Existing-Home Sales Rise 6.8% in March

By Stephanie Armour, USA TODAY

With a tax credit for first-time and repeat home buyers expiring next week, a report Thursday suggests the stimulus hasn't been as effective as a similar credit that dramatically increased home sales late last year.Existing-home sales rose 6.8% to a seasonally adjusted annual rate of 5.35 million units in March from 5.01 million in February, according to the National Association of Realtors. That was also about 16% higher than in March 2009.Last fall, home sales peaked at a 6.5 million annual rate, according to Moody's Economy.com. This spring, they're expected to peak at a 5.7 million annual rate in May.

MORTGAGE RATES: Unchanged from last week."This credit appears to be a shadow of the November credit," says Mark Zandi, chief economist of Moody's Economy.com.The national median existing-home price was $170,700 in March, up 0.4% from March 2009.Distressed homes, typically sold at a 15% discount, accounted for 35% of sales last month - unchanged from February, the National Association of Realtors reported."It doesn't look, at least, that there's been the kind of boom we had last time," says Joel Naroff at Naroff Economic Advisors. "But we have to give it one more month. We have to see April."Total housing inventory at the end of March rose 1.5% to 3.58 million existing homes available for sale, which represents an eight-month supply at the current sales pace, down from an 8.5-month supply in February.The tax credit, which requires a binding contract be signed by April 30 and a deal that closes by June 30, wasn't the only factor behind March's gains. Better weather than in February is believed to have helped, too.In addition, the Federal Housing Administration announced that it is increasing its mortgage insurance premium from 1.75% to 2.25% of mortgages it guarantees. This premium increase, which took effect in early April, was behind a recent five-week surge in mortgage applications, says Brian Bethune at IHS Global Insight."I don't think (the tax credit) has had any impact at all," Bethune says. "You do see it boosting sales a little bit. Maybe it's had a quarter of the effect that the other one did."The current tax credit provides up to $8,000 for first-time home buyers and up to $6,500 for move-up buyers. An earlier tax credit of $8,000 for first-time buyers expired Dec. 1."The biggest benefit is to first-time buyers, and a lot have already taken advantage of it, so we have a smaller potential pool in this go-round," Zandi says.

Home Prices Rise in three California cities

A trio of California cities bucked a nationwide home price decline in February while most of the other metro areas posted losses or flattened out, underscoring the resurgence of the Golden State's coastal markets, data released Tuesday showed.The Standard & Poor's/Case-Shiller index of 20 metropolitan areas was down 0.1% from January on a seasonally adjusted basis, marking the closely watched measure's first decline since home prices began to recover last June.But in a positive sign for housing, the index posted a 0.6% increase from February 2009, its first year-over-year increase in more than three years.The mixed readings come as the expiration of a federal tax credit for buyers looms at the end of this week. Many analysts expect home prices to decline once the incentive runs out — but not nearly as steeply as when values entered a nearly three-year free-fall in the summer of 2006 that helped drag the U.S. into one of the most brutal recessions since the Great Depression.
"Generally, I don't see an upbeat picture, I see the trend as faltering," said David Blitzer, chairman of Standard & Poor's Index Committee. "One of the few spots that seems surprisingly strong is California."California cities saw home prices in February gain 0.8% in San Diego, 0.4% in San Francisco and 0.2% in Los Angeles.Mark Zandi, chief economist with Moody's Economy.com, said the strong showing in California reflected the reduction in foreclosures on the market over the last year. Foreclosures made up 44.3% of the resale market in February, down from an all-time high of 58.8% in February 2009, according to San Diego research firm MDA DataQuick."California is perhaps the most efficient state in respect to resolving its foreclosure issue and so a lot of properties were pushed through the process," Zandi said. "There are now fewer in the pipeline."Although foreclosures may increase in California in coming months, leading to a period of flat prices and perhaps even some declines, the state was "much further along in getting its house in order than most parts of the country," he said.Not reflected in the Case-Shiller numbers are regions in the state farther from the coast where overbuilding was more prevalent and the unemployment rate remains above average, said Richard Green, director of USC's Lusk Center for Real Estate."We are doing a little better than the rest of the country, and that is not particularly surprising because California, in general, didn't overbuild the way Arizona and Las Vegas and Florida did," Green said. "In the places we did, prices collapsed so much it's hard for them to fall much further."In the next two months, some California shoppers have a shot at as much as $18,000 worth of tax credits if they get their timing right.The federal tax-credit program, set to expire Friday, provides up to $8,000 for first-time purchasers and as much as $6,500 for some current homeowners. To qualify for that credit a buyer must sign a contract on a home by April 30 and close the deal by June 30.Adding to that incentive is a statewide credit, which was approved by lawmakers last month and kicks in May 1, for as much as $10,000 for first-time buyers and those purchasing newly built homes.The Case-Shiller index covers three months of data beginning in December, when sales began a three-month slump after what was to have been the federal tax credit's Nov. 30 expiration; Congress in November extended the credit. February's sales data capture that plunge and the traditionally slow winter months. Home sales picked up again in March, and many expect that trend to continue at least through April.Along with the California cities, Las Vegas eked out a 0.1% gain. Fourteen cities posted declines in February over January, with the biggest losses in Portland, down 1.9%; Dallas, falling 1.4%, and Chicago, down 1%. Two cities were flat for the month.

