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REO sales will peak when the banks decide to peak them.  From HW:

The sale of properties repossessed through foreclosure may not peak until 2013, keeping home prices from a meaningful recovery for some time, analysts estimated Monday.

Nearly half of the more than 552,000 REO properties liquidated in the first half of 2011 were held by private banks. In the years ahead, the government — including the Department of Housing and Urban Development, Fannie Mae and Freddie Mac — will begin taking a majority of the activity.

In 2013, REO sales could reach 1.48 million properties, according to estimates from Bank of America Merrill Lynch analysts, a 10% increase from projected amount in 2012.

“We do not expect to see anywhere near the downward pressure on home prices that we had back in 2008, since the expected percent changes in liquidation volumes are so much smaller,” BofAML analysts said. “But home prices are starting from a negative point, so the implication is that home prices will continue to decline as the foreclosures transition through the pipeline.”

Most of the projected increase will come as the government begins to unload its backlog. The government-sponsored enterprises and HUD, analysts estimate, will liquidate roughly 595,000 properties in 2013 alone.

Total REO liquidations wouldn’t drop below 1 million until 2015, according to BofAML.

The Obama administration began work last month developing new strategies for selling this mass of properties, which may involve renting more of them. The Federal Housing Finance Agency is also working on a way to refinance more underwater borrowers to entice them from walking away.

“I would essentially rent the house back to those who are living in them now,” said Susan Woodward, an economist with Sand Hill Econometrics. “I don’t think it makes a lot of sense to push 4 million people out of their homes when they’re victims of a slower economy they had nothing to do with.”

Other analysts were skeptical of anyone who could predict accurately what the GSEs or Washington would do, especially after the elections in 2012.

“Do they really think that the government under any administration would let 500,000 homes hit the mark and crash prices all over again, six years after the first crash?” said Scott Sambucci, chief analyst at Altos Research.

He said even if unemployment improved by a full percentage point or two — which he said would be a stretch — the market would still struggle to meet such a supply influx.

“It would crash the market, so no, it’ll never happen,” Sambucci said.

Daren Blomquist at RealtyTrac, which monitors foreclosure filings across the country, said the sale of REO is on track to reach 825,000 by the end of 2011.

“We do expect the REOs to pick back up in 2012 as lenders push through some of the foreclosures delayed by processing and paperwork issues,” Blomquist said, adding the inventory needed to be sold could reach well into the millions.

Read the rest of this entry »

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:

From sddt.com:

The outlook for California’s residential real estate market may be dubious, but there are some bright spots in San Diego County.

Leslie Appleton-Young, California Association of Realtors chief economist and Robert Kleinhenz, CAR deputy economist, delivered their pronouncements during a webcast Tuesday.

Appleton-Young said it is difficult if not impossible to have a strong housing market, when the statewide unemployment rate is higher than 12 percent as it has been for most of the past 18 months — especially since that doesn’t tell the whole story.

“If you include those who have given up and the underemployed, the figure climbs to 16 percent,” Appleton-Young stated.

The good news is “that housing affordability looks really great,” Appleton-Young said.

Appleton-Young noted that the median price of a resold home in the state is slightly less than $300,000 at present, and while that is still twice the national average, it is considerably more affordable than when it was closer to $500,000 at the peak of the market in the middle of the last decade.

San Diego is more affordable, as well. Whereas the percentage of those who could afford a median-priced home here was generally in the teens in the middle of the last decade, the CAR pegged the number at 41 percent at the end of June.

The median price of a resold home was $379,270 in San Diego County in June, after having been closer to $600,000 in the middle of the last decade.

While bank sales and short sales played a significant role here, particularly in eastern Chula Vista, both Appleton-Young and Kleinhenz said that San Diego will be much quicker to return to a normal market than the Inland Empire, which had enormous job losses during the recession.

“San Diego is way ahead of the curve in this regard,” Kleinhenz said.

The CAR reported about 8 percent of the resales in San Diego County were REO or bank-owned sales, and another 19 percent were short sales in August.

The distressed sales are much closer to 50 percent and higher in places, such as the Inland Empire, that are still in a much more painful recovery than here.

Still, there seems to be improvement just about everywhere in the state.

Statewide, Appleton-Young said last month traditional transactions accounted for 58 percent of the sales in August, 19 percent were REO and 22 percent of the state’s residential resale transactions were short sales.

“We’ve seen good improvements in these numbers,” Kleinhenz said, adding there still could be room for a few more REO sales added to the mix in the state, to help bring inventories back up higher than the 2.6-month level at present.

Despite all that has happened during the past three to four years, homes are still in such short supply that the CAR says multiple bids are becoming the rule rather than the exception, regardless of whether the transaction is a traditional, bank-owned or short sale transfer.

Inventory levels may be low, but Kleinhenz said there are plenty of causes for concern at the state level.

For one thing, while default notices were headed downward, there was a bump up in California last month. He worries this may be more than a blip lasting the rest of the year.

As for what all this means for San Diego, Kleinhenz said he expects sales will be modestly higher for the remainder of the year, sales will increase by about 1 percent next year and prices will increase by something less than 2 percent in 2012.

