Housing Headed For Trouble
As a short sale specialist, my listings usually sell very quickly. However, since March 2010 began my short sale listings are selling more slowly than they did previously. I attribute this to the first-time home buyer tax credit since those buyers were the primary buyer pool in my market Middle Tennessee. I think this is particularly true for most markets in the US where the tax credit had a substantial short term impact (particularly in lower priced markets where the $8,000 tax credit is a fairly substantial percentage of the sale prices). Now that the first time home buyer tax credit is nearing expiration, those tax credit buyers are, apparently, not willing to buy new short sale listings (they will still buy pre-approved short sales that can be closed in 30-45 days with a reasonable degree of certainty) since there is no guarantee that they will be able to close by 6/30/2010 (the expiration of the tax credit). Therefore, the only way to sell these short sale listings is to lower the price. These increasingly lower priced short sale and pre-foreclosure listings will put downward pressure on new construction and other retail priced listings.
The next phase of the great real estate meltdown is beginning to unfold as I predicted it would over 1 year ago (see my blog post from 11/2009 for a detailed breakdown of the drivers of the real estate market: Our Phony Real Estate Market). Unfortunately, the tax credit was nothing more than a temporary band-aid solution (really a gimmick) that will ultimately result in the tax credit buyers ending up in foreclosure at a very high rate since they are underwater the moment of closing (most put little to nothing down and have very little cash reserves) and will be even more so as the market declines. The buyers who purchased short sales and foreclosures as substantial discounts will likely be fine. That is why I only sell those types of properties. Unfortunately, home buyers who purchased new construction or other retail priced listings will be in trouble in the next few years. The main problem is that the entire US economy was built on debt. Consumer spending, which was 70%+/- of the entire US economy, was built largely on consumer debt (think credit cards, home equity loans, HELOC's, personal loans, etc.). Without this debt there can be little to no growth in consumer spending, and by extension, little to no growth in the US economy, until personal incomes increase at least enough to pay down current debt and still leave enough to spend more. Given that unemployment still hovers near 10% (the real number is about 16%) this will not happen anytime soon. It is just a matter of simple accounting. In addition to the end of the tax credit buyer ear there is the Option ARM foreclosure wave coming. As a result, there will lots of foreclosures and short sales over the next 5-10 years.
Short Sale and Foreclosure Help and Assistance for Real Estate Investors, Home Builders and Developers in Nashville TN and Middle TN. If you are a Nashville Tennessee, Franklin Tennessee, Brentwood Tennessee, Nolensville Tennessee, Spring Hill Tennessee, Murfreesboro Tennessee, Smyrna Tennessee, La Vergne Tennessee, or Middle Tennessee real estate investor, home builder, condo developer or real estate developer who cannot pay the property/project mortgage payments (due to the poor economy, adverse financing conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), have already defaulted on the mortgage, or are already in foreclosure, or owe more than the property/project is worth, please contact me to discuss your options including a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/project). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN, Belle Meade TN, Nolensville TN, Springfield TN, Gallatin TN and Mt. Juliet TN). If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Nashville Tennessee and Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.
Showing posts with label tax credit. Show all posts
Showing posts with label tax credit. Show all posts
Monday, April 5, 2010
Friday, January 22, 2010
First-Time Home Buyers Fading
First-Time Home Buyers Fading
According to this Real Estate Economy Watch article, First-time Buyers Faded in Q4, the percentage share of home buyers that are first-time home buyers has been declining since the peak in October 2009. The cause of the October 2009 peak was the first-time home buyer tax credit, which got a large number of first-time home buyers off the fence. I have been saying that the extension and expansion of the tax credit would not produce the same results since most of the remaining firs-time buyers that did not buy when the original tax credit was announced either cannot buy now or won't buy now (at least without an even larger tax credit/incentive). Unfortunately, many of the first-time home buyers who purchased homes due to the tax credit will end up in foreclosure since most had little or no money for a down payment and as a result are already underwater. They thought they were getting a good deal, but were really duped into buying in the face of a declining market. This is just another case of fleeting government market propping which will ultimately fail - and result in more foreclosures and short sales. Be smart and buy only distressed properties (at a substantial discount) to guard against future price declines.
