Real Estate Horizon
Last week Moody’s downgraded their ratings for several classes of Residential Mortgage Backed Securities (RMBS) warning that loss assumptions would be increased. They projected that Alt-A loans (buyers with good credit and down payments, but stated income) originated in the second half of 2007 would experience 25.5% losses of original balance. The projected losses for Alt-A loans from the first half of 2007, the second half of 2006 and the first half of 2006 are 23.9%, 22.1%, and 17.1% respectively. Clearly there are many more people who will be drowning in mortgage debt this year as the severe recession causes the pain to climb up the food chain.
A total of 523,624 California properties received a foreclosure filing (Notice of Default) in 2008, more than any other state. The bulk of foreclosed properties from the sub-prime loans have now worked their way through the system. The new wave of foreclosure activity is from higher quality loans (such as Alt-A) going bad in large numbers. Half of the inventory of homes for sale in the more desirable zip codes now consists of distress sales (either bank-owned or short sales) compared to about 10% last year at this time.
It looks like the losses are just going to keep coming. Commercial mortgage paper will soon be written down as well. How the stimulus package now being debated will address this trend remains to be seen. Details may emerge next week. It is safe to say that banks will be given incentives to work out loan modifications when appropriate. It is also safe to say that for people who are not candidates for a loan modification, the banks will be more willing to accommodate a short sale, and foreclosure will be the last resort.
Meanwhile, it appears that buyers will be encouraged to buy with low interest rates and tax credits.
Feeling the Pain
The precipitous economic downturn coupled with tight credit and deflated property values is inflicting real pain. There are ways to get relief for those who are drowning in mortgage debt: renting rooms, loan modifications, selling as a “short sale”, foreclosure, and deed in lieu of foreclosure. After avoiding short-sale listings last year, the new realities of the market now require me to embrace them. (In a short-sale, the proceeds from the sale do not cover the loan payoff and the lender agrees to accept less than full payment.) There are so many amateur agents taking these listings that only one in ten actually close; and buyer’s agents steer their clients away from short-sale listings to save them the frustration of waiting months for nothing.
I am now certified as a short-sale specialist and have systems in place to handle these complex transactions and get favorable results so that only one in ten DON’T close! Not everyone is a candidate. You cannot do a short sale simply because your home is worth less than what you owe! If you…or someone you know…needs help clarifying their options, contact me for a no-obligation consultation.
At Home
The tree outside the kitchen window is fully cloaked in white blossoms, always the first to declare spring. Stunning beauty…right in my face… along with the morning dishes! The bird-feeder out back, site of an avian party that seems to go on longer these days, is emptying at the rate of one pound of seed daily! I noted the party in full swing this morning: the band jammin’, lines at the buffet table, splashing in the pool, flirting, dancing, liaisons in planning, phone numbers exchanging, and even a whiff of nectar in the air.
Inspired, I went to grab my camera from the office and returned moments later to see the place completely deserted! Incredible. I walked out the door and a Coopers hawk (Accipiter cooperii) perched on the back fence got spooked and stroked off toward the lagoon. The party had shut down and everyone disappeared faster than you could say “cops are here!” I’ve seen this hawk around the house quite often lately, the most memorable when it perched on the fence right outside the office window…just eight feet away…and stared in at me like a cold calculating killer stationed comfortably high on the food chain.
One on-line source says the Coopers Hawk “specializes in eating birds.” A description of the Cooper Hawk feeding habits says: “captures birds from low, stealthy approach-flight or after a short chase. Uses cover, including manmade structures, to conceal approach. In open area may drop on prey from high flight. Captures birds at bird feeders.” (emphasis mine). Turns out we’re operating a drive-up taco stand for Mister Cooperii.
A Trend?
A new condo listing of mine received an acceptable offer this week after ten days on the market and brisk activity: twenty showings, two offers, and two more offers threatening. The model match unit (a foreclosure) in the complex just closed two weeks prior for $289K. That unit had been listed below market for $269K and sparked a bidding contest that resulted in a sale $20K over list price, a common scenario with bank-owned (REO) properties these days.
Over the last year, the selling price of that REO unit would have lowered the bar and effectively established the new “fair market value” for the complex. My seller listed in a price range starting at $300K and accepted an offer for $317K which is $28K higher than the fresh “comp” sale! Not likely to have happened just a few months ago.
As usual... wonderful writing, and inspiring real estate news. Thanks!
Posted by: Richard M. Sander | February 17, 2009 at 11:44 AM