Housing Hope

From the sddt.com:

Elizabeth Duke of the Federal Reserve board of governors was invited earlier this month to deliver a speech to the National Association of Realtors titled, “Prescriptions for Housing Recovery.”

Her opening comments were painfully honest.

“It is difficult to think of a single prescription that by itself will generate a sustainable recovery in housing,” Duke said. “At the same time, I do see policies that I believe will help reduce the shadow inventory of houses in the foreclosure pipeline. I also see policy actions that could be taken to improve credit availability for potential homebuyers, and, in turn, demand for houses.”

Her presentation comes at a time when the housing market is starting to show some legitimate signs of recovery. Recent reports on April existing and new home sales both suggested improving sales and price trends.

The National Association of Realtors said sales of existing homes rose 3.4 percent to an annualized rate of 4.62 million units. At the same time, median prices rose 10.1 percent in April compared to the same month a year ago.

Here in the West, the numbers were even more impressive. Sales rose 4.4 percent, and prices were up 15.9 percent to $221,700.

“It is no longer just the investors who are taking advantage of high affordability conditions,” said Lawrence Yun, chief economist at the association. “A return of normal home buying for occupancy is helping home sales across all price points, and now the recovery appears to be extending to home prices.”

The main source for optimism in the marketplace is affordability. With prices still near eight-year lows and mortgage interest rates at all-time lows, the ability to qualify as a buyer has improved dramatically.

“A brighter economic picture, coupled with record-high housing affordability, pushed the spring home buying season off to a strong start,” said LeFrancis Arnold, president of the California Association of Realtors. “With a continuing improving economy and interest rates declining to new record lows in recent weeks, we should see a steady improvement in the housing market throughout the end of the year.”


Bottom Bouncing

Even though we keep hoping for more inventory, new listings are down in every category around North SD County’s Coastal region, compared to the last two years.

New Listings of Detached Homes between April 21st and May 25th:

Year Short Sales REOs Non-SS/REO

We thought this was going to be the Year of the Short Sale….and with 562 SFRs on the default list, you’d expect that we’d be seeing more than 1-2 short sales and/or REO listings per day.  But as we see more stories on the market improving, the more defaulters will think about hanging on. 

Somehow, sales are enduring nicely.

NSDCC Detached Closings between April 21 and May 25:

Year # of Sales Avg. SF Avg. $/SF Avg. DOM Med. DOM Median SP Med. $/SF

My comments on each category:

A. I think the fact that closed sales are holding up in spite of a lower inventory indicates two things. a) Buyers are plentiful, and determined to dig out the right buy for them – it would be easy to quit looking right now. b) With roughly the same number of closings as the last couple of years, there must be about the same number of serious sellers. We can live with fewer OPTs who are just testing the market.

B. We are averaging about the same sized house, just cheaper. In 2006, the average home sold was 2,902sf, but it cost $481/sf on average (22% cheaper now).

C. The lower median-days-on-market statistic shows how those listings priced right are flying off the shelf this year, but the average DOM reflects how much longer it takes the sellers and listing agents of over-priced properties to wake up – about the same as last year.

D. The media will tout that “Prices Are Going Up/Down” with any change in the median sales price, but we are smarter than that – all it means is that the mix of homes was different. All it will take is for 12 more high-end sales to be added by late-reporters to have the median sales price rise to $860,000+.

E. I think the median $/sf shows the real trend – slightly downward.

I guess this is what bouncing along the bottom feels like?

Second Mortgages Being Pursued

Hat tip to stormin for sending this along, from News10:

SAN DIEGO — Adding new uncertainty in the state’s ongoing mortgage crisis, a Texas company is aggressively pursuing hundreds of Californians to collect second-mortgage debt — on homes they’ve already lost through foreclosure.

Many of these former homeowners believed their mortgage debt had been erased after their houses were taken by banks and lending companies. But the Texas company, Heritage Pacific Financial, has aggressively pursued collections and filed lawsuits claiming those debts still linger.

For Ahmed Abdelfattah of San Jose, debt collectors started calling in 2009, saying he owed Heritage Pacific $135,000. He said he’d never heard of the company before.

“It’s been a nightmare,” Abdelfattah said. “It’s cost me money and time, and they ruined my credit until now.”

Oscar Trejo said his first encounter came a few days before he expected to exit bankruptcy and get a fresh financial start. That was in November 2010, he said. Heritage Pacific sent Trejo, who also lives in San Jose, a letter saying it had asked a bankruptcy judge not to discharge, or erase, its $88,800 claim against him.

Trejo invested in properties in Merced and later lost them all in foreclosures. But he hadn’t done business with Heritage Pacific. “I had never seen the company’s name,” he said.


