Silver Lake, CA area Home Sales, July 2010

Inventory continues to climb; sales are down by 258 units over June. As you will see in the graph below however, the number of properties "pending" (e.g. in escrow) is relatively flat. This is, no doubt mostly due to continued drops in interest rates. There are some fantastic buys out there right now and with historically low interest rates available on home loans, the savings (over 15 to 30 years) are significant!

If you're looking for more specific information on Silver Lake or other areas please contact me with the details. Also be sure to become a fan of Silver Lake Real Estate and Echo Park Real Estate on Facebook!

Source: Trendgraphix, Inc.

For more information regarding this post or other real estate information contact Robert Dixon at RE/MAX Palos Verdes Realty (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed.

SOCAL Sales Up 08 to 09, while Prices Level or Fall Off

With the Federal Tax Credit deadline passing, April 30th there has been a very noticeable slow down. For example combined South Bay properties pending (reported start of Escrow April vs. May) were down to 799 in May compared to 1009 in April. Inventory, however has continued to climb from 2674 listed in April, 2845 in May and 3084 reported listed in June. Average price per square foot for South Bay, as a whole is at the lowest level since February however that covers a wide range of prices and demographics. As I continue to say, interest rates (whether buying or refinancing) are the highlight. Falling or level pricing and increased inventory is another.

Please contact me for numbers and prices on specific areas, if you’re considering buying, selling or leasing and especially if you believe you’re upside-down on your loan and fear you may lose your home as there are alternatives to foreclosure.


Southland home sales edge up, prices level off

July 13, 2010

Southern California’s housing market continued its slow crawl toward normalcy in June as sales volume rose and the median price slipped back a notch from May, but remained 13 percent higher than a year ago. Red-hot, fire-sale deals continued to give way to mere bargains in the lower- cost inland markets where first-time buyers and investors have competed fiercely, a real estate information service reported.

A total of 23,871 new and resale homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 7.2 percent from 22,270 in May, and up 2.6 percent from 23,262 for June 2009, according to MDA DataQuick of San Diego.

The sales count was the highest since July last year when 24,104 homes were sold. It was the strongest month of June since 2006 when 31,602 homes sold. The average June since 1988 has had 28,086 sales.

“The market was wildly out of kilter a year ago, now it’s just somewhat out of kilter. We’re still seeing lots of bargain hunting, and we’re not seeing much discretionary buying. The single-biggest issue is still mortgage financing. Rates may be at record lows, but that doesn’t mean much if the lender won’t qualify you,” said John Walsh, MDA DataQuick president.

“Still, more money was spent last month buying homes in Southern California than in the past two years, and more money was loaned. The tax credits had something to do with that, though it’s not clear exactly how much. With the impact of the credits fading fast, the next few months will tell us a lot.”

The median price paid for a Southland home was $300,000 last month. That was down 1.6 percent from $305,000 in May, and up 13.2 percent from $265,000 for June 2009. The low point of the current cycle was $247,000 in April 2009, the high point was $505,000 in mid 2007. The median’s peak-to-trough drop was due to a decline in home values as well as a shift in sales toward low-cost homes, especially foreclosures.

Foreclosure resales accounted for 33.0 percent of the resale market last month, down from 33.9 percent in May, and down from 45.3 percent a year ago. The all-time high was February 2009 at 56.7 percent, DataQuick reported.

Government-insured FHA loans, a popular choice among first-time buyers, accounted for 39.0 percent of all mortgages used to purchase homes in June.

Last month 20.8 percent of all sales were for $500,000 or more, compared with 22.2 percent in May and 19.3 percent a year ago. Zip codes in the top one-third of the Southland housing market, based on historical prices, accounted for 29.6 percent of existing single-family house sales last month, down from 31.0 percent in May but up from 27.8 percent a year ago. Over the last decade those high-end areas have contributed a monthly average of 33.3 percent of regional sales. Their contribution to overall sales hit a low of 21.0 percent in January 2009.

High-end sales would be stronger, and the overall market recovery more robust, if adjustable-rate mortgages (ARMs) and “jumbo” loans were more available. Both have become much more difficult to obtain since the August 2007 credit crisis.

While 43.9 percent of all Southland purchase mortgages since 2000 have been ARMs, it was 6.6 percent last month, up from 6.5 percent in May and up from 2.7 percent in June last year.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 17.3 percent of last month’s purchase lending, up from 17.2 percent in May and from 14.9 percent in June 2009. Before the credit crisis, jumbos accounted for 40 percent of the market.

Absentee buyers – mostly investors and some second-home purchasers – bought 19.7 percent of the homes sold in June, paying a median of $220,000. Buyers who appeared to have paid all cash – meaning there was no indication that a corresponding purchase loan was recorded – accounted for 23.5 percent of June sales, paying a median $213,000. In February this year cash sales peaked at 30.1 percent. The 22-year monthly average for Southland homes purchased with cash is 14.1 percent.

The “flipping” of homes has also trended higher over the past year. Last month the percentage of Southland homes flipped – bought and re-sold – within a six-month period was 3.4 percent, while a year ago it was 1.9 percent. Last month it varied from as little as 3.0 percent in Orange and San Diego counties to as much as 3.8 percent in Los Angeles County.

MDA DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,251 last month, down from $1,293 for May, and up from $1,193 for June a year ago. Adjusted for inflation, current payments are 44.3 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They were 54.4 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above- average, MDA DataQuick reported.

Source: DataQuick

For more information regarding this post or other real estate information contact Robert Dixon at RE/MAX Palos Verdes Realty (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed.

SOLD June, Palos Verdes - South Bay Beach Cities

SOLD during the month of JUNE 2010

61 The number of residential properties sold on the Palos Verdes Peninsula, 90274 and 90275.

120 The number of residential properties sold in the South Bay Beach Cities, El Segundo, Manhattan Beach, Hermosa Beach, Redondo and Torrance Beach.

Residential properties SOLD during the month of MAY 2010
 
For more information regarding this post or other real estate information contact Robert Dixon at RE/MAX Palos Verdes Realty (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed.

Palos Verdes - South Bay: Distressed Sales verses Standard Sales

156 / 824 - The number Distressed Sales verses Standard Sales closed since January 1, 2010

86 / 715 - The number Distressed Sales verses Standard Sales currently listed (Active) on the MLS

Areas covered: El Segundo, Manhattan Beach, Hermosa Beach, North and South Redondo Beach, Walteria, Hollywood Riviera, West and South Torrance, Southwood and the Palos Verdes Peninsula.

Source: Multiple Listing Service (MLS). Distressed Property defined as properties: In Foreclosure, Notice of Default (NOD), Real Estate Owned (REO), Short Sale or Short Pay or Auction

SOLD in May, Palos Verdes - South Bay Beach Cities

During the month of May 2010

76  The number of residential properties sold on the Palos Verdes Peninsula, 90274 and 90275.

156  The number of residential properties sold in the South Bay Beach Cities, El Segundo, Manhattan Beach, Hermosa Beach, Redondo and Torrance Beach.

South Bay area Real Estate Sales for 2010

As reported May 18, 2010 on DQNews.com (DataQuick) in Southern California as a whole, homes sales volume dipped slightly last month (see first 3 paragraphs and link to entire report below).