If you are a home buyer or real estate investor in Middle Tennessee who is interested in purchasing a Fannie Mae foreclosure, a Freddie Mac foreclosure, bank foreclosure or REO, a short sale, home, investmenr ptoperty, condo, or other distressed real estate in order to get a great home or investment property at an attractive price without dealing with the difficult REO/foreclosure listing agents and you want aggressive and professional buyer representation, please contact me, or visit my website Search the Middle Tennessee MLS - Find Middle TN Short Sales, Pre-foreclosures, Foreclosures & REO's so that you can find foreclosures, short sales and other distressed real estate and homes in Middle TN. I help home buyers in Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN, Belle Meade TN, Nolensville TN, Springfield TN, Gallatin TN and Mt. Juliet TN).
Wednesday, November 25, 2009
Housing Will Decline In 2010
Housing Will Decline In 2010
According to this CNBC article, Housing Slump May Worsen Next Year, Not Get Better, in 2010 the housing market will get worse, not better. Their premise is that due to the first time home buyer tax credit (and the recent extension and expansion), "Sales of existing homes will peak in the final quarter of 2009, then begin a year-long slide, which is likely to be a sharp one, according to some estimates."
The article quotes Global Insight economist Patrick Newport as saying "Most of it [the tax credit] is simply shifting sales from one period to another. "It doesn’t get rid of the fundamental problem; there's still a glut of houses. At the end of 2010, you’re still going to have that glut." That is why I have been saying that new home construction does not need to slow - it needs to stop completely. According to Newport, single-family home sales will reach an annual rate of 5.88 million units in the 4th quarter of 2009 (vs. 5.30 in the third quarter). In 2010 he predicts that home sales will decline to 5.65 million units in the 1st quarter of 2010 and average around 4.75 million units in the second half of 2010. That indeed is a large decline.
According to the article, even David Crowe, chief economist at the National Association of Home Builders (NAHB), agrees with the sales shifting premise when he said "We expect a little stall in 2010. I agree, you do advance demand, so you steal it for (from?) the future. The economy and the job market didn't pick up as people expected in '09 and as a consequence that is rolling it in 2010." According to the article, NAHB has predicts a homes sales situation similar to that above with single family home sales reaching a peak of 5.60 million units in the 1st quarter 2010 and declining to about 4.50 million units in the 3rd quarter of 2010, for a 2010 home sales average of 5.15 million units.
According to the article, supporters of the tax credit (and the recent extension and $6,500 expansion to repeat home buyers) did believe that the tax credit would prompt some people to purchase a home sooner than they originally intended, thus reducing the future buyer pool, but those lost future purchases would eventually be replaced by another group of home buyers brought into the real estate market by the improving economy and job market. However, now there is doubt that the $6,500 credit for repeat buyers will help the housing market at all due to the original tax credit not being enough to help new home sales.
The article quotes Andrew Jakobovics, associate director for housing and economics at the Center for American Progress, as saying "I don’t know if the expansion is really going to get anyone else into the market, if you think about what the transaction costs (are). The people who are going to take advantage of it [the tax credit] were going to move anyway. A lot of the new households will be renters or stay renters." I agree in that the marginal effect of the tax credit extension/expansion will be much smaller than NAHB and NAR want. The article states "Most economists see the jobless rate—now 10.3 percent—peaking around 11 percent sometime in early to mid 2010 and then creeping down to around 10 percent by the end of the year. That's too high to make much of a dent in the current glut. Inventory levels are now at an 8-9-month supply--Down from the 10-11-month levels of early 2009, but still above the 6-7-month goal. Another casualty of the job market is household creation, which has meant a steady stream of buyers in the past, helping keep inventories at a healthy level. In 2008, for the first time in years, household creation fell—and sharply, too. At the same time, the number of young adults living at home and average marriage ages increased. More recently, there has been a flattening." As a result the less than desired tax credit effects, continuing high unemployment, and declining and/or flattening of household formation, the housing market will still be in poor shape near the end of 2010. Add in the expiration of the tax credit, the coming end of the government mortgage buying programs and the failing FHA (due to record defaults) - see my blog posts: Housing Faces Upcoming Challenges and Our Phony Real Estate Market - the housing market could be substantially worse in 2010. In fact, short sales and foreclosures will likely increase in 2010 and the result will continued downward pressure on housing prices.
