11/23/11
11/10/11
If they keep predicting a market bottom…eventually they’ll all be right!
Just to say it at the outset of this post…why don’t any of the reporters, be it newspaper, online outlets or television, ever do any research and ask any tough questions when they continue to interview and quote the “experts” regarding housing?
Case in point: Here is a headline of an article/interview of Zillow chief economist, Stan Humphries, 18 months ago:
As Housing Market Nears Bottom, Pent-Up Supply Waits…And here is the prediction directly from the article: We forecast that the nation will hit a bottom in home values in the third quarter of this year, (which would have been July-Sept 2010) but that there will be negligible appreciation in home values for three to five years after we’ve reached bottom…
Case-Shiller, an oft quoted research firm has this on-the-money prediction from an interview from November 30th 2009:
U.S. home prices are unlikely to fall much further in the next year even after a “discouraging” report on values in September, said Karl Case, the co-creator of the S&P/Case-Shiller Index.
“If I were betting even odds, I’d bet that we don’t have much further decline, but that we bounce along the bottom,” Case, a retired professor of economics at Wellesley College, said today in a Bloomberg Television interview…
And then here is a quote from an interview Shiller did less than 60 days ago: SHILLER: “House Prices Probably Won’t Hit Bottom For Years”
And the icing on the cake has been our own chief economist(s) of the National Association of Realtors:
04/2006: We can expect a historically strong housing market moving forward, earmarked by generally balanced conditions across the country and fairly stable levels of home sales with some month-to-month fluctuations.”, NAR
07/2006: “Right now we are on course for a soft-landing in housing.”, NAR
10/2006: “The worst is behind us, as far as a market correction. This is likely the trough for sales. When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.”, NAR.
12/2006: “At least the bottom appears to have already occurred. It looks like figures will be improving.”, NAR.
01/2007: “It appears we have established a bottom” David Lereah, NAR Chief Economist.
07/2007: “Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year.”, NAR
11/2007: “I don’t anticipate any further major sales declines,” Yun said. However, the NAR didn’t anticipate the sales declines of the past two years, and it’s been predicting a bottom nearly every month since early 2006. (from Marketwatch)
02/2008: Reuters reports that “The NAR’s chief economist, Lawrence Yun, said the market is ‘scratching the bottom,’ with sales holding at a deflated rate of around 5 million units for the past several months.”
02/2008, There is no chance of a large price decline in Rockford, Lawrence Yun told a crowd of more than 400 at Cliffbreakers, 700 W. Riverside Blvd. There is not a price bubble in Rockford., BusinessRockford.com (see July, 2009 news report below)
07/2008: There are signs of pent up demand . I think we are very near to the end of the housing downturn, Yun said.
12/2008: I would not have done anything different. But I was a public spokesman writing about housing having a good future. Ex-NAR Chief Economist Lareah.
04/2009: “We are close to the bottom, says Lawrence Yun, chief economist for the National Association of Realtors. Once home sales begin to rise that could boost home buying confidence and get others off the sidelines.”
04/2009: The “worst may be over” in parts of the West, said Lawrence Yun, NAR Chief Economist.
07/2009: Follow up from 2/08 quote above: BusinessRockford.com – The local housing market showed few signs of rebounding in the first half of 2009, with sales of single-family homes and condominiums falling nearly 20 percent and median sale prices falling in all but two of the Rock River Valley’s largest municipalities... In Rockford, the median prices of the 61104 ZIP code are down 52.3 percent from the first six months of 2008, dropping from $64,950 to just $31,000.
Now, more than ever, it is so important to work with an agent that will consult, diagnose and recommend solutions based upon a multitude of factors…with the MOST important one being; what is in YOUR best interest.
In the past several years, I have ‘converted’ many buyers into renters, but also, some renters into buyers, because that's what we decided, together was the best option for them. I have also dissuaded many sellers from becoming ‘landlords by default’ and putting tenants in their homes while waiting for “prices to go up’ because they didn’t want to “give their house away”. On the flip side of that coin, I just had a conversation with a prospective client yesterday and we decided AGAINST selling, as the cash-flow the home would generate, along with the tax benefits of renting outweighed the prospect of home value declines…their time horizon was sufficiently long to mitigate the risk when compared to the monthly cash flow.
