Daily Real Estate News, January 10, 2011
A recent decision by the Massachusetts Supreme Judicial Court is expected to have sweeping implications for the nation’s banking industry when it comes to how they’ve approved foreclosures and may even invalidate thousands of foreclosures across the country.
The court, in affirming a lower court’s ruling, invalidated two mortgage foreclosure sales because the banks failed to prove the home owners actually owed the mortgages at the time of foreclosure.
In recent months, the industry has been under fire across the country for using “robo signing” to review foreclosure affidavits, a process in which low-level employees went through hundreds of foreclosure affidavits a day without verifying any of the documents. Such blanket procedures have hurt the banks’ ability to prove that they owned the mortgages.
In the Massachusetts case, the court found that the banks — who were not the original mortgagee — failed to show that they held the mortgages at the time of foreclosure, which called into question whether the foreclosure sale was valid.
"There is no dispute that the mortgagors of the properties in question had defaulted on their obligations, and that the mortgaged properties were subject to foreclosure,” wrote Justice Robert Cordy about the court’s decision. “Before commencing such an action, however, the holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order.”
Attorney Paul Collier III, who represents Antonio Ibanez, one of the home owners in the case, said the ruling stands to affect thousands of mortgages across the country.
"For home owners and foreclosures in general, it means that any mortgage foreclosure which was initiated by a securitized trust at a time when the trust had not obtained a mortgage assignment which gave it the lawful right to do so is void," Collier told the Associated Press. "Those home owners, like Mr. Ibanez, still own the property."
Source: “Highest Massachusetts Court Rules Against 2 Big Banks in Pivotal Mortgage Foreclosure Case,” Associated Press (Jan. 7, 2011)
Monday, January 10, 2011
Wednesday, January 5, 2011
Pricing: Finding the Magic Number
Pricing strategies can help you market your listings and generate offers that turn into closed deals.
By Katherine Tarbox
January 2011
"Once you get a real estate license, you can start telling consumers what their homes are worth," says Melanie McLane, ABR, CRB, owner of the Melanie Group in Jersey Shore, Pa. She’s a certified appraiser with more than 30 years’ experience in real estate. "But I find many people aren’t prepared or haven’t done their homework to know what the market will support before giving price estimates."
And just doing your homework isn’t the end of setting a price; it’s also important to have a pricing strategy that works for your market and your clients. Here are four techniques:
•Employ shock and awe.
Remember Economics 101—the simple law of supply and demand? Adam Smith, the grandfather of modern economics, said when an asset is undervalued, the "invisible hand of the market" corrects the pricing to fair market value. It’s a principle that Amanda DiVito Parle, ABR, CRS, broker associate with RE/MAX Alliance of Arvada, Colo., has used to her sellers’ advantage. By drastically lowering the price on some of her luxury listings—a process she calls "shocking and awing the market"—she creates instant demand. "I listed a $1 million–plus property for $599,000, and a sales professional called and asked if it was correct," she says.
Often, properties can end up selling for more what you’d have originally listed them at. "You need to the drop the price so dramatically that buyers think it’s outrageous," she says. "They’ll determine the price. They’ll be eager to see the property and create a competitive bidding war."
•Set a market-leading price.
"Do your homework on the local market and price the home to lead the market, not chase the market," says Rick Lawrence, e-PRO, SFR, a sales associate with RE/MAX Professionals Select in Naperville, Ill. He recommends showing sellers virtual tours of comparables to get them on the same page about setting a price that will lead the market.
•Pick an exact number.
Ben Kinney, founder of the Home4Investment real estate team in Bellingham, Wash., assesses a listing’s value, setting a price to the dollar: $137,368 or $213,348, for example. "Consumers assume that even prices aren’t carefully calculated and probably just a home price thrown out for the sake of it." At least with Kinney, that notion is correct. He considers all the features of the home to reach a precise number.
•Don’t get counted out.
It’s not uncommon to price a house slightly under an even price point, say at $199,000 instead of $200,000, to give the home a competitive edge. The trouble is, buyers who search for homes online (and virtually all do) are typically searching a range of prices, Kinney says. So a buyer looking for a $200,000–$250,000 house wouldn’t even see your $199,000 listing. By knowing the range buyers usually use for a neighborhood, you can price your listing for maximum exposure, Kinney says.