As always, the article mentions that Lawrence Yun, NAR's chief ecomonist, as being bullish on real estate with a prediction that home prices will increase by 4% in 2010. As a homeowner I would like to believe this, but it just defies common sense.
If you are a Middle TN homeowner, property owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (homeowners, property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN). If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.
According to this CNBC article, Housing Slump May Worsen Next Year, Not Get Better, in 2010 the housing market will get worse, not better. Their premise is that due to the first time home buyer tax credit (and the recent extension and expansion), "Sales of existing homes will peak in the final quarter of 2009, then begin a year-long slide, which is likely to be a sharp one, according to some estimates."
The article quotes Global Insight economist Patrick Newport as saying "Most of it [the tax credit] is simply shifting sales from one period to another. "It doesn’t get rid of the fundamental problem; there's still a glut of houses. At the end of 2010, you’re still going to have that glut." That is why I have been saying that new home construction does not need to slow - it needs to stop completely. According to Newport, single-family home sales will reach an annual rate of 5.88 million units in the 4th quarter of 2009 (vs. 5.30 in the third quarter). In 2010 he predicts that home sales will decline to 5.65 million units in the 1st quarter of 2010 and average around 4.75 million units in the second half of 2010. That indeed is a large decline.
According to the article, even David Crowe, chief economist at the National Association of Home Builders (NAHB), agrees with the sales shifting premise when he said "We expect a little stall in 2010. I agree, you do advance demand, so you steal it for (from?) the future. The economy and the job market didn't pick up as people expected in '09 and as a consequence that is rolling it in 2010." According to the article, NAHB has predicts a homes sales situation similar to that above with single family home sales reaching a peak of 5.60 million units in the 1st quarter 2010 and declining to about 4.50 million units in the 3rd quarter of 2010, for a 2010 home sales average of 5.15 million units.
According to the article, supporters of the tax credit (and the recent extension and $6,500 expansion to repeat home buyers) did believe that the tax credit would prompt some people to purchase a home sooner than they originally intended, thus reducing the future buyer pool, but those lost future purchases would eventually be replaced by another group of home buyers brought into the real estate market by the improving economy and job market. However, now there is doubt that the $6,500 credit for repeat buyers will help the housing market at all due to the original tax credit not being enough to help new home sales.
The article quotes Andrew Jakobovics, associate director for housing and economics at the Center for American Progress, as saying "I don’t know if the expansion is really going to get anyone else into the market, if you think about what the transaction costs (are). The people who are going to take advantage of it [the tax credit] were going to move anyway. A lot of the new households will be renters or stay renters." I agree in that the marginal effect of the tax credit extension/expansion will be much smaller than NAHB and NAR want. The article states "Most economists see the jobless rate—now 10.3 percent—peaking around 11 percent sometime in early to mid 2010 and then creeping down to around 10 percent by the end of the year. That's too high to make much of a dent in the current glut. Inventory levels are now at an 8-9-month supply--Down from the 10-11-month levels of early 2009, but still above the 6-7-month goal. Another casualty of the job market is household creation, which has meant a steady stream of buyers in the past, helping keep inventories at a healthy level. In 2008, for the first time in years, household creation fell—and sharply, too. At the same time, the number of young adults living at home and average marriage ages increased. More recently, there has been a flattening." As a result the less than desired tax credit effects, continuing high unemployment, and declining and/or flattening of household formation, the housing market will still be in poor shape near the end of 2010. Add in the expiration of the tax credit, the coming end of the government mortgage buying programs and the failing FHA (due to record defaults) - see my blog posts: Housing Faces Upcoming Challenges and Our Phony Real Estate Market - the housing market could be substantially worse in 2010. In fact, short sales and foreclosures will likely increase in 2010 and the result will continued downward pressure on housing prices.