Here in the South Bay sales held steady, significantly ahead of March and April 2009 (see chart below) and the number of pending sales is higher than at any point in the past 18 months. Days on market are down and properties are holding, on average about 95% of their list price (based on 2674 sales in April).

Low interest rates, tax breaks and perceived bargains on homes are still the leading reasons for a percentage of buyers, low interest being the most compelling. Contrary to what many people (not in the market) believe, there are transactions happening. Banks are lending and buyers are closing deals and here locally the majority of properties purchased are not REOs or Short Sales. Of the 416 Single Family Residences, Condominium or Townhomes sold since January 1, 2010 (sample area: Walteria, the Hollywood Riviera, Southwood, West Torrance, North and South Redondo Beach) only 57 were classified as In Foreclosure, Notice of Default, Real Estate Owned or Short Pay.

Southern California home sales dip, median price rises from ’09

Southern California’s housing market leveled off last month as sales activity migrated ever-so-slightly from inland bargain areas toward entry- and mid-market neighborhoods closer to the coast. The overall median price was unchanged from the month before, but it jumped compared with April 2009’s low point, a real estate information service reported.

Sales of new and resale homes totaled 20,299 in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 0.9 percent from 20,476 in March, and down 1.0 percent from 20,514 for April 2009, according to MDA DataQuick of San Diego.

It’s possible that a significant number of sales that would otherwise have closed escrow in April were delayed until May as buyers tried to take advantage of new state tax credits effective May 1. In addition, those who rushed to sign a sales contract last month before the April 30 deadline for a federal home buyer tax credit would likely close escrow in May or June.

This report covers the entire Greater South Bay area. If you are interested in similar information on a more specific segment or multiple areas, please contact me with you needs.

The full report includes charts and data on: the Number of Homes For Sale vs. Sold vs. Pended, Average Price per SQFT, Average Days On Market and Sale Price/Original List Price Percentage, Average Price of For Sale and Sold.

California Foreclosure Activity Declines in Q1 2010

California Foreclosure Activity Declines Again
April 20, 2010

Lending institutions started formal foreclosure proceedings on fewer California homes last quarter. It is unclear how much of the drop can be attributed to shifts in market conditions, and how much is because of changing policies, a real estate information service reported.

A total of 81,054 Notices of Default ("NODs") were recorded at county recorder offices during the January-to-March period. That was down 4.2 percent from 84,568 for the prior quarter, and down 40.2 percent from 135,431 in first-quarter 2009, according to San Diego-based MDA DataQuick.

The year-ago number is the highest in DataQuick's statistics, which go back to 1992 for NODs. The quarterly average is 44,041, while the low of recent years was 12,417 in third-quarter 2004, when housing market annual appreciation rates were around 20 percent.

"Several factors are at play here and it's hard to know how they play into each other right now. A year-and-a-half ago the subprime loan mess was the black hole. Now, playing catch-up, is the financial distress households are experiencing because of the recession. Add to the mix shifting policy decisions, both by lending institutions and in public policy," said John Walsh, DataQuick president.

"We are seeing signs that the worst may be over in the hard-hit entry-level markets, while problems are slowly spreading to more expensive neighborhoods. We're also seeing some lenders become more accommodating to work-outs or short sales, while others appear to be getting stricter about delinquencies. It's very noisy out there," Walsh said.

The state's most affordable sub-markets, which represent 25 percent of the state's housing stock, accounted for 47.5 percent of all default activity a year ago. In first-quarter 2010 that fell to 40.9 percent.

California's mid- to high-end housing markets were more likely to have seen a rise in mortgage defaults last quarter, though the concentration of default activity - measured by defaults per 1,000 homes - remained relatively low in those areas.

For example, zip codes statewide with median home sale prices of $500,000-plus saw mortgage defaults buck the overall trend and rise 1.5 percent last quarter compared with the prior quarter, while year-over-year the decline was 19 percent (versus a 40.2 percent marketwide annual decrease). Collectively, these zips saw 4.5 default notices filed for every 1,000 homes in the community, compared with the overall market's rate of 9.3 NODs for every 1,000 homes statewide.

In zip codes with medians below $500,000, mortgage default filings fell 5.8 percent from the prior quarter and declined nearly 43 percent from a year earlier. However, collectively these zips saw 10.5 NODs filed for every 1,000 homes - more than double the default rate for the zips with $500,000-plus medians.

On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the NOD. The borrowers owed a median $14,066 in back payments on a median $330,147 mortgage.

On home equity loans and lines of credit in default, borrowers owed a median $3,897 on a median $64,422 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.

While many of the loans that went into default during first-quarter 2010 were originated in early 2007, the median origination month for last quarter's defaulted loans was July 2006, the same month as during the prior four quarters.

San Diego-based MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.

Although 81,054 default notices were filed last quarter, they involved 79,457 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit). Multiple default recordings on the same home are trending down, DataQuick reported.

Following a historical pattern, mortgages were least likely to go into default in Marin, San Francisco and San Mateo counties. The probability was highest in Merced, Stanislaus and San Joaquin counties.

The number of Trustees Deeds (TDs) recorded, which reflect the number of houses or condo units lost to the foreclosure process, totaled 42,857 during the first quarter. That was down 16.1 percent from 51,060 for the prior quarter, and down 1.7 percent from 43,620 for first-quarter 2009. The all-time peak was 79,511 in third-quarter 2008.

In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The state's all-time low was 637 in the second quarter of 2005, MDA DataQuick reported.

There are 8.5 million houses and condos in California.

On average, homes foreclosed on last quarter spent 7.5 months winding their way through the formal foreclosure process, beginning with an NOD. A year ago it was 6.8 months. The increase could reflect, among other things, lender backlogs and extra time needed to pursue possible loan modifications and short sales.

Foreclosure resales accounted for 42.6 percent of all California resale activity last quarter. It was up from a revised 40.6 percent the prior quarter, and down from 57.8 percent a year ago, the peak. Foreclosure resales varied significantly by county last quarter, from 13.8 percent in San Francisco to 67.7 percent in Merced.

At formal foreclosure auctions last quarter, an estimated 24.6 percent of foreclosed properties went to investors and others who do not appear to be lender or government entities. That's up from an estimated 17.6 percent a year ago.

The lenders that originated the most loans that went into default last quarter were Countrywide (7,282), World Savings (6,459), Washington Mutual (6,371), Wells Fargo (5,204) and Bank of America (3,851). These were also the most active lenders in the second half of 2006, and their default rates were well below 10 percent.

Smaller subprime lenders had far higher default rates for that period: ResMAE Mortgage, Ownit Mortgage, Master Financial, First NLC Financial Services and Fieldstone Mortgage all had default rates of more than 65 percent of the loans they originated in the second half of 2006. These and most other subprime lenders are long gone.

Most of the loans made in 2006 are owned or serviced by institutions other than those that made the loans. The servicers pursuing the highest number of defaults last quarter were ReconTrust Co., Cal-Western Reconveyance and NDEx West, MDA DataQuick reported.

