A new, 90-day state moratorium on foreclosures went into effect this week to give homeowners more time to avoid losing their homes.
But because the California Foreclosure Prevention Act exempts lenders from the moratorium if they submit modification programs for review, few owners are expected to benefit from the law, government officials and industry leaders said.
As of yesterday, 39 institutions, which handle most lending activity in the state, had won 30-day exemptions from the moratorium while their plans are being reviewed. Seven of those, including Bank of America, had obtained approval for their plans and received permanent exemptions.
“My view is if we can even help one family avoid foreclosure, it’s a win,” said Assemblyman Ted Lieu, D-Torrance, who sponsored the law. “The goal of this bill is not to put in a moratorium as much as it is to get banks to run loan modification programs to keep people in their homes long-term.”
The new moratorium would extend to six months the time between the notice of default and the foreclosure sale, which is double the current time, officials said. Eligible loan modification programs must offer favorable terms for principal residences bought from 2003 through 2008.
Since the beginning of last year, about 200,000 loan modifications have taken place in the state, said Department of Corporations spokesman Mark Leyes. Over that same period, more than 304,000 homes have been foreclosed on, according to MDA DataQuick.
Even with loan modifications, many homes still are foreclosed because two-thirds of approved changes have not made monthly payments more affordable, said Paul Leonard, state director of the Center for Responsible Lending.
There is always somebody with more reach than you have.
Not just more reach, but more frustration too, because they are further along in the hunt.
The Five Stages of Buyers’ Grief:
Denial – Buyers are adamant about not overpaying.
“The only house I’m buying is the one I can steal from the bank” is a common theme. Buyers read daily about how bad the economy is, how bad the real estate market is, and figure this might be a good opportunity. They begin their search.
Anger – With every house on the internet, most buyers take matters into their own hands.
They surf the web in search of that steal, thinking that there will be plenty laying around. How hard can it be to find a deal? But then they realize that a cursory overview of the inventory produces junkers and over-priced turkeys. Anger begins to set in when they realize it isn’t going to be as easy as they thought.
Bargaining – Early on every buyer wants to make low offers – we’re stealing one, right?
But the good listings always seems to have competing offers, with 95% of the buyers chasing 5-10% of the inventory. This is where ArtElectric’s thought comes in – there are other buyers who are further along in the five stages of buyers’ grief – and they outbid you. Virtually every buyer will lose out on 1-3 offers before succeeding.
Depression – It’s hard enough just to find a good deal, to then lose out on one or more is depressing.
Many give up for a while, deciding that it’s not meant to be, they’ll wait until the market comes down more, wait until the economy gets worse, banks unleash the shadow inventory, etc. But there’s a haunting feeling that it won’t get easier.
Acceptance – Buyers loosen up on their demand to steal one, and shift to acquisition mode.
By now most just want to get it over with, and accept that the successful search and purchase of a home is more time- and energy-consuming than they thought. The next one they find that suits their needs, they step up a little sooner, and a little higher than everyone else, and finally land one.
Today’s buyers don’t like these feelings, and many will wait it out, hoping it’ll get easier, later. But with the government backstopping the markets and banks being very deliberate about processing their short sales and REOs, it could be a long wait.
Will the banks start unloading? I think they could double or triple their output of REOs in good areas and sell every one of them today.
We’ll see if the demand holds up – the fourth quarter of 2009 should be very telling.
Could enough cheerleading about housing turn into a self-fulfilling prophecy?
My dear readers of bubbleinfo.com are too smart to fall for it, but there are only a couple of thousand of you. What about the rest – the ones who listen to Cramer, read promising headlines, and rely on typical realtors?
Cramer is a buffoon in most people’s eyes, but many homebuyers are tired of waiting – will they compromise on price or quality when they hear that it’s time to get in? Or how about his comment that the banks are flush, and can hold back REOs? Does that erode your confidence that free markets will prevail?
This is a continuation of the comments from the last post, which I really appreciated and wanted to continue. Specifically, that the vast majority of homebuyers who aren’t as studious as you, are the ones making the market today. They are the ones out-bidding you for REOs, buying other non-REO houses at mind-numbing high prices, and spoiling it for those patiently waiting for normalcy.
Or is this as normal as it’ll get, with manipulation gumming up free enterprise?
Dawg is right, of course, that nobody knows for sure, and there’s no telling how it’ll turn out. But let’s explore a hypothetical case.
