“… millions of properties are being held off the market. This “shadow inventory” is well-known (tens of thousands of people are living rent and mortgage-free in homes that the [...]]]> Charles Hugh Smith had a good read recently concerning the current state of the crippled housing market. A few snippets about how we got there:

“… millions of properties are being held off the market. This “shadow inventory” is well-known (tens of thousands of people are living rent and mortgage-free in homes that the banks have yet to even put in the foreclosure pipeline), so no one has any confidence that “the bottom is in.” Confidence cannot be restored until the market clears the inventory and a real bottom is established.”

Here’s another idea being tried that has worked brilliantly:

“Lower the rate that banks can borrow from the Fed to zero, and then pay the banks interest on all funds deposited at the Fed.

Hint: They can’t.

As repored:

“… the federal government is about to dump millions of the foreclosed homes at fire-sale prices to hedge funds and private-equity [...]]]> The Daily Reckoning had an interesting article yesterday about how ordinary investors can get in on bulk purchases of portfolios of REO Bank Owned properties sold at fire sale price.

Hint: They can’t.

As repored:

“… the federal government is about to dump millions of the foreclosed homes at fire-sale prices to hedge funds and private-equity firms with government connections. If you’re an individual investor who might like to get in on the action, forget it! You’re shut out of this deal.

Homeowners who might be interested in buying the foreclosure property next door? Out of luck. And retirees hoping for a return on their money more than 1.8% on a five-year CD find another avenue closed off.”

Well, folks, as George Carlin once said: “It’s a big club, and you’re not in it.”

We are back to buying REOs, mostly one property at a time, certainly at higher prices than the bulk sales envisioned above.

Be careful out there, folks. Seek experienced assistance.

The full article –

Imagine that.

The net effect is that the housing bust we have experienced so far is much worse than the NAR had originally reported:

“A [...]]]> The Wall Street Journal is reporting in 2 separate articles recently that the National Association of Realtors (NAR) revised their last 5 years of sales data downward to reflect, apparently, reality.

Imagine that.

The net effect is that the housing bust we have experienced so far is much worse than the NAR had originally reported:

“A real-estate trade group said Monday it plans to lower its estimates of how many homes were sold in the U.S. since 2007, after analysts came up with evidence that the group was overestimating sales.

Earlier this year, outside analysts called into question some of the assumptions behind the trade group’s data. For example, Corelogic, Inc., an independent housing data firm, found a far smaller number of home sales by tracking property records through local courthouses.”

Links to both Wall Street Journal articles –

http://blogs.wsj.com/economics/2011/12/12/realtors-to-revise-2007-2011sales-data-down/

http://blogs.wsj.com/developments/2011/12/12/housing-bust-to-look-worse-with-sales-revised/

Apparently, for many, not too well:

“Zillow.com, the real estate information company, says the average price [...]]]> The Wall Street Journal had an article  on Tuesday worth considering. It revisits the subject of the tax credits to home purchasers offered by the Government back in 2009 and 2010 and analyzes how that all worked out.

Apparently, for many, not too well:

“Zillow.com, the real estate information company, says the average price of an American home fell again last month to $171,500 — the lowest level in eight years. That’s down 4.4% from a year ago, although it’s been about stable over the summer.

Now compare the average prices with those that people paid in 2009 and 2010, when they took advantage of the credits.

Zillow tracks prices closely in 157 cities and major towns around the country. Humphries says that in 110 of those, prices today are more than $8,000 lower than they were in June 2010.

The picture is even worse when you compare prices today with the average for the entire year-and-a-half that the credits were in place. By that measure, prices have fallen by more than $8,000 in about 130 cities and towns.”

The full article –

http://www.marketwatch.com/story/the-great-26-billion-real-estate-swindle-2011-11-08

]]> http://homebuyerpower.com/2011/11/10/the-great-26-billion-real-estate-tax-credit-swindle/feed/ 0 http://homebuyerpower.com/2011/09/30/baltimore-area-shadow-inventory-reported-at-50000-homes/ http://homebuyerpower.com/2011/09/30/baltimore-area-shadow-inventory-reported-at-50000-homes/#comments Fri, 30 Sep 2011 12:44:44 +0000 admin http://homebuyerpower.com/?p=865 An article in the Baltimore Sun reported that, according to John Burns Real Estate Consulting, Baltimore’s “Shadow Inventory” of homes may be in the 50,000 range:

“Thousands of homes are on the market in the Baltimore region. But as the commercials say, wait — there’s more.

Tens of thousands of Baltimore-area homeowners are [...]]]> An article in the Baltimore Sun reported that, according to John Burns Real Estate Consulting, Baltimore’s “Shadow Inventory” of homes may be in the 50,000 range:

“Thousands of homes are on the market in the Baltimore region. But as the commercials say, wait — there’s more.

Tens of thousands of Baltimore-area homeowners are behind on their mortgage payments. At least some of their homes will end up on the market too, either as short sales or repossessed foreclosures.

California-based John Burns Real Estate Consulting, which does market research for homebuilders and banks, estimates this “shadow inventory” in the Baltimore region at 50,000 homes as of June. That’s how many properties the company believes will eventually become distress sales but aren’t yet listed.

“That equates to 14 months of supply based on the average resale sales volume for the area over the last 10 years,” Wayne Yamano, a vice president at John Burns, said in an email. “The U.S. average is about 9 months of shadow inventory in comparison.”

As Baltimore’s real estate market has historically been a good barometer of Ocean City’ market, it leads one to wonder what the “Shadow Inventory” number for Ocean City Maryland might be.