Notices of Default (first step in foreclosure process)
houses and condos

Trustees Deeds Recorded (signal homes were lost to foreclosure)
houses and condos

Source: DQNews.com (DataQuick Information Systems)

Southern California Home Sales for March 2010

More Incremental Gains for Southland Real Estate Market

April 13, 2010

Home sales and prices continued their steady but pokey climb up from the bottom in Southern California last month as buyers scrambled to take advantage of low prices and low mortgage interest rates. The market is still tilted toward low-cost distress sales, but not by as much as previously, a real estate information service reported.

A total of 20,476 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 33.3 percent from 15,359 in February, and up 5.0 percent from 19,506 in March 2009, according to MDA DataQuick of San Diego.

Sales always go up from February to March. Last month was the 21st in a row with a year-over-year sales increase. The March sales average is 24,936 going back to 1988, when DataQuick’s statistics begin.

“It’s a reflection of just how grim things got, that we’ve now had almost two years of sales gains and we’re still 18 percent below the sales average. The market won’t rebalance until mortgage lending patterns normalize, and that’s just not happening yet. Some of the best deals out there right now are happening when the buyer comes in with cash,” said John Walsh, MDA DataQuick president.

The median price paid for a Southland home was $285,000 last month, up 3.6 percent from $275,000 in February, and up 14.0 percent from $250,000 for March 2009.

The median peaked at $505,000 in mid 2007 and appears, so far, to have bottomed out at $247,000 in April last year. The peak-to-trough drop in the median was due to a decline in home values as well as a shift in sales toward low-cost homes, especially foreclosures.

Foreclosure resales accounted for 38.4 percent of the resale market last month, down from 42.3 percent in February, and down from 54.8 percent a year ago. The all-time high was in February 2009 at 56.7 percent.

As sales of lower-cost foreclosure properties have waned over the past year, activity has picked up from very low levels in many high-end areas. Last month sales of homes priced at $500,000 or more made up 19.4 percent of all Southland transactions, compared with 18.5 percent in February and 14.9 percent in March 2009. Over the past five years, $500,000-plus deals averaged 35 percent of monthly sales, while over the past 10 years they averaged 26 percent of all transactions.

Higher-end sales are still hampered by the troubled jumbo loan market, which has improved only modestly over the past year. Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 15.7 percent of last month’s purchase lending, up from 14.8 percent in February and from 10.5 percent in March 2009. However, before the credit crisis in the fall of 2007, jumbos accounted for 40 percent of the market.

Adjustable-rate mortgages (ARMs) haven’t come close to recovering from the credit crunch, either. While 44.6 percent of all Southland purchase mortgages since 2000 have been ARMs, last month they represented just 4.8 percent, up from 4.0 percent in February and 2.1 percent in March last year.

Meanwhile, Uncle Sam continues to prop up lending for many low-to mid-priced homes. Government-insured FHA loans, a popular choice among first-time buyers, accounted for 38.6 percent of all mortgages used to purchase Southland homes in March.

Absentee buyers – mostly investors and some second-home purchasers – bought 21.3 percent of the homes sold in March.

Buyers who appeared to have paid all cash – meaning there was no indication that a corresponding purchase loan was recorded – accounted for 27.1 percent of March sales. In February it was a revised 30.0 percent – an all-time high. The 22-year monthly average for Southland homes purchased with cash is 13.8 percent.

The “flipping” of homes has also trended higher the past year, though it eased a bit in March. Last month the percentage of Southland homes flipped – bought and re-sold – within a three-week to six-month period was 3.2 percent of total sales, down from 3.5 percent in February but up from 1.6 percent a year ago. Last month flipping varied from as little as 2.6 percent of total sales in Riverside County to as much as 3.9 percent in Los Angeles County.

MDA DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,220 last month, up from $1,180 for February, and up from $1,074 for March a year ago. Adjusted for inflation, current payments are 45.2 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They were 55.1 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above-average, MDA DataQuick reported.

Source: DQNews.com (DataQuick Information Systems)

Gov. Arnold Schwarzenegger waives state taxes on mortgage debt forgiven in a foreclosure or short sale

There’s good news for thousands of California taxpayers who sell homes at a loss, a practice known as a short sale. A measure (SB 401) signed last week by Gov. Arnold Schwarzenegger waives state taxes on mortgage debt forgiven in a foreclosure or short sale.

The federal liability waiver for mortgage debt relief is still in place, but the state waiver was set to expire at the end of 2008. The new state provision applies to mortgage debt forgiven by lenders during tax years 2007 to 2012.

Without the tax shelter, the difference between the mortgage debt and sale price on a short sale becomes taxable income. So a state earner making $65,000 who sold a home at a $100,000 loss would be responsible for taxable income of $165,000.

On April 5, the Obama administration expanded the existing Home Affordable Modification Program to include new federal guidelines and incentives for lenders and qualified borrowers. The new Home Affordable Foreclosure Alternatives program helps eligible homeowners avoid foreclosure by providing options for short sales or deeds-in-lieu of foreclosure.

Borrowers are required to be owner-occupants of the principal residence, show financial hardship and have a first lien mortgage originated on or before Jan. 1, 2009 with a principal balance that does not exceed $729,750. In addition, the borrower’s total monthly mortgage payment must be greater than 31% of his or her monthly gross income.

Under the new HAFA program, borrowers can get up to $3,000 in relocation assistance. Service providers can get $1,500 for administrative and processing costs. Forgiven debt that does not exceed the debt used for acquisition, construction or rehabilitation of a principal residence is not taxed as income. (Make sure that you check these guidelines with a tax advisor or the IRS.)

If the home remains unsold despite a good-faith effort by the owner, the lender may accept a title transfer and release the borrower from the debt and further claims through a deed-in-lieu of foreclosure. For more information about HAMP programs, visit Making Home Affordable.gov or call (888) 995-4673.

Source: LA Times, Money & Company, On the Market: Short sales

Citi Reports Profit of $4.4 Billion

"After 2 Years of Losses, Citi Reports Profit of $4.4 Billion. Losses in Citigroup’s domestic mortgages and credit units however continued to mount — Citigroup Holding, which contains the bulk of most-troubled mortgage and credit card assets along with businesses marked for sale, lost $876 million."

The piece goes on to say that the government may soon be selling it's ownership in the company, some 7.7 billion shares...


After 2 Years of Losses, Citi Reports Profit of $4.4 Billion
New York Times by ERIC DASH
April 19, 2010

After nearly two years of being drenched in red ink, Citigroup provided the strongest signs yet that the troubled bank is beginning to recover as it reported a $4.4 billion profit in the first quarter.

The earnings, which handily beat analyst expectations and were the bank’s best since the financial crisis began, were the result of the resurgence in the bond market and improvements in the economy, particularly overseas. Both play to Citigroup’s strengths as a major player in fixed income and emerging markets, and come as some of its rivals benefited from similar trends. JPMorgan Chase and Bank of America both reported big first-quarter earnings from hefty trading profits and from adding less money to their loan loss reserves.

Full article at NYTimes.com

Realty Check: Televison Hit Show 'Extreme Makeover' Downsizes

Interesting, mostly due to the television aspect... In my mind dealing with smaller homes should have broader appeal.

