Yet more info on Southland property flippers

I've been posting about flipped properties lately, and here's more info and statistics about that very thing from today's L.A. Times.  The short of it: investors, most of whom are likely property flippers, are crowding the low end of the market.  The title should link; if not, click here.  Some salient quotes:

"The one thing that is certainly true at the moment — because rents are rising and house prices are flat or falling — is yields on houses are pretty good right now," said Richard Green, director of the USC Lusk Center for Real Estate. "It creates a problem for ordinary people, because a lot of investors are buying with cash, and so cash buyers can buy for less money." So if it seems like there are no inexpensive homes on the market, that's why.

And "...buyers who paid all cash purchased 29% of all Southland homes in December." Statistically, many of those cash sales were in the middle- and high-price catagories, too.  I am constantly amazed by how much cash is out there.

And, perhaps the most important stat of all: "Nearly 1 in 3 homes sold last month on the resale market was a foreclosure and about 1 in 5 was a short sale."

The article also discusses price declines in December, but that usually happens at the end of the year.  My take-away is good and bad.  Obviously, even though there should be great deals on properties out there, the competition for true bargains in all price catagories is fierce and cash is king.  The good news for regular buyers is that many/most of these investors are doing some very nice rehabbing of properties.  They are spending their cash on the fixes needed so you can spend yours on your mortgage -- and tax deduction.

I think I need to start going to foreclosure auctions.

About our next favorite thing after real estate: Food! And what's the best Mexican restaurant in the SFV?

Are you thinking about food when you're not thinking about Southern California real estate?  Today's L.A. Times Food section has a great article about the best smaller, ethnic food places in the L.A. area.  Note how many are in the San Fernando Valley!  Title should link; if not, click here.

Along these lines, does anybody know of a really good Mexican food place in the east SFV besides Don Cuco's and Mucho Mas?  We went to El Cholo in Pasadena the other day but it has become very corporate.

Happy New Year! Where do you stand on the great home buyer/seller divide?

I hope 2012 is a great new year for us all! To start the new year off right, here's an article about a study of the divide in expectations between home buyers and sellers. It appeared in today's L.A. Times; the title should link but if not click here. The article starts out this way:

"Where do you side in the great real estate buy-sell divide of 2012? If you're a homeowner considering selling sometime in the new year, are you apprehensive that you won't get the price you need or want, and therefore it's possible you won't even try to sell? If you're a buyer, do you agree that with 30-year fixed mortgage rates now below 4% and home prices near cyclical bottom in many areas, 2012 offers extraordinary opportunities, even if listings are fewer than you might prefer?"  Boy, that certainly hits the nail on the head.  In my experience, the sellers' sentiment is extremely common.

The article also states, "Many owners "have not adjusted their price expectations downward" to keep pace with local declines in property values after the mortgage bust." I'll say.  But in fairness, many owners can't go down much on price without being upside-down, either.

And here's a final take that I'm seeing more and more of: "...agents sometimes walk away from unreasonable listing price demands, but they also use a technique that seeks to bridge the seller-buyer divide: pre-authorized price reduction clauses in the listing contract that ratchet down the asking number."

Botched appraisals -- this just happened to me on the Norwich condo

Here's an article on botched appraisals from today's L.A. Times.  If you scan posts below, you'll see that this just happened to me on the Norwich condo.  We got the appraisal reversed.  Yes, it is possible.

Refinancing underwater home loans to get easier, maybe.

Breaking news from the L.A. Times! Refinancing Fannie Mae and Freddie Mac home loans that are underwater should be easier now, thanks to the Obama administration.  The title above should link; if not, here's the article.  However, don't get too excited yet.  Here's a quote:

"Even with the new rules, only borrowers with mortgages taken on by Fannie and Freddie on or before May 31, 2009, can qualify. Their loan amounts must top 80% of the current market value of their homes. And they must be current on their payments, with no late payment in the last six months and no more than one late payment in the last 12 months."

So, as usual, the devil is in the details and the proof is in the pudding and all that. 

Here's another article from today's L.A. Times regarding the administration's efforts to help people refinance their loans.  It details other, non-Freddie/Fannie efforts.  The article is skeptical in tone and so am I.

