One Of The Elephants In The Room
Readers suggested a topic on foreclosures. “Is the Financial Accounting Standards Board responsible for the shadow inventory? If it wasn’t for them reclassifying mark-to-market rules would it mater what the Fed or the Government does to fix the housing market. I say these guys are at the heart of the problem.”
A reply, “I’ve been watching the markets here in Tampa for years now. I would like to find a nicer house while prices are much lower than 2007, but it seems they get bought up very quickly if they are what I consider a ‘good deal.’ They barely make a listing before they are sold. But, there are many overgrown, abandoned and houses in disrepair. I have noticed a trend. The houses are left to sit until the other houses in the neighborhood, that were previously abandoned and in need of repair are marketed and sold.”
“Once they have new occupants, the latest of the abandoned properties seem to go into foreclosure and get into the market over the next few months. In other words, there are lots of vacant houses, but only a limited number come up for sale at any given time. Once occupied, some of the other vacant houses get some attention and a for sale sign. I am seeing what I consider ‘controlled releases.’ So, in addition to gaming the interest rate and terms of buying, the next market manipulation is inventory control.”
Another said, “Either they are lying about the delinquency rate or the whole pipeline is clearing out. I kind of doubt they are lying but I wouldn’t put anything past these guys. If the trend holds the distressed market will slowly clear to a more normal 4 - 5 % rate. That seems to be the trend nationally. That could form a bottom in the market. These stats are starting to look more and more like the mid-1990’s when the last big housing bear market ended and began the climb up in California. Is it time to take off the bear-suit and buy?”
The Commercial Appeal. “City crews descended on 835 Stonewall Thursday following complaints from neighbors and found live and dead animals at the site. A peek inside the one-story home in this otherwise well-manicured neighborhood revealed trash, debris, rotting furniture and animal excrement lining the floors. But city officials could have a hard time figuring out where to send the bill for the clean-up job, or who could be responsible for any civil or criminal charges or fines levied against the property.”
“That’s because mortgage companies and banks often do not formally foreclose on, or take legal possession of, properties like the one at 835 Stonewall to avoid paying any taxes or other costs associated with the properties, city officials said. ‘The mortgage companies won’t take it on so they don’t have to care for the property and have it on their books,’ said Onzie Horne, deputy director of the Public Works Division. ‘They don’t want it and they don’t want the responsibility to maintain it.’”
“There are 24,982 vacant lots in Memphis and another 43,000 properties with a vacant or abandoned structure, according to a study released in 2010.”
The Kitsap Sun. “Kitsap County home prices in September were 4 percent higher than a year ago but still below what they were in 2006, before the housing market collapsed. Inventory, the number of homes available for sale, continued to decrease to 1,552 in September, a 13 percent fall from a year ago. The number, however, can be deceiving as it does not include the several hundred homes in Kitsap County that are in foreclosure or are being held off the market by the banks.”
“The banks have slowly been releasing a fraction of the distressed homes they took back to keep prices from falling too fast, explained Mike Eliason, association executive for the Kitsap County Association of Realtors. The concern among his members is that banks could flood the market, which would force prices quickly downward.”
“Besides that elephant in the room, NMLS representatives are characterizing the upticks in price as part of the beginning of a slow recovery. Shrinking inventory, combined with modest increases in price and sales pace, have caused buyers who come forth with too-low offers to go ‘back on the street looking at their second-choice home,’ according to Frank Wilson, a member of the NMLS board and broker at John L. Scott Real Estate in Poulsbo. ‘Today we’re saying buyers who are most realistic with their offers and preapproved with a lender, and who are the most aggressive, might get the house they want.’”
The Orange County Register. “Investors and homeowners needn’t fear homes in the ’shadows’ of the housing market, a panel of experts said as the California Association of Realtors wrapped up its annual conference in Anaheim this week. The housing market’s so-called ’shadow inventory’ has long been considered a threat by unleashing an avalanche of discounted foreclosures onto the housing market. But members of CAR’s economics panel said distressed homes will continue to trickle back onto the market bit by bit.”
“Joel Singer, association CEO and former chief economist, argued that California’s foreclosure process is ranked among the most efficient in the nation, meaning that if lenders wanted to foreclose more homes, they could do it reasonably quickly. ‘I do feel good that in the California marketplace is going to give us advance warning,’ Singer said. ‘From the standpoint of there being a huge inventory coming out at a particular point in time, when somebody tells you that, you probably ought to turn and walk away.’”
Enhanced Online News. “California’s housing market will continue to recover in 2013, as home sales are forecast to increase for the third consecutive year and the median price to rise for the second straight year, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) ‘2013 California Housing Market Forecast,’ released today.”
“‘Sales would be even higher if inventory were less constrained in REO-dominated markets, particularly in the Central Valley and Inland Empire, where there is an extreme shortage of available homes,’ said said C.A.R. President LeFrancis Arnold.”
“‘The housing market momentum which began earlier this year will continue into 2013,’ said C.A.R. Chief Economist Leslie Appleton-Young. ‘Pent-up demand from first-time buyers will compete with investors and all-cash offers on lower-priced properties, while multiple offers and aggressive bidding will continue to be the norm in mid- to upper-price range homes. The actions of underwater homeowners will play an important role in housing inventory next year, with rising home prices inducing some to stay put and others to list and move forward,’ she said.”
The Daily Bulletin. “Selling prices of existing homes in the two-county San Bernardino/Riverside region increased 11 percent in August over year ago levels, while the number of homes sold dropped 5.7 percent, the California Association of Realtors reported. A shortage of properties to sell accounted for much of the housing price boost as well as the drop in total sales, analysts and real estate professionals say.”
“Daren Blomquist, VP of Realty Trac said the Inland Empire’s inventory is small for two reasons: People who are underwater on their mortgages don’t want to sell their house, because that would mean they would have to pay off the loan balance when the house sells. And lenders are not quickly processing foreclosed houses that they pick up. John Husing, a Redlands-based economist who studies the Inland Empire, said that more than 50 percent of homeowners in both counties owe more on their homes than what they can sell them for. ‘This housing market won’t be where it was for a long, long, long time,’ he said.”
“For that reason, Husing said the proposal of Mortgage Resolution Partners to help this group (underwater mortgage holders) in a proposed Joint Powers Authority ‘makes sense.’ ‘The government has been unable to bring them any sort of relief,’ he said.”
The New Zealand Herald. “The number of mortgagee sales in the first half of this year is close to figures last seen in the recession in 2009. But a property expert says the surge in forced sales is most likely banks selling off old stock and taking advantage of a lucrative seller’s market. Helen O’Sullivan, the chief executive of the Real Estate Institute, said she believed that banks were taking advantage of market conditions and selling properties they had on their books for some time.”
“‘Banks aren’t in any hurry to take a loss and it’s not in their interest to push consumers into painful forced sales,’ she said.”
“Ms O’Sullivan said there were no other factors which would suggest New Zealand was heading towards a recession similar to 2009. ‘It’s possible some of this overhang dates back to then because banks learned a lot from the late 1980s in terms of how much it hurts when you exit a lot of the stressed loans in a hurry.’”
