If anyone thinks selling REOs is gravy, take a look at this:
San Diego sold pricing is showing roughly a 10% increase over the last 12 months on this $/sf chart. Seller optimism is way out in front, though the blue line is only measuring those that haven’t sold, so it should always be higher:
On a day where 2 billion people are engrossed with the kisses of two British 20-somethings, let’s shine the spotlight on San Diego’s own King of Graphs, Rich Toscano.
Here’s an excerpt and two of the graphs from his post, click here for the full story:
It is interesting, however, that the low-priced tier of the index dropped as much as it did. After weathering the recent fall/winter lull better than the other tiers, the low-priced homes were spanked for 2.7 percent in February. The middle tier was down 1.4 percent and the high tier by .5 percent for the month.
This looks like somewhat of a catch-up move which reverses the low tier’s previous strength and gets it more into line with recent price changes in the overall market.
We just saw the FICO study a few days ago, here are excerpts fromareportby the Federal Reserve Board, in an article written by Keith Jurow at the Business Insider:
Last May, a very significant analysis of strategic defaults was published by the Federal Reserve Board. Entitled “The Depth of Negative Equity and Mortgage Default Decisions,” it was extremely focused in scope. The authors examined 133,000 non-prime first lien purchase mortgages originated in 2006 for single-family properties in the four bubble states where prices collapsed the most — California, Florida, Nevada, and Arizona. All of the mortgages provided 100% financing with no down payment.
By September 2009, an astounding 80% of all these homeowners had defaulted. Half of these defaults occurred less than 18 months from the origination date. During that time, prices had dropped by roughly 20%. By September 2009 when the study’s observation period ended, median prices had fallen by roughly another 20%.
This study really zeroes in on the impact which negative equity has on the decision to walk away from the mortgage. Take a look at this first chart which shows strategic default percentages at different stages of being underwater.
Notice that the percentage of defaults which are strategic rises steadily as negative equity increases. For example, with FICO scores between 660 and 720, roughly 45% of defaults are strategic when the mortgage amount is 50% more than the value of the home. When the loan is 70% more than the house’s value, 60% of the defaults were strategic.
The implications of this FRB report are really grim. Keep in mind that 80% of the 133,000 no-down-payment loans examined had gone into default within three years. Clearly, homeowners with no skin in the game have little incentive to continue paying the loan when the property goes further and further underwater.
While the bulk of the zero-down-payment first liens originated in 2006 have already gone into default, there are millions of 80/20 piggy-back loans originated in 2004-2006 which have not.
We know from reports issued by LoanPerformance that roughly 33% of all the Alt A loans securitized in 2004-2006 were 80/20 no-down-payment deals. Also, more than 20% of all the subprime loans in these mortgage-backed security pools had no down payments.
Here is the most ominous statistic of them all. In my article on the looming home equity line of credit (HELOC) disaster posted here in early September (Home Equity Lines of Credit: The Next Looming Disaster?), I pointed out that there were roughly 13 million HELOCs outstanding. This HELOC madness was concentrated in California where more than 2.3 million were originated in 2005-2006 alone.
How many of these homes with HELOCs are underwater today? Roughly 98% of them, and maybe more. Equifax reported that in July 2009, the average HELOC balance nationwide for homeowners with prime first mortgages was nearly $125,000. Yet the studies which discuss how many homeowners are underwater have examined only first liens. It’s very difficult to get good data about second liens on a property.
So if you’ve read that roughly 25% of all homes with a mortgage are now underwater, forget that number. If you include all second liens, It could easily be 50%. This means that in many of those major metros that have experienced the worst price collapse, more than 50% of all mortgaged properties may be seriously underwater.
JtR Summary: These studies and charts show what we’ve suspected – that negative equity is the main reason why borrowers are doing strategic defaults.
We’ve been monitoring the NOD/NOT lists, but to stay ahead of potential defaults, you need to peruse the tax rolls and determine how many homeowners have negative equity in your target neighborhood. You can’t judge it by date purchased, because they could have refinanced in 2004-2007 – we seen many foreclosed who bought 20-30 years ago.
It needs to be a property-by-property search of neighboring streets around any home you are thinking of purchasing. It sounds like a lot of work, but it needs to be done – and realtors have access to the tax rolls. If there were 1-3 potential strategic-defaults within a block or two, you could probably survive them without a big hit to values. More than that might be pushing it.