Realty Check: 'Extreme Makeover' Downsizes Its Dream Homes
Producers of Hit TV Show See Bad Loans, Dashed Dreams, Default
The Wall Street Journal
April 6, 2010

The house at 10512 Baldy Mountain Rd. in Sandpoint, Idaho, looks like just another vacant foreclosed home. Some appliances, a bathroom mirror and even the hot tub are missing. The dining room of the three-bedroom house has water damage.

But this isn't your run-of-the-mill problem house. Call it an Extreme Foreclosure. The 3,678-square-foot McMansion is a product of the popular "Extreme Makeover: Home Edition" reality television show. It isn't the only "Extreme" home to fall on hard times.

Each week, an average 9.4 million viewers tune in to ABC-TV for what, over seven seasons, has become a classic formula: Find a struggling family with a heart-tugging story and send them on vacation as an army of volunteers work frantically to replace an existing home with a much nicer and bigger one in just 106 hours. Each episode ends with a dramatic tear-filled tour of the new home, packed with donated furnishings, and outsize extras like a carousel or bowling lanes.

But after the cameras have gone, another trend has been developing: Homeowners struggle to keep up with their expensive new digs. In many cases, the bigger, more lavish homes have come with bigger, more lavish utility bills. And bigger tax assessments. Some homeowners have tapped the equity of their super-sized homes only to fall behind on the higher mortgage payments.

The show's producers say they are aware of the problem and are making changes appropriate to current economic reality: downsizing.

Back in the boom, the makeovers got a little out of hand because of competition among home builders aware of the free publicity that came with the show and who tried to outdo previous projects. These days, the show is backing away from the boom-era showpieces. We "scaled back," says Conrad Ricketts, an executive producer for the show created and produced by Endemol USA.

The average size of current makeovers is 2,800 to 3,000 square feet. A 2005 episode featured a house in Lake City, Ga., that became a 5,300-square-foot English castle boasting five bedrooms, seven bathrooms, five fireplaces and an outdoor kitchen. These days, the houses appear more subdued, eschewing over-the-top amenities.

A swimming pool is no longer a must, unless it could be used for therapy. When pools are built, the show explores a well system to help reduce water usage and costs. Lavish landscaping is out, working with the local environment is in. "We're not going to New Mexico, the desert, and trying to put sod down," Mr. Ricketts says.

Tracy Hutson, an interior designer who has been with "Extreme Makeover" since the beginning, says homes are receiving more earth-friendly products, such as low water-flow toilets and solar panels, curbing the giant electricity bills that caused a hardship for some families. "I think our hearts were in the right place, but we just got carried way," says Ms. Hutson. "It can be extreme without being the biggest house you've ever seen."

Back in 2003, the 59-year-old Mr. Ricketts, who has worked in movies and TV for nearly three decades, was looking to develop a home-remodeling series. As he traveled down a "nice street" in Santa Clarita, Calif., he came upon a broken-down house that didn't seem to fit in. He learned the family had a child battling leukemia, leaving little money for maintenance. "I knew at that moment it was the soul of the TV show," Mr. Ricketts recalls.

The California family's home was remodeled for the first episode airing later that year. But soon, remodeling gave way to razing and rebuilding houses, making for more dramatic television during the housing boom. As the show became more popular, donations flowed and builders got more and more ambitious.

It has since become part of pop culture, and, while plenty of makeover shows have come and gone, it remains the most ambitious, well-known and generous of the genre.

It's also important to ABC when it comes to ratings and selling ads: Among broadcast networks, the show ranks second in the key female demographics and tops with children ages 2 to 11.

Huber Engineered Woods LLC has donated its premium floor, wall and roof products for 25 houses. While TV viewers don't always see the brand, "connecting with builders and framers on job sites" has led to increased awareness and additional sales, says Matt O'Brien, vice president of commercial operations.

For many families featured on the program, the Extreme Makeover experience has been a dream come true. But for some, the experience has been financially stressful.

Several owners have sought loan modifications to reduce their payments in order to stay in their homes, lenders say. Some families seek a quick-fix by trying to sell. But because Extreme Makeovers tend to be big, fancy residences plopped into working-class or rural communities, the houses can be a hard sell.

The house in Sandpoint, which was owned by Eric Hebert, appears to be the first Extreme Makeover home to actually fall into foreclosure, in October. Mr. Hebert did not answer requests for comment. But he told a local television station last year that "the biggest mistake I think that I made was I took too much money out on the house thinking that I was going to have a job, you know, in the future."

Source: WSJ.com

Foreclosure activity for Q1 in 2010

"Foreclosure activity in California fell 6.4 percent from the same time last year, but rose 4.7 percent from the fourth quarter, giving the state the fourth-highest foreclosure rate. One in every 62 units got a filing."

I realize that this is not what a lot of you what to see... however I post these reports for several reasons not the least of which is that there are those who choose to fan the flames stating this is a recovery. Isn’t that the approach that got us into this mess? I tend to want to paint a clearer picture. I want my clients, whether buying or selling to be thoroughly aware of the environment in which they venture. Yes, there’s been a spike in activity and this activity can potentially continue, providing that financing remains available. It’s predicted, however that roughly 50% of the real estate sales volume in 2010 will involve distressed property and the numbers indicate that there will be plenty of inventory available.

An estimated 3.2% of all loans are in foreclosure with an additional 10% being more than 60 days late. With the more recent activity involving prime loan (as opposed to the wave of sub-prime failures last year) this is not just a matter of irresponsible buyers and lenders.

Where the topic of California’s part is concerned, it’s common to hear that we’re not really touched in the South Bay. A quick search of Redondo Beach, Hermosa Beach, Manhattan Beach and the Palos Verdes Peninsula produces 603 properties in some stage of foreclosure.

For many homeowners foreclosure is not the only option. Losing a home is a devastating reality; however a loan modification or short sale, when possible is far better than allowing a home to go back to the bank and new government guidelines through HAFA (part of HAMP) seek to streamline the process. If you are a homeowner with a legitimate hardship you need to understand your options and act immediately.

If you or someone you know is concerned about whether they will be able to keep their home or have already received a notice of default do not wait.

Call for additional information and guidance at (310) 750-5751


Foreclosure activity escalates in Q1
Utah's foreclosure rate soars
By Inman News, Thursday, April 15, 2010.

Properties receiving foreclosure filings jumped 16 percent in the first quarter compared to the same period last year, according to a quarterly report by foreclosure data site RealtyTrac.

Filings -- default notices, scheduled auctions and bank repossessions -- went to 932,234 properties, a 7 percent surge from the fourth quarter. That means 1 in every 138 housing units in the country received a foreclosure filing, the report said.

March saw the biggest monthly total since RealtyTrac's first U.S. Foreclosure Market Report in January 2005: 367,056 properties posted filings in March -- 39.4 percent of total for the first quarter.

"Foreclosure activity in the first quarter of 2010 followed a very similar pattern to what we saw in the first quarter of 2009: a shallow trough in January and February followed by a substantial spike in March," said James J. Saccacio, RealtyTrac's CEO.

"One difference, however, is that the increases were more tilted toward the final stage of foreclosure, with REOs increasing 9 percent on a quarterly basis in the first quarter of 2010 compared to a 13 percent quarterly decrease in REOs in the first quarter of 2009."

