Here’s a tool from CNN/Money to predict the change in various real estate markets.

Corvallis, OR Metropolitan Statistical Area:

• Forecast change: second quarter, 2011 – second quarter, 2012 +3% 
• Forecast change: second quarter, 2012 – second quarter, 2013 +9.9%

This tool tracks 384 markets. It will be interesting to see what actually happens.

Track a market near you: Home Price Data on 384 Markets

These charts of 30 year mortgage loan rate histories (Freddie Mac rates) were provided by a local lender and are used with permission.  It is very interesting to see how low rate really are right now, especially in relation to the past.

If it makes sense for your life goals, the lower price of homes coupled with the low interest rates create a time of opportunity.  But, only if it makes sense for your life goals as well.  There is financing available for people that have good credit and verifiable income.

These charts were provided courtesy of:
Dolly Davis
Production Manager
Mortgage Consultant
PrimeLending, A PlainsCapital Company
1390 Liberty St S.E.
Salem, OR 97302
Phone: 503-362-0111
Mobile: 503-580-0029
Fax: 877-643-6101
www.dollydavis.com

Foreclosure numbers–A Comparison

We often hear the numbers and think how bad it is. What if you look at the opposite side?  How bad is it?

There are approximately 61,800,000 homeowners in the US

One third, that’s 33%, of US homeowners own their homes free and clear—that’s right, no mortgage.

Nationally, 3.4% of mortgages are in foreclosure (approximately 1,400,000). This percentage is only measured against homes with mortgages. That means that 96.6% (approximately 41,200,000) of homeowners with mortgages are not in foreclosure.

Of all the homeowners in the country 60,400,000 (or 97.7% of all homeowners) are not in foreclosure.

Of course, on a home-by-home, family-by-family basis, any foreclosure is a crisis. But, the numbers from a statistical “big picture” standpoint need perspective. 

Related Link: The Inventory Of Foreclosed Properties Has Begun To Shrink…

Note: A property moves into the foreclosure inventory when the mortgage servicer places the property into the foreclosure process after serious delinquency is reached and remains there until the foreclosure is completed.  Calculations assume that information provided by CoreLogic is accurate. Some variance is numbers results from rounding in calculations.

This is a great explanation and graphic concerning the states that are most impacted by seriously delinquent mortgages.¹

Tie this to the concept that the “normal level” of distressed housing inventory is under 5% (REALTOR® Magazine January/February 2012 “Clean Slate”)  one can see that there are specific areas of the country with ongoing issues, but that there is improvement.

“The inventory of foreclosed properties has begun to shrink, and the pace at which properties are entering foreclosure is slowing. While foreclosure filings are being curtailed by a variety of judicial and regulatory constraints, mortgage servicers are completing REO sales faster than they are completing foreclosures,” said Mark Fleming, chief economist with CoreLogic. “This is the first time in a year that REO sales have outpaced completed foreclosures, and part of the reason for the decrease in the foreclosure inventory.”

According to our analysis, for 2011 completed foreclosures totaled 830,000 compared with 1.1 million in 2010. In December 2011 there was a month-over-month decrease in completed foreclosures to 55,000 from 57,000 in November 2011. The December 2011 completed foreclosures figure was also down from one year ago when it stood at 67,000. From the start of the financial crisis in September 2008, there have been approximately 3.2 million completed foreclosures.

Nationally 1.4 million homes, or 3.4 percent of all homes with a mortgage, were in the foreclosure inventory as of December 2011. The foreclosure inventory is the stock of homes in the foreclosure process.

*A property moves into the foreclosure inventory when the mortgage servicer places the property into the foreclosure process after serious delinquency is reached and remains there until the foreclosure is completed. The foreclosure inventory is measured only against homes with an outstanding mortgage, rather than against all homes. Nationwide, roughly one-third of homeowners own their homes outright.