A proposed law facing a key vote in Sacramento on Wednesday would require lenders in California to make a decision on mortgage modifications for delinquent homeowners before beginning the repossession process, in effect ending “dual track” foreclosures in the state.
Financial institutions commonly pursue foreclosure even if a borrower has requested a loan modification, a two-track process the lending industry has argued is necessary to protect its investments. But dual tracking is under fire from regulators and lawmakers in the wake of last year’s “robo-signing” scandal, which revealed widespread foreclosure errors.
The California Homeowner Protection Act, authored by state Senate President Pro Tem Darrell Steinberg (D-Sacramento) and Sen. Mark Leno (D-San Francisco), is one of the furthest-reaching efforts to limit the practice. Several other states have passed requirements for third-party groups to oversee mediations between mortgage servicers and homeowners.
The California bill, SB 729, would require a lender to fully evaluate a borrower for a loan modification before filing a notice of default, the first stage in the formal repossession process, and a significant change in the way foreclosures are conducted in the Golden State.
The law would give delinquent homeowners the right to sue their lenders to stop foreclosures if they believe the requirement to properly evaluate their loan modification requests had not been followed. If the sale occurs without the proper evaluation,homeowners would also be given the right to sue for damages or to void a foreclosure sale for up to a year after the sale.
Such a change is necessary in the state because the two-track process often leads to unintended foreclosures by mortgage servicers that “don’t know what they are doing” and often bungle the loan modification process, Leno said in an interview.
“We know of folks not only entering the loan modification process, but folks who have already been accepted, and are making timely loan modification payments, and then getting a knock on their door and being told ‘your home will be sold,'” Leno said. “The stories are many and horrifying.”
The latest from Altos data @mikesimonsen: financial markets are correcting dramatically + #mortgagerates are at their highest in 2 yrs. How quickly will this impact #homebuying decisions?: https://hubs.ly/Q012SS230
Jim the Realtor is legit - I interviewed three brokers; he said list price should be $100,000 higher than the other two brokers; listed it with him and had all cash (no financing) offer in two days, five day contingency period, closing in two weeks - and it closed at his recommended list price. I could not recommend anyone more than I recommend Jim the Realtor.
When we moved to San Diego in 2005 we rented a big house on Mt. Soledad (La Jolla) with 180 degree ocean views for the same payment as a mortgage on a dump in Chula Vista. Clearly something was wrong. Yet, the media was full of the usual happy-talk nonsense, so I was glad to find Jim's blog. I've followed his honest assessments and data since.
We decided to sell and move to AZ at Thanksgiving. Dec. 1st we met with Jim to sell our home. We closed today (29 days later). Jim orchestrated a feeding frenzy -- we had 25 showings in 2-1/2 days, multiple offers, and sold for well over asking price. I'd say he earned his commission! We have owned and sold homes in 5 different States always using experienced, productive, full-time realtors. Jim outshines them all.
You don't decide to sell and close 29 days later over Christmas (with COVID lockdown) without some miracles. Donna was amazing at performing lots of those miracles and ensuring that everything was done right and on time. They are a terrific team with a very responsive and professional network.
Where do we begin..2020 has been a year for everyone. When COVID hit and shut down both my husband and my businesses, we were left with a mortgage and very little income coming in. We were stressed, scared and felt stuck. We made the hard decision to sell our home and move out of state. We contacted the Klinges' and spent a good hour going over what we hoped we could accomplish. Jim and Donna came over with comps in hand and suggestions on improvements to get our house ready for the market. It was overwhelming to think about, but Donna was there and one step ahead in every scenario. Basically we just approved what they suggested and Donna handled literally everything. We placed our house on the market and within the first day we had multiple offers well above asking price! We couldn't believe it. We were overjoyed! Jim countered the offers to weed through them, and everyone came back with way more. It was amazing, and we are ?? sure it was because of the staging and repairs the Klinges suggested we do.
Due to unforeseen dishonesty from the buyers lender, we hit a big hurdle when trying to close. We had already moved out of state and were shocked when three days before closing the lender dropped a bombshell on the buyers and us. However, Jim and Donna handled it like veterans, not afraid to play hard ball and represent their clients. After a few phone calls with us, and several between Donna and the lender, they had a plan B-Z to make sure we were taken care of. In the end we closed with even more money than we ever thought possible and with very little work from us. The Klinges handled this entire "2020" worthy event with the utmost professionalism and did everything in their power to not only make this as smooth as possible for us, but we also walked away with more money from the sale of the house than we ever hoped for. After working with Jim and Donna, you don't ever use anyone else. They are hands down the best team to represent you in any scenario.