The full article –

http://weblogs.baltimoresun.com/business/realestate/blog/2011/09/firm_baltimorearea_shadow_inventory_at_50000_homes.html

“The actual, not seasonally adjusted, data suggests that the momentum of declining sales has leveled off. However, in order for the oversupply in distressed markets to be [...]]]> An interesting and very detailed analysis was posted yesterday on the Wall Street Examiner Web Site regarding the state of the U.S. housing market. A few snippets:

“The actual, not seasonally adjusted, data suggests that the momentum of declining sales has leveled off. However, in order for the oversupply in distressed markets to be absorbed, that’s not enough. Sales must increase. That is largely dependent on household formation, which in turn is dependent on growth in full time jobs. And that’s not happening.”

The full article is worth a read. Find it at -

http://wallstreetexaminer.com/2011/08/24/housing-time-bomb-goes-tick-tock-tick-tock/

Who would have guessed?

The New York Times is reporting:

“Millions of homeowners in distress are getting some unexpected breathing room — [...]]]> Imagine that.  The banks are alleged to be manipulating the system thru a strategy of reducing the number of filed foreclosures — thereby reducing the amount of available sales inventory and artificially bolstering prices.

Who would have guessed?

The New York Times is reporting:

“Millions of homeowners in distress are getting some unexpected breathing room — lots of it in some places.

Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.”

I wonder how long it would take in Ocean City Maryland?

A better question would be, who really believes we’ve seen the bottom in prices?

The full article –

http://www.nytimes.com/2011/06/19/business/19foreclosure.html?_r=2&emc=eta1&pagewanted=all

But what does this mean for “strategic defaults”?

An excellent article addressing this question appeared recently [...]]]> There has been much written in the last couple of weeks about the latest National quarterly home value numbers. None of it good.  Many people are coming to realize that we may very well see even lower prices in the future.

But what does this mean for “strategic defaults”?

An excellent article addressing this question appeared recently in the Wall Street Journal. It looks at data provided by the Federal Reserve Board (FRB) to draw some rather alarming conclusions:

“The implications of this FRB report are really grim. Keep in mind that 80% of the 133,000 no-down-payment loans examined had gone into default within three years. Clearly, homeowners with no skin in the game have little incentive to continue paying the loan when the property goes further and further underwater.

Here is the most ominous statistic of them all. In my article on the looming home equity line of credit (HELOC) disaster posted here in early September Home Equity Lines of Credit: The Next Looming Disaster?, I pointed out that there were roughly 13 million HELOCs outstanding. This HELOC madness was concentrated in California where more than 2.3 million were originated in 2005-2006 alone.

How many of these homes with HELOCs are underwater today? Roughly 98% of them, and maybe more. Equifax reported that in July 2009, the average HELOC balance nationwide for homeowners with prime first mortgages was nearly $125,000. Yet the studies which discuss how many homeowners are underwater have examined only first liens.” (emphasis added)

Did we read that right?  All of this talk about “underwater mortgages” we have heard to date addresses only the impact of FIRST LIENS? Yes, I’m afraid so:

“So if you’ve read that roughly 25% of all homes with a mortgage are now underwater, forget that number. If you include all second liens, It could easily be 50%. This means that in many of those major metros that have experienced the worst price collapse, more than 50% of all mortgaged properties may be seriously underwater.” (emphasis added)

So what does this mean for the projected number of  future “strategic defaulters”?

“What seems fairly clear… is that as home values continue to decline and loan-to-value (LTV) ratios rise, the number of homeowners choosing to walk away from their mortgage obligation will relentlessly grow. That means growing trouble for nearly all major housing markets around the country.”

The full article –

http://www.marketwatch.com/story/strategic-defaults-could-get-very-ugly-2011-05-04?pagenumber=2

“Homeowners who are falling behind on a mortgage often worry just how much they might be damaging their credit score.

How much will a score be dinged if a [...]]]> The Baltimore Sun had an interesting article on Monday on the subject of the relative impact of foreclosures and short sales on credit scores:

“Homeowners who are falling behind on a mortgage often worry just how much they might be damaging their credit score.

How much will a score be dinged if a payment is late a month or more? Or worse, what happens if the homeowner must resort to a short sale or winds up in foreclosure?

FICO, which produces the widely used credit score of the same name, says it has been getting many such questions from regulators, lenders, loan servicers and others who advise consumers with mortgage troubles.

Lenders use credit scores to decide whether to extend credit and under what terms.”

It has been widely believed that a borrower/homeowner short selling their property had less of an impact on their credit scores than losing the property thru foreclosure. According to the Sun article, this is not quite true:

“One of the big myths, FICO scores director Joanne Gaskin says, is that a short sale is better for a credit score than a foreclosure.

‘Both are considered a default. There is little difference in impact,’ Gaskin says.”

However, the full answer is a bit more nuanced than that:

“In certain cases, a short sale could be less damaging than a foreclosure. Credit scores are derived from information that lenders and others send to credit reporting agencies. Some lenders report a short sale without including the amount of debt the borrower didn’t repay.

When a balance shortfall isn’t reported, a score would be 35 points higher in a short sale than a foreclosure, FICO says.

That’s not much, but there are better reasons to consider a short sale,

And lenders might look more kindly on you in the future.

For example, if you’re current on your mortgage and undergo a short sale, you still could qualify for a mortgage insured by the Federal Housing Administration.  But after a foreclosure, homeowners must wait three years to be eligible for an FHA-backed loan.”

Is this enough of a difference for you? Homeowners are well advised to make that business decision with the advice and guidance of  their legal counsel.

The full article –

http://www.baltimoresun.com/business/real-estate/bs-bz-ambrose-fico-scores-foreclosure20110502,0,1824554.story