The lack of homes for sale hurting the overall real estate market

Jul 222012

With banks and squatters not selling their homes, it has completely stopped the supply of home coming on the market. As investors and first home buyers picked the cheapest homes, it has reduced the overall demand for the market. Regular buyers and move up buyers can’t participate in the market.

Why Drop in Foreclosures Is Bad for Housing Market

CNBC.com | July 19, 2012 | 11:59 AM EDT

In a normal housing market, lack of supply is generally considered a good thing. When demand outweighs supply, home prices rise and homeowners gain equity. Like so many things in this historic economic recovery, that premise doesn’t exactly apply.

This housing market has been running on distress for the past year, as investors rush to buy foreclosed properties in order to take advantage of today’s hot rental market. Sales of millions of foreclosed homes pushed home sales higher, off the bottom in fact.

Now that supply of distressed properties is drying up, and pulling overall home sales down with it. Sales of existing homes dropped unexpectedly in June, down 5.4 percent from the previous month, according to a new report from the National Association of Realtors.

Home sales were particularly hard hit out West, where there is the largest concentration of delinquent mortgages and foreclosed properties. Overall sales out West were down 3.6 percent in June from a year ago according to the Realtors, but in the $0-100,000 price range, they were down nearly 36 percent.

“More than 50 percent of all existing home sales have been to “investors” and “first timers” — thin and volatile cohorts relative to repeat buyers — looking for low-end properties to rehab and occupy or rehab and rent/flip respectively. These two cohorts have carried the market for three years,” California-based mortgage analyst Mark Hanson noted.

The distressed share of home sales fell to 25 percent, while it had been running at a third for much of the past year. The first-time home buyer share also fell to 32 percent, down from 34 percent the previous month and from a normal range of 40-45 percent. First-timers are having particular trouble obtaining home loans.

So why is the supply of foreclosures so low when there are so many hungry investors waiting to pounce? There should be plenty to go around, given that the total U.S. delinquency rate is at 7.2 percent, representing 5.57 million loans either delinquent or in the foreclosure process, according to Lender Processing Service’s June Mortgage Monitor.

The answer is the process.

This from Fannie Mae’s most recent quarterly report:

“Our foreclosure rates remain high: however, foreclosure levels were lower than they would have been during the first quarter of 2012 due to delays in the processing of foreclosures caused by continuing foreclosure process issues encountered by our servicers and changing legislative, regulatory and judicial requirements.”

New laws in Nevada, criminalizing faulty foreclosure processing ground that state’s foreclosure machinery to a near halt. Foreclosure filing there down 61 percent annually in the first half of this year according to RealtyTrac.

California just passed a new law requiring mortgage servicers to prove they have the right to foreclose by showing title of the loan. That is sure to create huge delays, as many of these distressed loans were sliced and diced and sold off in strips to investors during the housing boom.

La Habra Overview

Median home price is $268,000. Based on a rental parity value of $437,000, this market is under valued.

Monthly payment affordability has been worsening over the last 2 month(s). Momentum suggests worsening affordability.

Resale prices on a $/SF basis increased from $207/SF to $207/SF.

Resale prices have been falling for 12 month(s). Price momentum suggests falling prices over the next three months.

Median rental rates increased $75 last month from $1,739 to $1,814.

Rents have been slowly rising for 1 month(s). Price momentum suggests slowly rising rents over the next three months.

Market rating = 6

Proprietary OC Housing News home purchase analysis

450 North DEXTER St La Habra, CA 90631

$365,000 …….. Asking Price
$250,000 ………. Purchase Price
4/25/2012 ………. Purchase Date

$115,000 ………. Gross Gain (Loss)
($20,000) ………… Commissions and Costs at 8%
============================================
$95,000 ………. Net Gain (Loss)
============================================
46.0% ………. Gross Percent Change
38.0% ………. Net Percent Change
161.3% ………… Annual Appreciation

Cost of Home Ownership
——————————————————————————
$365,000 …….. Asking Price
$12,775 ………… 3.5% Down FHA Financing
3.80% …………. Mortgage Interest Rate
30 ……………… Number of Years
$352,225 …….. Mortgage
$93,511 ………. Income Requirement

$1,641 ………… Monthly Mortgage Payment
$316 ………… Property Tax at 1.04%
………… Mello Roos & Special Taxes
$91 ………… Homeowners Insurance at 0.3%
$367 ………… Private Mortgage Insurance
………… Homeowners Association Fees
============================================
$2,416 ………. Monthly Cash Outlays

($251) ………. Tax Savings
($526) ………. Equity Hidden in Payment
$16 ………….. Lost Income to Down Payment
$111 ………….. Maintenance and Replacement Reserves
============================================
$1,767 ………. Monthly Cost of Ownership

Cash Acquisition Demands
——————————————————————————
$5,150 ………… Furnishing and Move In at 1% + $1,500
$5,150 ………… Closing Costs at 1% + $1,500
$3,522 ………… Interest Points
$12,775 ………… Down Payment
============================================
$26,597 ………. Total Cash Costs
$27,000 ………. Emergency Cash Reserves
============================================
$53,597 ………. Total Savings Needed
——————————————————————————————————————————————-
This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707
949.769.1599……
sales@ochousingnews.com…..

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