Why the housing recovery remains a long way off
(MoneyWatch) It's another mixed week for housing news. Home prices remain affordable and mortgage rates low, but the shaky labor market and ongoing wave of foreclosures continue to dampen the housing sector.
So-called short sales of homes -- where properties are sold for less than what is owed on a mortgage -- have yet to surpass the sale of foreclosed houses nationwide. That has many analysts skeptical that a full recovery is imminent.
"The recovery is happening, though not at a breakout pace, but we have seen nine consecutive months of year-over-year sales increases," said Lawrence Yun, chief economist for the National Association of Realtors in a statement Thursday.
Home sales up from 2011
Home sales were down slightly last month, but are trending positively for the year. According to NAR, total existing home sales declined 2.6 percent from February to March to a seasonally adjusted annual rate of 4.48 million. Year-over-year, existing home sales increased 5.2 percent.
"Existing home sales are moving up and down in a fairly narrow range that is well above the level of activity during the first half of last year," Yun said. "With job growth, low interest rates, bargain home prices and an improving economy, the pent-up demand is coming to market and we expect housing to be notably better this year."
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Nationally, the average price for existing homes was $163,800 in March. That's a 2.5 percent increase from the same time last year. (Just remember national numbers may not reflect what's going on in your neighborhood.)
Distressed sales slowing rebound
Distressed homes are still preventing a more substantial recovery. Homes sold as foreclosures or short-sales accounted for 29 percent of March sales, according to NAR. Of those distressed homes sales, 18 percent consisted of foreclosures, down 2 percent from February. Foreclosure sold for an average discount of 19 percent below market price in March.
More than 100,000 properties nationwide started the foreclosure process in March, up 7 percent from February, according to market research firm RealtyTrac. Despite the month-over-month surge, that represents a drop of 11 percent in foreclosure filings from March of 2011.
Eleven percent of the distressed homes sold in March were short sales, according to NAR. That's a dip from February, when these transactions accounted for 14 percent of the total number of distressed homes sold. Ideally, more of these homes would be sold as short sales than foreclosures, which would push up the price of homes by limiting the number of cut-rate foreclosures.
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The prices of distressed homes are continuing to drag down the market as a whole. NAR data shows short sales were discounted an average of 16 percent below market value in March. According to RealtyTrac, the average price of a pre-foreclosure sale property nationwide was $184,221 for the fourth quarter of 2011, down 3.45 percent from the previous quarter.
Short sales have yet to surpass sales of bank-owned homes (known in the industry as real estate-owned, or REO, sales) nationwide. But data from both NAR and RealtyTrac show the gap between the two is closing, with short sales overtaking REOs in select markets.
Many lenders are starting to prefer selling a home in a short sale, rather than adding it to their REO inventories
/ Shutterstock.comWhat's next?
It's possible the short sale trend will continue as more lenders try to keep REOs off their books. RealtyTrac projects that this year's first quarter will see more than 105,000 short sales. And there may be more to come.
The analytics company reports two pools of potential short sales on the horizon: delinquent loans that have not yet started the foreclosure process and mortgages currently underwater.
According to RealtyTrac, 28 percent of the 45 million outstanding mortgages nationwide are seriously underwater, meaning they owe at least 25 percent more on their mortgage than their home is worth. Whether they're delinquent or not, these homeowners are good short-sale candidates if they choose to sell in the near future (and get approved by lenders) and could contribute to short sale inventory.
Charlie Engel, senior vice president of RealtyTrac, said in a web conference Thursday that he believes lenders are beginning to see short sales as a better alternative to foreclosures for all the parties involved. The willingness of lenders, combined with the recent decline in short sale market times, leads him to believe that we're headed for a "wave of short sales."
Engel also thinks foreclosures will increase over the coming months, as banks become more efficient at processing them.
It remains to be seen whether short sales will outpace foreclosures, or if that trend will help speed up the recovery. One thing is certain -- the housing market has a long way to go before it is fully healed.