As always, the article mentions that Lawrence Yun, NAR's chief ecomonist, as being bullish on real estate with a prediction that home prices will increase by 4% in 2010. As a homeowner I would like to believe this, but it just defies common sense.
If you are a Middle TN homeowner, property owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (homeowners, property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN). If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.
Housing Faces Upcoming Challenges
Housing Faces Upcoming Challenges
According to this Real Estate Economy Watch article, The Last Days of the Homebuyer Tax Credit, there are 2 upcoming issues that will hurt housing.
The upcoming decrease in government mortgage is a much bigger problem. Per my previous blog post, Our Phony Real Estate Market, right now the housing market is almost entirely being supported by artificial government intervention. When that government intervention ends the housing market will have to survive based on the fundamentals (think jobs and income). Therefore, it will be a difficult time for housing if unemployment is still around 10% or worse and all these government housing subsidies expire. This does not even factor in the coming wave of Option ARM foreclosures caused by a large number of Option ARM mortgages resetting starting in the spring of 2010. Because of these issues I predict another decline in housing beginning in 2010. The gist of the matter is that there will be more short sales and foreclosures and this will drive the price of homes down further. Some areas will be harder hit than others, but the effects will be felt nearly everywhere.
If you are a Middle TN homeowner, property owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (homeowners, property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN). If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.
According to this Real Estate Economy Watch article, The Last Days of the Homebuyer Tax Credit, there are 2 upcoming issues that will hurt housing.
- Permanent Expiration of the Housing Tax Credit - According to the article, "This is it. No more extensions. When April 30 comes and goes, the tax credit for everyone is over and buyers have only until June 30 to close. With the prospect of getting more than they bargained for in the short term, the housing lobby agreed." In essence lawmakers made representatives of the National Association of REALTORS (NAR) promise that they would not come back and ask for another extension of the housing tax credit. Therefore, buyers have until April 30, 2010 to sign a contract to buy a home and June 30, 2010 to close in order to get the tax credit. That's it.
- Government Mortgage Purchasing Will Decrease Dramatically - According to the article, "About the same time the credit goes away, something more serious will hit the housing markets, the end of the Federal Reserve’s programs to buy up $1.25 trillion of mortgage-backed securities and to lend as much as $175 billion to Fannie Mae and Freddie Mac to do the same. Mortgage-backed securities are sold to investors and the better the market for them, the lower the interests that consumers pay. These government programs to buy mortgage securities have helped to prop up the mortgage-backed securities markets and keep mortgage rates at record low levels for nearly a year. The Fed announced two weeks ago that both are going away April 10."
The upcoming decrease in government mortgage is a much bigger problem. Per my previous blog post, Our Phony Real Estate Market, right now the housing market is almost entirely being supported by artificial government intervention. When that government intervention ends the housing market will have to survive based on the fundamentals (think jobs and income). Therefore, it will be a difficult time for housing if unemployment is still around 10% or worse and all these government housing subsidies expire. This does not even factor in the coming wave of Option ARM foreclosures caused by a large number of Option ARM mortgages resetting starting in the spring of 2010. Because of these issues I predict another decline in housing beginning in 2010. The gist of the matter is that there will be more short sales and foreclosures and this will drive the price of homes down further. Some areas will be harder hit than others, but the effects will be felt nearly everywhere.
If you are a Middle TN homeowner, property owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (homeowners, property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN). If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.
Monday, October 12, 2009
Housing Market Problems Persist Despite Government Intervention
Housing Market Problems Persist Despite Government Intervention
According to this REUTERS article, Housing risks still lurk even as buyers return, the US housing market will likely decline further due to continued pressure from adverse economic forces. The article proposes that the most significant economic forces which will hurt the real estate market in the near and mid term future are:
The article states "California led the United States when housing prices soared early this decade, spurred by an array of public policy incentives to encourage home ownership. The boom fueled a frenzy of lending and spending that drove the U.S. economy. But California proved to be the epicenter of reckless lending that pushed housing throughout most of the United States over a cliff in 2007, triggering a credit crisis that plunged the world economy into recession. The sobering view now from ground zero of the U.S. property market underscores the problems faced by President Barack Obama as he tries to fix the U.S. economy. Washington is trying to stem rising numbers of homeowners who cannot afford their mortgages as job losses mount. Housing prices have fallen to levels not seen since 2003. But even investors pouring millions of dollars back into real estate say it may take up to four more years for California's housing market to settle. The reasons why -- rising foreclosures, joblessness and tight credit -- are not unique to the state and may have already slowed a recent recovery in places like Florida."