When the offers do start rolling in, take them seriously, McLane says. Sellers sometimes make the mistake of refusing reasonable offers early in the listing period. Help your clients understand that the longer their house sits, the less desirable it may become to active house hunters.
By Katherine Tarbox
January 2011
"Once you get a real estate license, you can start telling consumers what their homes are worth," says Melanie McLane, ABR, CRB, owner of the Melanie Group in Jersey Shore, Pa. She’s a certified appraiser with more than 30 years’ experience in real estate. "But I find many people aren’t prepared or haven’t done their homework to know what the market will support before giving price estimates."
And just doing your homework isn’t the end of setting a price; it’s also important to have a pricing strategy that works for your market and your clients. Here are four techniques:
•Employ shock and awe.
Remember Economics 101—the simple law of supply and demand? Adam Smith, the grandfather of modern economics, said when an asset is undervalued, the "invisible hand of the market" corrects the pricing to fair market value. It’s a principle that Amanda DiVito Parle, ABR, CRS, broker associate with RE/MAX Alliance of Arvada, Colo., has used to her sellers’ advantage. By drastically lowering the price on some of her luxury listings—a process she calls "shocking and awing the market"—she creates instant demand. "I listed a $1 million–plus property for $599,000, and a sales professional called and asked if it was correct," she says.
Often, properties can end up selling for more what you’d have originally listed them at. "You need to the drop the price so dramatically that buyers think it’s outrageous," she says. "They’ll determine the price. They’ll be eager to see the property and create a competitive bidding war."
•Set a market-leading price.
"Do your homework on the local market and price the home to lead the market, not chase the market," says Rick Lawrence, e-PRO, SFR, a sales associate with RE/MAX Professionals Select in Naperville, Ill. He recommends showing sellers virtual tours of comparables to get them on the same page about setting a price that will lead the market.
•Pick an exact number.
Ben Kinney, founder of the Home4Investment real estate team in Bellingham, Wash., assesses a listing’s value, setting a price to the dollar: $137,368 or $213,348, for example. "Consumers assume that even prices aren’t carefully calculated and probably just a home price thrown out for the sake of it." At least with Kinney, that notion is correct. He considers all the features of the home to reach a precise number.
•Don’t get counted out.
It’s not uncommon to price a house slightly under an even price point, say at $199,000 instead of $200,000, to give the home a competitive edge. The trouble is, buyers who search for homes online (and virtually all do) are typically searching a range of prices, Kinney says. So a buyer looking for a $200,000–$250,000 house wouldn’t even see your $199,000 listing. By knowing the range buyers usually use for a neighborhood, you can price your listing for maximum exposure, Kinney says.
When the offers do start rolling in, take them seriously, McLane says. Sellers sometimes make the mistake of refusing reasonable offers early in the listing period. Help your clients understand that the longer their house sits, the less desirable it may become to active house hunters.
What Qualifies as a Short Sale Hardship?
Daily Real Estate News, January 5, 2011
Sellers aren’t entitled to a short sale just because they’ve lost equity in their home. Lenders look for other hardships when approving short sale transactions. Lisa Udy, a real estate professional with Logan Real Estate in Utah, notes in a recent article the following hardships often qualify:
Job loss
Illness
Divorce
Death of spouse
Natural disasters
Bankruptcy
However, besides a hardship, lenders also consider whether the home’s value has dropped, the mortgage is near or in default (you don’t have to default to qualify but you must prove that if something isn’t done soon, you will default, Udy notes), and the seller has no other assets.
What doesn’t qualify as a hardship? Udy says:
Bad purchase decision or over-bought on the home
Unhappy with location
Purchased another home
Pregnancy
Walk away
Home value declined
Source: “Short Sale Hardships -- Qualifying for a Short Sale,” Tempe Real Estate Agent (Jan. 4, 2011)
Sellers aren’t entitled to a short sale just because they’ve lost equity in their home. Lenders look for other hardships when approving short sale transactions. Lisa Udy, a real estate professional with Logan Real Estate in Utah, notes in a recent article the following hardships often qualify:
Job loss
Illness
Divorce
Death of spouse
Natural disasters
Bankruptcy
However, besides a hardship, lenders also consider whether the home’s value has dropped, the mortgage is near or in default (you don’t have to default to qualify but you must prove that if something isn’t done soon, you will default, Udy notes), and the seller has no other assets.
