Home Prices Could Be Upended
↑ by the Mysterious Flying Miser ↓
From the Press-Enterprise:
“The median price of homes sold in Riverside and San Bernardino counties inched up by $5,000 last month from July, but fewer were sold as would-be buyers had trouble finding bargains in a diminished supply of low-cost foreclosed homes, according to the monthly report from MDA DataQuick.
“Chapman University economist Esmael Adibi cautioned that factors can change from month to month, and he said year-over-year statistics show Southern California’s housing market is headed in the right direction. ‘This is not a sign that the housing market has bottomed out but, definitely, the rapid decline in prices and decline in sales has leveled off,’ Adibi said. As long as sales continue to rise and the inventory of unsold homes diminishes, ‘ultimately the prices are going to firm up.’
“Andrew LaPage, an analyst with San Diego-based DataQuick, warned that there’s widespread uncertainty about how many more distressed homes are stacking up and are destined for foreclosure. ‘It could undermine any price stability that’s forming out there,’ he said.
“Sales have increased year over year for 17 consecutive months in Riverside County and 15 consecutive months in San Bernardino County. Overall, Southern California sales slowed between July and August, which DataQuick described as ‘unusual,’ considering home sales typically are active in the summer.
“The dip could be a result of fewer ‘bargain’ foreclosed homes on the market, LaPage said. But with more foreclosures likely coming, depending on the severity, median home prices could be upended again, he said.
“‘It’s such a crazy market right now,’ said John Marcell, president of Upland-based Better Mortgage Brokers, who said bidding wars have discouraged first-time homebuyers and flooded the market with investors. One recent deal brought in 17 offers, he said. Ridding the housing market of unsold inventory is a good thing, but he said special consideration should be given to homebuyers living in the house instead of investors buying homes to rent them.
“Marcell said he expects to see more foreclosures into 2012 as the unemployment rate rises. The sale of new homes in August was a record low in San Bernardino County where 241 were sold. In Southern California, as well as Riverside County, new home sales were the lowest they had been in the month of August since 1993.”
“But for new home developers, any home sold whether its broken in or brand new, is a good sign that people are willing to buy, said JP Ackerman, director of strategic marketing for Pulte Homes, Del Webb and Centex of Southern California. Ackerman said the price difference between a resold home and new home has winnowed enough to make it possible for firms like his to appeal to a first-time home buyer who doesn’t want to enter a bidding war for a pre-owned home.
“‘They’ve collapsed to a point where they’re right on top of each other,’ he said of prices.”
From USA Today:
“Tens of thousands of financially strapped homeowners who have asked lenders to lower their mortgage payments are instead winding up with higher monthly payments and larger debts on their homes. Homeowners who were hoping for lower payments are discovering to their dismay that lenders roll late fees, back taxes, or other costs into the principal, sometimes turning a difficult payment into an impossible one. That is one reason that many reworked mortgages are sliding back into default.
“Of loans modified from Jan. 1, 2008, through March 31, 2009, monthly payments increased on 27% and were left unchanged on an additional 27.5%, according to a recent report by banking regulators. Many modified mortgages fall delinquent — 25% to 40%, depending on the type of mortgage — often because of homeowners’ loss of income or additional outstanding debt, according to a report last month by CreditSights, a financial research firm.
“‘Payments have gone up …. (and) the payment relief can last for the first few years and then go up (again),’ says Alan White, assistant professor of law at the Valparaiso University School of Law in Valparaiso, Ind. He has studied the subprime mortgage situation for 10 years. ‘(The lenders) focus on today and not on the future.’ Even under the Obama plan, they don’t focus on permanent debt reduction, White says.
“The majority of borrowers who’ve gotten mortgage modifications have seen their overall principal balance go up, according to an analysis by CreditSights and ICP of about 660,000 mortgages modified this year. In about 90% of the modifications, the principal balance after a modification was larger, CreditSights said.
“That’s the situation facing Samantha and Steve Jensen. When the couple bought their $550,000 home in Scottsdale, Ariz., six years ago, they thought they’d found the perfect place to raise their three children. But when their adjustable-rate mortgage reset to a higher rate, they could no longer afford the monthly payments that jumped by about $1,000 a month, to $3,300. So they were relieved when their bank in June offered to modify their mortgage by lowering their interest rate.”
“Under the modification they were to pay $2,600 a month — but then they discovered they also had unpaid property taxes. Once the bank added taxes to their principal, they say, their monthly mortgage payment grew to $3,500. They got a modification in June and are now two months behind on their mortgage payments and facing possible foreclosure.”
“‘The bank could have done more and reduced our principal,’ says Samantha, 40, a special education teacher. ‘You have the anticipation of relief and then you realize it’s not going to make it better. It’s like being punched in the stomach twice.’”
“Some research suggests lenders may gain financially if they don’t modify a mortgage at all. According to a paper published this year by the Federal Reserve Bank of Boston, more than 30% of delinquent borrowers fix their situation on their own and are able to pay even if no action is taken. Another reason lenders might resist modifications is the combined impact of high redefault rates and falling property values in many markets. A lender might calculate that helping a borrower avert foreclosure now only risks a deeper loss if the house goes to foreclosure anyway a year later. And some lenders say even if they modify loans, so many homeowners are underwater — meaning their homes are worth less than their mortgages — that some borrowers are defaulting on purpose, walking away after the lender has spent money and time renegotiating the loan.”
