Foreclosure rates are declining across the Southwest. Lenders are slowing foreclosures because they want house prices to bottom and start going up due to a lack of distressed supply on the MLS. This would be a natural occurrence once shadow inventory is eliminated, but right now, this slowing of foreclosures is a contrived policy of a cartel desperately hoping they can force prices to move higher. If foreclosures were declining because lenders were out of delinquent mortgages to foreclose on, we would all be celebrating the housing market recovery. However, lenders are not out of delinquent mortgage squatters to boot out of the houses they are not paying for. In fact, lenders have slowed their foreclosure rates so much, they are no longer keeping up with current new delinquencies. As a result, shadow inventory is growing again.
It is difficult to imagine how house prices can put in a durable bottom with millions of delinquent mortgages yet to be processed. The federal reserve and government regulators have done everything possible to create conditions favorable to lenders. Zero percent interest rates lower the cost of capital to banks to near zero enabling them to sustain billions in non-performing loans on their books without bankruptcy. Suspension of mark-to-market accounting rules allows lenders to pretend their bad loans are still worth face value to give the appearance of solvency. Both of these measures have one thing in common; they buy time. Ultimately, neither measure will cause house prices to go up. Low interest rates make housing much more affordable which induces buying, but only improved credit conditions, low
er unemployment, and higher wages will make house prices go up.
The market-has-bottomed meme currently touted by every major media outlet is a concerted effort to improve buyer sentiment and induce people to enter into a transaction that may not be in their best interest. Affordability is currently quite good in nearly every housing market due to the low interest rates — and that is a good reason to buy — but sheeple are so accustomed to buying for appreciation that the market-has-bottomed meme must be pounded into the public’s heads to knock people off the fence. A secondary benefit of a widespread belief in future appreciation is a reduction in strategic default.
Rising prices through artificially reduced foreclosure rates has a price. Lenders hope rising prices will curb strategic default, but they must face the reality that reducing foreclosure rates increases strategic default because borrowers know they get a free ride. In the latest Mortgage Bankers Association survey, the increase in delinquency rates is being blamed on a weak economy. I don’t think that’s the reason. The economy is not strong, but unemployment is still declining. The increase in delinquencies is not due to people losing their jobs. It’s much more likely the increase in delinquencies is caused by strategic default.
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Proprietary Irvine Housing News home purchase analysis
14692 OAK Ave Irvine, CA 92606
$575,000 …….. Asking Price
$325,000 ………. Purchase Price
8/25/1989 ………. Purchase Date
$250,000 ………. Gross Gain (Loss)
($26,000) ………… Commissions and Costs at 8%
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$224,000 ………. Net Gain (Loss)
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76.9% ………. Gross Percent Change
68.9% ………. Net Percent Change
2.5% ………… Annual Appreciation
Cost of Home Ownership
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$575,000 …….. Asking Price
$115,000 ………… 20% Down Conventional
3.65% …………. Mortgage Interest Rate
30 ……………… Number of Years
$460,000 …….. Mortgage
$108,093 ………. Income Requirement
$2,104 ………… Monthly Mortgage Payment
$498 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$144 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$46 ………… Homeowners Association Fees
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$2,792 ………. Monthly Cash Outlays
($332) ………. Tax Savings
($705) ………. Equity Hidden in Payment
$137 ………….. Lost Income to Down Payment
$92 ………….. Maintenance and Replacement Reserves
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$1,984 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$7,250 ………… Furnishing and Move In at 1% + $1,500
$7,250 ………… Closing Costs at 1% + $1,500
$4,600 ………… Interest Points
$115,000 ………… Down Payment
============================================
$134,100 ………. Total Cash Costs
$30,400 ………. Emergency Cash Reserves
============================================
$164,500 ………. Total Savings Needed
The property above is available for sale on the MLS.
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Cost of Ownership Analysis
Are you ready to make an offer, but you are worried the cost of ownership is really more than you can afford? Don't make a mistake that might cost you the family home, your life savings, and your good credit! Get the advice of a seasoned professional. Contact us at info@ochousingnews.com today!
