The Obama administration will begin working on new strategies for how to better sell previously foreclosed homes held by Fannie Mae, Freddie Mac and the Federal Housing Administration, which may include renting more REO.
The Federal Housing Finance Agency, the Treasury Department and the Department of Housing and Urban Development put out a request for information, seeking new ideas from market participants for selling REO. Currently, the government owns roughly half of the REO inventory in the U.S.
The agencies called on private property managers to submit ideas on how to reduce the REO portfolios at the GSEs and the FHA in a cost-effective manner. They also seek new ideas on property repair, sales strategies in specific hard-hit areas and new analysis of when to sell or even rent these properties.
There are 92,000 properties currently for sale from HUD, Fannie and Freddie. Inventory is different as many properties are held up and not currently on the market due to delays in the process or state and federal regulations. Fannie Mae held 135,719 REO properties at the end of the second quarter, and Freddie held an inventory of roughly 61,000 REO.
The agencies said there could be new programs developed for allowing the previous owner to rent the home or to allow current renters to become owners. They are also looking for private holders of REO to partner with the government in the effort.
FHFA Acting Director Edward DeMarco said Fannie and Freddie will continue marketing individual REO for sale, but they will also look at possibly pooling these properties in some areas to reduce credit losses and stabilize neighborhoods.
“Partnerships involving enterprise properties may reduce taxpayer losses and meet the enterprises’ responsibility to bring stability and liquidity to housing markets. We seek input on these important questions,” DeMarco said.
Treasury Secretary Timothy Geithner said solving glut of REO on the market is crucial to repairing housing finance overall.
“Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets, and support neighborhood and home price stability,” Geithner said.
HUD Secretary Shaun Donovan said millions of families, who have struggled to maintain their monthly payments, have seen the value of their home drop because of abandoned properties.
“At the same time, with half of all renters spending more than a third of their income on housing and a quarter spending more than half, we have to find and promote new ways to alleviate the strain on the affordable rental market,” Donovan said. “Taking steps to encourage private investment in REO properties and transition them into productive use will help stabilize neighborhoods and home values at a critical time for our economy.”
When the mainstream media starts talking to people who are actually participating in the marketplace, then we’ll have a consistent and accurate view of what’s happening. Until then, we’ll have guessers like these who come off as experts, but are really just grasping at straws:
Hat tip to JP for sending this along, fromUSAToday.com:
In the aftermath of the nation’s housing-market collapse and recession, more than 500 midsize and large cities have seen a rise in the share of homes that are rented rather than owned, according to a USA TODAY analysis of Census data.
Nationally, 34.9% of occupied homes were rented in 2010 compared with 33.8% in 2000, according to Census data.
Almost 4 million homes have been lost to foreclosures in the past five years, turning many former owner-occupied homes into rentals.
The shift to rental housing is potentially long-lasting and portends changes for neighborhood stability and how people build wealth, economists say.
“The changes are big but glacial,” says Mark Zandi, economist at Moody’s Analytics.
Hat tip to Mr. T for sending this along, fromCNNMoney.com:
Move.com, which runs the Realtor.com website, has identified the 10 top metro areas where it thinks housing markets have started down the road to recovery. Move.com, with a database of homes for sale all over the United States, looked at several factors.
One is changes in asking prices, which reveals seller confidence (or lack thereof). Then there’s the time homes are sitting on market, which shows how fast homes are selling. Move.com also looked at how often prospective buyers were logging on to Realtor.com.
One example of a turnaround town is San Diego. Like the rest of the coastal California housing markets, it went through some post-bubble hard times, with high foreclosure rates and a big dip in home prices. They fell about 40% from their boom highs.
Now, with mortgage related foreclosures pretty much cleaned out of the system, the city has begun a recovery; it has been on the comeback trail for more than a year. Its prices rose 1.6% in 2010, according to Fiserv.
Move expects the recovery to strengthen. Sales have gotten brisker and inventory lasts on the market only a median of 79 days, about half the national median. Sellers have noticed the improvement and raised their asking prices 1.4% in March, compared with a month earlier.
