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Home Sales to be Tested this Winter

Despite recent figures showing that house prices have increased for the last three months, concerns for this winter are starting to appear that housing may be in for a deep freeze. Three main factors are at the focal point of the debate: the tax credit expiration, default and distress sales and artificially low interest rates.  One or a combination of the three could slow down home sales and shift home prices downward.

In the Tri-Valley of Northern California, the area that Loan Mitigation Advocates has our headquarters, default and distress properties have been waning. The last few months have seen less foreclosure and short sale properties come on to the market.  Six months to over a year ago, these default and distressed homes where primarily found in the lower to middle price ranges. Many of the homeowners in this price range had secured subprime mortgages which later resulted in big problems and consequently led to foreclosures and short sales. Now, things are beginning to shift away from the lower to middle priced homes.  More homes at the middle to upper price ranges are expected to become default and distress sales according to a recent New York Times article.  “Plenty of pain yet to come,” said Joseph Shapiro, chief United States economist for MFR.

At Loan Mitigation Advocates, we are always trying to stay abreast of current market trends.  In talking to homeowners, we have identified that some homeowners at the higher price points have been more equipped financially to survive the downturn in the market.  Despite job losses or reduction in income, they have been able to live off savings or the liquidation of stock for a longer period of time.  Some have been able to adjust their lifestyle while others have found jobs to replace lost income. However, for those who have not been able to overcome their hardship, they are faced with the grim reality that their life savings is being wiped out.  They may be left with no choice but to consider giving up their home to short sale or foreclosure.

On top of the potential for more default and distressed sales, another factor that could weigh in on home sales is a rise in Read more

Is the Housing Market Set for a Rebound?

Some experts argue that the worst is behind us and others are predicting the worst is yet to come.

Here are a few recent reasons in support of a market recovery:

New Home Builds

• Based on a government report, new home building increased in August.  The Census Bureau reported that builders broke ground for 598,000 new homes during August, up 1.5% from a revised 589,000 in July.
• Building permits rose 2.7% to 579,000.
• The National Association of Home Builders reported their index of homebuilder confidence had risen a point to 19, its highest level since May 2008.

Resale Homes

At Loan Mitigation Advocates, part of our job is to stay abreast of trends in the real estate market.  We pay particular attention to inventory numbers and the ratio of normal sales to REO/short sale transactions.  In our local area of Northern California, inventory numbers are reaching staggering low numbers in some areas.  There have been cases of multiple offers and homes selling for more than their asking price.  We have also noticed less foreclosures and short sales coming on to the real estate market over the past few months.

On the flip side, there are some potential pitfalls in the near future that could put a damper on the recovery:

Recasting Loans, Foreclosures and Short Sales

According to CNNMoney.com, a large number of non-conventional mortgage loans, including interest-only mortgages and option ARMS, will reset over the next year or so. These resets will lead to increases in the monthly mortgage payments for homeowners. Many people will not be able to afford the increases.

The interest-only loans specifically pose a large threat.  These are homeowners who are paying only the interest payment for a fixed number of months.  Once the number of fixed months is up, the payment is based on principal and a new interest rate, resulting in a much higher payment in most cases.  There were a number of these type of loans created back in 2005 that are set to recast in 2010.

Besides the threat of interest-only loans, option ARMs could create problems as well.  The option ARM loan has provided a borrower the ability to Read more

Have We Reached the Floor in Housing?

The recent uptick in real estate activity has really started to bring out the optimists.  I follow CNBC, the NY Times, and the FOX news organizations fairly regularly.  It hasn’t been until recently that I started to see stories with a positive tone regarding the housing market or the economy.  Who knows, maybe it’s that spring is here and flowers are blooming outside and better weather is upon us.  Needless to say, the recent rash of positive stories started to get me thinking of whether we actually might be at or approaching the bottom of the market. 