 ¹Reprinted with permission from TICOR Title, Corvallis, Cheryl Summers

Homeowner Relief and the $25-billion Foreclosure Deal

Is this another case of “I’m from the government and I’m here to help” or will it really help? Is this another pit of money that tax payers and the American public will fund? Only time will tell…

Some points I’ve gleaned from the reporting:

• This is in part “restitution” from large mortgage servicers for improper practices during the foreclosure process. (In my opinion, this will create an expense to the lenders that will be paid for by increasing costs to other consumers–odds are not on the side of the lenders taking less profit.) 
• The settlement creates new “standards” for mortgage servicing to be overseen by and independent monitor (aside: is this just another bureaucratic layer?)
• One aspect that appears to be quite helpful is that consumers will have one point of contact when working with their lenders toward loan modifications.  The Washington Post reported that the lenders will not continue to process foreclosures and modifications at the same time on the same loan.
• The lenders have agreed to devote billions of dollars to partially compensate people that lost their homes and help current homeowners avoid foreclosure.
• There is $17 Billion earmarked as principal reductions (paying down the loans) for about 1 million homeowners.
• $5 billion in cash is designated as restitution for foreclosure paperwork problems and other issues with the servicers.  1.5 Billion of the state money will be distributed directly to people whose home were foreclosed between 2008-2011 and there was a problem with the way the process was handled (lost documents, robo-signing).  The average check would be between $1,500-2,000.
• 9 additional servicers have been asked to sign-on to the agreement; if they did the dollar figure could go as high as $45 billion.
• Loans that are owned/serviced by Fannie Mae and Freddie Mac are not eligible (Fannie Mae and Freddie Mac are by far the largest servicers of mortage loans in the country, this will narrow the field of those able to take advantage of the settlement significantly)
• The settlement is said to address civil claims it does not prevent pursuit of criminal actions at a federal or state level.

All of this is well and good, provided the funding goes to those that were really harmed or are in need.  But, history often repeats itself.  What I’d like to not see is a process fraught with fraud (those not harmed benefiting), a process that is not bogged down in bureaucracy, and huge piles of money ear-marked to help people that end up absorbed into the overhead of the process.

Further, early in the melt-down, there were reports of abuses in the loan origination process that involved borrowers submitting fraudulent loan applications.  A couple of examples might be: 

• Flippers that took loans intended for primary residences when they really did not intend to do so or borrowers that used “stated income” and inflated their income just to qualify.
• Those that filed fraudulent loan applications and then lost their properties to foreclosure, should not benefit from this settlement.
• People that refinanced took the cash and then defaulted
• People that took “strategic” default as a way “out” by buying a replacement property then walking.

Related Links:

LA Times Story

Washington Post Story

The Settlement An overview

I picked up a couple of interesting bits of news this week about the economy. Thought I would share:

Last week’s Pending Home Sales index from the National Association of REALTORS® (nar) went up 7.3% in November, the highest level since April of 2010.  The 2010 numbers were pumped up because of buyers that were in the market to take advantage of home buyer tax credits available then, that are not available now.

NAR chief economist, Lawrence Yun (and one of Inman’s 100 most influential)  said,  “Housing affordability conditions are at a record high and there is a pent-up demand from buyers who’ve been on the sidelines,  but contract failures have been running unusually high. Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage”.

I think that some some contract failures are preventable, especially when both the buyer and seller want to see the transaction through — having the right team in place, real estate professional, lender and title/escrow in place, can make a huge difference on an individual basis. Local markets and individual circumstances drive the reasons for contract failures.

According to NAR, It should be noted that “Pending home sales are not affected by the recently published rebenchmarking of existing-home sales because the index uses a different methodology based directly on contract signings, and is adjusted for seasonality.

and

According to USA Today, news sources and the Bureau of Labor Statistics, the, U.S. unemployment numbers are the lowest in 3 years.  “The U.S. job market strengthened in the second half of 2011 and added 200,000 jobs in December while the unemployment rate fell to 8.5% from a revised 8.7% a month earlier.”