With a total of 257,944 properties repossessed by the lender during the quarter, REOs hit a record-high total, the report said, and REOs soared 35 percent compared to the same period last year.

"This subtle shift in the numbers ... may be further evidence that lenders are starting to make a dent in the backlog of distressed inventory that has built up over the last year as foreclosure prevention programs and processing delays slowed down the normal foreclosure timeline," Saccacio said.

At 369,491, scheduled auctions during the first quarter also hit a record high, rising 21 percent quarter-over-quarter and 12 percent from the fourth quarter.

The number of properties receiving default notices was mostly flat, rising 1 percent to 304,799 quarter-over-quarter and falling 1 percent from the previous quarter. They peaked in the third quarter of last year at more than 342,000, the report said.

More than 70 percent of the nation's first-quarter foreclosure activity was concentrated 10 states, the report said. California had the nation's highest total of properties receiving foreclosure filings: 216,263, or 23 percent of all activity.

Next came Florida, with 153,540 properties receiving a filing, followed by Arizona (55,686), Illinois (45,780), Michigan (45,732), Georgia (39,911), Texas (37,354), Nevada (34,557), Ohio (33,221) and Colorado (16,023), the report said.

The number of properties in Nevada receiving a foreclosure filing fell 16 percent from 2009's first quarter, but rose 15 percent from the fourth quarter.

According to RealtyTrac, Nevada has been contending with the nation's highest foreclosure rate for the past 13 quarters. A staggering 1 in 33 housing units received a foreclosure filing in the first quarter, four times the national average, the report said.

For the third straight quarter, Arizona posted the nation's second-highest rate with one in every 49 properties receiving a foreclosure filing, the report said. The state's foreclosure rate rose 13.8 percent quarter-over-quarter and 22.4 percent from the previous quarter.

Florida registered the third-highest foreclosure rate in the nation for the second straight month. One in every 57 properties got a filing, increasing 28.8 percent quarter-over-quarter and 7 percent from the previous quarter.

Foreclosure activity in California fell 6.4 percent from the same time last year, but rose 4.7 percent from the fourth quarter, giving the state the fourth-highest foreclosure rate. One in every 62 units got a filing.

Utah had the fifth-highest rate -- 1 in every 88 housing units had a foreclosure filing. There, foreclosure activity skyrocketed a whopping 75.1 percent from the same quarter last year and 21.2 percent from the fourth quarter.

Michigan, Georgia, Idaho, Illinois and Colorado rounded out the states with the top 10 foreclosure rates.

RealtyTrac bases its foreclosure reports on foreclosure filing data from 2,200 counties across the country, accounting for more than 90 percent of the American population.

Source: Inman News

SHORT SALES: Home Affordable Foreclosure Alternatives Program (HAFA)

Distressed Properties are expected to comprise 50% of the U.S. market transactions this year

New government guidelines designed to streamline the Short Sale process go into effect April 5th. All HAMP lenders and real estate agents working in the rapidly expanding Short Sales market MUST be familiar with these new guidelines. The new program is called HAFA: The Home Affordable Foreclosure Alternative program

According to the National Association of REALTORS®, Short Sales and Foreclosures (REO's) are the new traditional transaction and as part of my standard real estate business I specialize in helping distressed homeowners’ determine their options. To this end, I am certified by the NAR through their SFR (Short Sale and Foreclosure Resource Certification) program.


Home Affordable Foreclosure Alternatives Program (HAFA)

In 2009, the Treasury Department introduced the HAFA program to provide a viable option for homeowners who are unable to keep their homes through the existing Home Affordable Modification Program (HAMP). The HAFA program takes effect on April 5, 2010—although some servicers may implement it sooner, if they meet certain requirement--and sunsets on December 31, 2012.

Home Affordable Foreclosures Alternatives Program: Guidelines and Forms

HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program. Servicers participating in HAMP are also required to comply with HAFA.

A list of servicers participating in HAMP (including HAFA) is available at: Making Home Affordable

HAFA Provisions

•• Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.

•• Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.

•• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).

•• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).

•• Uses standard processes, documents, and timeframes/deadlines.

•• Provides the following financial incentives:

•• $3,000 for borrower relocation assistance;

•• $1,500 for servicers to cover administrative and processing costs;

•• Up to $2,000 for investors who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders, on a one-for-three matching basis.

•• Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

Source: National Association of REALTORS®

Governor signs home tax credit bill

Governor Schwarzenegger today signed AB 183 providing $200 million for home buyer tax credits. The bill allocates $100 million for qualified first-time home buyers who purchase existing homes and $100 million for purchasers of new, or previously unoccupied, homes.

Eligible taxpayers who close escrow on qualified principal residences between May 1, 2010 and December, 31, 2010, or who close escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credit.

This credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years. Under the bill, purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (i.e. repay it to the state). Buyers also must be at least 18 years old and be unrelated to the seller. First-time buyers are defined as those who have not owned a home in the past three years.

See AB 183 here

Must-do Home Cleaning & Maintenance

Spring is upon us, or so it would seem and with the fairer weather comes the urge to clean-up, air out and organize... Following is a list of Must-Do items to add to your regimen.

Whereas you may be comfortable doing some work yourself, other items require the expertise of a licensed professional (e.g. general contractor, plumber, electrician or HVAC contractor etc.). One great way to stay on top of home maintenance is to have regular inspections (minimum twice annually) by a licensed general contractor who offers home maintenance or handyman services. He or she will either be knowledgeable enough to address your issues or recommend that a specialist be brought in to evaluate the problem. Always be sure that every contractor is licensed and insured before any work begins.

If you need a good general contractor/handyman, I recommend South Bay Home Services. Jim Scira is clean, meticulous and conscientious.

Also, for more general room-by-room cleaning/spring cleaning pointers visit Spring Cleaning: A Complete Checklist (A Spring Cleaning Extravaganza) by Sarah Aguirre at About.com Guide


Maintenance & Cleaning Tips for Your Home

Index

1. Replace your furnace filter
2. Clean the kitchen exhaust hood and air filter
3. Check your electrical system
4. Always have a multi-purpose fire extinguisher accessible.
5. Check light bulbs in all fixtures for correct wattage
6. Review your fire escape plan with your family
7. Consider installing a lightning protection system on your home
8. Protect electrical appliances from power surges & lightning
9. Have an HVAC contractor inspect & maintain your system
10. Check for damage to your roof
11. Run through a severe-weather drill with your family
12. Repair all cracked, broken or uneven driveways and walks
13. Protect your home from sewer or drain back-up losses
14. Check all the fascia and trim for deterioration
15. Check your water heater
16. Check shutoff valve at each plumbing fixture
17. Clean clothes dryer exhaust duct, damper & under dryer
18. Replace extension cords that are brittle, worn or damaged
19. Inspect & clean smoke & carbon monoxide alarms
    

Replace or clean your furnace filter

It should be checked once a month and replaced or cleaned as needed. Some filters are reusable and are supposed to be taken out, washed with a hose and re-inserted. A dirty filter can lower the efficiency of the heating/cooling system, increase heating costs and cause fires.

