen the potential use of taxpayer funds in disposing of those REOs and provide a potential future revenue stream for the government.

We’ve wondered if NAR would provide some leadership for the real estate market, but they want someone else to give them the solutions. For those who are hoping that realtors at the state level might offer some helpful insight, take a chance on wasting almost three minutes of your life here (or at least make it to the technical analysis at the 0.27-second mark):

As I contemplate recommendations for the NAR president (your thoughts are encouraged!), it should be obvious to him that the real estate industry is advancing with, or without, the help of realtor organizations.

Here’s an interesting website that agents have been using lately: www.kazork.com - shouldn’t NAR be blazing this trail?

Benefits

When was the last time you saw the NAR come out with anything innovative, if ever?

While you’ll deserve the three minutes of your life back after watching this NAR video, at least our president says he is looking for answers.  The NAR Expo is in Anaheim next month, so I’m going to take him up on his offer when he is here and deliver recommendations to solve the housing crisis:

Hat tip to MDS for posting that Redfin has already shut down the agents’ scouting reports.  Check their blog; the comments from competing agents were running hot:

Dear Customers,

Redfin is suspending access to Scouting Report, the online tool that publishes deal histories and performance metrics for agents across the United States. We will continue to show this information for our own agents.

Our primary reason for excluding other agents is that the data we exposed has too many inaccuracies, mostly because agents work informally in teams, or don’t formally record who represented a buyer in a deal. You can read more about the decision on our blog.

We apologize to consumers and agents alike for discontinuing the service, and hope to restore it in the coming months.