If over the next two years you saw the banks dribbling out one by one their REOs in your target area, and enough demand to gobble them up and more, at what point do you quit waiting? Let’s add that mortgage rates somehow stay between 5% and 6% – is there a point where you’re going to give up on logic and compromise on price/quality?
Jim, I’ve heard a lot of talk that the bottom end always leads during a housing pullback, the top end goes last and recovers first. In other words, a lot of people like to say that what’s happening now is exactly what always happens in a regular cycle, ho hum, nothing to see here. However, I’ve been told by some seasoned pros that it’s the upper end that usually falls first, people trying to move up a rung on the ladder who didn’t get a firm grasp, while the bottom end is usually relatively stable since that’s where people are slipping down to.
Indeed, when I bought my first house in 1992, right after a serious pullback, you could get a lot more house for just a little more money, indicating weakness at the upper end. If the long-term pros are right, this big crash in low-end properties last year was very unusual and is now seemingly over, while the pending correction in high-end is more what you’d expect to see in a normal economic cycle as people lose jobs, need to cutback expenses, etc. What do you think?
Forget the first example, this isn’t your standard run-of-the-mill downturn. If it was, it would have started in 2001-2002, and we’d be on our way back up by now. Anybody who tries to soft-peddle this collapse as a normal event isn’t an expert, they are a shill.
I agree with your second example, and it’s the job losses and cutbacks of expenses in personal and business that worries me the most – they lead to a worsening economy overall.
For those who want to buy a house today, consider what one client is doing (mentioned here before).
We can’t find ANY high-end sellers who are realistic in his area, so he has focused on cheaper investment properties. He had purchased a number of low-end condos in the 1980s and 1990s as rentals that he sold in 2004-2005, and is stocking up again. In that search we happened to find one that would work for a few years as his residence, so he moved in.
Today’s buyers should do the same thing – search in the lowest-priced end of their desired markets.
Here’s an example. Check out the street named Caminito Vistana in 92130. Eleven of the 103 houses on the street are for sale, and all of them are looking for at least $2 million.
In the last six months there has been ONE sale, at $2,300,000. If you were thinking of buying one on the street for more than $2 million, you are doing so at great risk. Eleven for sale, and one closed in the last six months is a scary combo, especially at $400 to $500/sf.
But if you can find a quality house in 92130 at, or around $300/sf, you’ll see them fly off the market, because they’re selling like hotcakes – that is the lower-end of the Carmel Valley market.
The other angle to having the prices come down is buying more house later, for the same money. If you are a candidate for a move-up purchase in a few years, you might consider buying a quality CV house at $300/sf today, and get a bigger & better one for $300/sf to $350/sf in a few years. Many will say just don’t buy, period, but for the folks who are renting (and tired of it) and have the desire to buy now, you could make sense of it – if you wanted to keep the old one as a rental. You’d want to use a big down payment now to keep the payments lower, but as we’ve seen, most are doing just that.
Is there any chance that we won’t have massive price reductions in the high-end market? About the only scenario I can imagine is a wicked combination of full government intervention in the mortgage markets, combined with a heavy dose of inflation. But that seems like the path we’re on.
If you are buying today, make sure the house will suit your needs forever, just in case.
Foreclosures sales jumped 31.9 percent in May, following a 35 percent increase the prior month. Notices of Trustee Sale, which set the auction date and time, also rose a significant 42 percent from April, indicating that foreclosure sales are likely to continue to rise in the weeks and months ahead. Despite these increases, and a record number of foreclosures scheduled for auction, lenders continue to voluntarily postpone the majority of foreclosure sales.
“While many complain that lenders are foreclosing too aggressively, and others claim a wave of foreclosures sales is imminent, the data actually shows that lenders are doing everything possible to delay foreclosure,” says Sean O’Toole, founder and CEO of ForeclosureRadar. “The reality is that we have very few homeowners being foreclosed on when viewed as a percentage of those scheduled to be foreclosed on, in default, delinquent, or upside down in their mortgage.”
Of those foreclosures currently scheduled, 40 percent are being postponed to a future date at the lenders request, and another 33 percent are being postponed based on the mutual agreement of lender and borrower, clearly demonstrating that lenders are indeed delaying foreclosure in the majority of cases on their own accord. Specifically note that lenders were under no obligation in May to offer a loan modification program, short sale, or other resolution, and that these efforts would have resulted in a cancellation of the sale rather than a postponement. May saw just 6 percent of scheduled foreclosures cancelled, the lowest percentage of cancellations we have on record.