Tax Credit Threat
The article describes how the potential housing rebound will be challenged by the expiration of the $8,000 first time home buyer tax credit on November, 30, 2009. According to the article, the "(tax credit) plan has resulted in 357,000 home sales so far in 2009, out of a total 3.88 million, according to a survey of realtors by research firm Campbell Communications Inc." The article quotes John Burns Real Estate Consulting in Irvine, California as saying that ending the tax credit "will likely cause a drop-off in buyers, or a "false peak" of the budding housing recovery."
Recent rumblings in Washington indicate that the government is considering extending and/or expanding the home buyer tax credit due to their concern that the housing market is still not stable. I have to say that the housing market is definitely not stable.
According to article, "Helped by government measures and a sense that the worst of the price slump is over, U.S. home prices have risen nearly 4 percent from their low point in April. But the bounce was preceded by a 33 percent slide since the peak in July 2006. The nascent housing recovery has combined with stronger data in other sectors to suggest the U.S. recession is over. This has helped thaw credit markets that are the lifeblood of the economy. Bidding wars are breaking out in some areas. Sales are now routinely above asking prices in California, from wealthy Orange County towns like Irvine to harder-hit San Bernardino County in the high desert east of Los Angeles." Apparently foreclosed houses are selling for 25-30% less than their 2007 market peaks, but still about 40% more than their original new construction prices of 2002. To me, those prices are still too high. Ask yourself, did incomes of the buyers for these types of homes increase 40% from 2002 to 2009? The answer is "No". Therefore, those homes are still priced too high.
Job Loss Threat
According to the article, "Efforts by the government and by banks to help struggling homeowners cut payments and stay in their homes are outpaced by mortgages going bad. The mortgage-modification programs risk being swamped by rising unemployment." A recent mass loan modification event in Los Angeles "drew 50,000 people over five days, hoping for mortgage-reduction deals to help keep them in their homes." The article quotes JC Ferebee, manager of Wells Fargo's team at the mass loan modification event, as saying "When you look at the whole culture right now and the economy with the jobs situation, it's a domino effect." We already know that the September 2009 US unemployment rate hit a "26-year high of 9.8 percent and is likely to head into the double-digit levels already suffered in California. The jobless rate is usually considered to be a lagging economic indicator because employers are slow to hire after a recession as they wait to be sure a recovery is for real. Economists fear that a protracted and high unemployment rate this time will deter Americans from spending more again on houses and goods, raising the prospect of a slow recovery." In short, jobs drive consumer spending and home purchases. With the economy shedding over 500,000 jobs each month there can be no real and meaningful housing market recovery. What we are seeing now is more mirage than substance.
Foreclosures Threat
In previous blog posts I have stated that the banks are holding back on offering their foreclosures for sale and not taking back homes even when the home owners haven't paid their mortgages for many months. My opinion is that the banks are trying to artificially inflate the market values of their foreclosed assets (i.e. homes). According to the article, "Economists fear a repeat of the flood of foreclosure listings that scared all but vulture buyers -- specialized in assets few others want -- and sped the 2008-09 price slump. More than half of house sales in southern California in late 2008 and early this year involved "distressed" properties, accelerating price drops, according to Thomas Lawler, founder of Lawler Economic & Housing Consulting in Leesburg, Virginia. In response to the slump, banks slowed foreclosure sales to seek other solutions for homeowners and help shore up prices. At the same time, the Federal Reserve's emergency slashing of interest rates to near zero has helped encourage buyers to take advantage of the lowest prices in decades and a rush by the Federal Housing Administration, a U.S. agency, to guarantee more loans is also helping would-be home owners find credit. But the emergency steps by the government and the Fed will be overrun by economic forces, according to many analysts. "We are far from persuaded by a little summer upturn in a sector that the government had endeavored so mightily to support," Deutsche Bank said in a report last month. In California's Inland Empire -- a 27,000 square mile (69,900 square kilometers) region made up of Riverside and San Bernardino counties, prices will likely fall 15 percent from June for a peak-to-trough drop of 66 percent, the most for the biggest 10 U.S. metropolitan areas, Deutsche Bank predicted. Local buyers rely not only the scheduled-to-expire tax credit but almost entirely on funding from the FHA, which in response to rising taxpayer losses may soon tighten access to its credit. One bill would require bigger down-payments." I discussed this FHA insolvency issue in a previous blog post. In short, lending irresponsibly is not a solution for a problem that was caused by lending irresponsibly.
