There are still a lot of threats to this housing recovery.
Is Housing Recovering as Much as Everyone Thinks?
Published: Tuesday, 9 Oct 2012 | 10:41 AM ET
The news is finally good: Consumer sentiment in housing is at the highest level since the recovery began.
Realtors say not only are buyers coming back, but much-needed sellers are too. Inventories of distressed properties are shrinking, and mortgage rates are hitting record lows nearly every week. (Read More: Is Housing Rising From Ashes? ‘Industry Has Come Back’.)
The housing crisis is over, right?
“While we have seen many dramatic headlines touting the housing recovery over the last 3.5 years, these headlines and the analysts who author them have been over- predicting changes in the housing market (versus what actually occurred).” said Laurie Goodman of Amherst Securities in a new report.
“Recoveries, with attendant price increases, were anticipated in the spring and summer of 2009, 2010 and 2011; by the fall and winter the predictions of price changes were amended to reflect further price declines. In actuality, after netting out the seasonal factors, home prices have been little changed in the past few years.”
Does that mean that we’re headed for yet another housing scare come Halloween time? Is housing’s winter chill just around the corner? Not according to the bulk of Americans surveyed in yet another new report:
“Consumers are showing increasing faith in the nascent housing recovery,” said Doug Duncan, senior vice president and chief economist of Fannie Mae. “Home price change expectations have remained positive for 11 straight months, and the share expecting home price declines has stabilized at a survey low of only 11 percent.”
The expectation is now that home prices will increase an average of 1.5 percent in the next year, according to the survey, and that has sellers coming back to the market. Of those surveyed, 19 percent said now is a good time to sell. That’s the highest since the survey began in June 2010. But wait, 19 percent? That’s still not a lot.
These national surveys seek overall trends and tout big headlines, but real estate is and always will be local, and this recovery is becoming increasingly local. That is clear in the latest numbers on supplies of distressed homes.
The so-called “shadow inventory” of homes that either have seriously delinquent mortgages, are in the foreclosure process or are bank-owned but not yet listed for sale, fell to 2.3 million units in July according to CoreLogic. That’s a 10 percent year-over-year drop, and puts the supply at about six months by the current sales pace.
“The decline in shadow inventory has recently moderated reflecting the lower outflow of distressed sales over the past year,” said Mark Fleming, chief economist for CoreLogic. “While a lower outflow of distressed sales helps alleviate downward home price pressure, long foreclosure timelines in some parts of the country causes these pools of shadow inventory to remain in limbo for an extended period of time.”
And that’s the problem. In states where a judge is required in the foreclosure process, like New York, Florida and New Jersey, foreclosure timelines are still marked in years, not months. That will keep home prices from recovering as quickly there. Prices could in fact deteriorate. (Read More: Housing Alert: Short Sales may Be in Big Trouble.)
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Proprietary OC Housing News home purchase analysis
1381 STARLAND St La Habra, CA 90631
$599,000 …….. Asking Price
$345,000 ………. Purchase Price
3/30/2000 ………. Purchase Date
$254,000 ………. Gross Gain (Loss)
($27,600) ………… Commissions and Costs at 8%
============================================
$226,400 ………. Net Gain (Loss)
============================================
73.6% ………. Gross Percent Change
65.6% ………. Net Percent Change
4.4% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$599,000 …….. Asking Price
$119,800 ………… 20% Down Conventional
3.40% …………. Mortgage Interest Rate
30 ……………… Number of Years
$479,200 …….. Mortgage
$108,157 ………. Income Requirement
$2,125 ………… Monthly Mortgage Payment
$519 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$150 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$2,794 ………. Monthly Cash Outlays
($328) ………. Tax Savings
($767) ………. Equity Hidden in Payment
$126 ………….. Lost Income to Down Payment
$170 ………….. Maintenance and Replacement Reserves
============================================
$1,994 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$7,490 ………… Furnishing and Move In at 1% + $1,500
$7,490 ………… Closing Costs at 1% + $1,500
$4,792 ………… Interest Points
$119,800 ………… Down Payment
============================================
$139,572 ………. Total Cash Costs
$30,500 ………. Emergency Cash Reserves
============================================
$170,072 ………. Total Savings Needed
The property above is available for sale on the MLS.
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Cost of Ownership Analysis
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Nearby Foreclosures
Gain a competitive advantage over other buyers. By locating distressed properties -- before they hit the MLS -- you can discover where tomorrow's REOs and short sales will appear. Most of these properties are not listed on the MLS, but they will be soon. Research properties in advance and get a jump on your competition. Don't miss out on another deal because you couldn't act quickly. Use this tool to your advantage! The red properties are already bank owned. As soon as REO asset managers prepare them for sale, they will be on the MLS. Get ready! The green and blue properties have owners who are not paying their mortgages. They may be offered as short sales, or they may go through foreclosure and become REO. Either way, they will also likely be available on the MLS soon. Find your next home! Be prepared to offer on these properties by researching them in advance or risk losing out to buyers who are have done their homework. Start your research today! To find distressed properties, enter your desired location and press search. Scroll through list by pressing "next."Comparative Market Analysis
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Apparently, lenders are in no hurry to process their foreclosures.
Foreclosure Activity Falls to Five-Year Low: RealtyTrac
Foreclosure filings — including default notices, scheduled auctions, and bank repossessions — were reported on 180,427 U.S. properties in September, according to RealtyTrac. The total number of filings last month was down 7 percent from August, down 16 percent from September 2011, and was the lowest monthly total recorded by RealtyTrac since July 2007.
The foreclosure tracking company says the decrease in September helped pull Q3 2012 numbers down to make it the lowest quarterly reading since the fourth quarter of 2007.
Foreclosure filings were reported on 531,576 properties during the third quarter of this year, a decrease of 5 percent from the second quarter and a decrease of 13 percent from the third quarter of 2011. It marks the ninth consecutive quarter of annual declines in foreclosure activity.
According to RealtyTrac’s report, one in every 248 U.S. homes received a foreclosure filing during the July-to-September period. The company says U.S. foreclosure starts in the third quarter decreased both from the previous quarter and a year ago, reversing the rise seen in new foreclosures during the second quarter.
“We’ve been waiting for the other foreclosure shoe to drop since late 2010 … but that other shoe is instead being carefully lowered to the floor and therefore making little noise in the housing market —- at least at a national level,” said RealtyTrac VP Daren Blomquist.
“Make no mistake, however,” Blomquist added, “the other shoe is dropping quite loudly in certain states, primarily those where foreclosure activity was held back the most last year.”
A number of judicial foreclosure states — including Florida, Illinois, Ohio, New Jersey, and New York –- registered substantial year-over-year increases in foreclosure activity, whereas non-judicial foreclosure states such as California, Georgia, Texas, Arizona, and Michigan posted sizable declines.
Blomquist says states where foreclosures were not so dammed up last year could still see a roller-coaster pattern in activity going forward because of regulations and court rulings that have substantively changed the rules for proper foreclosure processing. He contends a backlog of delayed foreclosures will likely build up in those states as lenders adjust to the new rules.