Bright spots.  I’m looking forward to serving your Real Estate needs to 2012.  If you have questions about Corvallis, Albany, Philomath or other mid-Willamette Real Estate feel free to get in touch.

Contact Dava

The following are some “local” fact for the Corvallis and Albany, Oregon area and surrounding markets.

It’s very interesting to see a comparison between 2009 and 2010 figures for the number of foreclosures. Some communities have obviously been more impacted by job loss and down-turn than others.

I think this is a pretty good explaination of why the Corvallis market is a little more stable than some of the other markets and why it’s difficult for buyers coming from other regions of the country to understand our market. It also clearly demonstrates that there are some good buyer opportunites out there.

Note: total sales has approx. a margin of error due to the way sales data is aggregated and stored by third parties

Information provided by First American Title

Misinformation regarding a 3.8 Percent “Transfer Tax” Rumors continue to be “out there”

Misleading e-mails and other communications about the 3.8 percent Medicare tax in the health care reform law continue to circulate. You may be receiving some of these messages. The communications typically say the 3.8 percent tax is imposed on unearned income that includes the sale of a principle residence, but the tax that’s being referenced is far more narrow than that and only has the potential to impact a small sliver of high-income households who receive investment income. The $250,000-$500,000 capital gains exclusion remains in place.

Application of the Tax

This tax WILL NOTbe imposed on all real estate transactions. When the legislation becomes effective in 2013 it may impose a 3.8% tax on some (but not all) income froma interest, dividends, rents (less expenses) and (capital gains (less capital losses). The tax will fall only on those individuals with an AGI (Adjusted Gross Income) over $200,000 and couples finling a joint return with more than $250,000 AGI.

Types of Income

Interest, dividends, rents (less expenses) capital gains (less capital losses)

Formula

The new tax applies to the lesser of

• Investment income amount
• Excess AGI over the $200,000 or $250,000 amount

Please see the following National Association of REALTOR^® Brocure that follows for Scenarios and Examples:

An interesting item in DSNews: Economists Say Home Prices Have Already Hit Bottom

I’m glad that a panel of economists could read the writing on the wall:

 “When it comes to the distressed side of the business, it’s become clear that the nation’s high level of unemployment is now one of the primary triggers of default among struggling homeowners. Getting more people back to work is key to a recovery in housing and getting a handle on still-rising delinquency numbers.”  

Home prices in some markets have hit the floor, some may be rebounding and some may still experience a dip, it has a lot to do with what the local (key word here is “local”) economy is doing including housing inventories, the job market, business growth, and potentials for lender owned properties to come into the market (affecting inventory).

Locally, there are vast differences between markets that are virtually contiguous. For example, Albany and Corvallis have vastly different economic profiles. Philomath is a community adjacent to Corvallis; it’s small and often gets overlooked in “searches” (Realtor.com, Zillow, Trulia, and other real estate search sites.) One does not “compare’ properties in these differing markets against each other when attempting to establish a market value.

Job availability and types of jobs, growth rates, volume of new construction during the “boom” (which added to inventory), profile of homes built, price appreciation during the “boom”, supply and demand (including supply and demand for rental properties), homeowner and home buyer demographics all play into the availability, pricing and negotiability of prices. 

Further, “The group of economists is projecting gains in home prices of 1.2 percent over the course of 2011”, I personally find it inappropriate to make sweeping comments about “home prices”.  There is no “national real estate market” it’s all local. Saying there’s a “national average home price” or a “national median home price” is a little like saying there’s “a national average temperature” or “a national median temperature”.  Those kinds of statistics are a method of measuring change, but one should not take the figures and attempt to apply them to any specific market. 

Consumers, either Buyers or Sellers, looking to enter any market are best served to research that market, taking into consideration the local economy and local housing market prior to drawing conclusions. Investigate communities near-by. Good values can be found in surrounding communities. Don’t assume that the market where you are going is similar to the one from which you are moving. Let’s all just know that the key to any recovery is the strength of the local job market and get on with the business of living.