I think writing down interest is a great idea; I think writing down principal will never happen.

Foreclosure info AND loan modification info for So. Cal.

The Los Angeles Times had two interesting articles about our local real estate market yesterday.  The first is titled Foreclosure activity soars in third quarter, ending lengthy lull.  No, this isn't the much discussed "shadow inventory" hitting the market.  It's just that the lending banks have stopped suspending foreclosures due to the robo-signing scandal.  Other salient facts from the article, as if you didn't know: "Defaults hit lower-cost neighborhoods harder. Areas with a median home sale price below $200,000 saw 11 default notices filed for each 1,000 homes, compared with 8.1 per 1,000 homes statewide and 2.8 per 1,000 homes in areas with a median sale price above $800,000." And people wonder about the 99% protestors.

The second article is titled Plan would allow refinancing of some underwater mortgages.  Don't get excited yet.  The article states: "The new proposal would apply to people who are underwater on their homes but making mortgage payments on time. Only mortgages owned by banks — about 20% of all mortgages — would be eligible. Most mortgages are owned by investors as part of mortgage-backed securities."  How and who is this going to help? I think the amount of mortgages owned by banks are much less than 20%.  Why not just write down the interest rates if people aren't behind (yet) on their mortgage payments? 

U.S. to lower the size of mortgage it will guarantee - but I don't think that's going to have too much of a negative impact

Here's an article from today's L.A. Times about lower loan limits that will go into effect at the end of September.  While many of my colleagues are wringing their hands over this change, I'd like to point out three things. 1) The limit is reducing from $729,750 to $625,500.  So any loan amount over $625k will now need to have jumbo financing. Therefore this will really only impact home buyers, and home prices, between those two loan amounts only -- that's only a price spread of $104,000+.  2) Jumbo rates are at an all-time low. 3) Yes, many of the areas I serve have high home prices; but a greater amount of neighborhoods have home prices that don't exceed $600,000 in the first place.  So will there be wide-spread harm? It remains to be seen, but I doubt it.

From Sunday's L.A. Times: Read the second part of the headline first. Home prices soar (what?) AND monthly payments are more affordable

Sunday's L.A. times had a syndicated column by Lew Sichelman entitled Home prices soar in some areas as buyers opt for more expensive properties.  Lower mortgage rates are making monthly payments more affordable.  Does it seem that those are two different subjects to you? Well, the first part of the article says,

"[Prices] didn't just rise, though. They shot up by double digits, as much as 54.5% in Kansas City [Kansas City? Really?], almost 39% in Detroit and nearly 28% in Indianapolis from the second quarter last year, according to a survey of the nation's 32 largest metro areas by the Federal Housing Finance Agency.

Of course, house prices didn't really soar that much in a year's time. What's far more likely is that people in those places and several others bought more than the usual number of expensive properties in the April-May-June period." Okay, that explains it.  
The article then switches horses in mid-stream and discusses low interest rates. 
One consultant states, "Buyers also shouldn't worry about whether prices will continue to fall... because mortgage rates have only one way to go, which is up. Even a small jump in rates will wipe out any savings buyers might achieve by waiting for prices to drop further." And here's an interesting mathmatical take-away: " If prices remain flat and rates rise a full percentage point, to 5.5% from 4.5%, the same $200,000 house will cost 12% more each month to own, Yamano said. And if rates should spring up 2 percentage points, to 6.5%, your mortgage payment would jump 25%."  I don't think anybody needs to worry about interest rates rising today, but the article is correct: they have no place to go but up, and I think it's a good idea for would-be buyers AND sellers to be mindful of this.

"South California" a 51st state? But it wouldn't include Los Angeles

According to today's L.A. Times, 13 California counties want to break away and form their own state.  It would be called "South California" and would NOT include Los Angeles, because L.A. is too liberal.  I say: fine, as long as we can still annex Disneyland. 