Hat tip to Aztec for sending along this article from Bloomberg:
By Jody Shenn
June 16 (Bloomberg) — Prices for the most expensive U.S. homes may not reach bottom for another few years, according to JPMorgan Chase & Co. analysts. (click on image for clarity)
The CHART OF THE DAY shows the supply of unsold homes by price in California, data that the mortgage-bond analysts including John Sim and Matthew Jozoff used in a June 12 report to illustrate the weakening market for the most-expensive residential properties. The supply of homes priced $750,000 to $1 million held steady while the supply of more expensive properties increased.
“Tighter lending standards and the lack of cheap financing for these borrowers continue to be key issues,” the New York-based analysts wrote, referring to “jumbo” mortgages. That’s after so-called interest-only and option adjustable-rate loans were a “major driver” of soaring values, they said.
The government’s moves to aid the housing market include the Federal Reserve’s mortgage-bond purchases to drive down interest rates; President Barack Obama’s “Home Affordable” loan modification and refinancing programs; and new tax credits for some first-time buyers. None of the U.S. initiatives “directly focused on helping the sales of these so-called millionaire homes,” the analysts wrote.
“Currently, we have national home prices bottoming in 2011,” they said. “However, prices for more expensive homes may not bottom out until 2012, and ultimately result in peak-to-trough declines in excess of 60 percent (compared to 40 percent nationally).”
“California is probably worse than other states, but higher-priced homes in general are going to be a problem,” Sim said in a telephone interview today. The state’s median sales price for existing single-family homes fell 37 percent in April from a year earlier, to $256,700, according to California’s Association of Realtors. Nationwide, the price fell 15 percent to $169,800, according to the National Association of Realtors.
Tobias suggested that we compare the foreclosure counts (NOD, NOTS, & REO of SFRs and condos only) to the number of homes to see the relative impact. The home counts come from city-data. Also included here are the number of active listings of detached and attached, and the number of those sold in May, 2009:
Town or area
F/C Notices
# of Homes
% in default
ACT/Sold in May
Mo. of Inv.
Del Mar
32
6,714
0.48%
188/19
10
La Jolla
169
19,529
0.87%
478/38
13
Encinitas
189
19,138
0.99%
240/35
7
Solana Bch
61
6,072
1.00%
144/10
14
RSF
49
3,517
1.39%
366/15
24
Carlsbad
552
33,717
1.64%
503/124
4
Carmel Vly
195
11,304
1.73%
267/44
6
Oceanside
1,691
59,498
2.84%
563/226
2
We can say that over 10% of Rancho Santa Fe is for sale!
Hat tip to Kwaping for sending this along, from the U-T:
The real estate slump has arrived in La Jolla, Rancho Santa Fe and other high-end San Diego County neighborhoods.
After holding their own in sales strength, sales of homes priced at $1 million or more started to fall a year after lower-priced homes hit the skids.
Now, instead of selling their multimillion-dollar homes at multimillion-dollar profits, some sellers are taking a bath or renting their properties while they wait for a sunnier day.
“The market is terrible,” said Jan Paulin, 58, who bought his 4,164-square-foot home on Hillside Drive in La Jolla for $2 million in 2000, put it on the market for $4.5 million last year and is now hoping to get $3.8 million.
If Paulin doesn’t get what he wants, he plans to rent it for $10,000 a month. Other high-end owners are following the same strategy, area agents say.
“I’d rather hold on to it for a while and wait it out until the market turns, and we can get some revenue in the meantime and at least cover the carrying costs,” Paulin said.
Yesterday in the Cielo project east of Rancho Santa Fe, Bill Menish, a former local TV anchor turned auctioneer, conducted an auction for a 5,000-square-foot home bought for $2.65 million in 2001. The highest bid was $1.965 million, which took 20 minutes to reach and was close to the seller’s reserve.
“The owners have a lot of equity in it, have moved into another house and would like to take their capital and move it into an alternative investment,” said listing agent Bill Taylor.
Through the first four months of the year, 337 homes priced at $1 million or more closed escrow, down 52.4 percent from the same time last year, according to MDA DataQuick.
Over the same period, sales of homes less than $1 million totaled 10,987, up 37.5 percent. The overall median price in April was $290,000, down 44 percent from the peak of $517,500 in November 2005.
“The low end has been driving the county sales higher, while the luxury market has typically remained extremely sluggish,” said DataQuick analyst Andrew LePage, adding, “Wealthy folks have taken huge hits that they haven’t taken in a long time, if ever.”
