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Where are the most stubborn sellers, price-wise?

NSDCC active detached listings by price range:

Last year there were 646 closings over $1,200,000, at an average of $541/sf, which sounds miraculous in and of itself.

But there are more listings priced OVER $1,200,000, then there are under!

Can the upper-enders hold out long enough? Will they adjust their price, and if so, when?

CR outlined on his show how the Fannie/Freddie HAPR refinances will escalate in March when they change to automated underwriting, and loosen the guidelines by not requiring appraisals or income verifications.  See more details here:

http://www.bubbleinfo.com/2012/01/11/harp-no-income-refis-in-march/

In the State of the Union address last night, President Obama said he will send to Congress a proposal to expand the refinancing to loans carried by private lenders.  An excerpt from the nytimes.com:

The new plan would require Congressional approval, a difficult hurdle for any legislation in the current polarized environment. Still, some Republicans have expressed support for expanding the availability of refinancing, and White House officials insisted that the plan was not an act of theater.

“I’m sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates,” Mr. Obama said Tuesday night in his State of the Union address. “No more red tape.  No more runaround from the banks.”

Administration officials said they would release the full proposal in the near future.

The new program will be directed at people whose mortgage debts exceed the value of their homes, according to a senior administration official who spoke on the condition of anonymity because the details have not yet been finalized. The official estimated that the program could benefit two million to three million homeowners who have loans that are not guaranteed by the government, and that the program’s cost would not exceed $10 billion.

The proposal is the latest in a long series of largely unsuccessful efforts by the administration to bolster the housing market. Like most of its predecessors, the plan is focused not on borrowers facing foreclosure but on those who have been able to keep making the payments on their homes. Reducing housing payments for those borrowers will allow them to spend more money on other things. It also could help to stabilize housing prices by encouraging them to stay in their homes.

They haven’t rolled out the details yet, let along convince Congress that they should add 2-3 million more refinances of private loans to the 1 million projected to be helped by HARP.

But if they did, the last sentence is the key – it will bring fewer homes to market, which may or may not ‘stabilize housing prices’. 

What his program will do is stagnate the market further, because there will be fewer distressed sales selling for retail price or less (which would stimulate sales!).  Instead, the housing inventory will be dominated by equity sellers who insist on listing their homes for retail-plus prices, and holding out. 

This additional program will force buyers to contend with lowly-motivated sellers – the ones who will sell, if they get their price.  Will buyers be willing to pay more?

Are houses selling in the new year?  How hot is the start?

There isn’t any way to track the sales that fell out of escrow last year, we just have closed sales to count. But let’s compare last year’s closed sales to this year’s pendings, and figure that 10-25% will fall out:

NSDCC detached listings that were marked ‘Pending’ between Jan 1-22:

If 25% of this year’s pendings fall out of escrow (142 – 25% = 106), we are right on track with last year – and it appears that each price range is fairly represented too, though there is a downward tilt, depending on which ones fall out. The under-$700,000 category is bulging!

No contingents were counted either (there are 148 contingents, but you have to count them individually – maybe I can get an assist on that today?), so I think we’re off to a good start.

This year’s list prices are averaging $379/sf, and last year’s solds closed at $358/sf.

After 12 days on market, this cash buyer even got a bit of a discount on their way to paying the lowest price for this model since October, 2002.

Explanation?  Questionable short-sale comps are influencing the regular sales.

The existing-home sales stats for 2011 are out today; here are Diana’s comments from cnbc:

Home sales rose in December to the highest pace in nearly a year. The gain coincides with other signs that show the troubled housing market improved at the end of last year.  Still, sales remain depressed and ended 2011 well below healthy levels.

The National Association of Realtors said Friday that sales increased 5 percent last month to a seasonally adjusted annual rate of 4.61 million, the best level since January 2011 and the third straight monthly increase.

For the year, sales totaled only 4.26 million. While that’s up from 4.19 million the previous year, it’s below the 6 million that economists equate with healthy housing markets.

Sales are increasing at a time when the market is flashing other positive signs. Mortgage rates are at record-low levels. Homebuilders have grown slightly less pessimistic because more people are saying they might be open to buying a home this year. And home construction picked up in the final quarter of last year.

The median sales price rose 2.3 percent to $164,500 in December.

The glut of unsold homes declined to 2.38 million homes. At last month’s sales pace, it would take a nearly 7 months to clear those homes. Analysts say a healthy supply can be cleared in about six months.

Once last year she mentioned that we should keep our focus on local market activity – let’s do that!

Detached-Home Sales and Pricing:

For the comparison by zip code, click here.
http://www.bubbleinfo.com/2012/01/03/north-san-diego-sales-2011/

We’re looking forward to the second talk radio event of the year on Monday, January 23rd at 8pm.

Rich Toscano of www.piggington.com will be our guest!

If you have questions or comments for Rich, leave them here in the comment section, and/or tune in on Monday and be a caller during the show.

Click here on Monday to listen to the show, or www.bubbleinfo.com.

Check out Rich’s latest full post here: http://piggington.com/december_2011_resale_data_rodeo

An excerpt from his article showing how inventory dropped off at the end of 2011:

Rich:  This stat above, which is very important because it combines supply and demand into one figure, was substantially lower than a year prior, by 22.2% to be exact.  So we enter 2012 with a fairly different setup, supply and demand wise, (and thus a more positive outlook for prices) than we entered 2011. 

On a gloomier note, that higher demand is taking place in an environment of lifetime-low mortgage rates… if (when, in my opinion) that prop is removed, the housing market will have to fend for itself a bit more.  Of course, that could be a way off.  In the meantime, those waiting for a big price decline are likely to be disappointed.