Biggest Celebrity Real Estate Losers

The Biggest Celebrity Losers

Even celebrity home prices have hit rock bottom.

1. Suzanne Somers

Was: $35 million

Now: $12.9 million

Along with hubbie Alan Hamel, Somers has been working on this huge, 65-acre desert compound outside Palm Springs since 1977. "Les Baux de Palm Springs" mixes the charm of the French countryside with Hollywood touches like Zebra skin rugs (lots of 'em) and massive chandeliers. Even after dropping the price by more than $22 million this property is still on the market, with the current price "available upon request". (Source)

2. Nicolas Cage

Was: $35 million

Now: $17.5 million

Are there any mega-celebrities out there who live in simple, tasteful homes? Certainly not Nicolas Cage, whose old-Hollywood tudor in Bel Air reminds us of the sprawling Xanadu compound from "Citizen Kane". Actually, it's not so much the house as the crap it's filled with. Anyone want a life-sized Mickey Mouse? How about a boulder-sized amethyst geode? The good news is that the property is now being offered at a 50% discount. Anyone got seventeen-and-a-half million bucks lying around? UPDATE: Is this house about to be auctioned off on the courthouse steps? Has Cage defaulted on his mortgage? (Source)

3. Eddie Murphy

Was: $30 million

Now: $14.99 million

Eddie Murphy's seven-bedroom Englewood, NJ mansion known as "Bubble Hill" may be only ten minutes outside of Manhattan, but that doesn't mean he's had an easy time finding a buyer. Bubble Hill has been on the market for at least 5 years. Pro: it's got a bowling alley and a recording studio. Cons: $200k a year in property taxes. UPDATE: Looks like this house keeps dropping! 12.75 million and falling fast. (Source)

4. Mel Gibson

Was: $39.5 million

Now: $29.5 million

Another celebrity gets divorced, another mega-Tudor hits the market! This Greenwich, CT mansion was designed by architect Charles Lewis Bowman and built in 1926. It's actually a very tasteful home (we're glaring at you, Nic Cage), if you can get over the fact that Mel Gibson has a reputation for being a huge prick. You know you're a jerk when you drop the price of your house by $10 million but still nobody wants to buy it. UPDATE: Looks like somebody finally bought this place, though the purchase price remains undisclosed. (Source)

5. Hugh Hefner

Was: $27.995 million

Now: $18 million

Why did it take nearly 6 months and a ten million dollar price drop to sell this home? Are there not enough wealthy, single men out there who would pay almost anything for a pimp shack adjacent to the Playboy Mansion? Let me repeat that: you can literally stroll over to the Playboy Mansion in your silk pj's for a round of Texas Hold 'Em with the bunnies. We truly live in strange times. (Source)

6. 50 Cent

Was: $18.5 million

Now: $10.9 million

Mike Tyson. 50 Cent. You. What, you don't think you can fill shoes that big? 50 Cent reportedly spent $10 million on renovations alone fixing up this Farmington, CT mega-mansion that he purchased from Mike Tyson's ex-wife. I guess there aren't many people looking for 52 rooms... one real estate agent went on record saying he'd be surprised if this place sells for more than $5 million. Ouch. (Source)

7. Richard Gere

Was: $17.995 million

Now: $11 million

It's no secret that Julian Schnabel's Palazzo Chupi units at 360 West 11th Street in Manhattan's West Village have sold poorly. (The units that have sold at all!) Only one big-name sucker took the plunge: Richard Gere. But the star of "Pretty Woman" and "Chicago" never even moved in before the apartment was re-listed at nearly $18 million. More than a year - and several price drops - later, the place finally sold for $11 million. (Source)