Regarding the failure of loan modifications, the article states "Nearly 43 percent of homeowners whose mortgages were modified in the first quarter fell behind on payments within three months, data from the U.S. Office of the Comptroller of Currency shows. For older modifications, the re-default rate is above 50 percent. Postponed foreclosures have created a backlog that banks may have little alternative but to dump onto the market. Foreclosures being processed surged nearly 80 percent in the second quarter from a year earlier to nearly 1 million. But completed foreclosures fell nearly 10 percent to 106,007, the OCC says. Brokers in California bemoan what they say is just a delay in the inevitable pain of people losing their homes and the follow-on boom in sales of cheap properties, something for which there is no shortage of demand today. Bruce Norris, president of property investment firm The Norris Group, said inventory levels are "completely artificial, completely baloney ... The delinquency rate (in California) has exploded, but inventory levels have gone down. In many of these cases the banks have simply avoided foreclosure." I have been saying this for months.
According to the article, "Amherst Securities, a broker-dealer specializing in residential mortgage-backed securities, calculated a mountain of 7 million U.S. housing units is likely to end up on the market -- equivalent to 135 percent of a normal year's supply." Fred Arnold, a broker in Stevenson Ranch, California said "It's going to drip on the market. We don't have the state and federal government that will let the natural supply and demand market occur which is pushing the real estate problem into 2012." Amen, that is what I have been saying for months now. The best way to get the housing market to stabilize is to allow the housing market to hit the real bottom, which will be at prices that buyers can actually afford without government subsidies. Per my previous post, it will take until about 2020 (or longer) for home prices to return to their 2006 peaks. For homeowners who owe more than their homes are worth and who have lost their jobs or suffered a reduction in their incomes 2020 will probably not come quickly enough. Many of these homeowners will need to get loan modifications, sell their homes via short sales, or suffer through a foreclosure.
If you are a homeowner in Middle Tennessee who is unemployed or have seen your income decline and your home is worth less than your mortgage balance, please contact me to discuss selling your home via a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure expert and REALTOR. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.
If you need to sell your home fast via a short sale you can my request help on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Expert.
According to this REUTERS article, Housing risks still lurk even as buyers return, the US housing market will likely decline further due to continued pressure from adverse economic forces. The article proposes that the most significant economic forces which will hurt the real estate market in the near and mid term future are:
- Expiration of the first time home buyer tax credit on Novermber 30, 2009.
- Continued job losses.
- High rates of foreclosures.
The article states "California led the United States when housing prices soared early this decade, spurred by an array of public policy incentives to encourage home ownership. The boom fueled a frenzy of lending and spending that drove the U.S. economy. But California proved to be the epicenter of reckless lending that pushed housing throughout most of the United States over a cliff in 2007, triggering a credit crisis that plunged the world economy into recession. The sobering view now from ground zero of the U.S. property market underscores the problems faced by President Barack Obama as he tries to fix the U.S. economy. Washington is trying to stem rising numbers of homeowners who cannot afford their mortgages as job losses mount. Housing prices have fallen to levels not seen since 2003. But even investors pouring millions of dollars back into real estate say it may take up to four more years for California's housing market to settle. The reasons why -- rising foreclosures, joblessness and tight credit -- are not unique to the state and may have already slowed a recent recovery in places like Florida."