Other issues are expected to be part of the mix. These include the upcoming lowering of Federal Housing Administration loan limits in the beginning of October from $697,500 to $625,500.

While that amount may not seem like a huge reduction, given that it is still more than $600,000, Appleton-Young noted that San Diego remains relatively expensive compared to other areas.

What’s more, much depends on where in the community a person feels he/she needs to live.

“This impact of this reduction will be felt in San Diego,” Appleton-Young said, “but it will be more pronounced along the coast.”

Hat tip to daytrip for sending in this article from Reuters about the alleged appraisal problems.  These people need to buck up and get a life – low appraisals are the realtors fault for not supplying enough good comps to justify the price:

When Sean McGowan signed a contract to buy a New Jersey home in November, he didn’t expect he’d still be living with his parents nearly a year later.

The deal fell through after two appraisals came in tens of thousands of dollars below the contract price, part of a wider trend of differences over property valuations that is compounding the U.S. housing crisis.

“It was very frustrating. We really wanted to move in,” said McGowan, a 31-year-old real estate lawyer.

Many housing experts say low appraisals are yet another headwind for a housing market already suffering from a plunge in prices, high unemployment and tight credit.

Read the rest of this entry »

From Channel 10:

An architectural marvel that has become one of the most photographed homes in the country is now on the auction block.

The 11,000 square foot home dubbed “The Razor” is hollowed out from the cliffs over Black’s Beach. It boasts floor-to-ceiling glass, polished concrete surfaces and picturesque views.

The home was designed by top architect Wallace Cunningham. It filters light in a way that changes the home’s look depending on the hour.

“To quote Wallace Cunningham, ‘It’s his masterpiece,’” said Hurwitz.

The four-bedroom, six-bath masterpiece also boasts a glass elevator, theater and a two-story guesthouse. The house has been featured in commercials for Calvin Klein and Visa’s Black Card. It has also been showcased in “Architectural Digest.” A commercial for Aston Martin will film later this week.

The home’s owner, software engineer Don Cooksey, spent $34 million in the last decade to build it before he declared bankruptcy and turned it over to a trustee for auction. The bidding will start at $16 million.

The home that has defined luxury now represents another high-priced trend. According to RealtyTrac, million dollar mortgages now make up about 2.3 percent of all foreclosures. That is double the number from 2007, which makes it the fastest growing segment of the foreclosure market.

(psycho-babble alert below – the Razor has been for sale since May, 2008, and been in bankruptcy court for 1+ years)

“What this means is people that had means to sustain an economic downturn are finally being hit,” said Nathan Moeder of The London Group.

However, one owner’s loss is a home buyer’s gain. “I definitely think it’s a steal,” said Hurwitz.

The auction takes place Sept. 28th, and go up in increments of $100,000.  

Part of the home, including the kitchen and bathrooms, remain unfinished.

 If you would like more information on the auction, plus photos, visit HurwitzJamesCo.com

The commercials below that feature the house nicely:

From dailyfinance.com:

By the end of the year, financial-services-technology firm Fiserv expects housing prices to stabilize in two-thirds of metropolitan areas, according to the latest analysis of home prices in 380 U.S. markets – based on the Fiserv Case-Shiller Indexes, released Tuesday.  That number will increase to 95% of all metro areas by the first quarter of 2013. 

“Relative to family income levels, the average U.S. home is now only 5% more expensive than it was in 2000″, said David Stiff, Fiserv’s chief economist.

He added that Monday’s S&P downgrade of Fannie Mae and Freddie Mac could hurt consumer confidence, but ‘the resurgent demand for Treasuries could cancel out’ the downgrade.

During the next two years, Fiserv projects that these markets will see the biggest price increases: Tacoma, WA (24.9%), Palm Bay, FL (18.3%), Seattle (10.2%), Tucson (10.2%), and Memphis (10%).

The company also expects prices to grow in areas such as Washington D.C., San Diego, and the San Francisco Bay Area, where strong labor markets and desirable geography will prompt home buyers to get in at low prices. 

Hat tip to Kwaping for sending this along from the U-T:

With a roiling stock market and stagnant housing market, it may seem premature to think about another boom and how to cope with a potential housing shortage in San Diego County.

But that’s what area builders of for-sale and for-rent homes are talking about.

The concern is that supply will lag behind demand and lead to low vacancies and spikes in prices and rents.

Alan Nevin, vice president at MarketPointe Realty Advisors, a consulting company to the industry, says a shortage already exists in apartments, as evidenced by a 4.1 percent vacancy rate recently reported, and a looming shortage in for-sale homes in three to five years once renters with good credit want to buy.

“If we continue to grow 15,000 to 20,000 jobs a year in the private sector, I think we will definitely result in a shortage,” Nevin said. “There will be an imbalance between supply and demand, and that will gradually drag up prices, and most of that increase will come at the bottom end of the market, starter homes.”

The area has been losing jobs in recent years, but SANDAG projects a growing job market over the next few years.

