More Inventory Coming?

An excerpt from HW:

Any homebuyer on the market right now will tell you the crowd of buyers and multiple offers are creating a challenge.

Those in search of distressed homes owned by the U.S. Department of Housing and Urban Development are not immune to this supply-and-demand situation. In fact, recently one HUD home in San Diego attracted 100 offers within 10 days.

“In this market, because it’s so competitive we’re seeing buyers just happy to get a house. They are being less selective on location and condition,” said Whissel, broker/owner of Whissel Realty.

But in its latest news report, RealtyTrac reported that an uptick in homes owned by HUD may create opportunities for patient buyers.

Experts project that over the next two years, as lenders steadily work through a backlog of foreclosures delayed by foreclosure-processing reviews, the supply of these HUD homes will increase significantly.


In the western part of Riverside County in California, HUD-owned home sales are increasing significantly.

“HUD sales have increased due to the hold back of bank-owned homes for robo-signing reviews, and, most recently, the Homeowner Bill of Rights,” said HUD local listing broker Nat Genis.

Genis added, “Inventory is there, just not being released during the banks/servicers review of the loan/mortgage documents.”

Read more here:


For those hoping for more inventory, it’s good to see that the recent foreclosure activity around San Diego appears to have been going in the right direction over the last couple of weeks:

San Diego County Filings

San Diego Case Shiller Feb 2013

Not only do we expect higher, but now much higher readings from the monthly Case-Shiller index.  The consensus expected +9.0% nationally, and it came in at +9.3% for the 20-city composite – the biggest gain since May 2006.

“Home prices continue to show solid increases across all 20 cities,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “The 10- and 20-City Composites recorded their highest annual growth rates since May 2006; seasonally adjusted monthly data show all 20 cities saw higher prices for two months in a row – the last time that happened was in early 2005.

“It is very strong, it’s a solid rebound, but I would not call it a bubble,” said Blitzer about housing.

San Diego’s Case-Shiller index topped the national composite, with +10% improvements both the seasonally-adjusted, and non-seasonally adjusted readings.

This is the 13th month in a row that we’ve seen gains, which means the Y-O-Y readings will be on top of a previous gain as well.  But we should see more eye-popping results in the next couple of months – probably higher than 10% increases year-over-year.

For example, here are the SD monthly average $/sf:

Month 2012 Avg 2013 Avg Difference

By the time we see the Case-Shiller March and April readings, will buyer exhaustion be setting in?  If so, more double-digit gains may cause them to surrender, especially when they see it tacked on to already-frothy list prices.

RE Advertising Needs Scrutiny

Our friends at shine the spotlight on this dubious topic; realtor advertising claims an excerpt:

A recent newspaper included a glossy magazine with an article urging me to run out and buy a house — fast!

always be closing“Thanks to historically low interest rates, affordability is at an all-time high,” the article said. “I highly recommend taking advantage of this opportunity before conditions change — although interest rates are still hovering just above their lowest rate, they will start to climb. In this climate, it’s absolutely crucial that you’re prepared to move quickly.”

This article was written not by some journalist but by the president and CEO of Douglas Elliman Real Estate, Dottie Herman. Nothing against Herman or her company, but the article, and the lack of scrutiny it received, highlight one of the puzzling aspects of the financial crisis and its aftermath — bankers were hit with new regulations and called before congressional hearings, but the real estate industry has escaped largely intact.

Herman’s assessment of housing “affordability” should be taken with a Everest-sized mountain of salt. The New York Times reported back in January of 2009 that the National Association of Realtors had declared “housing affordability was at an all-time high in December.” That was December of 2008 they were talking about; it’s now 2013, more than four years later, and the real estate industry is telling us again that “affordability is at an all-time high.”

Similar skepticism should be applied to her predictions about interest rates. Federal Reserve officials reportedly don’t expect to raise them until 2015. Even then there will be strong pressure from Treasury not to raise them much, because doing so would wreck the federal budget by increasing the government’s borrowing costs. If Dottie Herman really knew what’s going to happen to interest rates, you’d think she’d be trading bonds rather than selling real estate.

Her article bases the affordability claim on an example of “assuming a 30-year fixed mortgage with 10% down.” If these houses she is hawking are as affordable as she claims they are, you’d think the borrowers might be able to scrape together a 20 percent down payment.

There may be some formula by which housing affordability is at an all-time high, but to New Yorkers who have seen the nominal prices of houses and apartments double or triple or more in the past decade or two, this is the sort of claim that will elicit a chuckle, if not a snort or an eyeroll.

So is the admonition to“move quickly.” Most real estate brokers are paid by the deal, not by the hour, so if the buyers rush forward with “the strongest offer,” as Herman advises, it makes things easier for the brokers. If you are a buyer, though, you may get a better deal by being patient and waiting the seller out.

If this were a oil-company executive talking up his own interests, or a banker, the press or politicians would be tearing his claims apart. But for some reason, the real estate brokers get a pass. Maybe, as others have suggested, it’s because everyone’s mom’s friend seems to be a real estate broker, while Wall Street bankers or derivatives traders seem to be more remote and better paid.