8. Burt Reynolds

Was: $15 million

Now: $8.995 million

This old stallion may not regularly trim his famously thick body hair, but he certainly knows how to trim the asking price on his Hobe Sound, FL mansion. The listing has already dropped by about 40%, but without a buyer look for it to continue heading southward. This Mediterranean-style compound borders a wildlife refuge, so watch out for alligators if you take a tour. (Source)

9. Meg Ryan

Was: $19.5 million

Now: $14.2 million

Unlike Meg Ryan's reconstructed nose, her 1931 Spanish-style estate is practically flawless. A real movie star house, with ocean views and all that good stuff. Celebrity couples David & Victoria Beckham and Ben Affleck & Jennifer Garner reportedly took tours of the house, but no one was willing to fork over nearly $20 million. For $5 million less, though, it's hard to believe that this house is going to be on the market for very long. (Source)

10. Alex Rodriguez

Was: $14.9 million

Now: $10 million

A-Rod had to drop the price of his Trump Park Avenue apartment by $4 million before it sold, but even a price drop of nearly $5 million on his Coral Gables home hasn't lit a fire under buyers' checkbooks. Why sell? Looks like Rodriguez is trying to focus on baseball for once, rather than his well-known extracurricular activities. Or maybe the price of a hot dog and a beer at the new Yankee Stadium is just a little too steep? (Source)

11. Dylan McDermott

Was: $11 million

Now: $6.9 million

By all accounts a beautiful residence, McDermott has had major trouble selling this Spanish hacienda-style home in Brentwood, even with a steep price cut. McDermott picked up the house back in 1999 from Melanie Griffith and Antonio Banderas, who bought it in 1997 from Michelle Pfeiffer and David E. Kelly (creator of "The Practice", in which McDermott had a starring role). I'm not saying I've got the cash, but I'd love to live in this house. (Source)

12. Elle Macpherson

Was: $15.5 million

Now: $12.2 million

The falling price on this seven-story Notting Hill, London residence proves that even the UK is being hit hard by the housing crisis. The Victorian property was built in the 1850s and has six bedrooms. It was first listed in the summer of 2008. (Source)

13. Curt Schilling

Was: $8 million

Now: $5 million

This house has a history of selling for less than what its sports superstar owners would like to charge. When Drew Bledsoe owned this Medfield, MA home he tried to unload it for $9 million, but eventually had to settle for $4.5 from fellow Boston-area hero Curt Schilling. Schilling had been trying to get rid of it for $8 million, then dropped the price to $5 million. Update: the price has dropped again to $4.5 million. I guess that's really what this house is worth? (Source)

14. Dan Marino

Was: $15.9 million

Now: $13.5 million

Marino never won a Super Bowl, and he isn't much of a real estate champion either. He's been trying to unload his Weston, FL compound for nearly four years, dropping the price and throwing in freebies like $1.5 million worth of designer furniture and a signed football. A signed football? Wow! That's worth, like... four hundred bucks. (Source)

15. Scarlett Johansson

Was: $7 million

Now: $5 million

Scarlett Johansson purchased her 1931 Spanish-style home in LA's Outpost Estates neighborhood in 2007 for $7 million bucks. Now it's been listed for just under $5 million... that's $2 million actual dollars that Scarlett is waving goodbye to. Ouch. (Source)

16. Kimora Lee Simmons

Was: $7.8 million

Now: $5.9 million

Kimora may be living "Life in the Fab Lane" as a reality TV star and CEO of Baby Phat, but her real estate woes are the stuff of legend. Along with ex-hubbie Russell Simmons, she's had to drop the price of her Saddle River, NJ home by $7 million. She also cut the price of her own Beverly Hills home by nearly $2 million, but the house has recently been de-listed for lack of an interested buyer. (Source)

17. Lance Armstrong

Was: $12 million

Now: $10.5 million

Armstrong's 447-acre ranch in Dripping Springs, TX includes Deadman's Hole, a beautiful swimming hole that has a giant waterfall. The 7-time Tour de France winner celebrated the birth of his fourth child last year, so maybe he's thinking about keeping the toddler far away from unguarded bodies of water? (Source)