Clean the kitchen exhaust hood and air filter

Keeping this clean of cooking grease will help keep a stovetop fire from spreading.

Check your electrical system

Look for burn marks at the main electrical panel; they can be a sign of arcing inside the panel, which can easily lead to a fire. Loose connections or damaged insulation can cause the arcing. Note: Only a qualified electrician should remove the front panel cover.

Trip and reset the circuit breakers regularly.

Remove any combustible materials such as paper boxes or flammable liquids from the area near the main electrical panel. Sparks caused by arcing inside the panel can ignite material stored nearby.

Check all electrical outlets for loose-fitting plugs they are an indication of a worn out receptacle. Worn receptacles should be replaced as they cause overheating and fires. Also check electrical outlets and switches to be sure they work properly. If any switches, outlets or receptacles do not work, have a qualified electrician determine the problem and fix it to avoid fires inside the walls of your home.

Install safety covers to help protect children from electrical shock. Any appliance or tool that gives even the slightest shock should be unplugged and checked by an electrician or repair shop.

Always have a multi-purpose fire extinguisher accessible

Make sure it is Underwriters Laboratories (UL) listed or Factory Mutual (FM) approved. Check the gauges to make sure they are charged and ready to use.

Make sure the light bulbs in all your fixtures are the correct wattage

The light fixture manufacturer recommends the correct wattage. If too high a wattage bulb is used in a light fixture, heat produced inside the fixture can lead to fire inside the fixture, ceiling or wall.

Consider installing a lightning protection system on your home

Read more at Lightning protection systems.

Protect all your electrical appliances from power surges and lightning

Read more at How to choose surge protection for your home.

Have a professional air conditioning contractor (HVAC) inspect and maintain your system as recommended by the manufacturer

Maintenance should include:

- Cleaning the evaporator coil
- Lubricating fans and motors
- Tightening or changing the belts
- Checking electrical safeties
- Checking the drain pan for leaks
- Testing the capacitors
- Check the condensate drain
- Test the crankcase heater
- Calibrating the thermostat
- Visually checking the wiring for potential short circuits

These steps can help decrease the chance of fire, save money by making the system run more efficiently and help prevent breakdowns.

Things you can maintain:

- Check the condensate hose to be sure it is not blocked with algae.
- Clean the outside condensing unit screen of leaves.
- Listen for unusual noises.

Check for damage to your roof

Signs include missing, curling, cupping, broken or cracked shingles. Pooling or ponds of water that fail to drain from flat roofs may indicate low areas and inadequate drainage.

Repair all cracked, broken or uneven driveways and walks to help provide a level walking surface

This will help prevent guests and family members from slipping, tripping or falling.

Protect your home from sewer or drain back-up losses

Read more at Wet Basements.

Check all the fascia and trim for deterioration

These areas can become weathered and worn and may lead to potential water damage.

Check your water heater

If you have a gas-fired water heater, check to make sure it is venting properly. Light a match next to the vent and wave it out (don't blow it out). See if the smoke is pulled up into the vent. If it isn't, have a professional inspect and repair it. Otherwise, carbon monoxide and other combustibles can build up in the home.

Check around the base of your water heater for evidence of leaks. If your water heater is over 5 years old, it should be checked monthly for any leakage or rusting at the bottom. If water leakage or rust is found, the water heater should be replaced.

Check the shutoff valve at each plumbing fixture to make sure they function

Know the location of all valves and what equipment and water lines they serve. Teach all family members.

Clean the clothes dryer exhaust duct, damper and space under the dryer

Poor maintenance allows lint to build up in the exhaust duct and cause fire.

Replace all extension cords that have become brittle, worn or damaged

Exposed wires may cause arcing, which will produce heat and can start a fire. Care should also be taken to keep appliances and their power cords away from water or a heat source because this will damage the cord's insulation.

Inspect and clean dust from the covers of your smoke and carbon monoxide alarms

Read more at Smoke alarms save lives.

Living Rent-Free in the wake of the Real Estate Finance Crisis

This piece from the LA Times (February 27, 2010) is an interesting read and I believe gives an accurate analysis of the situation within our financial institutions. Frankly, they’re hammered. One observation however is there was no mention of short sales and that too is part of what could explain why banks are extending the foreclosure process.

It’s said that where a lender can foreclose and at least break even, there is no chance of an approval on a short-pay. I’d imagine that processing these properties is a priority. Everything else (the majority) is depreciated to the point that modification, short sale or foreclosure is the only option. As less than 30% of distressed properties owner seek alternatives (e.g. modification and short sale) lenders have a massive amount inventory to organize, foreclose and sell.


Many borrowers in default stay put as lenders delay evictions

Despite being months behind, many strapped residents are hanging on to their homes, essentially living rent-free. Pressure on banks to modify loans and a glut of inventory are driving the trend.

It's been 16 months since Eugene and Patricia Harrison last paid the mortgage on their Perris home. Eleven months since the notice got slapped on their front door, warning that it would be sold at auction.

A terse letter from a lawyer came eight months ago, telling them that their lender now owned the house. Three months later, the bank told them to pay up or get out by the end of the week.

Still, they remain in the yellow ranch-style home they bought seven years ago for $128,000, with its views of the San Jacinto Mountains. They're not planning on going anywhere.

"We're kind of on pins and needles, but who'd want to leave when you put this kind of energy into a house?" said Eugene Harrison, 70, gesturing toward a bucolic mural of mountains, stream and flowers the couple painted on the living room wall.

Throughout the country, people continue to default on their home loans -- but lenders have backed off on forced evictions, allowing many to remain in their homes, essentially rent-free.

Several factors are driving the trend, industry experts say, including government pressure on banks to modify loans and keep people in their homes.

And with a glut of inventory in places like Southern California's Inland Empire, Nevada and Arizona, lenders are loath to depress housing prices further by dumping more properties into a weak market.

Finally, allowing borrowers to stay in their homes helps protect the bank's investment as it negotiates with the homeowners, said Gary Kirshner, a spokesman for Chase bank, a major lender.

"If the person's in the property, there's less chance for vandalism, and they're probably maintaining the house," he said.

Economists say the situation won't last forever, but in the meantime the "amnesty" may allow at least some homeowners to regain their financial footing and avoid eviction.

In the Inland Empire, an estimated 100,000 homeowners are living rent-free, according to economist John Husing, who based that number on the difference between loan delinquencies and foreclosures. Industry experts say it's difficult to say how many families are in that situation nationally because only banks know for sure how many customers have stopped paying entirely.
But Rick Sharga of Irvine data tracker RealtyTrac notes that the number of loans in which the borrower hasn't made a payment in 90 days or more but is not in foreclosure is at 5.1% nationally, a record high. And yet the number of foreclosures last year was 2.9 million, below the 3.2 million that RealtyTrac economists predicted.

More evidence is provided by another firm, ForeclosureRadar, which says it now takes an average of 229 days for a bank to foreclose on a home in California after sending a notice of default, up from 146 days in August 2008.

"For some reason, banks are being more lenient with homeowners who are behind on their loans," Sharga said. "Whether it's a strategy to try and slow down the volume of foreclosures or simply a matter of the banks being able to keep up with volume is something that banks only know for sure."

