Low-ball bidders in many markets learn they can no longer get a steal on a house
Charles Buchanan/AP - ERA Realtor JoAnn MacHamer places a sold sign at 1941 Brookstone Drive in the Greystone subdivision between Kinston and La Grange Friday, Jan. 27, 2012.
By Kenneth R. Harney, Published: April 19
It’s not something that economists routinely track, but it provides a rough sense of what’s happening in local real estate markets. Call it the low-ball index.
A year ago, according to researchers at the National Association of Realtors, one out of 10 members surveyed in a monthly poll complained about low-ball offers on houses listed for sale. In the latest survey — conducted in March among 4,500 agents and brokers across the country but not yet released — there were hardly any. Instead, the focus of volunteered comments has shifted to declining inventory levels — fewer houses available to sell — and multiple offers on well-priced listings.
A low-ball offer typically involves a contract submitted to a seller where the price proposed by the purchaser is 25 percent or more below list. Low-balls increase sharply when there’s a glut of properties available, asking prices are out of sync with local economic realities and values are depressed or uncertain. Buyers figure: Hey, why not? Maybe I’ll get lucky.
Based on the latest survey results, that sort of strategy is not a winning move in many communities this spring. In fact, in local markets where inventories are tight and competition for homes rising, realty agents say that buyers looking to steal houses by low-balling their offers are ending up at the back of the line, their contracts either rejected out of hand or countered close to the original asking price.
In high-demand, high-cost markets that have rebounded from recession slumps, sellers are now firmly in control; they pay scant attention to low-ballers.
Jayne Esposito, an agent with Coldwell Banker Residential Brokerage in Los Gatos, Calif., says that multiple offers are “the rule, not the exception,” in her area, and many transactions end up with final contract prices higher than the listing. “Sure, I’ve had a few buyers try to low-ball, and they wouldn’t listen,” she said in an interview, “but that didn’t work out well for them.”
Similar trends are underway in more moderately priced markets.
Wes Neal, an agent at Prudential Olympia in Olympia, Wash., said “low-ball offers are down a lot because we’re seeing more homes come on the market that are more realistically priced.” Sellers have absorbed the hard lessons of the recession years about what the market can bear.
Even when buyers submit shockingly low bids, sellers no longer are so insulted that they send the contract back without a counteroffer. Now they negotiate aggressively, and the final number ends up close to the original asking price. For example, Neal said, a buyer recently came in with a bottom-fishing offer of $150,000 on a house listed for $250,000. Though the seller was irritated, after a series of negotiations the low-ball buyer settled for a final price of $230,000.
In Northern Virginia, well-priced houses in good locations move fast, sometimes pulling in multiple offers within 48 hours of listing, says Chris Ann Cleland, an agent with Long & Foster Realtors. Sellers who encounter the occasional outrageous low-ball offer reminiscent tell listing agents not to even bother with them. After all, there’s an excellent chance there will be a realistic offer shortly, maybe more than one.
In the suburbs south of Chicago, Judy Orr, an agent with Classic Realty Group in Orland Park, Ill., says low-ball frequency and efficacy depend on the specific neighborhood or town. “We still see them, and we try to work with them” in communities where prices are soft and the impacts of tough economic times persist, she said. Elsewhere, though low-ball offers are down, she urges sellers to stick with it and negotiate. Recently a low-baller came in $40,000 below the asking price. Through negotiations with the buyer, Orr managed to close the gap to just $2,000 below asking.
Marnie Matarese, an agent with J Wood Realty in Sarasota, Fla., said that while low-ball offers are far fewer this spring, some out-of-town buyers still appear to be under the impression that all Florida real estate remains depressed. They insist on submitting offers that make no sense in today’s environment. Matarese has no problem with this — “you can’t blame a buyer for trying to get a good deal,” she says — but the fact remains: They usually risk losing the house.
The takeaway here: Rolling low-balls at sellers may have been an effective approach between 2008 and early 2011. But in 2012’s environment — at least in rebounding markets — it could be counterproductive if you truly want to buy.
* * *
Update: Following a recent column on FHA’s controversial tightening of rules on collection accounts, the agency postponed the effective date of the policy change to July 1 from April 1.
Ken Harney’s e-mail address is kenharney@earthlink.net.
From: http://ping.fm/liyK6
Wednesday, April 25, 2012
Friday, April 20, 2012
RealtyTrac: Short Sales Up 33% in January, Outpace REO Sales in 12 States
RealtyTrac: Short Sales Up 33% in January, Outpace REO Sales in 12 States
04/19/2012 By: Esther Cho
With the number of short sales increasing and even outnumbering REO sales in certain states, experts are speculating short sales might become key to preventing an even greater swelling of foreclosed properties on the market.
Compared to a year ago in January 2012, pre-foreclosure sales, which are typically short sales, increased 33 percent, according to a RealtyTrac report released Thursday.
Short sales even outpaced bank-owned REO sales in 12 states, including Utah, California, Arizona, Florida, Indiana, Colorado, New York and New Jersey.
Also, 32 states saw annual increases in pre-foreclosure sales, with the top five being Georgia (+113 percent), Michigan (+90 percent), Wisconsin (+77 percent), South Carolina (+76 percent) and Utah (+70 percent).
Despite the increase, Daren Blomquist, VP of RealtyTrac and author of the report, points out that short sales have declined on a long-term basis, but January’s report could signal a turning point.
“Short sales have long held great promise as a market-based solution to the nation’s foreclosure problem, but short sales transactions over the past three years have actually declined after peaking in the first quarter of 2009,” said Blomquist. “January foreclosure sales numbers, along with first quarter foreclosure activity, strongly indicate that downward trend is ending, and we believe 2012 could be a record year for short sales.”
