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Short Sales Winding Down?

Fannie Mae’s new requirement that all HAFA short sales to be active on the MLS for at least five days amounts to shutting the barn door after the horses have escaped:

On or after August 1, 2013, all properties being considered for a standard short sale/HAFA II must be listed with an active status on a multiple listing service (MLS) for a minimum of five consecutive calendar days, including one weekend (i.e., Saturday and Sunday).

Insisting that the property be active on the MLS is easy to get around – agents who want to scam the system just won’t answer their phone for five days.

Lenders been requiring that short-sale participants sign an affidavit promising that the transaction is a legitimate arm’s-length deal, and has had open-market exposure. But shady realtors will sign those too – let’s face it, unless there is enforcement, rules and regs are meaningless.

But short sales appear to be winding down anyway. With lenders not threatening to foreclose, why short-sale?  Defaulters will just live for free.

Currently short sales are 3.2% of the inventory county-wide:

SD Co. Det & Att Listings
ACT
CONT
PEND
REOs
135
33
114
Short-sales
204
1,808
622
Non-REO/SS
5,966
54
4,300
Totals
6,305
1,895
5,036

With only 204 short-sales on the market, hopefully it means we are getting closer to the end – though they will likely stay around for years as a quiet alternative to the occasional foreclosure action.

On a side note, how about that active-to-pending ratio of 6,305:6,931? Any time that REOs and short-sales amount to less than 6% of the current inventory, and there are more pendings than actives you can say the market is in pretty good shape.

Contingents are similar to pendings; they probably have roughly the same chance of closing, because pendings are less of a sure bet at higher rates/prices.

Eminent Domain – Mortgages

Hat tip to daytrip for sending this in from nytimes.coman excerpt:

Robert and Patricia Castillo paid $420,000 for a three-bedroom, one-bathroom home in Richmond, Calif., in 2005. It is now worth $125,000.

The power of eminent domain has traditionally worked against homeowners, who can be forced to sell their property to make way for a new highway or shopping mall. But now the working-class city of Richmond, Calif., hopes to use the same legal tool to help people stay right where they are.

Scarcely touched by the nation’s housing recovery and tired of waiting for federal help, Richmond is about to become the first city in the nation to try eminent domain as a way to stop foreclosures.

The results will be closely watched by both Wall Street banks, which have vigorously opposed the use of eminent domain to buy mortgages and reduce homeowner debt, and a host of cities across the country that are considering emulating Richmond.

The banks have warned that such a move will bring down a hail of lawsuits and all but halt mortgage lending in any city with the temerity to try it.

But local officials, frustrated at the lack of large-scale relief from the Obama administration, relatively free of the influence that Wall Street wields in Washington, and faced with fraying neighborhoods and a depleted middle class, are beginning to shrug off those threats.

“We’re not willing to back down on this,” said Gayle McLaughlin, the former schoolteacher who is serving her second term as Richmond’s mayor. “They can put forward as much pressure as they would like but I’m very committed to this program and I’m very committed to the well-being of our neighborhoods.”

The city is offering to buy the loans at what it considers the fair market value. In a hypothetical example, a home mortgaged for $400,000 is now worth $200,000. The city plans to buy the loan for $160,000, or about 80 percent of the value of the home, a discount that factors in the risk of default.

Then, the city would write down the debt to $190,000 and allow the homeowner to refinance at the new amount, probably through a government program. The $30,000 difference goes to the city, the investors who put up the money to buy the loan, closing costs and M.R.P. The homeowner would go from owing twice what the home is worth to having $10,000 in equity.

Read full article here:

http://www.nytimes.com/2013/07/30/business/in-a-shift-eminent-domain-saves-homes.html?pagewanted=1&_r=1&ref=business&

SD Case-Shiller May +17.3% Y-O-Y

The San Diego Case-Shiller party keep raging in May, though the nationally the pace has “cooled’.  Here are our recent improvements:

Month
M-O-M
Y-O-Y
March ’13
+2.0%
+12.1%
April ’13
+2.8%
+14.7%
May ’13
+3.2%
+17.3%

“The report was unlikely to alter economists’ views that the housing sector continues to recover, making it a bright spot for the economy. All 20 cities rose on a yearly basis, led by a 24.5 percent surge in San Francisco.”

Zillow and the Future

Spencer was in town today discussing the Zillow features. www.zillow.com

These are mostly things that NAR, CAR, the MLS systems, and major brokerages have ignored or tip-toed around, but Zillow doesn’t seem to care any more – they are going for it. They are throwing millions of dollars at creating their own full assortment of products and services to benefit realtors and consumers directly.