18. Britney Spears

Was: $7.9 million

Now: $6.5 million

Does anyone really have the energy to listen to one more word about Britney Spears? I didn't think so. Let's just call her a (real estate) loser and be done with it. (Source)

19. J-Lo & Mark Anthony

Was: $8.5 million

Now: $7.5 million

Jennifer Lopez and Mark Anthony have sold their understated Bel Air home to a hedge fund manager for $1 million below the asking price. With as much money as they have, do you think they'll even notice? Of course, they were forced to throw in $1.3 million of furniture to close the deal, adding a bit of insult to injury. (Source)

20. Bruce Jenner & Kris Kardashian

Was: $3.4 million

Now: $3.0 million

"Keeping Up with the Kardashians" may be a hit reality TV show, but as we've seen before that hardly insulates you from falling real estate prices. This house was even featured on the first few seasons of the show, but finding a buyer required a 12% price cut. Then again, just like the power couple featured at #19, do you think anyone with the last name Kardashian is going to worry about $400,000? (Source)

The Short Sale World Is Spinning

The Short Sale World is Spinning 2MP,
HAFA and Second Chance Can HAFA Work With 2MP?

First, the news on 2MP, Treasury’s second lien modification program that works in tandem with HAMP. As we mentioned here last week, Wells Fargo signed on to the program. In January, Bank of American was the first major servicer to formally agree to participate in the program. Today, Chase committed to the program, leaving only Citi, of the big four, yet to commit. One has to believe that Citi will announce very soon.

While the 2MP program has been specifically drafted to work with HAMP modifications, I have had conversations with representatives from Treasury who have indicated that coupling 2MP with HAFA is a logical next step. Treasury has yet to announce an official initiative to integrate 2MP and HAFA. To apply 2MP to HAFA will likely require a new ‘Directive’, as certain provisions of 2MP would seem to be incompatible with a high percentage of HAFA short sales.

We expect to see a shift to the direction of coupling HAFA and 2MP soon, and we will keep you posted. In the meantime, we can draw a few conclusions as to how 2MP might work with HAFA and offer a couple of suggestions to agents working with homeowners looking to do a short sale who may qualify for HAFA, and possibly 2MP:

1. Work with the homeowner on trying to keep the 2nd from getting charged off. Work with the servicer on the second to agree to some payment arrangement that keeps it out of charge off. Charged off seconds may be tougher to settle through 2MP, and we all know they are tougher to settle now. Note: in most cases 2nds become seriously at risk of being charged off at the 180 days delinquent mark.

2.Get educated on both the HAFA program and on 2MP. There will be a great deal of confusion as to how the programs will operate and which loans, and which homeowners are eligible. Even Treasury describes the programs as complex, so go to a trusted source and get thorough training on how the programs work.

A ‘Second Chance’ at Homeownership?

Interesting article in American Banker today. A proposed Lender’s ‘Second Chance’ plan is discussed – well I assume it is discussed since I don’t pay the rather heavy subscription fee to receive anything other than a teaser from American Banker – that would make potential borrowers eligible for mortgage loans two years after a foreclosure. My immediate reaction was to naïvely believe that the Mortgage Bankers Association was looking to do a good deed here. Then, I read the headline: “Can Rehabilitating Homeowners Buoy the Mortgage Market?” In other words, if we help those folks that have suffered through the pain of mortgage hell, we could probably ramp up sagging revenue. Sorry for the digression. The fact that the issue is being placed on the table is important. It has been my feeling for some time, in fact as early as 2006, that policy makers and the mortgage industry would have little choice but to find a way to get many of the borrowers who went through foreclosure back into a mortgage – likely sooner rather than later. Agents, stay engaged with all your clients – past, present and future. Look for ways to add value by providing information and industry updates that will have them thinking about homeownership. Whether they weathered the storm and may be ready to move up, suffered a setback and are ready to re-enter the market, or flourished and may be ready to look at buying a duplex, your client database should be a primary focus when you are business planning.

No Positive Equity until 2020?

This morning, DSNews.com reported that First American CoreLogic's recent study shows that some areas in the U.S. have properties that are in a present negative equity scenario that will not see positive equity until 2020. Many of us knew it would be a while, but 2020? Their stats are based on data extracted from research done in many areas across the U.S.

So what does this mean for us in the real estate industry? Well, firstly, that short sales will be around in some capacity for a long time. Agents that are on the fence about short sales will need to surrender and take the plunge...or face a probable business failure. Agents that have already built up their business by getting certified and helping homeowners sell their upside down properties in the pre-foreclosure state will have a head start.