Average pre-foreclosure prices saw a decline, according to the report, with the average sales price in January at $174,120, down 10 percent from January 2011. This, RealtyTrac stated, shows that lenders are more willing to approve more aggressively priced short sales.
In January, a home sold via short sale sold at a 21 percent discount on average compared to the average price of a home not in foreclosure, according to RealtyTrac.
The five states with the biggest discounts were Massachusetts (40.86 percent), Missouri (35.5 percent) California (29.93), Indiana (29.82), and Georgia (29.31).
The five metropolitan areas with the greatest discounts were Kansas City (56.53 percent), Louisville/Jefferson County (44.25 percent), Milwaukee-Waukesha-West Allis (43.64 percent), Boston-Cambridge-Quincy (41.57 percent), and Indianapolis-Carmel (37.26 percent).
The time it took to approve of a short sale was a bit lower for the 2012 first quarter, averaging 306 days, down from 308 days in the fourth quarter of 2011 and down from a peak of 318 days in the third quarter of 2011. The short sale timeline begins when a property starts the foreclosure process to when it’s sold as a pre-foreclosure.
However, the average time to sell a pre-foreclosure has actually tripled since the first quarter of 2007, when it took an average of 113 days.
There’s nothing short about short sales. If you can survive that process and make that happen it’s going to be a better outcome for everyone, said RealtyTrac VP Charlie Engel during a broadcast hosted by the Charfen Institute for Certified Distressed Property Experts.
Recently, Bank of America and GSEs Fannie Mae and Freddie Mac announced efforts to streamline the short sale process. BofA’s change requires a decision on a short sale in less than 3 weeks.
Starting in June, the GSEs are requiring servicers to make a decision on a short sale within 30 days of receiving an offer or an application package from a borrower; if more time is needed, a servicer must provide the borrower with a weekly update and come to a decision no later than 60 days.
With foreclosure starts – either default notices or scheduled foreclosure auctions – numbering more than 100,000 in March, this means more opportunities for short sales, according to the report.
Compared to the month before, March foreclosure starts increased 7 percent, but were down 11 percent from a year ago. When looking at individual states, 31 posted monthly gains in foreclosure starts in March.
Other properties with potential to become short sales are delinquent loans, which represented approximately 3.5 million properties, according to a fourth quarter 2011 survey from the Mortgage Bankers Association.
RealtyTrac is an online marketplace of foreclosure properties, with more than 1.3 million default, auction and bank-owned listings from over 2,200 U.S. counties, along with detailed property, loan and home sales data.
From: http://www.dsnews.com/articles/realytrac-reports-short-sales-up-33-in-january-and-outpaced-reo-12-states-2012-04-19
04/19/2012 By: Esther Cho
With the number of short sales increasing and even outnumbering REO sales in certain states, experts are speculating short sales might become key to preventing an even greater swelling of foreclosed properties on the market.
Compared to a year ago in January 2012, pre-foreclosure sales, which are typically short sales, increased 33 percent, according to a RealtyTrac report released Thursday.
Short sales even outpaced bank-owned REO sales in 12 states, including Utah, California, Arizona, Florida, Indiana, Colorado, New York and New Jersey.
Also, 32 states saw annual increases in pre-foreclosure sales, with the top five being Georgia (+113 percent), Michigan (+90 percent), Wisconsin (+77 percent), South Carolina (+76 percent) and Utah (+70 percent).
Despite the increase, Daren Blomquist, VP of RealtyTrac and author of the report, points out that short sales have declined on a long-term basis, but January’s report could signal a turning point.
“Short sales have long held great promise as a market-based solution to the nation’s foreclosure problem, but short sales transactions over the past three years have actually declined after peaking in the first quarter of 2009,” said Blomquist. “January foreclosure sales numbers, along with first quarter foreclosure activity, strongly indicate that downward trend is ending, and we believe 2012 could be a record year for short sales.”
Average pre-foreclosure prices saw a decline, according to the report, with the average sales price in January at $174,120, down 10 percent from January 2011. This, RealtyTrac stated, shows that lenders are more willing to approve more aggressively priced short sales.
In January, a home sold via short sale sold at a 21 percent discount on average compared to the average price of a home not in foreclosure, according to RealtyTrac.
The five states with the biggest discounts were Massachusetts (40.86 percent), Missouri (35.5 percent) California (29.93), Indiana (29.82), and Georgia (29.31).
The five metropolitan areas with the greatest discounts were Kansas City (56.53 percent), Louisville/Jefferson County (44.25 percent), Milwaukee-Waukesha-West Allis (43.64 percent), Boston-Cambridge-Quincy (41.57 percent), and Indianapolis-Carmel (37.26 percent).
The time it took to approve of a short sale was a bit lower for the 2012 first quarter, averaging 306 days, down from 308 days in the fourth quarter of 2011 and down from a peak of 318 days in the third quarter of 2011. The short sale timeline begins when a property starts the foreclosure process to when it’s sold as a pre-foreclosure.
However, the average time to sell a pre-foreclosure has actually tripled since the first quarter of 2007, when it took an average of 113 days.
There’s nothing short about short sales. If you can survive that process and make that happen it’s going to be a better outcome for everyone, said RealtyTrac VP Charlie Engel during a broadcast hosted by the Charfen Institute for Certified Distressed Property Experts.
Recently, Bank of America and GSEs Fannie Mae and Freddie Mac announced efforts to streamline the short sale process. BofA’s change requires a decision on a short sale in less than 3 weeks.
Starting in June, the GSEs are requiring servicers to make a decision on a short sale within 30 days of receiving an offer or an application package from a borrower; if more time is needed, a servicer must provide the borrower with a weekly update and come to a decision no later than 60 days.
With foreclosure starts – either default notices or scheduled foreclosure auctions – numbering more than 100,000 in March, this means more opportunities for short sales, according to the report.
