July 8, 2013

Getting Burned, Cutting Loses On The Sacred Cow

The Associated Press reports on California. “San Diego broker Colleen Cotter began knocking on doors this year after scouring property records to find homeowners who didn’t owe money. If someone answers, she makes an all-cash bid on behalf of investors who don’t even visit. Nearly one of three homes sold in Southern California is paid for in cash, putting borrowers at a disadvantage. Some buyers write sellers about how they would cherish a home, hoping to spark a personal connection.”

“Josh Martin, 26, discovered homes he and wife considered buying had changed hands less than a year earlier at much lower prices. The first-time homebuyers lost nine bids since August- many to cash buyers - until finally landing a home in May for $250,000 in the San Diego suburb of Chula Vista. ‘It was very stressful because the prices just kept going up,’ said Martin, who recently left the Marine Corps. ‘Our lease was about to end and we didn’t want to sign another year.’”

The Desert Dispatch. “Barstow is one of five incorporated cities in San Bernardino County to see a decline in property tax assessments this year over 2012, according to a report by the assessor-recorder-county clerk. Barstow suffered a decline of 4.6 percent, the report showed, and Twentynine Palms, Needles, Yucca Valley and Big Bear also saw decreases.”

“Realtor Cesar Vasquez of Exit Strategy Realty in Barstow believed the low home prices locally could probably be attributed to the city’s remote location and a lack of jobs to draw in new residents. Many of the buyers in the area, he said, are out-of-town investors who turn properties into rental homes.”

“That apparent lack of demand isn’t a problem elsewhere in the High Desert, according to Larry Trombley, a private notary who works with cities in the Victor Valley. Trombley thinks a lack inventory might explain how cities such as Adelanto (4.7 percent) and Hesperia (4.3 percent) saw increases in their assessed value compared to 2012, according to the report. ‘With the lack of inventory, you put a property on the market,’ Trombley said, ‘and within a few days, you get multiple offers.’”

The Victorville Daily Press. “Regional research economist John Husing is skeptical about local economic recovery. Husing says the High Desert is lagging behind the rest of the country. Reached by phone Tuesday, Husing said very few homes are being sold to families because private investors and large Wall Street firms are buying up homes and giving a boost to the local housing market. According to Husing, High Desert housing prices are artificially rising due to the influence of investors.”

“Local real estate broker Caroll Yule supported Husing’s statements. ‘In the High Desert, 30 to 40 percent of the buyers are investors,’ Yule said. ‘We know that because of how many cash sales there are. There is a very limited supply.’”

“San Bernardino and Riverside counties have a long ways to go until we reach the levels we see nationally,’ Husing said. ‘Of all the areas in the country with a million or more people, we have the highest unemployment rate in the United States.’”

“Nonetheless, some local residents are opening their wallets a bit more freely these days. While enjoying lunch at Applebee’s in Victorville, John Garza said he has been more flexible with casually spending money. Garza, a Victorville resident, said that with the price of his home on the rise, he was able to make the perfect investment two years ago when he was able to buy his home while the market was still struggling.”

The Fresno Bee. “At the end of 2009, in the depths of the housing bust, more than half of Fresno County homeowners with a mortgage owed more than the house was worth, according to a recent real estate report. Now, only 35% of mortgages are underwater. Chris Blumen was one of those underwater homeowners whose equity finally climbed back into the black. Blumen sold his northwest Fresno condominium two weeks ago for $110,000. That’s what he owed for the three-bedroom, two-bathroom home he bought in 2007 for $187,000. In 2010, the home was only worth $75,000, Blumen said.”

“For Blumen, who has lived in Reno since 2010, it was just a waiting game. He never considered walking away from his home or selling it in a short sale. The responsible thing to do was to continue making the payments, he said. His Realtor put the home up for sale late last month and in two days got two offers, both for more than the asking price of $105,000.”

“‘I’m glad that the home prices have risen in the area since 2010,’ said Blumen who made enough in the sale to pay back his mortgage. He had to chip in a little extra for closing costs and to pay his Realtor fees. ‘Right now I am cutting losses. I’m happier. It’s a relief.’”

The Mercury News. “The Bay Area’s frenzied housing market, marked by soaring prices, short supply and a scramble for homes, is showing signs of cooling. Some buyers, fearful of a new bubble or worried about higher interest rates, are putting their plans on hold, while new listings of homes for sale have been increasing since March, which should put the brakes on spiraling prices.”

“Masa Shiohira and his wife are among the Bay Area buyers who have hit the pause button. Concerned about a possible housing bubble, they have stopped looking and plan to rent for a while. They’re selling their home in Montclair and a condominium in Foster City and putting the money aside for a year or two. They bought at the top of the market in 2006-07, and while they aren’t short selling, they are losing a little money on the sales.”

“‘We’re seeing something very similar to the situation we got burned in six years ago,’ Shiohira said.”

The Times Herald. “Fewer Solano County residents are losing their homes to foreclosure each month, a new real estate industry report shows. Solano Association of Realtors President Elect Toni Foster said that ‘given the federal incentives that banks are receiving by modifying old, high interest and underwater loans, it makes sense that our foreclosure rate has dropped. Many homeowners that were underwater have gained equity, making it a little more palatable to make that house payment, and less compelling to walk away.’”

From The Signal. “As part of ongoing talks over U.S. tax reform, Congress has been debating making major changes to — if not eliminating outright — the mortgage interest deduction. The negative domino effect would extend beyond the recovering housing market if Congress were to eliminate the mortgage interest tax deduction, Santa Clarita Valley Realtors and other financial experts agree.”

“Both the National Association of Realtors and California Association of Realtors have called on Congress to ‘do no harm’ to existing and future homeowners. ‘Home prices would fall over the country, which would destabilize the economy,’ said Paul Gonzales with Troop Real Estate. ‘The mortgage interest deduction is a sacred cow.’”

“Even if home ownership didn’t sink catastrophically, the move could mean a longer-term financial hit, said Mike Meena, president of August Financial in Santa Clarita. ‘Many Americans have trouble saving for retirement,’ Meena said. ‘They can at least pay off their homes and use that equity as another retirement vehicle and income source.’”

“Thirty-one percent of the city of Santa Clarita’s general fund is based on property taxes collected by Los Angeles County, said Darren Hernandez, Santa Clarita deputy city manager. Such a change could potentially drive down home ownership rates, drive up the cost of financing, and push down the value of real estate, he said. ‘Repealing the deduction would be bad for homeowners and it would be bad for cities and school districts that rely on property tax revenue,’ Hernandez said.”

“A major drop in property values — and thus taxes that can be collected — would mean an even greater blow to communities, he said. Fewer owner-occupied residences would have a negative effect, Hernandez said. Another impact, he said, is that a big portion of peoples’ net worth is the value of their home. If values drop, so would individuals’ net worth, he said. ‘There is a positive correlation between higher owner-occupancy rates and the quality of a community,’ Hernandez said. ‘People who own their homes tend to be more invested in the property they occupy.’”

Bits Bucket for July 8, 2013

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