Here is a snippet:

Zillow is reaching the consumers first, which means that the agents who are willing to pay the big money to be featured prominently will get the spoils. It could be seen as friendly extortion, but if it runs the cheap/lousy agents out of the business it will be a good thing.

Inventory Watch – Two Hot Weeks

For more perspective on the current inventory, consider the closed escrows over the last 30 days.

There were 150 NSDCC detached homes sold under $1,200,000 in the last 30 days (avg. $336/sf), so we can call the 262 actives about a 1.75-month supply.

There were 91 sales for $1,200,000+ (avg. $549/sf), which makes the 736 active listings about an 8-month supply of high-enders.

The UNDER-$1,200,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
April 29
201
$384/sf
36
2,599sf
May 5
195
$381/sf
36
2,633sf
May 9
207
$387/sf
35
2,624sf
May 18
241
$397/sf
33
2,566sf
May 23
236
$397/sf
34
2,529sf
May 30
230
$391/sf
35
2,591sf
June 5
229
$393/sf
35
2,577sf
June 11
239
$390/sf
34
2,569sf
June 17
246
$389/sf
36
2,577sf
June 24
255
$397/sf
36
2,535sf
July 1
244
$401/sf
38
2,526sf
July 8
256
$398/sf
38
2,530sf
July 15
269
$403/sf
38
2,486sf
July 22
258
$401/sf
39
2,442sf
July 29
262
$386/sf
39
2,493sf

The OVER-$1,200,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
April 29
620
$806/sf
94
5,183sf
May 5
606
$806/sf
93
5,223sf
May 9
628
$808/sf
93
5,150sf
May 18
653
$807/sf
92
5,161sf
May 23
661
$814/sf
92
5,141sf
May 30
659
$805/sf
95
5,222sf
June 5
663
$794/sf
96
5,185sf
June 11
672
$779/sf
96
5,163sf
June 17
661
$787/sf
99
5,164sf
June 24
679
$791/sf
98
5,097sf
July 1
705
$785/sf
94
5,084sf
July 8
702
$779/sf
95
5,100sf
July 15
736
$776/sf
94
5,038sf
July 22
748
$782/sf
96
5,043sf
July 29
736
$782/sf
100
5,057sf

We’ve had a couple of very strong weeks, and this might continue for the rest of the year (like it did last year!). The counts of new listings could drop, and/or OPTs come to their senses – and nerved-up buyers start gobbling:

Weekly NSDCC New Listings and New Pendings

Week
New Listings
New Pendings
May 30
70
84
June 5
87
64
June 11
77
69
June 17
73
66
June 24
100
69
July 1
86
64
July 8
81
53
July 15
106
54
July 22
105
89
July 29
71
74

Buyer Failed to Perform

A reader asked about a comment seen in the MLS remarks on a property that just came back on the market.

“What does ‘Buyer failed to perform….’ really mean?

It can mean anything, right?

Yes, because if the escrow failed due to the buyer’s job transfer, divorce, or losing a job, you would say that for clarity’s sake instead, wouldn’t you?

Buyer failed to perform is too vague and can mean anything.  Future buyers are going to ask so listing agents might as well concoct a better excuse right now to cover.

But lazy listing agents who are ticked that this stupid buyer cancelled for no “good” reason will just quickly throw the back into the MLS active bin and include the remarks, ‘Buyer failed to perform’ in order to stick it to the old buyer in hopes that they will see it.

The full sentence should be “Buyer failed to perform to listing agent’s unsavory demands”, because in most cases the buyer has figured out that they paid too much, and is looking for a discount or fresh compensation (i.e., credits).  Instead of finding a solution, the listing agent expects the buyer to pipe down and buy the house without making a fuss.

Market Snapshot

Open house over the weekend provided more reminders of the following:

  • Buyers are educated – they know the comps.
  • Buyers hope that higher rates mean lower prices.
  • Buyers are resigned to paying more than last year.

Those that will benefit, and could see values continue higher:

1.  Carmel Valley, due to thin inventory. Nobody wants to leave!

2.  Newer, cheaper homes.

3.  Fully-renovated, turn-key homes.

4.  Coastal.

The rest will have more of a struggle, but the market is healthy enough to pick up any house with an attractive price.

There have been 1,910 NSDCC detached homes sold, year-to-date.  There are only 1,013 for sale – and 80% of those are above $1,000,000! It leaves about 200 houses for sale under $1,000,000, in an area of 200,000+ people.

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