Tax Credit Threat
The article describes how the potential housing rebound will be challenged by the expiration of the $8,000 first time home buyer tax credit on November, 30, 2009. According to the article, the "(tax credit) plan has resulted in 357,000 home sales so far in 2009, out of a total 3.88 million, according to a survey of realtors by research firm Campbell Communications Inc." The article quotes John Burns Real Estate Consulting in Irvine, California as saying that ending the tax credit "will likely cause a drop-off in buyers, or a "false peak" of the budding housing recovery."
Recent rumblings in Washington indicate that the government is considering extending and/or expanding the home buyer tax credit due to their concern that the housing market is still not stable. I have to say that the housing market is definitely not stable.
According to article, "Helped by government measures and a sense that the worst of the price slump is over, U.S. home prices have risen nearly 4 percent from their low point in April. But the bounce was preceded by a 33 percent slide since the peak in July 2006. The nascent housing recovery has combined with stronger data in other sectors to suggest the U.S. recession is over. This has helped thaw credit markets that are the lifeblood of the economy. Bidding wars are breaking out in some areas. Sales are now routinely above asking prices in California, from wealthy Orange County towns like Irvine to harder-hit San Bernardino County in the high desert east of Los Angeles." Apparently foreclosed houses are selling for 25-30% less than their 2007 market peaks, but still about 40% more than their original new construction prices of 2002. To me, those prices are still too high. Ask yourself, did incomes of the buyers for these types of homes increase 40% from 2002 to 2009? The answer is "No". Therefore, those homes are still priced too high.
Job Loss Threat
According to the article, "Efforts by the government and by banks to help struggling homeowners cut payments and stay in their homes are outpaced by mortgages going bad. The mortgage-modification programs risk being swamped by rising unemployment." A recent mass loan modification event in Los Angeles "drew 50,000 people over five days, hoping for mortgage-reduction deals to help keep them in their homes." The article quotes JC Ferebee, manager of Wells Fargo's team at the mass loan modification event, as saying "When you look at the whole culture right now and the economy with the jobs situation, it's a domino effect." We already know that the September 2009 US unemployment rate hit a "26-year high of 9.8 percent and is likely to head into the double-digit levels already suffered in California. The jobless rate is usually considered to be a lagging economic indicator because employers are slow to hire after a recession as they wait to be sure a recovery is for real. Economists fear that a protracted and high unemployment rate this time will deter Americans from spending more again on houses and goods, raising the prospect of a slow recovery." In short, jobs drive consumer spending and home purchases. With the economy shedding over 500,000 jobs each month there can be no real and meaningful housing market recovery. What we are seeing now is more mirage than substance.
Foreclosures Threat
In previous blog posts I have stated that the banks are holding back on offering their foreclosures for sale and not taking back homes even when the home owners haven't paid their mortgages for many months. My opinion is that the banks are trying to artificially inflate the market values of their foreclosed assets (i.e. homes). According to the article, "Economists fear a repeat of the flood of foreclosure listings that scared all but vulture buyers -- specialized in assets few others want -- and sped the 2008-09 price slump. More than half of house sales in southern California in late 2008 and early this year involved "distressed" properties, accelerating price drops, according to Thomas Lawler, founder of Lawler Economic & Housing Consulting in Leesburg, Virginia. In response to the slump, banks slowed foreclosure sales to seek other solutions for homeowners and help shore up prices. At the same time, the Federal Reserve's emergency slashing of interest rates to near zero has helped encourage buyers to take advantage of the lowest prices in decades and a rush by the Federal Housing Administration, a U.S. agency, to guarantee more loans is also helping would-be home owners find credit. But the emergency steps by the government and the Fed will be overrun by economic forces, according to many analysts. "We are far from persuaded by a little summer upturn in a sector that the government had endeavored so mightily to support," Deutsche Bank said in a report last month. In California's Inland Empire -- a 27,000 square mile (69,900 square kilometers) region made up of Riverside and San Bernardino counties, prices will likely fall 15 percent from June for a peak-to-trough drop of 66 percent, the most for the biggest 10 U.S. metropolitan areas, Deutsche Bank predicted. Local buyers rely not only the scheduled-to-expire tax credit but almost entirely on funding from the FHA, which in response to rising taxpayer losses may soon tighten access to its credit. One bill would require bigger down-payments." I discussed this FHA insolvency issue in a previous blog post. In short, lending irresponsibly is not a solution for a problem that was caused by lending irresponsibly.