The solution to shortages in the past has been to:

• Speed up development in master-planned communities;
• Sprawl out to southern Riverside County, Imperial County and even into Mexico;
• Liberalize building regulations and lighten up on developer fees to stimulate production.

But Nevin said the conditions have changed and some of these actions aren’t feasible. The result, he fears, is a reduction in homeownership — going from the present about 55 percent to 45 percent. The national rate has tended to be two-thirds owners, one-third renters.

“To me, that’s sad,” he said, but he doesn’t think Generations X or Y will lose the American dream of ownership once they start families and pine for a home of their own.

On the other side of the debate are the demographers at the San Diego Association of Governments. Chief economist Marney Cox said a shortage of for-sale homes is not likely “because prices will be too high to afford.”

He agrees with Nevin that San Diego is headed toward a renter society and points to large urban areas like New York, where less than a third of residents are owners. He figures even fewer than 45 percent of households will be homeowners.

But to handle that shift, he said, more land will have to be zoned for apartments.

“That’s where the change has to occur,” he said.

No one knows what will emerge from the economic storms. SANDAG simply tries to look at the long term and ignore monthly gyrations.

But already, their projections are off-kilter. Their current draft of 2050 population projections indicate that 7,822 dwelling units will be approved by local jurisdictions this year. But for the first six months of the year, only 2,977 have been authorized, according to the Construction Industry Real Estate Board. Even if that pace continues in the second half of the year, which history shows usually doesn’t happen, the 5,954 total would be 23.9 percent below expectations. Next year’s projection of 10,298 homes could only result if there is a sudden burst of job growth and economic recovery.

“When we forecast average growth that’s going to occur,” says SANDAG’s Edward Schaefer, “there’s no way we can hit the cycles. That means sometimes we can be a little low and a little high.”

And, he acknowledges, current economic projections point to job growth that is “pretty slow.”

“I think the housing industry will have plenty of time to react,” he said.

Click on link to read what builders have to say at bottom of article:  LINK

From HW:

The Obama administration will begin working on new strategies for how to better sell previously foreclosed homes held by Fannie Mae, Freddie Mac and the Federal Housing Administration, which may include renting more REO.

The Federal Housing Finance Agency, the Treasury Department and the Department of Housing and Urban Development put out a request for information, seeking new ideas from market participants for selling REO. Currently, the government owns roughly half of the REO inventory in the U.S.

The agencies called on private property managers to submit ideas on how to reduce the REO portfolios at the GSEs and the FHA in a cost-effective manner. They also seek new ideas on property repair, sales strategies in specific hard-hit areas and new analysis of when to sell or even rent these properties.

There are 92,000 properties currently for sale from HUD, Fannie and Freddie. Inventory is different as many properties are held up and not currently on the market due to delays in the process or state and federal regulations. Fannie Mae held 135,719 REO properties at the end of the second quarter, and Freddie held an inventory of roughly 61,000 REO.

The agencies said there could be new programs developed for allowing the previous owner to rent the home or to allow current renters to become owners. They are also looking for private holders of REO to partner with the government in the effort.

FHFA Acting Director Edward DeMarco said Fannie and Freddie will continue marketing individual REO for sale, but they will also look at possibly pooling these properties in some areas to reduce credit losses and stabilize neighborhoods.

“Partnerships involving enterprise properties may reduce taxpayer losses and meet the enterprises’ responsibility to bring stability and liquidity to housing markets. We seek input on these important questions,” DeMarco said.

Treasury Secretary Timothy Geithner said solving glut of REO on the market is crucial to repairing housing finance overall.

“Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets, and support neighborhood and home price stability,” Geithner said.

HUD Secretary Shaun Donovan said millions of families, who have struggled to maintain their monthly payments, have seen the value of their home drop because of abandoned properties.

“At the same time, with half of all renters spending more than a third of their income on housing and a quarter spending more than half, we have to find and promote new ways to alleviate the strain on the affordable rental market,” Donovan said. “Taking steps to encourage private investment in REO properties and transition them into productive use will help stabilize neighborhoods and home values at a critical time for our economy.”

When the mainstream media starts talking to people who are actually participating in the marketplace, then we’ll have a consistent and accurate view of what’s happening.  Until then, we’ll have guessers like these who come off as experts, but are really just grasping at straws:

Hat tip to JP for sending this along, from USAToday.com:

In the aftermath of the nation’s housing-market collapse and recession, more than 500 midsize and large cities have seen a rise in the share of homes that are rented rather than owned, according to a USA TODAY analysis of Census data.

Nationally, 34.9% of occupied homes were rented in 2010 compared with 33.8% in 2000, according to Census data.

Almost 4 million homes have been lost to foreclosures in the past five years, turning many former owner-occupied homes into rentals.

The shift to rental housing is potentially long-lasting and portends changes for neighborhood stability and how people build wealth, economists say.

“The changes are big but glacial,” says Mark Zandi, economist at Moody’s Analytics.

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Percentages of homes rented in SD cities with at least 50,000 people:

I’m not sure if 1-3% change over ten years equals big changes, but hey, Zandi said it!