Compared to the month before, March foreclosure starts increased 7 percent, but were down 11 percent from a year ago. When looking at individual states, 31 posted monthly gains in foreclosure starts in March.
Other properties with potential to become short sales are delinquent loans, which represented approximately 3.5 million properties, according to a fourth quarter 2011 survey from the Mortgage Bankers Association.
RealtyTrac is an online marketplace of foreclosure properties, with more than 1.3 million default, auction and bank-owned listings from over 2,200 U.S. counties, along with detailed property, loan and home sales data.
From: http://www.dsnews.com/articles/realytrac-reports-short-sales-up-33-in-january-and-outpaced-reo-12-states-2012-04-19
Wednesday, April 18, 2012
Fannie and Freddie Set Timeline Requirements for Short Sales
Fannie and Freddie Set Timeline Requirements for Short Sales
04/17/2012 By: Carrie Bay
Beginning June 15, real estate agents working with distressed homeowners whose loans are backed by Fannie Mae and Freddie Mac should expect to receive a decision on a short sale offer within 30-60 days.
The GSEs issued new guidelines Tuesday that fall under the Servicing Alignment Initiative rolled out last fall and aim to bring greater transparency to the short sale process and expedite decisions related to these pre-foreclosure sales.
Not only is a short sale an effective foreclosure alternative when home retention is no longer an option, but it keeps homes occupied and helps to maintain stable communities, according to the Federal Housing Finance Agency (FHFA).
Addressing real estate practitioners’ No. 1 complaint about short sales, FHFA directed Fannie Mae and Freddie Mac to establish a new uniform set of minimum response times that servicers must follow in order to facilitate more efficient short sale transactions.
The GSEs’ new short sale timelines require servicers to make a decision within 30 days of receiving either an offer on a property under the companies’ traditional short sale programs or a completed Borrower Response Package (BRP) requesting short sale consideration, whether it’s through the federal government’s Home Affordable Foreclosure Alternative (HAFA) program or a GSE program.
If more than 30 days are needed, servicers must provide the borrower with weekly status updates and come to a decision no later than 60 days from the date the BRP or offer was received.
According to the GSEs, this 30-day add-on will provide some leeway for servicers who may need more time to obtain a broker price opinion (BPO) or a private mortgage insurer’s approval for a short sale. All decisions must be made within 60 days.
In the event a servicer makes a counteroffer, the borrower is expected to respond within five business days. The servicer must then respond within 10 business days of receiving the borrower’s response.
The GSEs plan to use the new short sale timelines to evaluate servicer compliance with the Servicing Alignment Initiative.
Edward DeMarco, acting director of the FHFA, says the GSEs new borrower communication and timeline requirements for short sales “set minimum standards and provide clear expectations regarding these important foreclosure alternatives.”
GSE servicers must comply with the new minimum communication time frames for all short sale evaluations conducted on or after June 15, 2012, although servicers are encouraged to begin implementing the new requirements sooner.
“I applaud Fannie and Freddie for finally coming out with real guidance with real world timelines for their servicers,” commented Anthony Lamacchia, broker/owner of McGeough Lamacchia Realty Inc., which specializes in short sales. “There is no question that this will help short sales and the market as a whole.”
Last year Freddie Mac completed 45,623 short sales, a 140 percent increase since 2009. Fannie Mae’s short sale completions shot up by 101 percent over the same period, totaling around 79,800 in 2011.
From: http://ping.fm/lTiX0
04/17/2012 By: Carrie Bay
Beginning June 15, real estate agents working with distressed homeowners whose loans are backed by Fannie Mae and Freddie Mac should expect to receive a decision on a short sale offer within 30-60 days.
The GSEs issued new guidelines Tuesday that fall under the Servicing Alignment Initiative rolled out last fall and aim to bring greater transparency to the short sale process and expedite decisions related to these pre-foreclosure sales.
Not only is a short sale an effective foreclosure alternative when home retention is no longer an option, but it keeps homes occupied and helps to maintain stable communities, according to the Federal Housing Finance Agency (FHFA).
Addressing real estate practitioners’ No. 1 complaint about short sales, FHFA directed Fannie Mae and Freddie Mac to establish a new uniform set of minimum response times that servicers must follow in order to facilitate more efficient short sale transactions.
The GSEs’ new short sale timelines require servicers to make a decision within 30 days of receiving either an offer on a property under the companies’ traditional short sale programs or a completed Borrower Response Package (BRP) requesting short sale consideration, whether it’s through the federal government’s Home Affordable Foreclosure Alternative (HAFA) program or a GSE program.
If more than 30 days are needed, servicers must provide the borrower with weekly status updates and come to a decision no later than 60 days from the date the BRP or offer was received.
According to the GSEs, this 30-day add-on will provide some leeway for servicers who may need more time to obtain a broker price opinion (BPO) or a private mortgage insurer’s approval for a short sale. All decisions must be made within 60 days.
In the event a servicer makes a counteroffer, the borrower is expected to respond within five business days. The servicer must then respond within 10 business days of receiving the borrower’s response.
The GSEs plan to use the new short sale timelines to evaluate servicer compliance with the Servicing Alignment Initiative.
Edward DeMarco, acting director of the FHFA, says the GSEs new borrower communication and timeline requirements for short sales “set minimum standards and provide clear expectations regarding these important foreclosure alternatives.”
GSE servicers must comply with the new minimum communication time frames for all short sale evaluations conducted on or after June 15, 2012, although servicers are encouraged to begin implementing the new requirements sooner.
“I applaud Fannie and Freddie for finally coming out with real guidance with real world timelines for their servicers,” commented Anthony Lamacchia, broker/owner of McGeough Lamacchia Realty Inc., which specializes in short sales. “There is no question that this will help short sales and the market as a whole.”