The GSE Bailout Story

Excerpted from MND:

Between 2001 and 2006 the US housing market experienced a “housing bubble” wherein the prices of single-family homes increased an average of 12 percent each year.  This increase was accompanied by mortgage debt that more than doubled from $5.1 trillion in 2000 to $11.2 trillion by June 2008.  In about the same time frame Fannie Mae’s mortgage-related assets and guarantees went from 1.3 trillion to $3.1 trillion and Freddie Mac’s from $1 trillion to $2.2 trillion (representing annual increases of approximately 11 percent for each GSE.)  Then, starting in 2007 home prices began to plummet and defaults to rise.  After more than doubling over six years, home prices fell by 27 percent between 2006 and 2008.

The GSEs had grown rapidly with only a thin capital cushion to provide protection against losses.  The capital they were required to hold met regulatory standards but fell well below the capital levels maintained by many large financial institutions so they were not prepared to manage the sharp decline in housing prices.  In 2007, with prices down an average of 9 percent, the GSEs businesses began to feel increasing stress and by the next year rates of seriously delinquent mortgages they either owned or guaranteed exceeded any levels of the previous decade.

Gains, Losses, and the Use of Funds

Fannie Mae lost $5 billion in the second half of 2007 and another $4.5 billion in the first half of 2008 and Freddie Mac lost $3.7 billion and $1 billion.  Then the collapse of the MBS market in the Fall of 2008 resulted in even larger losses.  During 2008 the two GSEs had combined losses of more than $100 billion.  For some perspective, over the 37 year history of the two companies (1971-2008) they earned $95 billion less than they lost in 2008 alone.  During the next three years ending in Q3 2011 the GSEs lost another $251 billion.  “In other words, the losses incurred during the conservatorships are more than double the cumulative net income the GSEs reported as public companies.”

On September 6, 2008, FHFA in concert with the Department of the Treasury put the GSEs into conservatorship citing concerns about their financial conditions, their ability to raise capital and to continue funding themselves, and the critical importance of each company to the residential mortgage market.  At the same time Treasury entered into an agreement to provide the GSEs with cash sufficient to eliminate what deficits they might occur in exchange for ownership of the GSEs senior preferred stock.  Since that time Treasury has made equity investments in the GSEs every quarter and, by the end of 2011 the cumulative amount was $185 billion.



Initially the Treasury’s investment was capped at $200 billion, subsequently increased to $400 billion and increased again to $400 billion over the amount actually drawn as of December 31, 2012.  As a condition o this support the GSEs agreed to pay to Treasury quarterly dividends at an annual rate of 10 percent on Treasury’s outstanding investment.

According to OIG, these dividend obligations, exacerbated by the 10 percent annual rate, are so large that the GSEs have yet to earn enough to pay them annually so Treasury has had to advance additional sums to pay the dividends.  At the end of 2011, Treasury’s $185 billion investment in the GSEs included $32 billion to pay its own dividends.  At present the required annual payment from the GSEs is $19.2 billion.  The two, in their best year, earned a total of $14 billion, so they have never in their history earned enough to cover the required dividend on Treasury’s current investment.


Drugs and Showings

Hat tip to RE for sending this in, from woai.com:

Be careful who you open your doors to at your “open house,” some drug addicts are now trying to score at real estate showings.  The pain-pill addicts are scouring the Sunday paper for open houses dressing up as potential buyers, and then showing up hoping to score.

Amara Durham is an addiction specialist with Caron Texas.

“And they’re there to find drugs that people have left behind in cabinets. If you are having an open house and you haven’t cleared out your prescription medications it’s the same as putting a note on the mirror and saying ‘Hey, open up!'”.

She says sometimes the value on a bottleof name brand medication can be worth $5,000 on the street. As the addiction rate to pain pills soars, so does the price.

“We have addicts who look like you and me and not like drug users in an alley with needles  in their arms … combing the  Sunday paper for an open house listed there. They go dressed, looking like potential buyers,” says Durham.

Durham says before hosting an open house, take your valuables and your medications with you.

“The responsibility lies with the homeowner and that means that before you show your home, you take those tablets, put them in a shoebox and take them from the home.”

Experts say the number of Americans who are addicted to prescriptiond rugs like painkillers far outstrips the number of people addicted to traditional street drugs like heroin and crack cocaine.

Fewer Listings, More Sales

With summer right around the corner, buyers are wondering if we’ll see more homes for sale.

It doesn’t look like it.

We’re down to a five-month supply of detached homes for sale in the North San Diego County Coastal region (La Jolla to Carlsbad):

Active listings: 1,066

Solds this year: 1,035

Pend/Cont: 691

This graph shows how the new listings (in green) started dropping off early last year, and how unusual the gap is between new listings and closings (in purple) – about half of what it has been the last couple of years:

Normally, we’ll see a fairly steady supply of new listings through the summer, like we did in 2010.

But last year the new listings started drying up at the beginning of summer, and now in 2012 it looks like we’ve already begun to slow:

May New Listings:

2010: 514

2011: 556

2012: 321 so far

The closings have been very strong, but with fewer homes for sale, sales will either drop off, or the buyers will have to pick through the OPTs, probably with great reluctance.

Pin It on Pinterest