Regarding the failure of loan modifications, the article states "Nearly 43 percent of homeowners whose mortgages were modified in the first quarter fell behind on payments within three months, data from the U.S. Office of the Comptroller of Currency shows. For older modifications, the re-default rate is above 50 percent. Postponed foreclosures have created a backlog that banks may have little alternative but to dump onto the market. Foreclosures being processed surged nearly 80 percent in the second quarter from a year earlier to nearly 1 million. But completed foreclosures fell nearly 10 percent to 106,007, the OCC says. Brokers in California bemoan what they say is just a delay in the inevitable pain of people losing their homes and the follow-on boom in sales of cheap properties, something for which there is no shortage of demand today. Bruce Norris, president of property investment firm The Norris Group, said inventory levels are "completely artificial, completely baloney ... The delinquency rate (in California) has exploded, but inventory levels have gone down. In many of these cases the banks have simply avoided foreclosure." I have been saying this for months.
According to the article, "Amherst Securities, a broker-dealer specializing in residential mortgage-backed securities, calculated a mountain of 7 million U.S. housing units is likely to end up on the market -- equivalent to 135 percent of a normal year's supply." Fred Arnold, a broker in Stevenson Ranch, California said "It's going to drip on the market. We don't have the state and federal government that will let the natural supply and demand market occur which is pushing the real estate problem into 2012." Amen, that is what I have been saying for months now. The best way to get the housing market to stabilize is to allow the housing market to hit the real bottom, which will be at prices that buyers can actually afford without government subsidies. Per my previous post, it will take until about 2020 (or longer) for home prices to return to their 2006 peaks. For homeowners who owe more than their homes are worth and who have lost their jobs or suffered a reduction in their incomes 2020 will probably not come quickly enough. Many of these homeowners will need to get loan modifications, sell their homes via short sales, or suffer through a foreclosure.
If you are a homeowner in Middle Tennessee who is unemployed or have seen your income decline and your home is worth less than your mortgage balance, please contact me to discuss selling your home via a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure expert and REALTOR. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.
If you need to sell your home fast via a short sale you can my request help on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Expert.
Thursday, May 21, 2009
When "Good News" Is Really Bad News
According to this RISMedia article, Single-Family Starts and Permits Edge Higher in April, the number of new home starts increased by 2.8% to a seasonally adjusted rate of 368,000 units and the the number of permits for future construction also increased. The article mentions that low mortgage rates, low prices, the federal $8,000 tax credit and additional state specific tax credits were partially responsible for the boost.
I will tell you right now that this is the terrible news. Overbuilding spurred by easy to get loans was a major contributor to the current real estate mess. We do not need more new homes being built, especially if they are fuled by artifically low rates, which will eventually increase significantly, and tax credits. Only rookie buyers or truly marginal buyers would make the decision to buy a home based on a measy $8,000 to $15,000 in tax credits, especially given the fact that taxes are going to increase in order to pay for the "stimulus plan". Therefore, these buyers will have less money than they think after their tax credit is factored in. I predict that these buyers will have a high foreclosure rate and the overall foreclosure rate will contnue to be high. All of this will continue to depress prices in the very areas that were most affected by the real estate decline.
I will tell you right now that this is the terrible news. Overbuilding spurred by easy to get loans was a major contributor to the current real estate mess. We do not need more new homes being built, especially if they are fuled by artifically low rates, which will eventually increase significantly, and tax credits. Only rookie buyers or truly marginal buyers would make the decision to buy a home based on a measy $8,000 to $15,000 in tax credits, especially given the fact that taxes are going to increase in order to pay for the "stimulus plan". Therefore, these buyers will have less money than they think after their tax credit is factored in. I predict that these buyers will have a high foreclosure rate and the overall foreclosure rate will contnue to be high. All of this will continue to depress prices in the very areas that were most affected by the real estate decline.
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