Last year Freddie Mac completed 45,623 short sales, a 140 percent increase since 2009. Fannie Mae’s short sale completions shot up by 101 percent over the same period, totaling around 79,800 in 2011.
From: http://ping.fm/lTiX0
Tuesday, April 17, 2012
Report: Sellers' Asking Prices Rose in March - Developments - WSJ
Report: Sellers’ Asking Prices Rose in March.
By Nick Timiraos
Here’s a sign that sellers are feeling more optimistic about their prospects this spring: median asking prices in March jumped by 5.6% from a year ago, and were up 1% from February, according to a report released Tuesday.
The jump in median asking prices comes amid a sharp drop in the number of homes listed for sale from one year ago. While listing inventories in March rose by 1.5% from February, they were still 21.5% below last year’s levels.
Inventories of homes listed for sale tend to go up in the spring, and the 1.8 million listings in March represented the second straight increase for the year. Over the past 27 years, the average increase in for-sale listings in March has been 1.8% from February, according to research firm Zelman & Associates.
The Realtor.com figures include sale listings from more than 900 multiple-listing services across the country. They don’t cover all homes for sale, including those that are “for sale by owner” and newly constructed homes that aren’t always listed by the services.
Compared with February, inventories declined in roughly less than half of the top 30 metros tracked by Realtor.com during March, with the biggest declines in Phoenix (-6.4%), Seattle (-4.8%) and Orlando, Fla. (-4.2%).
Northeastern cities showed the largest inventory gains — a finding that shouldn’t surprise given that sellers are more likely to list their homes when the weather improves. Washington, D.C., saw a 9.5% gain, followed by Philadelphia (8.1%) and Boston (7.4%).
But compared with one year ago, inventories are still down sharply in almost all of the 145 markets tracked by Realtor.com. Just two, Philadelphia and Hartford, Conn., have seen any annual inventory increases. Listings are down by more than half in Oakland and Bakersfield, Calif.
Where are prices rising? Median asking prices were up from one year ago or unchanged in the vast majority of markets, with whopping increases of 23% in Phoenix, 22% in Miami, 17% in Washington, D.C.
The biggest monthly price gains were reported in San Francisco (6.1%), Seattle (5%) and Washington, D.C. (4.1%).
Where are prices falling? Chicago topped the list, with median asking prices down by 9.5% from last year’s levels. Orange County, Calif., saw a 5.4% decline and Los Angeles posted a 3% drop.
Compared with February, asking prices turned up in all but one of the cities, with Minneapolis posting a 2.2% drop in median listing prices from February.
From: http://blogs.wsj.com/developments/2012/04/17/report-sellers-asking-prices-rose-in-march/
By Nick Timiraos
Here’s a sign that sellers are feeling more optimistic about their prospects this spring: median asking prices in March jumped by 5.6% from a year ago, and were up 1% from February, according to a report released Tuesday.
The jump in median asking prices comes amid a sharp drop in the number of homes listed for sale from one year ago. While listing inventories in March rose by 1.5% from February, they were still 21.5% below last year’s levels.
Inventories of homes listed for sale tend to go up in the spring, and the 1.8 million listings in March represented the second straight increase for the year. Over the past 27 years, the average increase in for-sale listings in March has been 1.8% from February, according to research firm Zelman & Associates.
The Realtor.com figures include sale listings from more than 900 multiple-listing services across the country. They don’t cover all homes for sale, including those that are “for sale by owner” and newly constructed homes that aren’t always listed by the services.
Compared with February, inventories declined in roughly less than half of the top 30 metros tracked by Realtor.com during March, with the biggest declines in Phoenix (-6.4%), Seattle (-4.8%) and Orlando, Fla. (-4.2%).
Northeastern cities showed the largest inventory gains — a finding that shouldn’t surprise given that sellers are more likely to list their homes when the weather improves. Washington, D.C., saw a 9.5% gain, followed by Philadelphia (8.1%) and Boston (7.4%).
But compared with one year ago, inventories are still down sharply in almost all of the 145 markets tracked by Realtor.com. Just two, Philadelphia and Hartford, Conn., have seen any annual inventory increases. Listings are down by more than half in Oakland and Bakersfield, Calif.
Where are prices rising? Median asking prices were up from one year ago or unchanged in the vast majority of markets, with whopping increases of 23% in Phoenix, 22% in Miami, 17% in Washington, D.C.
The biggest monthly price gains were reported in San Francisco (6.1%), Seattle (5%) and Washington, D.C. (4.1%).
Where are prices falling? Chicago topped the list, with median asking prices down by 9.5% from last year’s levels. Orange County, Calif., saw a 5.4% decline and Los Angeles posted a 3% drop.
Compared with February, asking prices turned up in all but one of the cities, with Minneapolis posting a 2.2% drop in median listing prices from February.
From: http://blogs.wsj.com/developments/2012/04/17/report-sellers-asking-prices-rose-in-march/
FHA Delaying Disputed Debt Rule Until July
FHA Delaying Disputed Debt Rule Until July
04/09/2012 By: Esther Cho
The Federal Housing Administration (FHA) rule preventing potential borrowers with outstanding collections debt of $1,000 or more from getting an FHA-insured loan is on hold until July 1.
The rule, which many in the industry warn would prevent even more consumers from taking out a loan during a time when lending has tightened, took effect April 1, but will be delayed now until July 1, 2012, according to a notice issued by the FHA.
According to the FHA, the delay is to allow “[m]ortgagees additional time to adapt their procedures to implement portions of the new guidance.”
Before the effective date, FHA said it intends to seek additional input on the rule, which was created to lower default rates.
For lenders who assigned case numbers between April 1, 2012, and April 8, 2012, as long as the numbers were assigned according to either the old or new guidance, the actions will not be viewed as a violation of HUD requirements.