As you may know, there is a proposal before regulators to require a minimum of 20 percent down on all residential transactions. If allowed to take effect, the rule would put home ownership out of reach for middle-income Americans. It would take the average family 14 years to save up the down payment to buy a home. We just don’t need more hurdles. So please take time to visit the REALTOR® Action Center to answer the Call for Action and tell Congress this does not work for our industry or our country.
Larry Summers, one-time director of President Barack Obama’s National Economic Council, believes the economy is recovering, albeit not as fast in some areas as desired, but enough to forestall a double dip.
“There is no longer any talk of a depression,” he told journalists at a Lincoln Institute of Land Policy seminar in Cambridge, Mass., over the weekend. “Now, there’s very little talk of a double dip.”
He pointed out that the economy has grown for seven straight quarters and the unemployment rate has fallen.
“The stock market has had the best two-year run since the beginning of the 20th century,” he said. He also said corporate profits are best in any two-year period since World War II.
But he acknowledged things are not improving fast enough.
“To be sure, we have a huge concern that the recovery is not nearly as rapid as we would like,” he said. “The housing sector remains extraordinarily weak. The nation’s long-term debt situation is not where it should be. There have been major steps in financial regulation but we can’t be certain we will avoid another financial crisis.
“But the catastrophe that could have been averted has been averted , and I think it has been averted with a combination of the right diagnosis, determined effort to act on that diagnosis, a good deal of luck and an important change in psychology.”
Summers, who served in the administration from 2009 until early this year, returned to Harvard as president emeritus. He was Treasury secretary under former President Bill Clinton and chief economist of the World Bank.
Home sales in Southern California grew between February and March, but remain 5.2% below year-ago levels, data firm DataQuick said Wednesday.
The La Jolla, Calif.-based research firm said home sales grew 35.1% on a month-to-month basis in March, but signs in the housing market still point to consumer resistance as the job market remains subdued.
In the counties of Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange, DataQuick reported 19,412 new and resale home sales in March, up from 14,369 in February.
Even still, that number is trending below the 20,746 sales recorded during the same period last year.
“Sales always increase from February to March,”DataQuick said in a release. “Last month’s sales count was 21.4% below the 24,706 average for all the months of March since 1988. Sales so far this year are 20% below the norm. During the last half of 2010 sales were 25% to 30% below average”
Sales of newly built homes fell to their lowest levels in 23 years last month.
Foreclosures are going to continue to plague the market “for a good while,” DataQuick concluded. However, the research firm sees “mortgage availability” as the key to unleashing a buyer’s market. Foreclosure resales made up 36.4% of all resales last month, down from 37% a month earlier.
“If a well-crafted home loan program comes down the pike, it’s going to make some lending institution the dominant player, at least for a while,” said John Walsh, DataQuick president.
In March, adjustable-rate mortgages accounted for 7.8% of last month’s purchase loans, while jumbo loans — or loans at the limit of $417,000 — made up 15.9% of March’s purchase lending, compared to 15.6% in February.
Cash purchases made up 30.5% of March home sales, with buyers paying a median of $205,250. Government-insured FHA loans represented 32% of all mortgages used to purchase homes last month.
This year’s March sales in SoCal were 5% lower than last year?
What about the housing tax credits?
The mainstream media said that the tax credits were the cause for the rejuvenated market last tear, and just wait until this year when sales fall off a cliff.
The HW reporter only covers housing, and Dataquick…..well, all they cover is housing.
Yet nobody wants to look a little deeper at the situation, and within five minutes discover the real problem with sales today.
The ONLY reason a SoCal home doesn’t sell today is because its list price is too high – and in most cases, WAY too high.
Detached and attached March sales in San Diego County (from MLS):
Year
# of Sales
Avg. SP
Avg. $-per-sf
SP:LP
DOM
2010
2,996
$411,249
$241/sf
99%
67
2011
2,815
$420,169
$232/sf
97%
82
Year-over-year sales in March were down 6%, and the average cost-per-sf was down 4%? That’s all? The average sales price went up? Either the tax credits didn’t have much impact, or this year’s market has held up pretty good so far.
