Haves and Have-Nots

From the latimes.com:

Cash talks. And it’s speaking loudly in California real estate these days, even in the nicest parts of town.

All-cash buyers grabbed a record 30.9% share of the Golden State’s houses and condos in January as low prices lured investors and others, according to San Diego research firm DataQuick Information Systems.

Cash activity has been brisk for months in foreclosure-ridden areas such as Riverside and San Bernardino. But now, the cash buyer has become a major player in Southern California’s most expensive communities, where cash deals account for as much as two-thirds of home sales.

The trend is being driven by several factors, analysts say, including the difficulty of getting a “jumbo” loan from lenders still stinging from the mortgage meltdown. It also reflects speculation by wealthy investors who believe home prices are at or near a bottom.

“A lot of people think housing will outperform other financial investments,” said Andrew LePage, a DataQuick analyst. “This is just a place to park their money.”

In the Southland’s $1-million-and-up market, 29.2% of buyers paid cash last year — the highest percentage since 1994, DataQuick statistics show. For homes selling for $5 million and up, 62.2% paid cash.  Overall, cash deals constituted 27.8% of Southern California home sales in 2010, the most since DataQuick began tracking the market in 1988. It’s also more than double the 13% average for cash sales over the last decade.

The shift toward cash purchases started when foreclosures became a significant factor in the market, said Gary Painter, director of research at the USC Lusk Center for Real Estate. That’s because investors buying properties on the courthouse steps don’t go looking for mortgages.

“There have always been all-cash investors who think they can go in and flip a home,” he said.

There’s just more of them now. Cash buying has reached fever pitch in parts of Orange County, where the Balboa community of Newport Beach saw the highest percentage of sales going to cash buyers last year of any $1-million-plus Southland community — 66.7%.

Chris Crocker, a Coldwell Banker broker in Corona del Mar, said well-heeled buyers are using cash to acquire investment properties and second homes or to better their portfolios.

“Buyers are looking out 10 years, and buying a trophy property for 40% off its price” before the housing downturn, Crocker said.

Within a five-mile radius, his office closed 24 all-cash deals in the $5-million-and-up price range in the last six months.

“The smart money is ahead of the game and buying before the summer selling season when they will have competition,” he added.


Principal Reductions

From HW:

Thirteen of the 20 largest mortgage servicers participating in the Home Affordable Modification Program have begun principal write-downs, according to Laurie Maggiano, director of policy at the homeowner preservation office inside the Treasury Department.

While outlining changes to HAMP at the Mortgage Bankers Association servicing conference last week, Maggiano said several thousand modifications have had the principal written down by an average between $50,000 and $100,000. That number was confirmed by the Treasury late Friday.

The Treasury announced the initiative in March 2010. The Treasury said then that the write-downs would apply only to borrowers with 115% or higher loan-to-value (LTV) ratios. Servicers initially forbear some or all of the balance exceeding 100% of the home’s value, down to a 31% debt-to-income ratio. Then, the servicer forgives the forborne amount in three equal installments over three years, contingent on the borrower’s ability to remain current on payments.

A spokesperson for the Treasury told HousingWire that the program is still very new and that it will begin reporting on the write-downs in March.

“Additionally, each servicer has a plan in place for implementation of the program – so principal reduction is on those loans they have targeted in their portfolio,” the spokesperson said.

Despite an increase in existing home sales, analysts at FNC, said home prices continued to decline in December because so many of those sales were foreclosures.

“Driven in part by rising sales of distressed properties and higher foreclosure-sales discounts, home prices declined for the seventh straight month in December and suffered their largest one-month drop during the year,” according to FNC.

Of the 30 major metro areas tracked by FNC, 23 had price declines in December by an average of 2.2%.

FNC’s dim view of house prices is not theirs alone. CoreLogic Chief Economist Mark Fleming expects home prices to decline between 5% and 10% through 2011. Fleming added that stabilization should occur by the end of the year, but the damage has been extensive and the road to recovery will be a long one.

“The flooding may have finally stopped,” Fleming said. “But the living room is half underwater.”

Bressi Model Open Sunday 12-3pm

It might surprise you to hear this, but I’m a competitive guy.  There’s nothing I like more than a good old-fashioned open house derby – going head-to-head with another realtor in the same general vicinity.  Especially when my listing is the cheaper house.

This will be a battle of heavyweights too (the houses, not the agents).  Here’s the competition:


Here’s my new listing:

County Tax Sales

From the sddt.com:

The San Diego County Treasurer-Tax Collector’s office is scheduled to auction off hundreds of tax defaulted properties next month.

Treasurer-Tax Collector Dan McAllister announced Friday that 469 tax defaulted properties are scheduled to be sold at the 2011 Property Tax Sale Auction scheduled for Friday, March 18, at the San Diego Convention Center.

The auction is being held in an effort to collect $2,432,354.26 in unpaid property taxes including penalties and fees.

“We currently have 76 improved properties, 278 timeshares and 115 unimproved parcels ready for auction,” McAllister said. “The numbers may change if owners step up and pay the defaulted taxes with penalties right before the deadline. Owners of delinquent properties have until 5 pm on Thursday, March 17, the day before the tax sale to bring their taxes and delinquent charges up to date, or their property will be sold.”


Shot Across Bow

From HW:

Any potential settlement U.S. regulators reach with large mortgage lenders and servicers to modify loans and pay $20 billion or so to help borrowers underwater on their mortgage will do little to help the already fragile market recover, according to Bank of America Merrill Lynch analysts.

Discussing details of the settlement first reported by The Wall Street Journal, mortgage-backed securities strategists Chris Flanagan, Vipul Jain and Timothy Isgro said the likelihood of a fine and principal reduction program is low. The Journal cited anonymous people familiar with the negotiations of the settlement, and said the nation’s largest banks have yet to receive any proposal.

“We believe that a $20 billion levy on banks to fund principal reduction would bring with it enormous costs that would far outweigh any potential benefits,” the analysts said.

Analysts at Keefe, Bruyette & Woods said the suggested amount of the settlement “seems high” and talks are in the early stages, so “it is too soon to draw significant conclusions” regarding companies that could be effected.

“We believe the most likely scenario would be a settlement where the servicers agree to a certain amount of money to provide principal writedown as part of mortgage modifications,” Bose George, Jade Rahmani and Ryan O’Steen said in a research note.  The proposed $20 billion fine would do little to address the nation’s aggregate negative equity of $744 billion, as estimated by CoreLogic, according to BofAML.

The analysts think banks would tighten private credit availability if this proposed settlement or others come down, “which in turn could damage the housing recovery, and force the government to assume an even larger role in housing finance than its current 94% share.”

Admitting that quantifying negative-equity risk is “almost impossible,” Flanagan said BofAML thinks banks “would immediately recognize that they have to incorporate the risk of future levies into the pricing of mortgage credit.”

In short, mortgage lending could come to a complete halt.  “In our view, this proposal would re-open the property question and create somewhat unquantifiable tail risk to the downside for home prices,” the analysts said.

“There is a simple way for banks to manage this tail risk: namely stopping mortgage lending, which clearly would be an unacceptable outcome,” BofAML analysts said.

Pin It on Pinterest