Lenders say the trend reflects their efforts to work with borrowers to modify loans to avoid foreclosure. Bank of America "continues to exhaust every possible option to qualify customers for modification or other solutions," spokeswoman Jumana Bauwens said.

Some lenders are making it a policy to partner with delinquent borrowers. Citibank said this month that it would let borrowers on the brink of foreclosure stay at their homes for six months, whether or not they make payments, if they turn over their property deed.

Such policies may partly reflect the fact that lenders can't keep up with all the foreclosures, some say.

"The mortgage lenders are so backlogged that some people are able to slip through the cracks," said Kathryn Davis, a real estate agent at America's Real Estate Advocates in Corona.

That was apparently the case for the Harrisons, who were told at various times that their house had been sold, that it belonged to someone else and that it was empty.

"It's been frustrating, a real major pain in the buttocks," said Eugene Harrison, a nondenominational minister with a clipped mustache and a sudden laugh.

The Harrisons missed their first payment in October 2008, shortly after Patricia Harrison, 57, lost her job as a healthcare aide and her husband's part-time towing work dried up. They said they applied for a loan modification with Countrywide Financial (since acquired by Bank of America) but were told that they couldn't receive one until they were three months behind on their payments. So they stopped paying.

In April 2009, they received a notice warning them that their property "may be sold at a public sale," and in July, they were told their house was a bank-owned property.

The bank sent a notice by FedEx in October demanding $3,000, and when the Harrisons called to discuss this notice, they were told they had four days to vacate the house.

Panicked, they arranged to stay with family in New Mexico and started packing their things, filling their garage with boxes of books, camping equipment and art. But no one came to kick them out.

"We were afraid to leave the house, afraid the sheriff was going to come," said Patricia Harrison, an amateur painter.

After contacting consumer advocates about their situation, the Harrisons decided to stay put. Soon after, two men in a white pickup truck showed up at the house and peeped in the windows, telling the Harrisons that they thought the house was abandoned.

The Harrisons suspected they were planning to move in themselves and chased them away.

The couple don't want to leave but are in the midst of a running dispute with Bank of America about the terms of their loan modification. The bank says it mailed them documents this month.

As they wade through the red tape, the Harrisons can't imagine abandoning a house where they've left their mark in the goldenrod and potpourri rose walls, the new fixtures and stenciling in the bathrooms, the fruit trees planted in the yard.

Although the Harrisons' future is uncertain, industry observers agree that the rent-free life can't last forever. As home values climb, banks will find it financially advantageous to foreclose on delinquent borrowers and sell their properties.

"In many cases, particularly in California, people owe a boatload of payments, and no bank is going to forgive that," said Guy Cecala, editor of Inside Mortgage Finance, a trade publication.

In Diamond Bar, the Fraguere family is finally moving on after living rent-free for 18 months. Job loss and other setbacks prevented them from paying their mortgage, but they say they didn't hear anything from the bank, First Franklin, until a real estate agent showed up at their door last month saying she was going to sell their house.

Sandy Fraguere wasn't surprised that it had taken the bank so long to ask them to move.

"I don't think they really knew what was going on or who was there," she said.

Next stop for the Fragueres is a hotel, where they plan to stay for two weeks until their apartment in Chino Hills is ready for them to move in. Their dogs are being boarded and their belongings stored until they can retrieve them someday. Their children, ages 8 and 9, are being steeled for more instability.

The Fragueres have started saying goodbye to their neighbors, adding yet another empty house to a block that has already seen two other families forced to pack up and leave.

Los Angeles Times - February 27, 2010 by Alana Semuels

Jumbo loan delinquencies move higher

This piece from the LA Times regarding jumbo loans is sobering and illustrates that everyone is affected. A “Jumbo” is defined as a loan amount over the conforming limit as set by Freddie Mac and Fannie Mae. In our region currently, that ceiling is a loan of over $729,750.00.

I get the same question constantly in regards to my real estate business, “How are things going, is it picking up?” The delivery is usually cautiously empathetic and concerned. “Is the worst over” is another common query and my standard answer to that is, if I could answer that question I’d be worth a billion dollars.

The truth is that no one knows and anyone who claims they do is selling something… There are so many factors that will determine how things go ultimately and frankly if our government would spend half the energy (focused on finding real solutions) that they devote to undermining each other, we’d be on a faster road to recovery.

Living in the “now”

Pursuant to the topic of the article, following are the local numbers. Properties sold for $750,000.00 or more in the combined South Bay market are up 103% for January 2010 compared to January 2009. Pending sales are also up 73% vs. Jan. 2009 even though inventory is down 32% as most non-distressed sellers are choosing to wait.

That said, ‘pre-foreclosure’ activity on the Palos Verdes Peninsula (90274 and 90275) in this price range is, I’m sure at record levels with 138 homes either showing as NOD (notice of default), scheduled for auction or REO (bank owned). The combined beach cities; Hollywood Riviera, Redondo, Hermosa and Manhattan Beach show 144 properties in these categories.


Prime jumbo loan delinquencies still rising, report shows
LA Times by Alejandro Lazo
February 8, 2010

People who hold jumbo loans on pricey U.S. properties continued to struggle in January as more Americans lose their jobs and property values have plummeted, according to a report released Monday.

Jumbo loans were popular -- and often necessary to afford homes in pricey areas like Southern California -- during the heady years of the boom.

Jumbo loans are generally defined as being above certain conforming limits set by mortgage titans Freddie Mac and Fannie Mae. (The conforming limit for single-family homes was $417,000 from 2006 to 2008 but was increased temporarily by federal lawmakers in early 2008 to $729,750 in certain high-cost areas, including Los Angeles County.)

Overall, delinquencies of 60 days or more on prime jumbo loans that were packaged into securities and sold to investors rose to 9.6% in January, up from 9.2% in December and 3.7% a year earlier, according to the report by the Fitch Ratings agency in New York.

California, which comprises 44% of the market, saw its delinquency rate rise to 11.3% in January from 10.8% in December and 4.1% a year earlier.

“The deterioration in performance is really the combination of two things going on: rising unemployment that took place throughout 2009 as well as our estimate that about a third of all jumbo loans that are current are underwater in terms of the value, so [borrowers] owe more on their properties than they are worth,” Fitch managing director Vincent Barberio said. “As more of these loans become delinquent, they ultimately will come into foreclosure.”

Prime jumbo loan delinquencies began to rise in the second quarter of 2007, but accelerated in 2009 and nearly tripled over the course of the year, Fitch said. The five states with the highest volume of prime jumbo loans outstanding are California, New York, Florida, Virginia and New Jersey.

Short Sales - Foreclosure: Tax implications

An important piece of the Short Sales – Foreclosure scenario that often gets overlooked are the tax implications of reduced or cancelled debt. The information and especially the links to the IRS website are a must read for anyone contemplating a distressed sale or loan modification.

As always, be sure to contact an accountant or attorney to verify that you understand completely what liability, if any you will have upon successfully selling or modifying.


Home Foreclosure and Debt Cancellation
Information provided by the Law Office of Gregory T. Royston

Update Dec. 11, 2008 — The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

The amount excluded reduces the taxpayer’s cost basis in the home. More details

Further information, including detailed examples, can also be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.


