The negative equity problem for U.S. homeowners might be worse than previously thought, at least according to a new measure from Zillow.
The online real estate data provider, in its first negative equity report, said 15.7 million, or 31.4% of homeowners were underwater on their mortgages in the first quarter. That’s up from 31.1% three months earlier but down from 32.4% in the first quarter 2011.
Homeowners owed $1.2 trillion more than the value of their homes in the first quarter, according to Zillow.
With roughly 10% of homeowners 90-days-plus delinquent on payments, negative equity “remains only a paper loss” for most, said Zillow Chief Economist Stan Humphries.
“As home values slowly increase and these homeowners continue to pay down their principal, they will surface again,” Humphries said in a news release.
On the tax rolls, it looks like they facilitated a short sale without having to put the house on the open market – there were no previous listings in the MLS:
We might still be having some newcomers joining us as a result of the Realtor Magazine article, which was posted on the NAR website last week. The actual magazine just arrived at my house yesterday by mail.
Welcome agents!
Let’s discuss the publishing of each agent’s sales statistics, and the insane paranoia surrounding it.
Redfin had their agent-scouting tool for about a week, but couldn’t shut it down fast enough once the whiners got a hold of it.
Now www.neighborcity.com is trying to make a living by generating leads that they can sell to local agents for a 30% share of the eventual commission. They have the typical home-search website, but they also include each agent’s sales over the last 12 months. Theirs is a statistical analysis, not opinions like you see on Yelp, so it looks straight-forward and objective.
But, of course, they are now being sued for copyright infringement by a local MLS company, with N.A.R.’s financial support. NeighborCity is fighting back:
Realtors as a group, led by the N.A.R., will always come out looking like big-monied bullies who are just scared to give up the old monopoly. By now the monopoly is an illusion anyway, let’s admit it and move into this century!
The N.A.R. should publish each agent’s sales statistics, and a feedback forum.
Such a package would help verify accuracy, give a reason for more people to use realtor.com, and hopefully generate some respect from consumers for providing transparency to the process.
Most importantly, it would help achieve two things:
1. Allow consumers to better judge who they are hiring.
2. Cause agents to focus on delivering top-quality, ethical service.
Instead of the glamour shots, fancy cars, and plastic surgery, the publishing of sales statistics and feedback from previous clients would force agents to deal with the truth.
The gimmick known as ‘value-range pricing’ got it’s American start here in San Diego years ago. It’s when a listing agent and seller decide to offer the house with a price range, saying, “sellers will entertain offers between $999,000 and $1,100,000”.
Range-pricing sends a mixed message to buyers, who typically just want to know how much.
When the answer is a range, it’s not specific – it is murky. Buyers hear the bottom price, and want to go down from there, while the sellers gravitate towards the high-end price. What’s worse is that there isn’t any conformity between agents, so you’ll see ranges with 1-2% gaps, and others with 10-20% spreads.
While our MLS companies have been asleep at the wheel, third-party websites have taken over the dissemination of our listings. Their reporting of range-pricing isn’t uniform either, leaving the consumer wondering what the actual price is!
How Third-Party Websites Report Range-Pricing on Listings:
Zillow: Low-end price only.
Redfin: High-end price, with the low-end mentioned in the fine print.
Trulia: Low-end price only.
Realtor.com: High-end price, with low-end in the fine print.
SDLookup: Shows the full range at top of listing.
Rather than complain, I’d like to simply encourage sellers and agents to stick with a single price.
I think buyers will appreciate the honesty, and be more willing to to do business with those who provide this sort of transparency, instead of the constant flim-flam. I know there are agents who swear by it, saying that range-pricing “gets the conversation started”.
But the industry has changed in the last ten years. With the price range being reported differently on every website, we need to recognize that our primary data is getting more garbled in tranmission – we need to take corrective action.
Or we could just terminate the listing syndications, but I think the jeannie is out of the bottle.
Here is the update on what has happened since Jim stopped sending his listings to The Big Three:
He complains that the Big Three websites re-sell his proprietary information (listings) to agents who have no knowledge of the homes. But then he allows the entire MLS to be advertised on his website via the IDX feeds, and I’m pretty sure he hasn’t seen all 6,000+ listings in San Diego.