What doesn’t qualify as a hardship? Udy says:
Bad purchase decision or over-bought on the home
Unhappy with location
Purchased another home
Pregnancy
Walk away
Home value declined
Source: “Short Sale Hardships -- Qualifying for a Short Sale,” Tempe Real Estate Agent (Jan. 4, 2011)
'Secret' Way to Lower Mortgage Payments
Daily Real Estate News, January 5, 2011
Home owners can trim their monthly mortgage payments by “recasting” or “re-amortizing” their loan, without having to refinance and face hefty closing cost fees, experts say.
When recasting, the borrower pays off a lump sum of the loan’s principal and then resets monthly payments at the loan’s original interest rate and terms.
Here’s one scenario: $230,449 is left on a 30-year fixed rate loan for a $300,000 mortgage taken out at 7.93 percent in 1995. The borrower pays $20,000 toward the principal and asks the lender to reamortize their payments over the remaining 15 years of the loan. The monthly payment then drops by $52, from $2,187 to $2,135 per month. ($100,000 toward the lump sum would save $730 a month.)
Since borrowers are not asking for a new loan, they will not have to pay closing costs or submit to another credit check. (Note: “Recasting” is often used in the mortgage industry to refer to interest rate resets on adjustable-rate mortgages. In this case, the interest rate and loan term remain the same. )
“People don’t really know about it, but it’s become more common recently,” Alan Rosenbaum, founder and chief executive of the Guardhill Financial Corporation in New York, said about recasting.
Borrowers who just make extra payments toward the loan’s principal but do not ask the bank to recast the loan will keep monthly payments the same and just shorten the overall time it takes to pay off the loan. Recasting, on the other hand, reduces the principal but then, in turn, lowers monthly payments and interest over the life of the loan.
Some recent buyers may find recasting a good option, particularly when it makes little financial sense to refinance so soon after purchasing a home but are expecting a large sum of money. For example, buyers who expect to receive a tax refund or other substantial money after closing on their property, such as proceeds from the sale of another property or stocks, may want to look into recasting to lower monthly payments, says Edward Ades, the owner of Universal Mortgage in Brooklyn, N.Y.
Source: “A Little-Known Strategy for Cutting Mortgage Payments,” New York Times (Dec. 30, 2010)
Home owners can trim their monthly mortgage payments by “recasting” or “re-amortizing” their loan, without having to refinance and face hefty closing cost fees, experts say.
When recasting, the borrower pays off a lump sum of the loan’s principal and then resets monthly payments at the loan’s original interest rate and terms.
Here’s one scenario: $230,449 is left on a 30-year fixed rate loan for a $300,000 mortgage taken out at 7.93 percent in 1995. The borrower pays $20,000 toward the principal and asks the lender to reamortize their payments over the remaining 15 years of the loan. The monthly payment then drops by $52, from $2,187 to $2,135 per month. ($100,000 toward the lump sum would save $730 a month.)
Since borrowers are not asking for a new loan, they will not have to pay closing costs or submit to another credit check. (Note: “Recasting” is often used in the mortgage industry to refer to interest rate resets on adjustable-rate mortgages. In this case, the interest rate and loan term remain the same. )
“People don’t really know about it, but it’s become more common recently,” Alan Rosenbaum, founder and chief executive of the Guardhill Financial Corporation in New York, said about recasting.
Borrowers who just make extra payments toward the loan’s principal but do not ask the bank to recast the loan will keep monthly payments the same and just shorten the overall time it takes to pay off the loan. Recasting, on the other hand, reduces the principal but then, in turn, lowers monthly payments and interest over the life of the loan.
Some recent buyers may find recasting a good option, particularly when it makes little financial sense to refinance so soon after purchasing a home but are expecting a large sum of money. For example, buyers who expect to receive a tax refund or other substantial money after closing on their property, such as proceeds from the sale of another property or stocks, may want to look into recasting to lower monthly payments, says Edward Ades, the owner of Universal Mortgage in Brooklyn, N.Y.
Source: “A Little-Known Strategy for Cutting Mortgage Payments,” New York Times (Dec. 30, 2010)
Monday, January 3, 2011
Kiss 4% Mortgage Rates Goodbye
NEW YORK (CNNMoney.com) -- The era of near 4% mortgage rates has ended after a quick rate rise since early November. But some industry experts think that may be a good thing for the flagging housing market.
The average 30-year fixed mortgage rate has risen to 4.86% from 4.17%, according to Freddie Mac's weekly mortgage market survey. In the Bankrate.com weekly survey, the rate has risen to 5.02% -- crossing the 5% mark for the second time in three weeks -- after being as low as 4.42% as recently as early November.