As I thought more about this possibility, I jotted down reasons for why people are considering this to be the bottom.  Here is what I came up with:

• Inventory numbers are decreasing
• Open houses are bustling with more potential buyers
• Properties are spending less time on the market
• Interest rates are at historical lows

These are all good signs.  Unfortunately, there are two things that are holding us back from becoming a true believer – foreclosures and short sales.  There appears to be some misleading information out there that the number of short sales and foreclosures coming on the market have slowed considerably.

One site, Trulia offers to explain this information. Trulia recently reported that despite the large volume of foreclosures (see the list below), there has been a significant drop in the number of foreclosure properties coming on the market in some states.

1.  Las Vegas, NV (31,983)
2. Phoenix, AZ (19,075)
3. Chicago, IL (16,038)
4. Los Angeles, CA (9,913)
5. Sacramento, CA (9,346)
6. San Diego, CA (7,668)
7. North Las Vegas, NV (6,852)
8. Bakersfield, CA (6,744)
9. Miami, FL (6,699)
10. Tampa, FL (6,487)
11. Indianapolis, IN (6,377)
12. Stockton, CA (5,924)
13. Atlanta, GA (5,859)
14. Orlando, FL (5,855)
15. San Jose, CA (5,802)

 What is the central cause of the drop?

According to the Trulia article, a number of states are Read more

Say Goodbye to the $15,000 Home Buyer Tax Credit. Say Hello to an $8,000 First-Time Homebuyer Tax Credit.

This whole tax credit thing feels like an auction gone awry.  For the last week, we have heard numbers from $15,000 to $7,500 and back up to $8,000. Loan Mitigation Advocates have been involved in discussions with clients and co-workers about the exact make-up of the tax credit – everything from the actual amount of the credit to whom it applies – first time home buyers or all home buyers.  For a while, it seemed that we wouldn’t have a definitive answer.

Well, it looks like we have some answers.  We recently read a blog from Jay Thompson, a Phoenix Real Estate Broker, who has been following the action closely.  Here is a link to his site for those of you who are interested in getting some more insight.  Also, Jay provided a synopsis on the breakdown for the first-time homebuyer tax credit.

The bottom line is that the $15,000 tax credit for home buyers has been reduced to $8,000 and is now only specific for first-time home buyers.

For a chart that breakdowns the first-time home buyer tax credit Read more

$15,000 Home Buyer Tax Credit

Besides loan modifications, another way Congress is looking to stimulate the housing market is to provide deeper incentives for purchasing a home.  The latest is in the form of a tax credit.  The Senate recently voted to include a $15,000 homebuyer tax credit to the American Recovery and Reinvestment Act. 

Here are some of the proposed highlights:

• The money would not have to be repaid to the government
• An income restriction on who can claim the credit does not exist
• The credit is nonrefundable and can be claimed over two years
• The tax credit would be limited to primary residences
• When the credit goes into effect is still unknown

Keep in mind, this is just a PROPOSED bill and the contents of the bill are subject to change.  Both the Senate and the House need to work out any differences in each of their individual versions.  The reconciled bill will go back to voting and must be passed by both groups.  President Obama is putting pressure for a quick resolution and is pushing to have the bill signed within the next few weeks.

Predictions for Residential and Commercial Real Estate

Take plummeting house prices, mix in an unprecedented number of foreclosure and short sales, sprinkle in a more restricted ability to obtain loans and then combine all of that with a weakening economy and you have a recipe that has made 2008 one of the worst real estate years on record.

Unfortunately, the sentiment out on the street is that 2008 may have been only an appetizer for 2009. The Wall Street Journal recently put together an article that sheds light on what might be coming down the pipeline for both residential and commercial real estate.  Here are some of the highlights:

Residential

• Some experts predict that trouble in the residential real estate sector is expected to continue.
• Many are urging the Obama administration to push for broad programs to limit foreclosures, stimulate demand for homes, and stop the slide in prices.
• The Treasury Department is considering Read more

Hidden Amongst the Doom and Gloom, Signs of Hope for Housing in 2009

I have three words for you – mortgage interest rates.  This item has offered a glimmer of life amid the constant bombardment of painful and negative news about the economy and housing market.  The central entities directly impacting mortgage interest rates are Capitol Hill and in particular the Federal Reserve.  The Fed is taking an unprecedented commitment to restore the credit markets and promote an economic recovery.