My point?
Let’s make it easier for buyers and sellers to experience full transparency, and demonstrate why we can be trusted to assist them with the biggest transaction of their life.
Hat tip to daytrip for sending this in, more details on the corruption case from thelatimes.com:
A former Los Angeles County property appraiser was taken into custody in Oregon on Monday, accused of falsifying documents and unlawfully lowering property values by $172 million on multimillion-dollar homes and businesses.
Scott Schenter, 49, allegedly secured campaign contributions from the owners for Assessor John Noguez, authorities said.
“The magnitude of Schenter’s suspected betrayal of public trust is almost inconceivable,” L.A. County Dist. Atty. Steve Cooley said in a prepared statement. “We believe his actions are not isolated.”
Schenter, who resigned in lieu of termination in January 2011 after a supervisor discovered his alleged misconduct, was charged on 60 felony counts for falsifying records. He was taken into custody at his father’s home about noon by U.S. marshals, authorities said
Prosecutors say they don’t know when Schenter will be extradited to Los Angeles.
Schenter told The Times last month that he secretly and improperly lowered property values to reduce the owners’ tax bills. He said he did it in the hope that the wealthy property owners would donate to Noguez. Schenter also said Noguez offered him a promotion and, along with several top aides, had applied “brutal” pressure to raise campaign funds.
Through a spokesman, Noguez has denied offering Schenter a promotion, instructing him to lower the values of the Westside properties or asking him to approach the owners for contributions.
Noguez acknowledged, however, that he asked Schenter to “check the status” of some of the properties. He has also admitted asking Schenter to help raise money for his campaign.
How can there be a real estate revival when the State of California has $875 Billion in debt and facing a $16 Billion budget deficit?
The California legislature has been so dysfunctional for so long that they are ignored. They don’t show any competence in solving the problems, and if they did, it wouldn’t involve much-higher taxes. If there were massive cutbacks in government services, we’d survive.
There are still a slew of reasons not to buy (Afghanistan, Iran, Europe meltdown, American economy, artificial rates, etc.), so for those who want to use those to justify staying on the sidelines, feel free. There will always be negativity, that is how this country rolls now.
Is it a genuine market recovery?
It is genuine, in the sense that it isn’t fueled by exotic financing. Buyers have to qualify for their mortgage, and most are investing large down payments.
Is it a recovery, meaning “being restored to a previous condition”?
Yes – it is back to how it used to be, a frenzy around the best buys.
The local market has enjoyed relatively-healthy demand over the last three years, so the action has been on-going. But in January it stepped up a notch or two, with buyers flooding the streets, looking to take advantage of the sub-4% rates.
Once you get into the fight and see bidding wars on every good buy, it draws you in. The excitement helps buyers forget about those concerns off in the distance.
It may appear to be fools rushing in, but they are people who are comfortable financially, and who are tired of waiting, and want to get on with their life – which for many has been on hold for 5-10 years.
The buyers must be financially sound. The reasons not-to-buy are so obvious, that they must be aware, yet they are proceeding anyway.
For the masses to believe in a market recovery, two things need to happen.
1. The shadow-inventory question needs to be resolved. The day that someone steps up to the microphone and convinces people that REOs sell for retail just like every other house, and that pushing more foreclosures through the pipeline is a good thing, then we’ll know we are getting closer to a real recovery.
It may not be that far off – see this article, although this guy didn’t quite get it :
“We think that differences in foreclosure procedures will continue to affect state-level house price trends, with nonjudicial states outperforming,” said Diggle. “After all, as foreclosure pipelines are brought down to healthier levels in nonjudicial, high burn-through states, supply conditions can more rapidly tighten to the point that they support price growth.”
Once we get that stigma turned around, then hopefully the banks and servicers will start pressuring defaulters to pay or quit.
2. Mortgage rates need to creep up to take some of the frenzy out of the equation.
If the good-paying Americans stopped seeing deadbeats being rewarded, they would be much more likely to participate in a recovery. But that would be taking us back to a day long ago, and I’m not sure if that is possible any more.
The house on one corner is a fairly straight-forward sale of a rental property owned by a seller who listed for an attractive price. It sounded like this going to end up in the mid-$600,000s (in spite of the shenanigans across the street).