Here are today’s Active Listings in SD County:
SD Co.
# of ACT
Avg. SP
Avg. $-per-sf
DOM
ACT
12,132
$705,002
$311/sf
95
Today’s average list price is 83% ABOVE LAST MONTH’S AVERAGE SALES PRICE, and the $$-per-sf is 34% higher. There’s no surprise that recent sales are slightly lower with this much greed in marketplace.
But the over-priced turkeys do help the good buys stand out – thank you OPTs!
If today’s sellers would get off their high horse, sales would easily surpass last year’s healthy pace.
Home prices fell 6.7 percent in February year over year, according to a new report from CoreLogic. That numbers includes distressed sales, that is, sales of foreclosed properties or short sales, where the bank agrees to let the homeowner sell for less than the value of the mortgage. If you take those sales out, however, home prices were basically flat.
“When you remove distressed properties from the equation, we’re seeing a significantly reduced pace of depreciation and greater stability in many markets,” notes CoreLogic’s chief economist Mark Flemming. “Price declines are increasingly isolated to the distressed segment of the market, mostly in the form of REO sales, as the stock of foreclosures is slowly cleared.”
Distressed sales, though, still make up more than a third of all home sales, according to the National Association of Realtors, and that number is likely to rise at least in the near future. The banks have slowed the process of foreclosure, and that has reduced the number of bank owned properties hitting the market lately, but it’s a whole different story with short sales.
“Absolutely we can see on the ground, it’s just happening,” says Robert Cruz, a real estate broker just south of San Francisco who deals primarily in short sales. “The banks are asking us to go out and engage the borrower, find the borrowers who have defaulted or re-defaulted and list the properties before they have to foreclose.”
Short sales used to be a long, tedious process with a very low success rate. “Short sales used to be a waste of time,” Cruz remembers. “Now it’s totally changed.”
Much of that is due to banks streamlining the process and a new government incentive program, but much of it is coming from the banks themselves. Cruz says in the first quarter of this year his firm’s short sale closings were up at least 60 percent, thanks to the banks and servicers being far more aggressive in pursuing them; not only are they pursuing them, but they are paying for them.
While the government’s Home Affordable Foreclosure Alternative Program offers borrowers $3000 in “relocation assistance” after successful short sales, Cruz says some of the banks are paying borrowers up to $25,000. He says the banks know the sellers are more savvy today and know they can live rent free for at least a year before a bank takes possession of the home in foreclosure. $3000 isn’t much incentive to move quickly; $25,000 is.
“It’s a sea change,” adds Cruz.
So why am I telling you all this? Because if short sales continue to increase at this rate, even just this year, that’s going to push the home price numbers down even further. Sure, if you take out the short sales, the numbers will look better, but those big headline numbers generally include short sales, and that will further erode confidence. More short sales will also force organic sellers and home builders to try to compete with lower prices. Short sales may be better for the banks and better for borrowers’ credit scores, but they will take their toll on the greater market.
Major banks may be forced to let severely delinquent homeowners sell their houses for less than the loan amounts owed as part of a broad settlement of federal and state investigations into botched foreclosure paperwork, according to government officials involved in the negotiations.
The requirement to allow so-called short sales would be in addition to forcing mortgage servicers to reduce the amount some homeowners owe on their loans, said two officials, who spoke on the condition of anonymity because negotiations are ongoing.
The goal of short sales would be twofold: provide a quicker and more economical way for banks to dispose of distressed real estate and to help stabilize the real estate market by clearing out a backlog of defaulted mortgages that are poised for foreclosure.
They would be used in situations in which borrowers were so underwater that the more costly and time-consuming process of foreclosure would seem to be the only option.
“Short sales just command a better premium than foreclosures,” said Glenn Kelman, chief executive for online brokerage Redfin. “It’s like day-old bagels. They never sell for the same price. If they sit there for a while, nobody wants them because houses just break down when they are left alone.”
