HOW DO I SAY THIS?

It seems as if everywhere you look, there's nothing but good news about the real estate market.  Even at the conference I attended most recently in Phoenix, all the buzz was about how the market is healed. 

Now that started to give me pause, because the attendees at this conference are the cream of the crop in real estate - the top 3% of agents in the nation.  And I know you all thought I was just a Negative Ninny four years ago when I said this downturn would last much longer than just a season.  So, NEVER wanting to be wrong, I had to come back and put this information into context, because this "feeling" everyone was having just didn't seem to square up with the numbers.

First of all, we've come off a year that included a Foreclosure Moratorium.  That moratorium has allowed about 49 months worth of inventory to stockpile.  It's commonly referred to in the press as the Shadow Inventory.  These are homes in some stage of foreclosure; everything from being 60 days late to being sold as a vacant house on your street.

Secondly, many of the Realtors I talked to in Phoenix were reporting they were having low inventory, multiple offers and sometimes offers over asking price.  How could that be, I wondered.  A closer look tells the story.

Many of these agents were from some of the hardest hit states in the nation; places like Florida, Arizona, California and Ohio.  In some cases, real estate has dropped up to 87% from it's high point in '05 and '06.  It's no surprise that investors are coming and grabbing up these deals.  That combined with that moratorium I spoke about - and you can see how it would "feel" like everything in just ducky!

What we've known for quite a while, though, is that this is going to be a see-saw recovery.  Up and then down and then up again.  And we all know that real estate is local.  So I thought it would be helpful if you could see exactly what's going on in our market.

Here's a map of the 6 major zip codes in the Mid-Willamette Valley.  As you can see, we've got some work to do here in the Valley before we start talking recovery. 

While this map is a little tough to take, the good news is our real estate market never fell like values did in the states of Arizona, California or Florida.  And besides - we're Oregonians....tough to the core! 

Amy's 2012 Real Estate Predictions

2012 Predictions!

Can I just say, 2011 was not my favorite year....not at all. But it's in the books, and I'd say as a benchmark, we've got some good things to look forward to in 2012. So lets focus on real estate!

1. We have historically low interest rates. If you're thinking of buying or refinancing - do it!

2. Nationally, home prices should be stabilizing. Locally we are expecting another dip in prices, because of our large dependence on government and our school district for employment.

3. The number of sales per year seems to have stabilized. We seem to have found the normal "set point" for the Mid-Willamette Valley.

4. We will see rising inventories as foreclosures again become more of a force in the marketplace.

5. Distressed properties will be an increasing part of the sales pie.

6. Improved Short Sale processes at the lender level will help even more families avoid foreclosure.

7. Homeownership rates will continue to fall, providing an opportunity for investors to purchase and provide housing for local families.

8. Foreign and domestic investors will make up about 25% of the buying market.

9. First time homebuyers will make up a signifcant portion of the market.

10. Buyers are still looking for a bargain; both in price and presentation.


All in all, we expect more of the same. In a way, that's good news. I'm often asked, "what is it going to take to turn this around?" My answer is always the same, "jobs." And that's what it is. No one is going to risk buying a home if they're worried about their job.

We're also advising our clients that given where we are, any real estate decision needs to be put in the context of about a 15 - 20 year plan. And No, I'm not kidding. It's really going to take that long.

Hopefully this gives you some insight into what to expect. We're here if you have questions, and we want to put the word out that we're available to come speak to any group who might want more insight into the Valley real estate market or the in's and out's of Short Sales.

Please don't hesitate to call. We're here to advise in all things real estate!

Happy New Year!

Housing Market: What’s Behind and What’s Ahead

 

The housing market in 2011 was a year that saw changing trends and breaking records.

Mortgage Rates

15- and 30-year fixed mortgages hit record lows during 2011. via money.CNN.com

Freddie Mac’s Primary Mortgage Market Survey showed the interest rate for a 30-year fixed-rate loan averaging 3.91% last week, the lowest in the 40 years of the survey’s history. The average interest rate for a 15-year fixed-rate mortgage was 3.21% — also a record low.

Mortgage rates are expected to remain low well into 2012.