Rates haven't been this high since May and forecasters now predict them to remain between 5% and 6% for all of 2011.
"You can kiss those record lows goodbye," said Greg McBride, chief economist for Bankrate.com.
Keith Gumbinger of HSH Associates, a provider of mortgage information said that the market reached a new plateau.
"I don't think we're going back to a 50-year low anytime soon without an economic collapse," he said. "Rates will probably never revisit those levels."
The increase will push mortgage payments higher for homebuyers. When rates rise from 4.25% to 5% it takes away about 9% of buying power, according to McBride.
"That's nothing to sneeze at," he said. "But it's still small relative to the steep drop in home prices over the past few years."
Good for the market?
Higher interest rates may even prove stimulating to the still quiet housing market in which sales volume and prices are scraping near their bottoms.
"The initial phase of an interest rate increase generally does not hurt markets," said Lawrence Yun, chief economist for the National Association of Realtors. "In fact, it can help."
The rapid rise introduces an element of urgency for potential homebuyers. They may now rush to buy before rates spurt even more.
The strength of the economic recovery will have far more impact on the housing market that this relatively modest increase in mortgage rates, according to Yun. If hiring gains momentum, housing markets should revive.
"If we add 2 million jobs as expected in 2011, and mortgage rates rise only moderately, we should see existing-home sales rise to a higher, sustainable volume," said Yun.
Gumbinger said that demand for homes may be tempered somewhat by the increased mortgage costs and so affect home prices a bit but the improving job picture and better consumer confidence matter much more.
"If the other factors are aligned," he said, "interest rates are not a big thing."
The real mortgage challenge, according to Yun, is to increase the number of loan applicants winning approvals. Too many potential homebuyers are still finding it difficult to qualify for loans.
"The current mortgage market is a unique situation" he said. "It's less about rates than it is about underwriting standards, which are, in my opinion, still too stringent."
"If lenders return to more normal, safe underwriting standards for creditworthy buyers, there would be a bigger boost to the housing market and spillover benefits for the broader economy."
The average 30-year fixed mortgage rate has risen to 4.86% from 4.17%, according to Freddie Mac's weekly mortgage market survey. In the Bankrate.com weekly survey, the rate has risen to 5.02% -- crossing the 5% mark for the second time in three weeks -- after being as low as 4.42% as recently as early November.
Rates haven't been this high since May and forecasters now predict them to remain between 5% and 6% for all of 2011.
"You can kiss those record lows goodbye," said Greg McBride, chief economist for Bankrate.com.
Keith Gumbinger of HSH Associates, a provider of mortgage information said that the market reached a new plateau.
"I don't think we're going back to a 50-year low anytime soon without an economic collapse," he said. "Rates will probably never revisit those levels."
The increase will push mortgage payments higher for homebuyers. When rates rise from 4.25% to 5% it takes away about 9% of buying power, according to McBride.
"That's nothing to sneeze at," he said. "But it's still small relative to the steep drop in home prices over the past few years."
Good for the market?
Higher interest rates may even prove stimulating to the still quiet housing market in which sales volume and prices are scraping near their bottoms.
"The initial phase of an interest rate increase generally does not hurt markets," said Lawrence Yun, chief economist for the National Association of Realtors. "In fact, it can help."
The rapid rise introduces an element of urgency for potential homebuyers. They may now rush to buy before rates spurt even more.
The strength of the economic recovery will have far more impact on the housing market that this relatively modest increase in mortgage rates, according to Yun. If hiring gains momentum, housing markets should revive.
"If we add 2 million jobs as expected in 2011, and mortgage rates rise only moderately, we should see existing-home sales rise to a higher, sustainable volume," said Yun.
Gumbinger said that demand for homes may be tempered somewhat by the increased mortgage costs and so affect home prices a bit but the improving job picture and better consumer confidence matter much more.
"If the other factors are aligned," he said, "interest rates are not a big thing."
The real mortgage challenge, according to Yun, is to increase the number of loan applicants winning approvals. Too many potential homebuyers are still finding it difficult to qualify for loans.
"The current mortgage market is a unique situation" he said. "It's less about rates than it is about underwriting standards, which are, in my opinion, still too stringent."
"If lenders return to more normal, safe underwriting standards for creditworthy buyers, there would be a bigger boost to the housing market and spillover benefits for the broader economy."