Foreclosures continue to drive down housing values, with prices in 20 major U.S. cities down an average of 3.1% in January compared with the same month a year ago, according to new data from a Standard & Poor’s/Case-Shiller index. Prices in Los Angeles were down 1.8%.
The latest proposal is among those to be discussed when executives from the top five mortgage servicers meet Wednesday in Washington with state and federal officials working on a settlement that could range from $5 billion to $25 billion.
Short sales would help accelerate the turnover of homes from borrowers who are months behind on their mortgage payments, Kelman said.
Some sellers are not eager to complete a short sale because it would force them out of their home. And lenders can withhold approval of a short sale if they don’t like the price.
Banks often resist such sales because they are difficult to execute, particularly when multiple creditors and other parties are involved. In addition, short sales lock in losses for the lender that might be reduced if the sale is delayed until the market improves.
Requiring banks to allow short sales could fuel further opposition from some Republican attorneys general and members of Congress who already have criticized the broad scope of the proposed settlement.
Some House Republicans have derided possible payments of $20,000 to encourage distressed homeowners — dubbed by some as “cash for keys” — as a bailout for irresponsible behavior.
Seven Republican attorneys general recently wrote to Iowa Atty. Gen. Tom Miller, a Democrat who is leading the negotiations for the states, saying the proposals go beyond resolving damages from foreclosure paperwork problems. Those problems include robo-signing, the practice of bank employees’ signing sworn documents without reading or understanding them.
“I think it’s morphed into something that’s bigger and different than what we talked about in the beginning,” said Oklahoma Atty. Gen. E. Scott Pruitt, a Republican who organized the signing of one of the letters.
Hat tip to Ross and Local Boy, who sent this in fromCNN/Money.com:
NEW YORK (CNNMoney) — Renters beware: Double-digit rent hikes may be coming soon.
Already, rental vacancy rates have dipped below the 10% mark, where they had been lodged for most of the past three years.
“The demand for rental housing has already started to increase,” said Peggy Alford, president of Rent.com. “Young people are starting to get rid of their roommates and move out of their parent’s basements.”
By 2012, she predicts the vacancy rate will hover at a mere 5%. And with fewer units on the market, prices will explode.
Rent hikes have averaged less than 1% a year over the past decade, according to Commerce Department statistics, adjusted for inflation. Now, Alford expects rents to spike 7% or so in each of the next two years — to a national average that will top $800 per month.
In the hottest rental markets, the increases will likely top the 10% mark annually for the next couple of years.
In San Diego, Alford anticipates rents will rise more than 31% by 2015. In Seattle rents will climb 29% over that period; and in Boston, they may jump between 25% and 30%.
This is a sharp change from the recession, when many Americans couldn’t afford to live on their own. More than 1.2 million young adults moved back in with their parents from 2005 to 2010, said Lesley Deutch of John Burns Real Estate Consulting. Many others doubled up together.
As a result, landlords had to reduce prices and offer big incentives to snag renters.
Now that the recession is easing, many of these young people are ready to find new digs, mostly as renters, not owners. Plus, the foreclosure crisis continues unabated, and the millions losing their homes are looking for new places to live.
Apartment developers many not be able to keep up with this heightened demand, which will force prices upwards, according to Chris Macke, a real estate analyst with CoStar, which tracks multi-family housing trends.
“There will be an envelope of two or three years,” said Macke, “when the rise in demand for rentals will exceed the industry’s ability to meet it.”
Plus, Alford added, “there’s been a shift in the American Dream. We’re learning from our surveys that a huge proportion of people are choosing to rent.”
They’ve experienced the downsides of homeownership — or seen friends and family suffer — and don’t want to take the risks or pay the higher costs of homeownership.
The Obama administration will begin working on new strategies for how to better sell previously foreclosed homes held by Fannie Mae, Freddie Mac and the Federal Housing Administration, which may include renting more REO.