Greg McBride, a senior financial analyst at Bankrate.com, commented that “for well-qualified buyers interest rates should be no impediment to home buying in 2012.”

Foreclosures & Loans

There were 14% fewer foreclosure notices served in November year-over-year. via Business Week

The  rate of foreclosure filings slowed considerably in 2011, as banks and servicers responded to the documentation and processing challenges from 2010.

The foreclosure liquidation rate is anticipated to rise next year. via Zillow.com

With the settlement between the states’ attorneys general coalition and the major lenders and servicers coming to a head, Zillow sees an increase “either in conjunction with a settlement… or, alternatively, in the aftermath of the settlement effort falling apart.”

Home Values

The slide in home values since 2008 slowed in 2011. via International Business Times

Zillow projects that home values will fall 35% less this year than in 2010; and the Case-Shiller Home Prices indices show that the rate of decline slowed from the second quarter of this year to the third quarter (from 5.8% to 3.9%).

Home values will likely fall a bit more to finally bottom out in 2012.

Jonathon Miller, president and CEP of Miller Samuel, predicts that the decline will be considerably less than this year.

Home Sales & Starts

In 2011, new single-family home sales are on pace to hit a record low of 301,000. via Business Week

On the flip side, however, existing home sales rose to 4.42 million this fall, the highest in 10 months.

Total home starts (houses and apartments) jumped 9.3% month-over-month. via Internation Business Times

This rise from October to November represents the fastest pace in more than 18 months. Although single-family home construction remains stalled, Fitch Ratings projects a 6.7% gain in residential housing starts next year.

Confidence

The Housing Market Index rose to 21 from last month’s 19. via Mortgage News Daily

The National Association of Home Builders (NAHB) surveys its members monthly to compile the index. Although not huge, 20 is the highest the index has been since May 2010.

 

 

 

 

Are Home Values Finally Stabilizing?

Zillow Real Estate’s latest market report says maybe

On a year-over-year basis, the Zillow® Home Value index declined 5.1 percent. Zillow reports that “the rate of monthly depreciation has stabilized around -0.2 to -0.3 percent over the last few months.”

Of the 156 metropolitan statistical areas covered by Zillow, while 95 showed monthly depreciation in home values, 39 areas actually saw an increase in monthly home value this past October. Twenty-two (22) areas remained flat.

The nine markets that saw the largest year-over-year home value increases from October 2010 to October 2011?

• Tulsa, OK— one-year price gain of 6.2%
• Oklahoma City, OK — one year price gain of 3.1%
• Lincoln, NE — one year price gain of 2.7%
• Madison, WI — one year price gain of 1.3%
• Honolulu, HI — one year price gain of 1.3%
• Fort Collins, CO — one year price gain of 1.3%
• Fort Myers, FL — one year price gain of 0.4%
• Pittsburgh, PA — one year price gain of 0.4%
• Boulder, CO — one year price gain of 0.2%

Another sign of stabilization is the decline in the foreclosure liquidation rate — at 8.1 out of every 10,000 homes being liquidated as of October, 2011 — down from the all-time high of 10.7 out of every 10,000 homes in October, 2010. That’s a drop of nearly 25 percent.

For more details on the Zillow Home Value Index and the latest Zillow Real Estate Market Report, check out these articles:

• U.S. Home Values Continued Fall in October; Rate of Decline Stabilizes (MarketWatch)
• Real Estate Markets: Top 9 Gainers in 2011 (Huffington Post)
• A Bit of Good Real Estate News? (Realty Times)

The Housing Market One or Two?

Analysts disagree over definition and future of the market

Last week, while some real estate analysts offered a somewhat rosy outlook regarding “stabilizing home prices for non-distressed property,” several industry experts from news sources argued that you cannot simply split the market in two pieces — distressed and non-distressed to paint the picture you want.

So what’s the bottom line? Is the market flat, dropping or rising?

Month over month, CoreLogic report that home prices overall fell 3.9 percent in October, and the S&P/Case-Shiller home price index was down 3.9 percent in September (which represents a three month running average of both distressed and non-distressed sales).