Working with Klinge Realty Group was a great experience! They are very responsive, professional and knowledgable about the real estate market! I would definitely recommend Klinge Realty Group.
Jim and Donna Klinge made the sale of our condo extraordinarily easy. They know the market and gave us sound advice backed by details and very considerable experience, reflected both in the initial pricing and subsequent negotiations. They work together as a team and are always available to talk. We had a few challenges with our property and they were able to coordinate the resolution to everything, including items that I would not think would ordinarily be their responsibility to handle. They made the whole process effortless on our part. They are folks with high integrity and we cannot recommend them highly enough.
Review for Member: Donna Klinge
I cannot believe there are no reviews of Donna yet, ugh!! She is the secret sauce of the Jim Klinge/Donna Klinge combo! I will touch on Jim here, but Donna is why I'm so totally loyal to these two (no offense to Jim :)).
I consider myself a rather savvy buyer/seller. I've bought/sold 7 times in about 15 years. On the buy side, Jim is the PERFECT combo of: completely digitally savvy (he will pull data all day long until you feel comfortable with your chosen house, area, school district, anticipated appreciation rate...anything!), he's super well respected and known in the area by other agents, an amazingly cool but strategic negotiator, is totally devoid of desperation for a sale/commission, and more.
Then once you get into contract phase, Donna literally handles every last and final detail in a concierge-like manner -- totally shielding you from the daily back and forth, noodling and annoyances of the buyer's requests. She solves it ALL; it's miraculous what that woman accomplishes over and above what is even expected in a buy/sell transaction.
On the sell side, Jim and Donna do the same, but even moreso. Donna in particular truly takes everything off your plate: she'll manage getting the house painted, the carpets replaced, she'll go on site (as she Jim both did for me when selling our rental properties) to work with the renters and make sure the house is ready to show -- freeing me to have to take time off of work to do so. They work with A+ integrity, too, so you know you are serving all parties fairly and lawfully throughout.
A home purchase/sale is the most considered you'll ever make. HIRE A SAVVY AGENT, not a friend!, and get what you need out of the transaction. Jim and Donna are our agents for life.
Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community. Jim's vast experience means he has worked with several realtors and knows the market all over north county. Donna is AMAZING in processing everything in the transaction. She scheduled trades people to work on the house in preparation for the sale as well as the repairs needed before closing. She communicated clearly every step of the way about what would be happening. She took the weight off my shoulders for the whole process. I will always use Jim and Donna for my future real estate needs and I whole heartedly recommend them to anyone buying or selling a home.
Jim and the team at Klinge Reality are without a doubt the best in the business! Not only was Jim helpful and extremely knowledgeable, he was patient and determined to help me find my first home. Jim and his team have been in the business for many years, and it shows. Jim is a wealth of knowledge and was my biggest proponent despite the temperature of the competitive market. I ended up getting the perfect property in my dream neighborhood all thanks to Jim. From the day my offer was accepted, Donna was a real lifesaver. She was extremely helpful, responsive, and knowledgeable when it came to every minute detail, and held my hand through the process. As a first time home buyer I had no idea what the process would entail, but Donna curtailed every concern I came across and made the escrow process feel seamless. Jim and Donna provided me the best home buying experience, and I am very grateful for all they did for me. It was truly a pleasure to work with Jim and Donna and I am already looking forward to the next time we work together!
Review for Member: Richard Morgan
Richard is an amazing realtor! He has high integrity and genuinely cares about his clients and their needs. Richard paid close attention to what I was seeking in a home and was very patient in our search to find it. I would highly recommend Richard and will use him for future transactions. Truly a different kind of realtor experience!
Could not be happier with my experience with Jim and his team. He helped me sell a very unique and challenging property. Throughout the entire process he was always available, honest, transparent, trustworthy, and always put my interests as a seller first. A (rare) true professional! During close of escrow Jim went above and beyond to complete the deal. It would not have been possible without his experience, fantastic team, and pure dedication. Highly recommended!
Thanks Jim and Donna Klinge!