California Real Estate 2011 Outlook
From Los Angeles Times
When will housing come back in California? Five experts offer their views.
Foreclosures in the state are still high. Sales of new homes are at historic lows. And millions of homeowners are underwater on their mortgages. So what's the outlook for 2011 and beyond?
Real estate historically has helped give a boost to economies exiting a recession, but the severity of this bust is nearly unprecedented: Californians have lost $1.73 trillion worth of equity in their homes since prices peaked in 2007, according to Moody's Economy.com.
• Richard Green, director of the USC Lusk Center for Real Estate, predicts home prices will remain flat in 2011.
California's recovery will hinge on location, said Green, who held professorships at several universities and worked as a principal economist at Freddie Mac before becoming director of the Lusk center.
"Draw a line from El Centro up to Sacramento and think of all the towns up and down that line. Unless we have hyperinflation in general in the economy — prices going up a lot — I would guess that in my lifetime we will not see a return to the prices that we had at the peak," Green said.
"Now, places like La Jolla, Malibu, Laguna, Huntington Beach, Atherton, Palo Alto, the city of San Francisco, Marin County, those are places where within the next five years I could easily imagine prices returning to their peak."
"The markets in the Central Valley were much more bubbly than the markets on the coast," he said. "You have very few people who make a lot of money in these places."
"Whereas a place like Silicon Valley, or a place like West Los Angeles, there is a critical mass of very high-income people.… That means you have a large number of people who can afford to spend in the neighborhood of $1 million on a house, and these are desirable places."
"The more a property is a commodity that you can easily substitute for something else, the less the chance it will ever come back to its peak. The rarer a property is, the more likely it's going to come back quickly."
• Leslie Appleton-Young, chief economist for the California Assn. of Realtors, predicts home prices will rise 2% in 2011.
There are few professionals who would like more to see the housing market bounce back to the heady days of old than Realtors. Real estate agents made a killing when the housing market soared and then took a pounding when it tanked.
During the boom years, Appleton-Young said, she espoused the theory that rising prices mattered more than making solid loans. That theory appeared correct as long as values kept rising.
"What happened this time was prices plummeted and everyone was in trouble," she said.
These days, the economist sees little chance of the market returning to its previous heights anytime soon.
"We are in a very slow-moving recovery with prices stabilized at the moderate and low end," Appleton-Young said. "We are still seeing price attrition and price softening at the upper ends of the market."
2011 will be lackluster, she said, but that does not mean California is not improving.
"We are almost two years into a price recovery. The problem is not to look at 2007 as the normal market that you are moving back up to, because it wasn't a normal market. We are back in an underwriting environment that actually makes sense."
"You are seeing prices recovering throughout the state," she added. "It is just going to take time."
• Bruce Norris, president of Norris Group in Riverside, expects home prices to fall 5% in 2011.
The real estate slump has been good to Norris, an investor in foreclosed homes. But he believes the market is being artificially boosted by government programs and is set to fall further this year.
"We are in an artificial recovery," Norris said. "It's government controlled and manipulated. We have extremely favorable interest rates that we really should not have, based on our debt. We have supported real estate with tax rebates, and we have prevented inventory from showing up by allowing people to be two and three years behind on their mortgages."
Foreclosed homes, in particular, are being kept off the market through loan modification attempts and other policies.
"You've had a slew of programs trying to prevent inventory from showing up, and that prevents reality from happening," Norris said. "It's definitely standing in the way of the natural process."
What does the housing market need most?
"Demand for houses," Norris said. "Somebody able to qualify for a loan and actually being able to get it. And that's why it is not going to happen."
• Emile Haddad, chief executive of FivePoint Communities Inc., expects home prices to "stabilize" in 2011 but declined to make a specific price prediction.
Determining whether the housing market is on steady footing is essential to developers such as Haddad, the former chief investment officer for Lennar Corp. Haddad, along with Lennar, is now part owner of FivePoint, which is managing the development of the Valencia community in Los Angeles County and other high-profile projects. He believes a recovery has yet to take hold in California.
"We are bumping along the bottom," Haddad said. "And that is a good thing, because that is the first thing that you need in order to start seeing a housing recovery. You need to have a period where values are not going down and the trend is moving in a different direction."
California's coastal markets will come back once the job market returns, he said, lifting consumer confidence. But California's inland areas are more likely to lag behind, and builders will have to reconsider the kind of product they offer in such places.