The new rule does include exceptions, such as debt disputed due to identity or credit card theft or if a hardship was faced such as death, divorce, or loss of employment.
FHA-insured loans accounted for 25 percent of the new market share in February, according to Ellie Mae’s Origination Insight Report. Overall, FHA currently has 4.8 million insured single family mortgages, the agency stated on its website.
From: http://ping.fm/iEwLi
04/09/2012 By: Esther Cho
The Federal Housing Administration (FHA) rule preventing potential borrowers with outstanding collections debt of $1,000 or more from getting an FHA-insured loan is on hold until July 1.
The rule, which many in the industry warn would prevent even more consumers from taking out a loan during a time when lending has tightened, took effect April 1, but will be delayed now until July 1, 2012, according to a notice issued by the FHA.
According to the FHA, the delay is to allow “[m]ortgagees additional time to adapt their procedures to implement portions of the new guidance.”
Before the effective date, FHA said it intends to seek additional input on the rule, which was created to lower default rates.
For lenders who assigned case numbers between April 1, 2012, and April 8, 2012, as long as the numbers were assigned according to either the old or new guidance, the actions will not be viewed as a violation of HUD requirements.
The new rule does include exceptions, such as debt disputed due to identity or credit card theft or if a hardship was faced such as death, divorce, or loss of employment.
FHA-insured loans accounted for 25 percent of the new market share in February, according to Ellie Mae’s Origination Insight Report. Overall, FHA currently has 4.8 million insured single family mortgages, the agency stated on its website.
From: http://ping.fm/iEwLi
Thursday, April 12, 2012
CoreLogic: Best Markets for Single-Family Rental Investments
CoreLogic: Best Markets for Single-Family Rental Investments
04/11/2012 By: Esther Cho
Single-family rental investing is a $3 trillion market, according to CoreLogic’s MarketPulse report, which further stated that the single-family rental market accounts for $21 million rental units, or 52 percent of the residential rental market.
The report, authored by Sam Khater, said that unlike multifamily rentals, single-family rents increased during the recession.
With reports showing rental prices have gone up and home prices have decreased, it’s no surprise that large investors have shown interest in buying up single-family homes at a discount to convert them to rental units.
Also, according to the report, during the last five years, foreclosures have turned 3 million former homeowners into potential renters.
Though, in terms of capitalization rates, which is a metric used to determine the profitability of an investment property, certain markets are much more attractive than others when it comes to profitability of an investment home.
Capitalization rates are found by taking the expense adjusted annual cash flow from renting a property relative to the acquisition price.
Based on the 26 major markets CoreLogic assessed, the markets that yield the highest single-family rental cap rates were generally in Florida or the Midwest. West Palm Beach had the highest rate at 12.4 percent, followed by Cleveland (12.3 percent), Fort Lauderdale (12 percent), Chicago (11.6 percent), and Las Vegas (11.4 percent).
The common denominator for areas with lower cap rates was lower than average prices. Honolulu at 5.4 percent had the lowest cap rate, followed by Raleigh (7.3 percent), and Austin (7.7 percent). Among the larger markets, Miami had the lowest cap rate at 7.7 percent, which is partly due to improved home prices.
As of January 2012, cap rates for the single-family market averaged 8.6 percent, according to CoreLogic.
From: http://ping.fm/f3Jmj
04/11/2012 By: Esther Cho
Single-family rental investing is a $3 trillion market, according to CoreLogic’s MarketPulse report, which further stated that the single-family rental market accounts for $21 million rental units, or 52 percent of the residential rental market.
The report, authored by Sam Khater, said that unlike multifamily rentals, single-family rents increased during the recession.
With reports showing rental prices have gone up and home prices have decreased, it’s no surprise that large investors have shown interest in buying up single-family homes at a discount to convert them to rental units.
Also, according to the report, during the last five years, foreclosures have turned 3 million former homeowners into potential renters.
Though, in terms of capitalization rates, which is a metric used to determine the profitability of an investment property, certain markets are much more attractive than others when it comes to profitability of an investment home.
Capitalization rates are found by taking the expense adjusted annual cash flow from renting a property relative to the acquisition price.
Based on the 26 major markets CoreLogic assessed, the markets that yield the highest single-family rental cap rates were generally in Florida or the Midwest. West Palm Beach had the highest rate at 12.4 percent, followed by Cleveland (12.3 percent), Fort Lauderdale (12 percent), Chicago (11.6 percent), and Las Vegas (11.4 percent).
The common denominator for areas with lower cap rates was lower than average prices. Honolulu at 5.4 percent had the lowest cap rate, followed by Raleigh (7.3 percent), and Austin (7.7 percent). Among the larger markets, Miami had the lowest cap rate at 7.7 percent, which is partly due to improved home prices.
As of January 2012, cap rates for the single-family market averaged 8.6 percent, according to CoreLogic.
From: http://ping.fm/f3Jmj
Monday, April 9, 2012
Credit Scores Rising, LTVs Dropping on New Mortgages: Report
Credit Scores Rising, LTVs Dropping on New Mortgages: Report
04/06/2012 By: Carrie Bay
Mortgage lenders remain cautious in terms of credit quality, down payments, and valuations, as evidenced by the findings outlined in the new Origination Insight Report generated by Ellie Mae.
The company found that the average credit score for loans approved by lenders and closed is steadily rising, while acceptable loan-to-value (LTV) ratios are declining.
Ellie Mae’s report series tracks the current lending environment for refinance and purchase mortgages and provides metrics on the kinds of loans getting done and on the challenges consumers and lenders are facing. The company intends to issue the report monthly.
Ellie Mae’s inaugural Origination Insight Report discusses changes in mortgage lending activity over the month of February 2012, as compared to the company’s historical data from the prior six months.
The average credit score on loans that closed was 750 in February, up from 740 six months before. Meanwhile, the average loan-to-value (LTV) ratio was 76 percent, a decrease of 3 percent from August 2011.
