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…

The Oregon Association of Realtors Reports the Following as of Today (07-01-2010):

Congress Extends Closing Deadline for Homebuyer Tax Credit 
After a close encounter with the deadline, the United States Senate passed an extension of the Homebuyer Tax Credit closing deadline last night. The extension applies only to transactions that have approved contracts in place as of April 30, 2010 and have not yet closed. The legislation should create a seamless extension and the new closing deadline for eligible transactions is now September 30, 2010. There will be no gap between June 30, 2010 and the date the President signs the bill into law.

It’s important to note that this does not extend in any way the time frame for buyer’s to make a contract or get into one. It helps the approximately 180,000 individuals that have already entered into binding agreements as of April 30th and have not been able to finalize their transactions–this is espeically true for those that are involved in Short Sale transactions or are bogged down in the lending process.

National Flood Insurance Extended

Last night, the Senate also passed the National Flood Insurance Program Extension Act of 2010, which extends flood insurance until September 30, 2010, and will allow transactions to move forward. The bill is retroactive and covers the lapse period from June 1, 2010, to the date the extension is enacted.

Hopefully, before September 30th, they’ll come up with a more permanent solution. The lack of flood insurance creates instablility in the market and is potentially damaging to many homeowners.

Typical drama spin to the headline: “Real Estate Notes: Rates for 30-year home loans surge” in today’s Washington Post Real Estate Notes.

And, how ridiculous too! Since when is slightly more that 1/8th of 1% increase considered a surge?  Even when compared to the historic, record low of 4.71% we saw in December 2009, current rates are just 1.5% higher than the record low. Hardly a surge. Market rates for interest rates change all of the time. And, yes, the market is poised for rate increases (recovering economy, less federal intervention in the process and anticipation of inflationary times will all impact interest rates). But, in reality, these are still historically low rates–And, absolutely a very good reason to act now if you are considering entering the market… while rates are still at record lows.

I found this chart of interest rate history at MortgageNewsDaily.com.  Interest rates were significantly higher in 2000 (non-recessionary times). Certainly a leap to those levels would be considered a “surge”.

Isn’t it funny how the words make such strong impact…  “up slightly” or “up-tick” or “up just over an eighth” just wouldn’t cause the same stir would it? It makes me wonder how much of or “bad” economy could be blamed on “bad” headlines. Designed to grab the reader, but don’t really paint a true picture.

Most recent Money Magazine projections…

Money Magazine’s latest projections for some of the Nation’s largest metro areas places Corvallis, OR as a top gainer in real estate price appreciation for the period Q1 2010 – Q1 2011 at average price increases of 4.1%.  Good numbers in a sluggish economy, but fairly close to expected numbers in a “typical” year.  Eugene, OR ranks #25 at 1.6%

Check out the snap shot synopsis of why Corvallis…

So, is it a Good Time to Buy Real Estate in Corvallis, Oregon? 

1) Low Interest Rates

2) Federal Tax Incentives

 and

3) Value Increase Projections… 

What do you think?

Corvallis, Oregon included in top 5 metro market that show promise.

Smart Money, part of the Wall Street Journal digital network is reporting that overall the real estate market is not looking good (of course, there is no such thing as a national real estate market…but that’s another discussion).  However, there are a few “pockets” that are seeing “strength” in the market.  Corvallis, Oregon is reported as being third of five of the best performing markets derived from a model created by Moody’s Economy.com which evaluated 384 metro areas.  Read the full Smart Money  article here.

It’s great for Corvallis to get this kind of press.  The real estate market is not all doom and gloom.

The problems with housing market data: What does it all really mean?

I recently came across this blog post about housing market data, headlines and statistics. Honestly, I couldn’t agree more to what has been presented in terms of the daily news and how data is manipulated. Average, median and other “statistics” have even less contextual meaning in a “small” community because of the relatively small sample size and nearly no market significance when compared to an individual property. 

The “quality” of the data has an impact.  Is the reporting accurate? Do the reported sale prices include concessions (things the seller gives up to make the sale happen)?  When a market has a limited data sample, the variances and inaccuracies have a larger impact.

Price per square foot has to be one of the worst benchmarks ever.  Homes are not produce.  They do not sell by the pound.  Bananas are produce… Square footage is only one factor in determining price: style, location, fit & finish all affect price (and therefore price per square foot), lot size has an impact.

Another less than meaningful statistic is the “average number of days on the market”.  There are too many factors influencing this number including: method of calculation for number of days; does a re-list count as new? does the days-on-market include the escrow period (it does here,  and as such it’s a variable controlled by the needs of the clients, certainly not the “market”).  There are plenty of other factors influencing how long a specific property is on the market (e.g. new construction listed prior to build out; poor location; unique style; condition of improvements, potential to obtain financing; price point…).

National statistics have very little meaning in a local market.  It’s a little like trying to use the average temperature in the U.S. and compare it to a specific location. Not meaningful, especially if you’re in the warmest or coldest location.  What’s more important is how robust is a local economy?  How is the job market? What are the supply and demand levels? 

As stated in the post, these kinds of statistics become more meaningful when compared to similar properties in similar neighborhoods.  

The bottom line?  The public needs to be very careful before they embrace any “news” with broad based statistical data.  It’s interesting, but of limited value in a given market. 

If you are interested in what’s happening in the Corvallis, Albany or other areas of the Mid-Willamette Valley, I’d be happy to help you figure out what the statistics mean to you.