Why loan modifications aren't happening

Today's Michael Hiltzik column in the L.A. Times contains a great article on loan modifications and why so few of them are actually happening. The title should link; if not click here. IMO, here's the most pertinent text from the article:

The key to keeping a financially strapped borrower in a home is to modify the mortgage to cut the monthly payment, whether by cutting the interest rate or loan balance or by stretching out the repayment term. What makes this difficult is that often the loan servicer — the bank or office that bills the homeowner and tracks his or her payment history — doesn't own the loan, which has been packaged and sold to investors. The servicer's right to sign off on a mortgage modification may be murky, even if in the long run it will benefit the investor by keeping the home out of foreclosure.

In fact, servicers have powerful incentives to do the wrong thing — wrong for borrowers, wrong for investors, wrong for the economy. They make more money, and have better guarantees of payment, if they delay modifications, even if they force homeowners into foreclosure.

That's because they can continue to collect junk fees from homeowners while they stretch out the process. Although they have to advance interest payments (and sometimes principal) to investors even on delinquent or defaulting loans, they're first in line to be repaid from the proceeds of the sale of a foreclosed home. Under those circumstances, why would a servicer break a sweat to keep a home out of foreclosure?

Emphasis mine.  I've been wondering why more loan modifications, which make a lot of sense, aren't going through.  Thanks for nothing, servicers.

Tried to get a loan mod lately? Was it difficult? You weren't alone; read this

I know business news is boring, but this article from today's L.A. Times is a must read.  The headline says it all: "3 banks lose loan mod incentives" from the federal government.  Those three are BofA, JPMorgan Chase and Wells Fargo.  The government says these banks need to improve their loan modification practices to qualify for the money.  I'll say. Several other loan servicers were judged to be poor performers too: Ocwen, American Home Mortgage Servicing, Citigroup, GMAC, Litton, OneWest Bank and Select Portfolio.

Some short sale experts I've spoken with believe that the small amount of money that the government is offering these banks is a joke, and this article quotes others who say the same.  And the U.S. House of Representatives recently voted to end the program. To me, whether or not the banks get money for modifying loans, it's bizarre that banks would force their own customers into foreclosure instead of knocking points of their interest rates.  How does that scenario make sense?

Shadow inventory of solds?

We’ve all heard about the “shadow inventory” of foreclosures that is supposed to hit the real estate market. But could there be a “shadow inventory” of sold properties? Last week, L.A. Times published an article which states that real estate sales and home prices are not so hot for the Southland. Here’s the link if the title won’t link. As always, I’m not going to argue with statistics, but I don’t know that they tell the whole story. Yes, the early part of 2011 was slow, but I think there could be another reason for low numbers.

IMO, the sales numbers may be skewed by the sheer number of short sales out there. Here’s how it works. A regular home lists, attracts offers, and the buyer and seller enter a contract. The house usually closes escrow 30 to 90 days later and the sale is reported in both the multiple listing service and to the county tax assessor. That’s where all the data comes from. But with short sales, the buyer and seller can be in contract for four to eight months before the bank even approves the sale. During the time period, regardless of the agreement between buyer and seller, the house must be listed as “active” on the mls (the banks in their wisdom mandate this.) And then it can take a month or so to close. (For example, I had one last year that went eight months before it closed, and another one cancel after four months before the bank even got around to approving it.) Not to be Pollyanna-ish, but considering that a high percentage of homes on the market are distressed sales, I think we may be experiencing more of a time delay in reporting actual sale transactions, than in actual sales. What do you think?

L.A. Times and Case-Shiller say it's officially a double dip. Buyers, here's your chance.

This comes as no surprise to those of us "on the street," but housing price gains in the last year have been erased. Article link here.  L.A. has dropped 1%.  Not to be too rah-rah, but buyers, here's your chance to buy at low prices and low interest rates.

L.A. Times discovers the San Fernando Valley! Can L.A. Weekly be far behind?

Today's LA Times' travel section has a long article about attractions in the San Fernando Valley! Yay! Way to go, SFV! Click the title above or click here to read.  Long-time readers of this blog will note that Aroma Cafe and The Federal Bar, posted about here, are featured in the article.