"In the Central Valley, values have changed a lot," Haddad said. "You are not going to be able to really have enough depth in the market to sell large, expensive homes, because the ceiling of value is way down."
"If you pick on a market like Orange County," he said, "it is still a place that once people feel confident.... I believe people will be out buying homes."
Affordability is working in the market's favor.
"We have a mortgage environment that is more favorable — the rates are down — but people are not able to get mortgages, and that is not helping. The most important thing we need is jobs and job creation."
"Affordability is something I look at, and obviously that is a very attractive metric right now.... There is a value proposition out there right now that is very attractive, that we haven't seen in four decades."
• Christopher Thornberg, founding principal of Beacon Economics, predicts home prices will remain flat in 2011.
Once a senior economist for the UCLA Anderson Forecast, Thornberg was one of the first to predict the housing crash, pointing to prices that were way out of line with what people earned.
In that vein, he views the plunge in home values as its own recovery of sorts "because that is when prices went from stupid-high levels to levels that made sense again," Thornberg said. "Now we are in a post-recovery recovery, if you will."
"This is not the bust. A bust implies that prices have fallen to levels that are too low. And I would argue that prices today are relatively high. It's interest rates that have given us this degree of affordability, and from that perspective that is why I don't expect prices to come down."
Since helping found Beacon in 2006, Thornberg has become chief economist for state Controller John Chiang and chair of the Controller's Council of Economic Advisors. He serves on the advisory board of New York hedge fund Paulson & Co. He has been a forceful critic of the Obama administration's policy attempts to right the market.
"The administration has tried, through a variety of policy methods, to try and spike the market," he said.
When will housing come back in California? Five experts offer their views.
Foreclosures in the state are still high. Sales of new homes are at historic lows. And millions of homeowners are underwater on their mortgages. So what's the outlook for 2011 and beyond?
Real estate historically has helped give a boost to economies exiting a recession, but the severity of this bust is nearly unprecedented: Californians have lost $1.73 trillion worth of equity in their homes since prices peaked in 2007, according to Moody's Economy.com.
• Richard Green, director of the USC Lusk Center for Real Estate, predicts home prices will remain flat in 2011.
California's recovery will hinge on location, said Green, who held professorships at several universities and worked as a principal economist at Freddie Mac before becoming director of the Lusk center.
"Draw a line from El Centro up to Sacramento and think of all the towns up and down that line. Unless we have hyperinflation in general in the economy — prices going up a lot — I would guess that in my lifetime we will not see a return to the prices that we had at the peak," Green said.
"Now, places like La Jolla, Malibu, Laguna, Huntington Beach, Atherton, Palo Alto, the city of San Francisco, Marin County, those are places where within the next five years I could easily imagine prices returning to their peak."
"The markets in the Central Valley were much more bubbly than the markets on the coast," he said. "You have very few people who make a lot of money in these places."
"Whereas a place like Silicon Valley, or a place like West Los Angeles, there is a critical mass of very high-income people.… That means you have a large number of people who can afford to spend in the neighborhood of $1 million on a house, and these are desirable places."
"The more a property is a commodity that you can easily substitute for something else, the less the chance it will ever come back to its peak. The rarer a property is, the more likely it's going to come back quickly."
• Leslie Appleton-Young, chief economist for the California Assn. of Realtors, predicts home prices will rise 2% in 2011.
There are few professionals who would like more to see the housing market bounce back to the heady days of old than Realtors. Real estate agents made a killing when the housing market soared and then took a pounding when it tanked.
During the boom years, Appleton-Young said, she espoused the theory that rising prices mattered more than making solid loans. That theory appeared correct as long as values kept rising.
"What happened this time was prices plummeted and everyone was in trouble," she said.
These days, the economist sees little chance of the market returning to its previous heights anytime soon.
"We are in a very slow-moving recovery with prices stabilized at the moderate and low end," Appleton-Young said. "We are still seeing price attrition and price softening at the upper ends of the market."
2011 will be lackluster, she said, but that does not mean California is not improving.
"We are almost two years into a price recovery. The problem is not to look at 2007 as the normal market that you are moving back up to, because it wasn't a normal market. We are back in an underwriting environment that actually makes sense."
"You are seeing prices recovering throughout the state," she added. "It is just going to take time."
• Bruce Norris, president of Norris Group in Riverside, expects home prices to fall 5% in 2011.