Read more here:


Inventory Watch – Split Market

Here is our regular NSDCC inventory watch:

Date NSDCC Active Listings Avg. LP $$/sf
Jan 14
Feb 4
Feb 10
Feb 25
March 6
March 11
March 16
March 23
March 31
April 5
April 11
April 17
April 22
April 29

Not much change, but it is deceiving because of the split market. Of the 812 active listings, 67% of them are over $1,500,000 – no wonder the numbers aren’t moving much. Here is the split:

The UNDER-$1,200,000 Market:

Date NSDCC Active Listings Avg. LP/sf DOM Avg SF
April 29

The OVER-$1,200,000 Market:

Date NSDCC Active Listings Avg. LP/sf DOM Avg SF
April 29

There is the usual mantra; “more expensive properties take longer to sell”, but in reality those sellers just wait for someone to come along.

Buyers in the upper ranges need to proceed cautiously – look at how many choices there are!

Subprime is Back

Some excerpts from the – thanks daytrip!

Subprime loans are trickling back.

Michele and Russell Poland’s credit was shot, but they managed to buy their suburban dream home anyway.

After a business bankruptcy and a home foreclosure, they turned to a rare option in this era of tightfisted banking — a subprime loan.

The Polands paid nearly $10,000 in upfront fees for the privilege of securing a mortgage at 10.9% interest. And they had to raid their retirement account for a 35% down payment.

Most borrowers would balk at such stiff terms. But with prices rising, the Polands wanted to snag a four-bedroom home in Temecula near top-rated schools for their 5-year-old son. By later this year, they figure, they’ll be able to refinance into a standard loan.

“The mortgage is a bridge loan,” said Russ Poland, now working as an insurance investigator. “It was expensive, but we think it’s worth it.”

In the aftermath of the housing crash, there’s no shortage of Americans who, like the Polands, are eager to rebuild their shattered finances. In response, lenders are emerging to offer the classic subprime trade-off: high-priced loans for high-risk customers.

Today’s high-risk lenders differ from those during the housing boom in key ways. These lenders say the new subprime mortgages are actually old school — the kind of loans made in the 1980s and 1990s. In other words, a borrower’s collateral matters, down payments matter, income and ability to pay matter.

Among those hoping to reverse the trend is the Polands’ lender, Citadel Servicing Corp. of Orange County. Chief Executive Daniel L. Perl said he has tested the water by making a few dozen subprime loans since late 2011, mostly with his own money rather than investment capital.

The Polands, among the first to receive Citadel loans, are part of a success story, Perl said. None of the loans has gone bad; about a third have already been paid off. With that track record, Perl recently raised $200 million from private investors. He’s hiring 55 employees to help him make loans through mortgage brokers across most of the West, and he’s moving from Citadel’s Aliso Viejo location to larger offices in Irvine.

“We’re looking to build it up over the next 24 months to $30 million to $50 million a month,” Perl said. “It’s a decent business plan in a credit-barren world.”

Perl requires 25% to 40% down, depending on credit scores that can drop as low as 500 on an 850-point scale. His potential customers, who pay a minimum of 7.95% interest, include higher-income as well as lower-income borrowers.

“Quite a few” affluent borrowers are good credit risks, Perl said, even though they had recent short sales — they sold homes for less than they owed on their mortgages. Perl also writes mortgages that exceed the Fannie Mae and Freddie Mac threshold for conventional loans, which varies but tops out at $625,500 in the most expensive areas.

“They come from all walks of life — doctors and lawyers as well as blue-collar workers,” Perl said. “As long as they have the ability to pay and equity in their homes, they are a candidate for one of our loans.”

John C. Williams, president of the Federal Reserve Bank of San Francisco, sees no reason that subprime mortgage bonds can’t reemerge in “plain vanilla” form, as opposed to the complex concoctions that ended up as “toxic assets” in the meltdown.

“I can’t understand why it hasn’t come back sooner,” he said, pointing out that there’s a strong market for bonds backed by subprime auto and credit-card loans.

“California has been famous for devising exotic mortgages,” Williams said. “But the reality is that they held up rather well until we started doing things like giving them to people with no jobs.”,0,6498564.story

Pocket Listings

The California Association of Realtors addressed the ‘pocket listings’ topic.

It took them an hour to boil it down to this – the listing agent is bound by California law to properly explain the benefits of exposing the property on the MLS, and how it is in the sellers’ best interest.

The webinar finishes with this threat: “Regulate yourself before the regulators/trial attorneys/legislators regulate you.”

So there, problem solved.

Data from the five counties around Silicon Valley were used to demonstrate the issue.  Of last year’s sales in Santa Clara County, 15% of them weren’t in the MLS.  The median price of those was 10% lower than the median SP of those that did sell in the MLS.

They only touched on one important question during the Q&A session:

What can be done about listings being inputted as ‘sold before processing’?

The MLS rules require that all listings be submitted onto the MLS within 48 hours.  They wimped out on answering the question, saying that it is possible to consummate a sale within the first 48 hours, but the listing agent is still bound by their fiduciary duty to the sellers.

Sellers or other agents can complain to your local MLS to report violations.  Those found guilty are faced with the possibility of severe hand-slaps and letters in files, though for good measure they did add that you could lose your real estate license.  Yeah, right.

pocket listing

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