If you would like to discuss all of the factors that you should be considering, whether it be on the selling or buying side, please call me at 561-602-1258…or email me at Steve@TheJacksonTeam.com
Thanks for reading,
Steve Jackson
11/9/11
Home values…Negative equity…etc
Nationally, on a year-over-year basis, Zillow reports that home values were down 4.4 percent with the Zillow Home Value Index at $171,500. Overall, this quarter could have looked a lot worse considering all of the economic headwinds and turbulence that materialized over the summer. In terms of strict fundamentals, housing affordability looks compelling with big resets in home value levels and historically low mortgage rates. At this point, however, it’s clearly an issue of confidence, and high unemployment and economic uncertainty are not helping on this front. While we still have a ways to go in terms of home value depreciation, the pace at which home values are falling has declined considerably during the course of this year. Nationally, foreclosure re-sales made up 18.9 percent of all sales in September, up slightly from the Q2 level of 18.8 percent. Foreclosure re-sales have, however, significantly increased from their Q3 2010 levels of 15.1 percent. This foreclosure pipeline will continue to depress home prices moving forward...the large shadow inventory will keep pressure on pushing home prices lower. That is why year over year home prices are still falling:
Negative Equity
National negative equity edged up slightly to 28.6 percent , (the local negative equity figure is close to 50% when you count all of the homes that are within 5% of being in a negative equity position) of all single-family homes with mortgages, compared to 26.8 percent in the second quarter. Negative equity fell in the second quarter on the basis of sharp improvements in depreciation rates and flat foreclosure rates. This quarter, however, home values remained relatively flat while foreclosure rates slowed further, and these two factors combined to increase negative equity. (Because Zillow and other firms that calculate negative equity use valuations, each which has some margin of error, and because the number of homeowners just barely in positive equity is somewhat greater than the number who are just barely in negative equity, the estimation error will tend to incorrectly place more people in negative equity (who are, in fact, in positive equity) than is offset by incorrectly placing people in positive equity (when, in fact, they are in negative equity). This subtle point has the possibility of producing an upward bias in the negative equity statistic.)
People selling their homes in Palm Beach County lost money nearly 46 percent of the time during the third quarter of this year, according to Zillow. The percentage of Palm Beach County properties that sold for a loss between July and the end of September, was a 3.4 percent increase from the previous quarter and at an elevated rate predicted to continue through at least next year.
Any homeowner who is in negative equity and who experiences a financial setback, like a job loss, income reduction or divorce, will find their options limited. To sell a home while underwater means the seller must pony up the difference between the mortgage and the current value, or negotiate a short sale with their bank. Therefore, negative equity does open homeowners up to risk they would not otherwise encounter, and it’s important to understand the total universe of homeowners who have this increased risk.
If you happen to fall in to the 50% at or near being upside down and you need to sell or just want to know what your options may be, visit our blog http://www.shortsales123.com/, read some of the posts, then give me a call at 561-602-1258.
Thanks for reading,
Steve Jackson
10/29/11
Lake Charleston 2011 sales breakdown
10/22/11
Have a loan with BofA? NOW IS THE TIME TO DO A SHORT SALE!
If you have a loan with BofA and owe more on your loan than your home is worth…DO NOT WAIT…CALL ME TODAY
(you’ll see why below)
Below is a partial screen-shot of an email that I recently received from Bank of America.
They are offering a MINIMUM of $5,000 paid to you, the short sale seller, at closing…and possibly as much as $20,000!
BUT…we only have about 6 weeks to get started.
Really, no kidding…if you have a Bank of America (Countrywide too) loan and are upside down…this is a great opportunity.
My direct # is 561-602-1258…if you reach my voicemail, leave me a message…or you can also send me a text to that number.
Thanks for reading…Steve Jackson
10/20/11
Think buying a bank-owned home is a good deal? Not so fast!
We have always counseled our clients that when buying a bank-owned home there are many pitfalls and caveats...but this Massachusetts court decision casts a very dark shadow on foreclosure sales:
I see many buyers and investors flock to foreclosures because they think that's where the best deals are...but considering the above risk as well as the fact that some of the overall best deals are NOT bank-owned properties..we suggest that our clients consider other options that meet their investment/lifestyle criteria.
Please feel free to call me on my direct line at 561-602-1258 if you have any questions about the above court decision or would like to discuss your investment goals.
Thanks for reading...Steve
10/9/11
Bank Risk Managers: Home Prices Won't Recover Until 2020
An interview of bank risk managers by Julie Crawshaw this past week on Moneynews.com revealed the sentiment that home prices are unlikely to recover before 2020 and mortgage defaults will persist for years.