In December of 2008, the Fed performed two moves.  They dropped its target rate to close to zero and committed to buying quantities of bad mortgage securities. These two moves are starting to have positive signs to the functionality of the market. The most obvious over the last month has been the impact to Read more

Why the Housing Market Will Recover in the Near Future

Today, we at Loan Mitigation Advocates are going to give you hope. Well, at least after you read this blog you may see a potential glimmer. This is the second part in a series reporting on opposing views of the direction of the housing market.  Our previous blog identified various reasons ‘Why the Housing Market Will Not Recover in the Near Future.’ This piece will focus on the support for a turn around in the market.

Here are five reasons why the housing market will show new life in the near future:

• Impact of Loan Mitigation and in particular, Loan Modifications
• Government Intervention
• Home Prices are Falling at a Slower Rate
• Pending Home Sales Recently Increased
• Website Traffic Has Increased

Impact of Loan Mitigation and in particular, Loan Modifications
This is becoming a viable option for many people who are faced with a hardship and consequently the possibility of losing their home.  One component of loan mitigation involves the step by step process of where a homeowner or a third party loan mitigator attempts to negotiate a modification to the existing loan. This is a very time consuming process and can take months to complete.  However, more and more banks are realizing the importance and cost effectiveness of loan mitigation. By keeping people in their homes, this will minimize the amount of short sales and foreclosures set to come on to the market and, at the same time, will limit the amount of write-offs that the bank will have to take. At Loan Mitigation Advocates, we have helped numerous individuals modify their loans and stay in their homes.  We will spend time with you assessing your situation and help you determine if you are a good candidate for a loan modification. If you need to discuss your current situation, feel free to call our 800 number or email us directly.

Government Intervention
Potentially the biggest X factor in the group.  It is truly an unknown in terms of Read more

Why the Housing Market Will Not Recover in the Near Future

Today, we here at Loan Mitigation Advocates are going to play the Devil’s Advocate.  This is the first part in a blog series reporting on opposing views of the direction of the housing market.  Our next post will discuss ‘Why the Housing Market Will Recover in the Near Future’.

Here are five reasons why the housing market is in for a long recovery period:

• Restricted Credit
• Home Sale Prices are Less than the Amount Owed by Sellers
• Number of Defaulting Prime Mortgages
• Number of Homes Currently on the Market
• Additional Rounds of Adjustable Rate Mortgages are Scheduled to Reset

Each one of these reasons is damaging to a housing market in itself.  However, when combined, we could be in for a much longer road to recovery than some think.

Restricted Credit
One component that has played a role in a slower housing recovery is the ever-changing lending world.  Lending standards have been tightening over the last few months and a tightening effect will make it more difficult for new borrowers to find loans.  The result will be less demand for homes and, in turn, inventory may increase.

Home Sale Prices Are Less that the Amount Owed by Sellers
More homeowners than ever are selling at a loss. Zillow.com reports that nearly 25% of all homes sold nationwide (in the last year) sold for less than sellers originally paid. Homeowners are walking away with less in their pocket when Read more

The Most “Underwater” Town in America is…

Mountain House, California. Interestingly, Loan Mitigation Advocates happens to be located only 25 minutes from this town. This news is so big that even the NY Times carried a recent story on the unfortunate circumstances facing Mountain House residents. The article states that close to 90 percent of Mountain House homeowners owe more on their mortgages than their houses are worth. This is the highest percentage in the country.

Mountain House is clearly a microcosm of this widespread problem. Many families located in this area and people across the nation are adjusting their spending habits due to the depressing economy and the burden of paying a high mortgage.

“Most people pay very little attention to what their equity stake is if they can make the mortgage,” said First American CoreLogic’s chief economist, Mark Fleming. “They think it’s a bummer if the value has gone down, but they are rooted in their house. When my house is valued at 50 percent less than it was, does this begin to challenge the way I’m going to behave?”

If Mountain House and the impact on the surrounding area are any indication, the answer is Read more

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