How are short sales affecting the market?

This chart divides Actives by Pendings (A/P, our gauge of the relative ‘health’ of each market). We’ve seen in the past that a 2.00 reading seemed healthy, and 3.00 was tolerable. I included contingents in the Pending counts because now they are much more likely to stick, and if a buyer does cancel, it’ll be because they found a better one and replaced it.

The two columns on the right side of the chart show the number of short sales in each Pending count, and the total number of short sales closed last year in each town:

Oceanside and Vista are smoking red hot with 1.05 reading – they literally have almost as many pendings as actives. Why? Because sellers AND buyers AND agents have embraced short sales. Comparing the pending short-sale counts of current vs. last year, it looks like Oceanside and Vista will probably set new records this year – and received a lot of experience in 2011.

But in NSDCC (the last six categories), it appears that short sales are a relatively new concept – but coming on strong. The difference is capitulation – Oceanside and Vista sellers have conceded on price, and buyers are responding. As a result, the market is working.

We need some old fashioned market clearing in NSDCC, where it is stale and stagnant.

In the last six towns on the list, there are 1,086 detached homes for sale. Even with the dozens of “refreshed” re-lists in the new year, the average market time is 121 days – with 21% of them having been on the market for more than six months!

How many sellers are in the ‘pre-distressed’ stage, and are just testing the market today at higher pricing to see if they can get out with at least enough for a steak dinner?

There must be quite a few – what will be the effect when they finally cave?

Specifically, would it hurt the market if they lowered their price and entered short-sale status?

Based on areas that have already seen capitulation, it doesn’t look like it (capitulation = lenders and listing agents getting sellers off the fence, price-wise).

Oh but wait JtR, Oceanside and Vista is a whole different socioeconomic class; there aren’t that many rich people. OK, we’ll see, but when there are 18 offers submitted on a funky older house on a busy street in La Jolla, I’ll stick to my guns that there are plenty of buyers….waiting.

Short sales are the device being used to ensure a softer landing, and the lenders/servicers will control the pace as needed. But they would be smart to recognize that market clearing is working great where implemented!

In the not-so-distant past, both buyers and agents avoided short sales. They took too long, and the outcome was very uncertain.

But closings of detached-home short sales are increasing around the county:

We saw that the banks’ approval rate of recently closed NSDCC short sales was less than 60 days – helping to keep buyers interested in sticking around. With banks typically pricing REOs at retail, short sales might be the only place where you can find a deal.

An excerpt from cnnmoney.com, about respected Laurie Goodman, the current record holder for highest estimate of expected foreclosures across the country:

On top of the 2.5 million homes that have already fallen to foreclosure since the bubble burst, another 4.5 million mortgage holders have given up paying and are likely to lose their homes, she calculates.

Millions more are underwater — owing more than their home is worth — and may give up if things don’t improve soon. All told, Goodman warns that more than 10 million of the nation’s 55 million mortgage holders could default by 2018. If home prices fall much more than the 6% or so she’s projecting over the next 12 to 18 months, the picture worsens, as more foreclosures drive prices down further, in turn causing more sheriffs’ sales.

Goodman’s research into who defaults shows that many governmental and private efforts at saving borrowers — and reducing investors’ losses — by modifying mortgages weren’t helping because they only extended payments or reduced interest rates. They didn’t fix the fundamental problem of unsupportable debt loads.

Goodman found that investors lose as much as 70% when the homes underlying their subprime MBS are foreclosed upon. Lenders that tried to rehabilitate delinquent borrowers by reducing the principal (or total amount owed) by an average of 26% were far less likely to have to foreclose, and they actually provided MBS investors higher returns. “If you save a borrower, you save an investor,” Goodman says.

To avoid the “moral hazard” of rewarding foolish borrowers, Goodman recommends that lenders swap immediate principal reductions for shares of any gains on the mortgaged house when it is sold.

Many mortgage holders, including giants Fannie Mae and Freddie Mac, are refusing any kind of principal-reduction deals, however. Some don’t want to have to take the immediate write-downs that would be required, preferring to delay the financial pain and hope for a rebound.

‘One bailout = endless bailouts’

Many servicers refuse to consider them because their fees are tied to the amount of principal rather than to the ultimate payback to investors. And banks often hold second mortgages for the loans that they service. Principal reductions typically require them to take total losses on those notes.

In short, banks “are ridden with conflicts of interest” that pit them against the interests of borrowers and investors, Goodman says. “Many of the rules in place now are extremely large-bank-friendly, but borrower- and investor-unfriendly.”

Goodman’s firm, of course, is decidedly on the side of the MBS investor in this fight. Nevertheless, ideas she’s been advocating since 2008 are catching on.

The Treasury Department and several state attorneys general are encouraging lenders to offer principal-reduction options. And “shared appreciation mortgage” (SAM) modifications have won support from big thinkers such as Nouriel Roubini, the New York University economist who warned of a housing bubble in 2005. Roubini, who cites Goodman’s work in his own, recently co-wrote a report suggesting that SAMS could help “unclog the real estate and financial arteries and restore healthy circulation.”

At least one private servicer, Atlanta-based Ocwen Financial Corp., has started to try this “share the pain and gain” option. “Progress is slow,” Goodman says, “but I feel like I am getting some traction.”

http://money.cnn.com/2012/01/13/pf/ows_goodman_best_money_moves.moneymag/index.htm

On Tuesday, we were fortunate to share almost two hours with Bill McBride, of  Calculated Risk.

Here is the written transcript:

Bill McBride on blog talk radio with JtR