“Housing has been an enormous drag on the economy for over three years as U.S. households lost trillions of dollars in equity,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs.
“While the housing sector will almost certainly gain strength during the next nine years, many bankers clearly believe prices will remain depressed for half a generation." "This puts the devastation of the housing crash into perspective.”
Among bankers surveyed, 49 percent said that recovery would not occur until 2020 and 73 percent believed mortgage defaults would remain elevated for at least five more years.
Furthermore, 46 percent of respondents expected mortgage delinquencies to increase over the next six months, and only 15 percent of respondents believed mortgage delinquencies will decline during that period. Only 15 percent of respondents expect mortgage delinquencies to decline during that period.
Housing prices nationwide could keep falling and might not bottom out for years, says Yale Professor and housing expert Robert Shiller.
In February, Shiller said housing prices could still fall 10 percent to 25 percent in real terms before hitting bottom. He recently told Yahoo’s The Daily Ticker he's standing by the prediction, adding that the economic big picture is looking worse. "I think the economic situation looks more precarious now," says Shiller, one of the authors of the S&P Case-Shiller Home Price Index, which was down 4.1 percent year-on-year in July although up from previous months earlier this year.
My comments: These type of stories always intrigue me for the sheer fact of how superficial and incomplete reporting has become. The sentiment is interesting and accurate, on the surface. However, one of the most important details; What is the risk managers definition of “recovery”, was omitted. Does “recovery” mean that prices will regain the highs of 2005? Does it mean simply that 2020 is when they think prices will stop declining and resume a historical rate of modest appreciation?
And housing is inherently local in nature…while some markets may not “recover” until well after 2020…some have already neared a bottom.
Here in Palm Beach County, with about 50% of all homes with mortgages already in a negative equity position (under water) and a non-existent job recovery, wed are going to have continued mortgage defaults and distressed sales (short sales and bank-owned sales)…which will, in turn, continue the cycle of increasing the percentage of properties in a negative equity position and increasing the probability of further defaults.
I can guarantee, unless we have serious inflation, that 2020 will NOT bring back the good old days of 2005…and inflation may not even accomplish it without serious and stable job growth.
Thanks for reading…Steve Jackson
10/4/11
Strategic default OK for Mortgage Bankers Association…but not for you?
The article below is from a recent post on the Mortgage-Mod_Monster blog:
Freely quoting from Mandelman’s post: “The CEO of the powerful Mortgage Bankers Association, John Courson, has said that underwater borrowers should keep paying on their mortgage loans and ‘should not walk away from lawful debts’. In an interview this past year, Courson appeared genuinely concerned adding: ‘What about the message they will send to their family and their kids and their friends?’
Just last year, you pointed out that defaults hurt neighborhoods by lowering property values, so borrowers would do less harm to our society were they just to repay what they owe. You know… like the responsible homeowners.
This past week, the Co-Star Group, Inc., indicated that it had agreed to buy the MBA’s 10-story headquarters building in DC for $41.3 million. The only problem is that $41.3 million comes up a skosh shy of the $75 million first mortgage on the building that the MBA took out from PNC Financial Group way back in 2007, when they purchased the property for $79 million.
The very same MBA also defaulted on their payments and secured a forbearance agreement, prior to the short sale. Nicely done, Johnny-O.
What kind of message are YOU now sending to Your family, Your children, and Your friends by walking away from Your lawful $75 million debt? Are they being morally harmed by your decision to stick the bank with close to $25 million? And why aren’t You simply paying Your mortgage as agreed, Mr. Courson?
Again, advice to the distressed homeowner: Answer the emotional question first – do you want to keep your house? or walk away with the least damage and purchase another home in two years? Then consider the financial questions. Do you have steady, although significantly reduced employment that you can count on for the foreseeable future? Do you believe your property recover any lost value in 5 to nine years?
Currently, the best answer to solving a distressed mortgage is the REST Report. The REST Report calculates Net Present Value and enables a distressed mortgage owner to negotiate an unbiased mortgage modification with court support if the mortgage servicer chooses to ignore the calculations and pursue foreclosure…
If you don’t believe your property can recover value in 5 to nine years, give the keys back to the bank…It even now has a name, compliments of firms like the Mortgage Banker’s Association. It’s called a ‘strategic default’. Do not even consider for one minute any ethical responsibility to anyone but yourself. Your bank cares not one whit for your well-being. You owe them, or anyone else, not one red cent.