What does this mean for defaulted or soon to be defaulted homeowners? The study mentioned states that "The latest numbers from First American CoreLogic show that more than 11.3 million, or 24 percent, of all residential properties with mortgages were underwater at the end of the fourth quarter of 2009". Wow! That's almost a quarter of the mortgages in the U.S.! Furthermore, "Among the new housing initiatives announced by the administration Friday was assistance for borrowers with negative equity. In order to deter these homeowners from strategically defaulting, the Treasury will begin requiring servicers to consider principal write-downs as part of their Home Affordable Modification Program (HAMP) evaluations for borrowers whose loan balance is more than 115 percent of the property’s current value. The plan also includes a Federal Housing Administration (FHA) refinancing program for negative equity mortgages."

Ok, so we are expecting defaulted homeowners to "strategically default" on their loans due to the fact that there is no light at the end of the tunnel...equity speaking. That could create a disasterous effect on the housing market, which is already poised for future foreclosure waves in mass volume. So what is the governments answer to this potential epidemic of massive "strategic defaults"...principal write-downs (reductions) via loan modification for borrowers whose LTV is more than 115%. There is a lot of chatter about these principle write-downs and it will be very interesting to see how this plays itself out. Bank of America unveiled a plan on upside down defaulting HELOC's (that are in junior position) called "Earned Principle Write-doowns". With this program, the borrower would have to make the new modified payment for 5 years before the loan principal would be permanently reduced.

PartnerFirst members, chime in here or in the discussion/open forum area about your thoughts on these matters.

Article Link: http://www.dsnews.com/articles/print-view/how-long-will-negative-equity-last-2010-03-29

The Wisdom of Lowering a Short Sale

Recently I had the privilege of interviewing Troy Huerta, an active agent who closed 200 short sales in 2009, during one of our Partner First educational webinars. (also one of our PSC Trainers) During our discussion he commented on how in many cases he and / or his team encourage the Selling agent to go back to the Buyer, lower the price slightly, and ask for some closing costs to be paid for by the lender. The logic was that

a. The Buyer was possibly going to be more loyal if he / she could purchase it at a lower price (starting off on the right foot),

b. The additional closing costs might increase the Buyers patience and loyalty (and excitement), and the big one...

c. Most of the time, the lender will ask for a bump in the price anyways, so why not build it in to the transaction (which is a major reason for short sale failure, Buyers not willing to wait, nor increase the price based on the lenders instructions)

Since that call I have been asked if I agree with this practice and what my sentiments were. Firstly, far be it from me to discount the business practice of a highly esteemed colleague who's success speaks for itself. And secondly, let's look at the foundational principles that are likely in question.

1. Is lowering the price slightly in the Sellers best interest?

As a listing agent, our fiduciary duty and legal obligation is to act in the best interest of our client, the Seller. If Troy's vast experience serves as our ruler, and most of the time the lender does come back with a slight increase / bump in price, and that is a major cause for short sale failure...then let's look at that point. If doing something that increases the chance of short sale success is in the seller's best interest, then why would that be in question. My gut feeling is that many agents feel it is not normal, and thus must be wrong. Wrong to whom? The lender? The lender who is still going to get every bit of the amount they demand (based on their BPO)? How could it be wrong to them? It is merely a strategy that helps all parties achieve their goal...short sale success!

2. Can the Lender / Servicer demand the highest amount be offered?

My answer is "no". They are not the Seller, they are merely servicing the loan for the investor with the goal of minimizing the loss severity. They are in a passive position prior to the offer submission. Now, would they prefer that the higher offer be sent right away? Possibly, but not in all cases. Many times, even in my experience, the lender / servicer (i.e. loss mitigation) is actively assisting our team in finding creative solutions to satisfy all lien holders. As long as they receive their bottom line, what difference does it make how we got there? Remember, we do not have a legal obligation to act in the best interest of the lender / servicer, but of our client. This is not to say anything should be done underhandedly. Everything should be on the HUD-1, and full disclosure should be made to your client. But the means of achieving the desired result may require strategies such as this.

Always ask yourself, is what I am proposing to do in my clients best interest. If it is not, don't do it. If it is, make sure there are no RESPA, DRE, State, local government violations and proceed cautiously and intelligently.

Navigating through these choppy waters is not for the casual agent. We can learn a lot from our colleagues.