Obviously, the top end represents a small fraction of the local inventory. According to Zillow, 44,500, or 5.9 percent of the nearly 750,000 homes the online company tracks locally are worth $1 million or more. They are generally concentrated in coastal communities with a few scattered throughout the rest of the county.
But of the 13,010 homes on the local multiple listing service last week, 2,537, or 19.5 percent, carry asking prices in the seven figures. The National Association of Realtors reports that the national share of sales above $750,000 is half of what it was two years ago.
In San Diego County, the drop-off of sales of homes at $1 million or more is even more dramatic, down from 73 percent this year from 2006’s peak rate.
“I’ve been doing this since 1975 and never seen anything quite as volatile,” said Willis-Allen Real Estate agent Linda Daniels.
Daniels said buyers are playing it cool, offering 40 percent below asking price and walking away if sellers don’t cave.
“It’s wild,” she said.
And yet, Mike O’Brien, 38, wasn’t fazed when he put his waterfront home in Bird Rock up for sale for $8 million, three years after moving in. O’Brien and his wife, Julie, 34, paid $6.4 million and put $1.5 million into improvements.
“We’ve had a lot more showings recently,” said O’Brien, an online business entrepreneur. “I feel like we’re seeing more serious buyers. One group has come back three times.”
The O’Briens are selling because they are expecting their fourth son and would rather move than remodel.
O’Brien said the subject of real estate hardly comes up in conversations with friends: “The only thing families talk about less than sex is finances.”
There are several reasons behind the woes faced by the wealthy, experts say. Upper-end buyers have lost money in the stock market, have less to spend and, like many other San Diegans, are worried about their job security.
Those who are able to buy find that a “jumbo” loan — more than $697,500 — is hard to get and carries a premium interest charge of one or more percentage points above the norm.
“The jumbo market is not functioning,” said Lawrence Yun, chief economist at the National Association of Realtors. “We hear from our members every day — ‘Fix the jumbo market, fix the jumbo market.’?”
“You can’t buy today because you can’t get a loan, no matter how golden you are,” said Maxine Gellens, an agent with Prudential California Realty in La Jolla.
When their offers are accepted, buyers sometimes have to endure multiple appraisals by lenders before a loan closes. “It is definitely becoming more difficult to find good comparable sales for the variety of characteristics that million-dollar properties present,” said David Eshelman of Eshelman Appraisals Inc.
The problem is most critical for what David Adamo, president of Luxury Mortgage in Stamford, Conn., calls the “HENRYs” — “high-earning but not rich yet” dual-income households — those who earn between $250,000 and $500,000 annually. They can’t buy what they want because of the difficulty of securing a jumbo loan.
To get around the financial roadblocks, some buyers have enough assets to make all-cash offers.
“Cash buyers are getting wonderful values because they can pull the trigger,” said Lou Martin, a Prudential agent in Rancho Santa Fe.
As for the future, history does not portend good times for the rest of the year. Since 2001, the proportion of million-plus homes sold in the first four months was always higher than in than the last eight months, except in 2002 to 2004.
If that trend continues this year, the 2.98 percentage share this January-April would be the high point of the year.
Andy Nelson, president of Willis Allen, said top-tier buyers may upend history as they survey the relative bargains available and press sellers to lower prices even more than the 20 percent to 25 percent reduction so many already have absorbed.
“Yes, their existing homes may not be worth as much, but there are some great values out there to upgrade their location or move to a house on a single level,” Nelson said. “They may have an opportunity in the next few months to get something because we think the bottom is close at hand.”
Here we go again, more government intervention – the latest authored by Ted Lieu, from El Segundo (home of the World Champion Los Angeles Lakers).
Back in February the California state legislators passed the Lieu Foreclosure Prevention Act, and our governor signed it into law.
They should have called it the “In Lieu of Foreclosure Prevention”, because it gives MORE incentive to those who default – an extra 90 days for the lenders to offer loan advice and modifications before filing an NOD. Those who are thinking of defaulting will have close to a year of free rent guaranteed, counting the usual 60 days after the trustee sale.
The law only protects owner-occupied homes from foreclosure where the first loan was recorded between Jan. 1, 2003 and Jan. 1, 2008. The time remains at 90 days for all other loans.
Lenders can avoid the 90-day moratorium if they have a loan modification program in place that is based on the FDIC’s program.
The law goes into effect today, so it’ll be interesting to see if the lenders sent out a bunch of NODs over the last couple of weeks.