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This all started when B of A snatched up Countrywide, our original lender, and the debit withdraw feature no longer was "valid" and we found ourselves in severe default. I tried to get B of A to do an immediate electronic debit to pay the arrears and they refused, stating we had to MAIL a check they KNEW would not get there in time. So they tossed us into foreclosure unbelievably quick!
We hired a lawyer. We modified a loan under HAMP in 2010. We did not want the mod! However, we were forced into it. We simply wanted to pay the arrears, but they would not let us do that!
The modification went through without a hitch. That was 2010. It is now the middle of 2012 and we get a Notice of Acceleration in the mail! We are so far ahead on our payments, it's not funny....because we vowed to never let these bastards do this to us again. But they are!
After calling B of A, They said that the mod certification was never entered into the computer system. WHY DID IT TAKE ALMOST TWO YEARS THEN???? They said our payments are sitting there, but were not applied month to month as they should have been. No promises were made of fixing this bogus Notice of Acceleration; just attempts to "try and check back with us...."
This cannot be "simple" bureaucratic mistakes, as Dave Ramsey claims! I honestly think these banks want these properties at any and all costs, even if they have to fabricate, lie and extort money! But WHY????
I'm giving the Notice of Acceleration to my lawyer. He got us out of the last jam, I hope he can get us out of this.
And what, pray tell, are those of us without a job going to use to make that payment?
It must be nice to live in a neighborhood where absolutely no one has lost their job.
Here's a news flash for you: most of the people who have gone through foreclosure did not simply walk away from a mortgage. They lost their house because of being laid-off or high medical bills.
The media has become the lap dogs of this government. Sickening.
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True, but banks are under an obligation to protect shareholders and investors, just as families are under an obligation to protect themselves. If the house you bought declined 50% in value through no fault of your own, but rather the thought of entitled investor filth like the person who left the comment above, you are not "entitled" for walking away, you're just looking out for YOUR family rather than entitled GOP investor filth. Don't let ANY GOP investor piece of filth that defended the Wall Street bonuses talk try to guilt you into screwing your kids over claiming "morality".
The bank is under no obligation to accept a short sale. You, however, ARE under an obligation to make your mortgage payment. I make my mortgage payment and don't understand the entitlement attitude people have where they think they don't have to.
***
The attitude you espouse is why no one should *ever* sign a contract that contains a surety clause. Unless you have a working crystal ball and can see what the future brings, agreeing to a surety clause is like putting on a blindfold and walking into traffic.
Also, never agree to a "Hold Harmless" agreement. Why would you agree to let someone screw over and promise not to fight back? That's what a Hold Harmless agreement amounts to.
RealtyTrac is full of horse droppings. I just lost my house to foreclosure. We had two bona fide short sale offers and the lender, Flagstar Bank, would not even acknowledge the offers. It was clear that they were determined to foreclose for reasons only they know.
They promised me they were going to come after me for the difference between the foreclosure auction and the loan payoff. They bid the full value of the house before the financial crisis; they would only do that if they intended to sue me. My attorney told me that my only option was to file Chapter 7 bankruptcy and so I did. One month after that, Flagstar sent me a bill for insurance on the house!
My real estate agent told me that getting short sales approved is almost impossible. Lenders simply refuse to accept them.
There is no difference between how the Bush and Obama administrations handled the housing and Wall Street debacles. Those of you who think your favorite political party will save the day are deluded.
http://saucymugwump.blogspot.com/
1. "the new normal" will have shorter job spans and more relocation to find jobs that remain that can pay the bills for all that college education, making it impracticable to buy a home or have a community (ditto for the car)
2. wages may go down, home prices won't go down to be on par
3. taxes still go up
4. banks will need more bailouts, which means taxes will have to go up to help pay for them...
5. People with homes are frustrated or apathetic over the home values dropping
6. people seeing the devaluing are less likely to buy, for any of the reasons given above, or others...
Until fundamental issues are addressed, and nobody running in election 2012 seems to be bothered acknowledging these in any amount of fair detail, nothing can change.
Still, people don't want regulation or structure. Anarchy, here we come. But you wished for it, so don't complain now...