Removing the distressed sales(foreclosures and short sales) from CoreLogic’s analysis, however, home prices fell just 0.5 percent in October.

The Wall Street Journal noted that for the first nine months of 2011, non-distressed property prices were relatively stable, with only a two to three percent decline year over year. A real estate analyst from Barclays, a proponent of looking at the two market segments separately, feels that if the pricing trend continues (distressed pricing dropping while non-distressed pricing stabilizes), it could have the effect of “stabilizing something else: home-buyer confidence.” Only time will tell.

For more details, see:

• This blog post on HSH: Home prices may be more stable than we think
• CNBC Real Estate Reporter Diana Olick’s article, Are There Really Two Housing Markets?
•  WSJ mortgage and housing writer, Nick Timiraos’ post: Why Home Prices Are (and Aren’t) Stabilizing

More and More Experts Say Principal Reduction Is the Answer

Why does the head of Fannie Mae and Freddie Mac refuse to consider it?

Last week, a group of Democrats from the House sent a letter to Edward DeMarco (who currently heads up the agency (FHFA) that oversees Fannie Mae and Freddie Mac) asking for a better answer as to why he refuses to implement a principal reduction program at Fannie and Freddie.

The letter cites industry experts, all of whom advocate principal reduction as necessary to bring the housing market and economy out of the dumps, including:

• Chairman of the Fed, Ben Bernanke
• a former Chairman of the Council of Economic Advisers
• a former Vice Chairman of the Fed
• a former Special Inspector General for the Troubled Asset Relief Program

Even Greg Lippman, the former Deutsche Bank AG trader who made a fortune betting against subprime mortgages, has weighed in on the side of mortgage reduction. Now chief investment officer for a New York-based hedge fund, Lippman wrote a letter to investors saying “principal reductions are necessary to help ameliorate the housing crisis.” (For more on Lippman’s perspective and additional expert opinions, read this Bloomberg News article.)

DeMarco claimed in a Nov. 16^th hearing that his agency has “concluded that the use of principal reduction within the context of a loan modification is not going to be the least-cost approach for the taxpayer.” (For a great summary of DeMarco’s exchange with Rep. John Tierney (D-MA), read this post on Fire Dog Lake.)

According to the Democrats behind the letter, DeMarco has too long been spouting “superficial excuses about why principal reduction programs are not feasible at Fannie Mae and Freddie Mac, despite a growing chorus of economists and other experts who believe these programs serve the long-term interests of taxpayers.”

Felix Salmon, an award winning financial journalist, boils the likely real reasoning behind DeMarco’s stance down to the following:

If we [the FHFA]do principal reductions, the accounting conventions finally grow some teeth, and we’re forced to take a write-down. Since we don’t want to recognize reality and take that write-down, we’re simply going to avoid doing principal reductions instead.” (read Salmon’s full post on “Ed DeMarco’s Obstructionism” here)

The Democrats’ letter calls for DeMarco to provide documentation that proves there are statutory provisions preventing FHFA from letting Fannie Mae and Freddie Mac reduce mortgage principal. In addition, they asked DeMarco for an analysis that compares the financial implications of foreclosures with the cost of debt reduction. DeMarco’s deadline to provide these documents is December 9^th. 

Holiday Mortgage News. More of the Same

Rates continue to hover near historic lows

The short holiday week saw little change in mortgage rates.

According to Mortgage News Daily, the Best-Execution Rates for Friday, November 25^th ranged from 3.875% (“very few”) to 4.125% (“some”), with most seen at 4.0%. Realty Times reported the results of Freddie Mac’s Primary Mortgage Market Survey for the three-day week:

• 30-year fixed-ratemortgage averaged just under 4.0%, down from 4.40% a year ago
• Average rate for 5-year adjustable-rate mortgages (ARMs) reached a new low of 2.91%, down from 3.45% last year
• Average rate for 1-year ARMs was 2.79%, down from 3.23% last year

Although home sales were slightly up in October, according to the National Association of Realtors (NAR), they could have been even better had there not also been a high number of failed sale contracts in October. NAR’s chief economist attributes the failed contracts in part to appraised values not matching the negotiated sale price and to tight credit standards.