The average FICO score for borrowers who were denied a loan in February was 699, according to Ellie Mae’s analysis. The average LTV of denials was 83 percent.
“If you look at the full report on our website, you’ll see the impact of the higher underwriting requirements for refinance that were in place in February,” said Jonathan Corr, COO for Ellie Mae.
“Last month, if your FICO score was below 720 or you had a down payment or equity of less than 25 percent, there was a good chance that your refinance application for a conventional loan was denied or you were offered a significantly less attractive interest rate, Corr explained.
He also noted that borrowers denied a mortgage refinancing during the month had a front-end debt-to-income (DTI) ratio – which is calculated as total housing payment divided by total gross income – of 27 percent and a back-end DTI – measured as all monthly debt, including the mortgage, divided by gross income – of 43 percent.
Those borrowers that were approved for a loan and closed in February demonstrated a front-end/back-end DTI of 23/34.
Ellie Mae also offered up a snapshot of the types of mortgage loans closed in February. Sixty-seven percent were refinances and 33 percent were for the purchase of a home.
The Federal Housing Administration (FHA) garnered 25 percent of the new market share in February, while conventional loans made up 67 percent of the month’s closings.
The timeline from application to closing for the average loan was 44 days in February and 43 for a refinance, up 10 percent and 16 percent, respectively, over where the industry was six months ago. Corr says these timeframes track with the increases in demand seen at the end of 2011.
To get a meaningful view of lender “pull-through,” Ellie Mae reviewed loan applications initiated within the previous 90 days to calculate a closing rate and found that nearly 48 percent of all applications closed. There was a higher percentage of purchase mortgages closing (60%) than refinances (42%).
In 2011, the total volume of mortgages that ran through Ellie Mae’s Encompass360 mortgage management software was approximately two million loan applications, or 20 percent of all U.S. mortgage originations. The company’s Origination Insight Report mines its data from a sampling of approximately 33 percent of all applications initiated on the Encompass origination platform.
Given the size of this sample and Ellie Mae’s market share, the company believes the Origination Insight Report is “a strong proxy of the underwriting standards that are being employed by lenders across the country.”
From: http://www.dsnews.com/articles/credit-scores-rising-ltvs-dropping-on-new-mortgages-report-2012-04-06
04/06/2012 By: Carrie Bay
Mortgage lenders remain cautious in terms of credit quality, down payments, and valuations, as evidenced by the findings outlined in the new Origination Insight Report generated by Ellie Mae.
The company found that the average credit score for loans approved by lenders and closed is steadily rising, while acceptable loan-to-value (LTV) ratios are declining.
Ellie Mae’s report series tracks the current lending environment for refinance and purchase mortgages and provides metrics on the kinds of loans getting done and on the challenges consumers and lenders are facing. The company intends to issue the report monthly.
Ellie Mae’s inaugural Origination Insight Report discusses changes in mortgage lending activity over the month of February 2012, as compared to the company’s historical data from the prior six months.
The average credit score on loans that closed was 750 in February, up from 740 six months before. Meanwhile, the average loan-to-value (LTV) ratio was 76 percent, a decrease of 3 percent from August 2011.
The average FICO score for borrowers who were denied a loan in February was 699, according to Ellie Mae’s analysis. The average LTV of denials was 83 percent.
“If you look at the full report on our website, you’ll see the impact of the higher underwriting requirements for refinance that were in place in February,” said Jonathan Corr, COO for Ellie Mae.
“Last month, if your FICO score was below 720 or you had a down payment or equity of less than 25 percent, there was a good chance that your refinance application for a conventional loan was denied or you were offered a significantly less attractive interest rate, Corr explained.
He also noted that borrowers denied a mortgage refinancing during the month had a front-end debt-to-income (DTI) ratio – which is calculated as total housing payment divided by total gross income – of 27 percent and a back-end DTI – measured as all monthly debt, including the mortgage, divided by gross income – of 43 percent.
Those borrowers that were approved for a loan and closed in February demonstrated a front-end/back-end DTI of 23/34.
Ellie Mae also offered up a snapshot of the types of mortgage loans closed in February. Sixty-seven percent were refinances and 33 percent were for the purchase of a home.
The Federal Housing Administration (FHA) garnered 25 percent of the new market share in February, while conventional loans made up 67 percent of the month’s closings.
The timeline from application to closing for the average loan was 44 days in February and 43 for a refinance, up 10 percent and 16 percent, respectively, over where the industry was six months ago. Corr says these timeframes track with the increases in demand seen at the end of 2011.
To get a meaningful view of lender “pull-through,” Ellie Mae reviewed loan applications initiated within the previous 90 days to calculate a closing rate and found that nearly 48 percent of all applications closed. There was a higher percentage of purchase mortgages closing (60%) than refinances (42%).
In 2011, the total volume of mortgages that ran through Ellie Mae’s Encompass360 mortgage management software was approximately two million loan applications, or 20 percent of all U.S. mortgage originations. The company’s Origination Insight Report mines its data from a sampling of approximately 33 percent of all applications initiated on the Encompass origination platform.
Given the size of this sample and Ellie Mae’s market share, the company believes the Origination Insight Report is “a strong proxy of the underwriting standards that are being employed by lenders across the country.”
From: http://www.dsnews.com/articles/credit-scores-rising-ltvs-dropping-on-new-mortgages-report-2012-04-06
Tuesday, April 3, 2012
More realty agents report that their home sales are being canceled or postponed - The Washington Post
More realty agents report that their home sales are being canceled or postponed
By Kenneth R. Harney, Published: March 30
What’s behind the unusually high rate of contract cancellations and settlement delays in the real estate market? With signs of recovery emerging in many parts of the country, shouldn’t deals be zipping along with minimal complications?