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Nearby Foreclosures
Gain a competitive advantage over other buyers. By locating distressed properties -- before they hit the MLS -- you can discover where tomorrow's REOs and short sales will appear. Most of these properties are not listed on the MLS, but they will be soon. Research properties in advance and get a jump on your competition. Don't miss out on another deal because you couldn't act quickly. Use this tool to your advantage! The red properties are already bank owned. As soon as REO asset managers prepare them for sale, they will be on the MLS. Get ready! The green and blue properties have owners who are not paying their mortgages. They may be offered as short sales, or they may go through foreclosure and become REO. Either way, they will also likely be available on the MLS soon. Find your next home! Be prepared to offer on these properties by researching them in advance or risk losing out to buyers who are have done their homework. Start your research today! To find distressed properties, enter your desired location and press search. Scroll through list by pressing "next."Comparative Market Analysis
Are you ready to make an offer, but you are worried you will either (1) underbid and miss the property or (2) overbid and pay too much? Don't make a mistake and miss your dream home, or worse yet, overpay for it! Get the advice of a seasoned professional. Contact us at info@ochousingnews.com today!
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Reports are available for properties in the Southern California MLS coverage area, and are generally delivered within 24-72 hours. If you wish to receive multiple properties, please contact us at info@ochousingnews.com, and we will prepare the reports for you.
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$649,000 3512 BIRCH St |
0.07 miles 5 bd / 3.5 ba 2,400 Sq. Ft. |
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$659,000 3921 BLACKTHORN St |
0.41 miles 4 bd / 2.25 ba 1,897 Sq. Ft. |
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$624,500 3972 BANYAN St |
0.44 miles 4 bd / 2.75 ba 2,210 Sq. Ft. |
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$765,000 27 NEW JERSEY |
0.66 miles 5 bd / 3 ba 2,200 Sq. Ft. |
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$739,900 4252 MARGARITA St |
0.67 miles 4 bd / 2.25 ba 2,610 Sq. Ft. |
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$619,000 4372 BRIDGEWAY St |
0.79 miles 4 bd / 2.25 ba 1,782 Sq. Ft. |
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$759,900 7 PIERCE |
0.9 miles 4 bd / 3 ba 2,132 Sq. Ft. |
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$849,900 34 SANTA COMBA |
0.92 miles 4 bd / 2.5 ba 2,300 Sq. Ft. |
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$779,000 17 FILLMORE |
1.05 miles 3 bd / 2.5 ba 2,148 Sq. Ft. |
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$645,000 13781 SOLITAIRE Way |
1.06 miles 3 bd / 3 ba 2,257 Sq. Ft. |
Conventional wisdom states that rising home prices would bring out sellers. Apparently, the opposite is true.
Expectation for Prices to Rise Deters Would-Be Sellers: Survey
After surveying more than 1,800 active home sellers, Redfin found that some of its customers are holding back from selling now because they believe patience will pay off in the form of higher offers for their home.
The survey revealed that 38 percent of respondents plan to wait more than a year before selling their home, while 25 percent said they plan on selling now. About 36 percent of homeowners plan on waiting somewhere between 3 months and 12 months.
“The would-be sellers we surveyed have made it clear that inventory is not going to meaningfully increase any time in 2012, which will limit sales volume gains-and the lift that real estate delivers to the economy this year,” said Redfin CEO Glenn Kelman. “We believe the main problem is not, as conventional wisdom would have it, that people can’t sell because they’re underwater on their mortgage. The problem with sales volume is that most home-owners just don’t want to sell.”
More than a quarter (27 percent) of respondents said now is a bad time to sell as opposed to only 13 percent who said now is a good time to sell. Half of the respondents were in the middle and said now is an OK time to sell.
Most respondents view the market as one that is favorable toward buyers, with 60 percent stating now is a good time to buy and only 3 percent stating now is a bad time to buy.
San Diego homeowner Jane MacKenzie stated, “I’ve carefully tracked prices on comparable homes in my neighborhood, but they have not yet risen to the level at which I’d want to sell; thus my desire to wait until spring 2013 (tentatively) and reevaluate the comps situation. Hopefully by then some of the volatility in the stock market and the U.S./international scary headlines may have settled down a bit.”
Homeowners expressed optimism for future home prices, with 80 percent believing they are bound to get a higher price for their home after a year or two.
The optimism though is somewhat restrained, with 65 percent of respondents believing prices will rise by a little in a year, and just 7 percent believing they will rise by a lot. Twenty-one percent believe prices will stay the same.
With rental prices increasing, almost half (46 percent) of respondents stated they are considering renting out their home instead of selling.
Redfin explained the move towards renting over selling is likely a factor pushing down inventory as would-be sellers buy a new home and rent out their former primary residence.
The biggest concern for sellers this year was the economy (49 percent), followed by short sales/foreclosures (34 percent), financing trouble (30 percent), and the anticipation for prices to rise (28 percent).
Relocation (30 percent) and a life events (30 percent) were the two main reasons homeowners made plans to sell.
The survey was conducted between August 10 to August 15 and included 1,816 people across 20 metropolitan markets.