IMO, the L.A. Times is back! At least the biz section, anyway

Many of us were dismayed when the L.A. Times began to cut back on its editorial staff and pages a few years ago.  Personally, I missed the separate LAT real estate section and the L.A. Land blog, especially when the editor was the outstanding Peter Viles.  I turned to Calculated Risk and Gretchen Morgenson of the New York Times for my real estate and business news. Caveat: while I don’t have a really sophisticated understanding of all things finance, I do try to keep up with the news, especially about banking, lending and real estate.

But regular business columnists David Lazarus and Michael Hiltzik have changed my mind about the quality of the L.A. Times’ business reporting.  Both are outstanding writers and produce business news columns that are informative, topical and easy to follow for us regular folks.  I’ll never give up reading NYT’s Gretchen, and this isn't a smackdown, but Lazarus and Hiltzik make reading the L.A. Times biz section an educational pleasure once again.

LATimes: Housing prices edge towards double dip

I know I'm not supposed to report news like this, but today's L.A. Times has an article entitled Housing Prices Edge Towards Double Dip (the title above should link to the article).  I don't dispute the stats, nor do I want to gloss them over, but here are some things to consider:

• These are national stats.  All real estate is local, and some of our neighborhoods are seeing price rises.
• Studio City, Burbank, Toluca Lake and Sherman Oaks, et al do not have the same amount of foreclosures that other neighborhoods have, and foreclosures skew the stats lower as they make their way through the trustee sale process. Even short sales and foreclosures, when they eventually sell on the retail market, sell at market prices.
• This is good news for buyers as long as interest rates stay relatively low.
• If they purchased a home before 2003 (and didn't pull money out in HELOCs), most local sellers still have a lot of equity over their purchase price.
• Sellers with nice homes in nice neighborhoods at market prices are still seeing quick sales.

Help for those facing foreclosure. Or not.

Here is an article from today's L.A. Times with the following headline: "California plans $2 Billion program to help distressed homeowners." And here are details and quotes from the article:

"The Keep Your Home California program, which uses federal funds reserved for the 2008 rescue of the financial system, has the potential to make a sizable dent in California's foreclosure crisis and help the general housing market. State officials hope to fend off foreclosure for about 95,000 borrowers and provide moving assistance to about 6,500 people who do lose their homes." Sounds great, right? But wait. Apparently the banks aren't rushing to get on board. "Out of the five major mortgage servicers — Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Ally Financial and Citigroup Inc." only Ally Financial is on board.

And free-market proponents won't like this: "By keeping some cheap foreclosed properties from reaching the market, the program could give a boost to home values in general."

More details: "The biggest of the plan's four parts allocates $875 million as temporary financial help to people who have seen their paychecks cut or have lost their jobs, providing as much as $3,000 a month for six months to cover home payments and associated costs. The second-largest chunk of money, $790 million, is slated for a principal reduction program that would write down the value of an estimated 25,135 underwater mortgages.

Another piece would use $129 million to provide as much as $15,000 apiece to help homeowners get current on their mortgages, and another would take $32 million to provide moving assistance for people who can't afford to remain in their homes."

To qualify in L.A. County, a family could not earn more than $75,000 annually. Yes, that's a lot. I predict that, just as they are not doing now, the banks just won't get on board. And foreclosure help will continue to elude many homeowners.

LA Times: Housing recovery: are we there yet?

Here's some Sunday reading from today's L.A. Times: Alejandro Lazo's survey of five housing experts on what we can expect from the real estate market this year.  Not to be critical, but remember the old saying: ultimately, nobody knows anything.

From today's LAT: re-fi turns foreclosure nightmare

L.A. Times columnist David Lazarus has written an excellent article today about Lana Ashford, who attempted to re-finance her home with BofA and, through no fault of her own, ended up getting foreclosed instead.  Click here for the link, the title should work too.  I promise that you'll be even more scared to deal with the big banks after reading this.

If you've read this blog before, you'll remember my BofA refinance saga.  My husband and I tried to do a simple home refinance in January 2009.  We were immediately approved, but somehow it still inexplicably took six months to go through.

Here's my question, as a bank customer and also a Realtor who deals with short sales: why, two years into the lending crisis, haven't the banks ramped up enough to service their own loans in a timely, correct manner?  Have they just not hired enough people?  Are they stalling? What's going on?