Apparently not. Nearly one-third of realty agents in a new national survey reported experiencing contract cancellations — purchases crumbling before going to closing — in February. That’s up dramatically from a similar poll 12 months earlier, when just 9 percent of agents reported cancellations. Another 18 percent reported delays in scheduled closings in the latest study, which involved approximately 3,000 agents surveyed by the National Association of Realtors.
The high reported cancellation rate (31 percent) doesn’t mean that nearly one of every three of all signed contracts is falling apart, according to the association, but rather that more than triple the number of agents and their clients are running into deal-endangering problems compared with 2011. If you are a potential buyer or seller in an otherwise improving marketplace, you need to be aware of the issues that are hampering sales, and be prepared in advance to deal with some of the most prominent.
Tops on the list:
●Appraisals below contract. You may assume that the true market value of a house is what a seller and buyer agree to in a binding contract, but it’s not. The appraiser hired by the bank may come up with a different opinion of value — significantly below what was agreed between the parties — and this is occurring with far greater frequency today than in previous years. Part of the problem is the excessive use of price-depressed foreclosure sales chosen as “comparables” to value non-distressed houses under pending contracts.
In addition, some appraisers are inexperienced and unfamiliar with local pricing trends, and they go far beyond their normal duties.
For example, Risa Bell, an agent in Boston for national broker Redfin, recently represented purchasers of a bank-owned property being sold “as is.” An appraiser for the lender not only detailed a long list of needed repairs to the house but also said the deal could proceed only if the prospective buyers spent thousands of dollars fixing up the house before — not after — closing. Along the way, frozen pipes in the unheated house broke and a contractor hired to do repairs filed a mechanic’s lien requiring payment before the title could be transferred. All of this combined to kill the financing and torpedo the closing, but the buyers ultimately were approved by a second lender using a different appraiser, who made no such demands for repairs in advance.
●Ultraconservative underwriting and documentation requirements. It’s no longer just towering credit score minimums, hefty down payments and mind-bending paperwork submissions that get mortgage applicants turned down. “It’s a lot of other stuff, too,” said Melissa Zavala, broker and owner of Broadpoint Properties in Escondido, Calif. Increasingly she’s been running into regulatory snags and restrictive underwriting rules at FHA, Fannie Mae and Freddie Mac that knock signed contracts off the tracks or at least delay them for months.
For instance, FHA’s toughened rules on condominium sales — limits on the percentage of residents in the entire project who are delinquent on their condo dues, plus controversial requirements for “recertifications” of condominium developments that many condo boards find costly and burdensome in terms of legal liability — are making units in those communities difficult to get financed, no matter how well qualified the purchasers. Little-publicized recent changes in FHA rules on loan applicants who have outstanding collection accounts buried away in their credit files “can force you to take three to four months to clean up” through mandatory repayment plans, Zavala said in an interview. By that point the contract may well have gone bust.
●Poor service by lender staff. Agents in the survey identified “lack of customer service” and “generally bad attitudes” as contributing factors to delays and some contract failures. But Zavala said realty agents themselves need to be on the ball when loan processing deadlines begin to slip or communication breaks down with lenders. “Agents can be part of the problems” — and the solutions — in moving the financing along, she said.
Bottom line: If you seriously want to go to closing on a house you’re buying or selling, make sure you know all the key rules and requirements upfront, then stay on top of the lending, escrow, title and real estate professionals assigned to your transaction.
And don’t give up if your deal runs into complications. There are more of them out there than usual.
Ken Harney’s e-mail address is kenharney@earthlink.net.
From: http://ping.fm/OHE9X
By Kenneth R. Harney, Published: March 30
What’s behind the unusually high rate of contract cancellations and settlement delays in the real estate market? With signs of recovery emerging in many parts of the country, shouldn’t deals be zipping along with minimal complications?
Apparently not. Nearly one-third of realty agents in a new national survey reported experiencing contract cancellations — purchases crumbling before going to closing — in February. That’s up dramatically from a similar poll 12 months earlier, when just 9 percent of agents reported cancellations. Another 18 percent reported delays in scheduled closings in the latest study, which involved approximately 3,000 agents surveyed by the National Association of Realtors.
The high reported cancellation rate (31 percent) doesn’t mean that nearly one of every three of all signed contracts is falling apart, according to the association, but rather that more than triple the number of agents and their clients are running into deal-endangering problems compared with 2011. If you are a potential buyer or seller in an otherwise improving marketplace, you need to be aware of the issues that are hampering sales, and be prepared in advance to deal with some of the most prominent.
Tops on the list:
●Appraisals below contract. You may assume that the true market value of a house is what a seller and buyer agree to in a binding contract, but it’s not. The appraiser hired by the bank may come up with a different opinion of value — significantly below what was agreed between the parties — and this is occurring with far greater frequency today than in previous years. Part of the problem is the excessive use of price-depressed foreclosure sales chosen as “comparables” to value non-distressed houses under pending contracts.
In addition, some appraisers are inexperienced and unfamiliar with local pricing trends, and they go far beyond their normal duties.
For example, Risa Bell, an agent in Boston for national broker Redfin, recently represented purchasers of a bank-owned property being sold “as is.” An appraiser for the lender not only detailed a long list of needed repairs to the house but also said the deal could proceed only if the prospective buyers spent thousands of dollars fixing up the house before — not after — closing. Along the way, frozen pipes in the unheated house broke and a contractor hired to do repairs filed a mechanic’s lien requiring payment before the title could be transferred. All of this combined to kill the financing and torpedo the closing, but the buyers ultimately were approved by a second lender using a different appraiser, who made no such demands for repairs in advance.