I’ve been thinking about “Foreclosure Fraud” on the part of lenders…

There has been a great deal of talk in the news lately about what appears to be “Foreclosure Fraud”.There is chatter all over the news about  some employees in some financial institutions that have stated that they signed documents impropertly that were then presented to the courts in foreclosure cases.

Some of these documents were the documents that prove the lender owned and had the right to foreclose on  properties in default. There are 23 (those that require judicial approvalof the foreclosure–some states have provisions for both non-judicial or judicial mortgage documents may be an important factor in this issue) states in which at least one lender has put a hold on the foreclosure processes.  There are several major lender/servicers (JP Morgan/Chase, Bank of America, GMAC) invovled in the problem and investigations. And at least one title company has decided it’s too risky to issue title insurance on foreclosed properties being sold by these lenders, at least until the facts and details shake out and the mess is cleaned up…

It’s really not a  huge suprise to anyone that knows how a loan servicing department works and how the paper flows in large institutions that this could happen, especially on the heels of such huge volumes of new loans in recent years, the volume loan sales and the take over of lending portfolios by large lenders by other lenders as a result of the banking/lending melt down.

When a loan is made it is made in the “name” of the lender. When a new lender aquires the original lender (“note holder”) those assets (loans) are transferred to the new lender. There is a document (I’m familiar with the term “Assignment”) signed by the lender of record to the new lender. This is a one page paper form, signed and notarized, sometimes recorded in the county in which the property is located, sometimes not.  Every time a loan is transferred, this paperwork is completed.  Imagine the paper chase when the same loan is sold/transferred multiple times. Same thing happens when a lender “takes over” another financial institution.  Given that major players like Washington Mutual, Countrywide and SunWest were absorbed by other financial institutions as a result of the banking melt down, it’s not surprising to learn that there is a ton of this kind of paperwork out there.  Nor is it surprising that mistakes were made.

When a lender forecloses a property, the lender needs to document that they are the true lender and that they have a right to foreclose under the documents they hold. What they cannot and should not do is “make up” those documents because they cannot find the actual documents. 

There is a standard of practice and legal systems are in place for a reason. There are processes and procedures in place to protect consumers from unscrupulous practices. A foreclosure is a serious event in a homeowner’s life with long term financial repercussions. When lenders create situations that compromise the ability of staff to perform at reasonable levels and do the “due dilligence” that’s required to perform the job properly, there should be ramifications.

The fact that at least one title insurance company considers this situation enough of a risk that they are unwilling to isnure over it is an indicator of deep problems. The fact that several lenders and a number of states are involved is enough to get my attention.

Frankly, I think that they’ll find that it’s a bunch of clerical hassle; that there are some loans being serviced and “owned” by lenders that can’t prove it today, but will eventually find the paperwork and I seriously doubt that there were be reversals in foreclosures as a result.

The bigger concern is the ongoing issues that spring from poor lending practices and the ramifications of those actions on the confidence of the public and the negative impact on the recovery of our economy. And, the even bigger concern is the erosion of the ethics of employees and employers that create an atmosphere where it’s “OK” to fudge the truth in order to get the work done.  Just find the forms, do the job right!

If you are a homeowner facing foreclosure, I strongly urge you to get some pre-foreclosure counseling.  There are non-profits that may help.  Learn your rights and the ramifications of the actions you choose.  Also, use caution when responding to solicitations from parties offering to “help” for a fee (there’s a lot of scammers out there…)

And what else can this affect? Well, it could effectively slow down the market… inventories of foreclosed homes could sit while the paperwork is being sifted through. Not what’s needed to make a robust real estate market, but maybe what’s needed to heat up a political campaign or two.

Related links:

Willamette Neighborhood Housing/Foreclosure Prevention Workshops

News about the issue:

The BostonHerald.com

The StarChron 

msn.com

List of judicial foreclosure state and non-judicial foreclosure states (it’s all about the note and the provisions of the mortgage or trust deed.

DocMagic

and there’s a ton more out there…