The real estate slump has been good to Norris, an investor in foreclosed homes. But he believes the market is being artificially boosted by government programs and is set to fall further this year.
"We are in an artificial recovery," Norris said. "It's government controlled and manipulated. We have extremely favorable interest rates that we really should not have, based on our debt. We have supported real estate with tax rebates, and we have prevented inventory from showing up by allowing people to be two and three years behind on their mortgages."
Foreclosed homes, in particular, are being kept off the market through loan modification attempts and other policies.
"You've had a slew of programs trying to prevent inventory from showing up, and that prevents reality from happening," Norris said. "It's definitely standing in the way of the natural process."
What does the housing market need most?
"Demand for houses," Norris said. "Somebody able to qualify for a loan and actually being able to get it. And that's why it is not going to happen."
• Emile Haddad, chief executive of FivePoint Communities Inc., expects home prices to "stabilize" in 2011 but declined to make a specific price prediction.
Determining whether the housing market is on steady footing is essential to developers such as Haddad, the former chief investment officer for Lennar Corp. Haddad, along with Lennar, is now part owner of FivePoint, which is managing the development of the Valencia community in Los Angeles County and other high-profile projects. He believes a recovery has yet to take hold in California.
"We are bumping along the bottom," Haddad said. "And that is a good thing, because that is the first thing that you need in order to start seeing a housing recovery. You need to have a period where values are not going down and the trend is moving in a different direction."
California's coastal markets will come back once the job market returns, he said, lifting consumer confidence. But California's inland areas are more likely to lag behind, and builders will have to reconsider the kind of product they offer in such places.
"In the Central Valley, values have changed a lot," Haddad said. "You are not going to be able to really have enough depth in the market to sell large, expensive homes, because the ceiling of value is way down."
"If you pick on a market like Orange County," he said, "it is still a place that once people feel confident.... I believe people will be out buying homes."
Affordability is working in the market's favor.
"We have a mortgage environment that is more favorable — the rates are down — but people are not able to get mortgages, and that is not helping. The most important thing we need is jobs and job creation."
"Affordability is something I look at, and obviously that is a very attractive metric right now.... There is a value proposition out there right now that is very attractive, that we haven't seen in four decades."
• Christopher Thornberg, founding principal of Beacon Economics, predicts home prices will remain flat in 2011.
Once a senior economist for the UCLA Anderson Forecast, Thornberg was one of the first to predict the housing crash, pointing to prices that were way out of line with what people earned.
In that vein, he views the plunge in home values as its own recovery of sorts "because that is when prices went from stupid-high levels to levels that made sense again," Thornberg said. "Now we are in a post-recovery recovery, if you will."
"This is not the bust. A bust implies that prices have fallen to levels that are too low. And I would argue that prices today are relatively high. It's interest rates that have given us this degree of affordability, and from that perspective that is why I don't expect prices to come down."
Since helping found Beacon in 2006, Thornberg has become chief economist for state Controller John Chiang and chair of the Controller's Council of Economic Advisors. He serves on the advisory board of New York hedge fund Paulson & Co. He has been a forceful critic of the Obama administration's policy attempts to right the market.
"The administration has tried, through a variety of policy methods, to try and spike the market," he said.
Monday, December 20, 2010
Growing Economy Big Factor for Buyers
Daily Real Estate News, December 20, 2010
Economists are surprisingly positive about the impact of rising interest rates on home sales.
The consensus is that while rates are up from where they were, they are still at historically low levels and rock bottom rates are only a part of what encourages people to buy homes. More important factors could be jobs and other financial issues, which appear to be improving.
“Since the recent rate increases have essentially just undone the declines from earlier months, it is hard to see why sales should drop significantly further from current levels,” wrote Goldman Sachs economist Ed McKelvey in a research note published Thursday evening.
Source: The Wall Street Journal, Nick Timiraos (12/17/2010)
Economists are surprisingly positive about the impact of rising interest rates on home sales.
The consensus is that while rates are up from where they were, they are still at historically low levels and rock bottom rates are only a part of what encourages people to buy homes. More important factors could be jobs and other financial issues, which appear to be improving.
“Since the recent rate increases have essentially just undone the declines from earlier months, it is hard to see why sales should drop significantly further from current levels,” wrote Goldman Sachs economist Ed McKelvey in a research note published Thursday evening.
Source: The Wall Street Journal, Nick Timiraos (12/17/2010)
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