●Ultraconservative underwriting and documentation requirements. It’s no longer just towering credit score minimums, hefty down payments and mind-bending paperwork submissions that get mortgage applicants turned down. “It’s a lot of other stuff, too,” said Melissa Zavala, broker and owner of Broadpoint Properties in Escondido, Calif. Increasingly she’s been running into regulatory snags and restrictive underwriting rules at FHA, Fannie Mae and Freddie Mac that knock signed contracts off the tracks or at least delay them for months.
For instance, FHA’s toughened rules on condominium sales — limits on the percentage of residents in the entire project who are delinquent on their condo dues, plus controversial requirements for “recertifications” of condominium developments that many condo boards find costly and burdensome in terms of legal liability — are making units in those communities difficult to get financed, no matter how well qualified the purchasers. Little-publicized recent changes in FHA rules on loan applicants who have outstanding collection accounts buried away in their credit files “can force you to take three to four months to clean up” through mandatory repayment plans, Zavala said in an interview. By that point the contract may well have gone bust.
●Poor service by lender staff. Agents in the survey identified “lack of customer service” and “generally bad attitudes” as contributing factors to delays and some contract failures. But Zavala said realty agents themselves need to be on the ball when loan processing deadlines begin to slip or communication breaks down with lenders. “Agents can be part of the problems” — and the solutions — in moving the financing along, she said.
Bottom line: If you seriously want to go to closing on a house you’re buying or selling, make sure you know all the key rules and requirements upfront, then stay on top of the lending, escrow, title and real estate professionals assigned to your transaction.
And don’t give up if your deal runs into complications. There are more of them out there than usual.
Ken Harney’s e-mail address is kenharney@earthlink.net.
From: http://ping.fm/OHE9X
Spring Outlook: Reports From the Field Suggest Better Days Ahead
Spring Outlook: Reports From the Field Suggest Better Days Ahead
04/02/2012 By: Carrie Bay
Despite the fact that key market indicators released in recent weeks have shown declines in home sales, anecdotal reports from real estate agents in the field suggest “better days are ahead for the industry,” according to commentary released Monday by the economic team at Wells Fargo Securities, LLC.
Even builders – who’ve endured possibly the steepest drop-off in business over this downturn – are optimistic heading into the spring, the economists note.
As a result, Wells’ economic team has nudged its forecast for home sales slightly higher, as the spring selling season appears to have gotten off to a strong start. They are now expecting sales of existing homes to top out at 4.50 million in 2012 and rise to 4.65 million in 2013. These annual projections compare to 4.26 million existing homes sold in 2011.
“While employment conditions have clearly improved and consumer confidence and spending have risen, we remain concerned about the lack of real after-tax income growth.
That said, the anecdotal evidence is hard to dismiss,” the economists write.
Most real estate agents are reporting “significant gains in buyer interest and sales,” and these gains are organic rather than incentive induced, according to the Wells Fargo economic team.
Unfortunately, they note that conservative appraisals and tight mortgage underwriting continue to undermine a large number of deals, however, they “suspect that the undertow from these two hindrances will subside over the course of this year, as the fog surrounding shadow inventories lightens up a bit and more lenders come back to the market.”
Unseasonably warm weather led to upticks in existing-home sales in December and January. Those gains were paid back with a 0.9 percent decline in February, but the economic group at Wells says the underlying trend remains positive and they expect to see further improvements as the spring homebuying season kicks off.
Distressed transactions still make up a considerable portion of overall sales activity and will continue to pressure prices through at least the first half of 2012, they note in the report. Real home prices are now back down to 1999 levels, as are price-to-rent ratios, according to the economists.
“We expect home prices to definitively bottom by the middle of this year, as the backlog of foreclosures finally begins [to] clear,” writes Wells Fargo’s economic team. “For properties not in foreclosure, prices have probably already bottomed, but should remain relatively low” given the competition from foreclosures.
From: http://ping.fm/P6CVq
04/02/2012 By: Carrie Bay
Despite the fact that key market indicators released in recent weeks have shown declines in home sales, anecdotal reports from real estate agents in the field suggest “better days are ahead for the industry,” according to commentary released Monday by the economic team at Wells Fargo Securities, LLC.
Even builders – who’ve endured possibly the steepest drop-off in business over this downturn – are optimistic heading into the spring, the economists note.
As a result, Wells’ economic team has nudged its forecast for home sales slightly higher, as the spring selling season appears to have gotten off to a strong start. They are now expecting sales of existing homes to top out at 4.50 million in 2012 and rise to 4.65 million in 2013. These annual projections compare to 4.26 million existing homes sold in 2011.
“While employment conditions have clearly improved and consumer confidence and spending have risen, we remain concerned about the lack of real after-tax income growth.
That said, the anecdotal evidence is hard to dismiss,” the economists write.
Most real estate agents are reporting “significant gains in buyer interest and sales,” and these gains are organic rather than incentive induced, according to the Wells Fargo economic team.
Unfortunately, they note that conservative appraisals and tight mortgage underwriting continue to undermine a large number of deals, however, they “suspect that the undertow from these two hindrances will subside over the course of this year, as the fog surrounding shadow inventories lightens up a bit and more lenders come back to the market.”
Unseasonably warm weather led to upticks in existing-home sales in December and January. Those gains were paid back with a 0.9 percent decline in February, but the economic group at Wells says the underlying trend remains positive and they expect to see further improvements as the spring homebuying season kicks off.
Distressed transactions still make up a considerable portion of overall sales activity and will continue to pressure prices through at least the first half of 2012, they note in the report. Real home prices are now back down to 1999 levels, as are price-to-rent ratios, according to the economists.
“We expect home prices to definitively bottom by the middle of this year, as the backlog of foreclosures finally begins [to] clear,” writes Wells Fargo’s economic team. “For properties not in foreclosure, prices have probably already bottomed, but should remain relatively low” given the competition from foreclosures.
From: http://ping.fm/P6CVq
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