The questions and answers, below, are based on the law prior to the passage of the Mortgage Forgiveness Debt Relief Act of 2007.

1. What is Cancellation of Debt?

If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.

Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.

2. Is Cancellation of Debt income always taxable?

Not always. There are some exceptions. The most common situation where cancellation of debt is not taxable as income involve:

Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.

Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you.You are insolvent when your total debts are more than the fair market value of your total assets.Insolvency can be fairly complex to determine and the assistance of a tax professional is recommended if you believe you qualify for this exception.

Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.The rules applicable to farmers are complex and the assistance of a tax professional is recommended if you believe you qualify for this exception.

Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral.That is, the lender cannot pursue you personally in case of default.Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income.However, it may result in other tax consequences, as discussed in Question 3 below.

3. I lost my home through foreclosure. Are there tax consequences?

There are two possible consequences you must consider:

Taxable cancellation of debt income (Note: As stated above, cancellation of debt income is not taxable in the case of non-recourse loans).

A reportable gain from the disposition of the home, because foreclosures are treated like sales for tax purposes.(Note: Often some or all of the gain from the sale of a personal residence qualifies for exclusion from income).

4. I lost money on the foreclosure of my home. Can I claim a loss on my tax return?

No. Losses from the sale or foreclosure of personal property are not deductible.

5. Can you provide examples?

A borrower bought a home in August 2005 and lived in it until it was taken through foreclosure in September 2007. The original purchase price was $170,000, the home is worth $200,000 at foreclosure, and the mortgage debt canceled at foreclosure is $220,000. At the time of the foreclosure, the borrower is insolvent, with liabilities (mortgage, credit cards, car loans and other debts) totaling $250,000 and assets totaling $230,000.

6. I don’t agree with the information on the Form 1099-C. What should I do?

Contact the lender. The lender should issue a corrected form if the information is determined to be incorrect. Retain all records related to the purchase of your home and all related debt.

7. I received a notice from the IRS on this. What should I do?

The IRS urges borrowers with questions to call the phone number shown on the notice. The IRS also urges borrowers who wind up owing additional tax and are unable to pay it in full to use the installment agreement form, normally included with the notice, to request a payment agreement with the agency.

8. Where else can I go to get tax help?

If you are having difficulty resolving a tax problem (such as one involving an IRS bill, letter or notice) through normal IRS channels, the Taxpayer Advocate Service may be able to help. For more information, you can also call the TAS toll-free case intake line at 1-877-777-4778, TTY/TDD 1-800-829-4059.

In some cases, you may qualify for free or low-cost assistance from a Low Income Taxpayer Clinic (LITC). LITCs are independent organizations that represent low income taxpayers in tax disputes with the IRS. Find information on an LITCs in your area.

Related Items:

Publication 523: Selling Your Home
Publication 544: Sales and Other Dispositions of Assets
Publication 908: Bankruptcy Tax Guide
Form 1040: U.S. Individual Income Tax Return
Form 1040: Schedule D, Capital Gains and Losses
Form 1099-C: Cancellation of Debt
Form 9465: Installment Agreement Request

SHORT SALE vs. FORECLOSURE

What is the difference? By now you may know that a “Short Sale” is a lender approved sale of real estate in which the sale price is less than (or short of) the mortgage balance. A foreclosure however is where the bank takes the property and either it is sold through auction or sold by the bank in the open market.

What about the homeowner? After the smoke clears where does the homeowner stand? Obviously if the bank is loosing money, the borrower will not be taking anything away from the transaction. In the best case scenario the homeowner walks away without any liability and minimal credit damage. This is not the case with foreclosure.

It’s important to note that Short Sales will not work if the property has sufficient equity for the lender to foreclose, sell as an REO and at least break even. The homeowner must be thoroughly "upside-down" in their loan and be able to prove a legitimate hardship for a lender to approve the transaction.

The average cost for a lender to foreclose is approximately $50,000 and there are reserves that lenders are required hold to back up non-performing loans. Lenders don’t like to tie up resources to back up these loans and are generally open to alternatives.


The outline below will help to establish some of the major differences (impact to the borrower) between Short Sales and Foreclosure.

CREDIT SCORE

Foreclosure: Credit scores can suffer a loss of approximately 250 to more than 300 points and generally this can affect credit for over 3 years.

Short Sale: Late payments on mortgage will show and after the property is sold the loan is normally reported as ‘paid as agreed’, ‘paid as negotiated’ or ‘settled’. This can lower a credit score by as little as 50 as long as other accounts are being maintained. A short sale can influence a credit rating for as little as 12 to 18 months.

CREDIT HISTORY

Foreclosure: A foreclosure remains as a public record permanently and as part of a personal credit history for 10 years or more.

Short Sale: a short sale is not reported in a credit history. There is no specific report for short sales and the loan is generally reported as ‘paid’ or ‘settled’.

DEFICIENCY JUDGMENT

Foreclosure: In the State of California a lender has the right to pursue a deficiency judgment through judicial foreclosure.

Short Sale: The deficiency can be a point of negotiation with the lender

DEFICIENCY JUDGMENT (amount)

Foreclosure: The home will need to go through the REO process if it fails to sell at auction. Generally this results in a lower sales price and can take longer to sell, especially in a declining market. Bank offer these propertied “as is” and that will scare off many potential buyers. All these delays can result in a higher deficiency.

Short Sale: With a properly managed short sale the property should sell at close to market price resulting in a lower deficiency.

FANNIE MAE (primary residence)

Foreclosure: A homeowner who looses a home to foreclosure is ineligible for Fannie Mae-backed loans for a period of 5 years.

Short Sale: After successfully negotiating and closing a short sale the homeowner is eligible for a Fannie Mae-backed loan in 2 years.

FANNIE MAE (non-primary)

Foreclosure: An investor who looses property to foreclosure is ineligible for Fannie Mae-backed loans for a period of 7 years.

Short Sale: After successfully negotiating and closing a short sale an investor is eligible for a Fannie Mae-backed loan in 2 years.

MORTGAGE COMPANIES

Foreclosure: On any future loan applications, a prospective borrower will be required to answer YES to question C in Section VIII of the standard 1003 form that asks “Have you ever had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?” This will affect future interest rates.

Short Sale: There is no similar declaration or question regarding short sales.

SECURITY CLEARANCE

Foreclosure: As with a serious misdemeanor or felony conviction, foreclosure is a critical issue where a security clearance is concerned. In nearly all cases clearance will be revoked and the position will bet terminated.

Short Sale: On its own, a short sale does not challenge most security clearances.

CURRENT EMPLOYMENT

Foreclosure: Employers have the right and actively check the credit of all employees in sensitive positions. Foreclosure is frequently grounds for reassignment or termination.

Short Sale: A short sale is not report on a credit report and as such is not a challenge to employment.

FUTURE EMPLOYMENT

Foreclosure: Credit checks are required for applicants by many employers. A foreclose is among the most detrimental credit item an applicant can have and in many cases will challenge employment.

Short Sale: A short sale is not report on a credit report and as such is not a challenge to employment.