Charlotte Real Estate, Foreclosures, Short Sales

The U.S. Senate has approved an amendment to the economic stimulus package that would provide a tax credit of up to $15,000 for homebuyers who purchase a primary residence in the upcoming year. 

Senate added to the $900 billion stimulus bill on Wednesday a home purchase tax credit of $15,000, or 10% of the purchase price.   Also on tap is a proposal being pushed by Senate Republicans for a federalized 4% interest rate on 30-year fixed mortgages.   They believe this will spur home sales and help homebuyers, homesellers, builders and all alike. 

A Hike in FHA and VA Loan Limits?
The stimulus bill that passed included provisions to increase limits on loans eligible for financing from government-backed mortgage entities as high as $729,750 in the nation's most expensive housing markets.
Will it Work?
Some economist argue that throwing the "kitchen sink" in incentives to buyers will encourage builders to start doing what they love to do, build.  Therefore increasing our already oversupply of inventory on the market. 

What I believe
I believe that believing in our government and having a bit of consumer trust will spur home sales. It's like having an addict as a friend or family member. You want to invite them back into your life, but they not only need to talk the talk they have to walk the walk. Even though the country seemed to have had confidence that change was coming, it did not take away the continued job loss, home sales decline and lack of a plan to help the masses. This administration is doing a lot to help our economy, but it takes a lot to help our ecomony. Home prices are still TOO high in most housing markets for those who have experienced job loss, pay decreases and higher living expenses to afford a home and all that comes with maintaining it. Many foreclosures enter the market at fair market value within 90-120 day marketing modules instead of "quick sale pricing". Why? Why not? If there is an offer generated within 1-90 days to help the investor recapture some of the possible loss of the foreclosure, why not take that risk. Especially if the property is located in a stable to mildly depreciating market area. We need to push short sales more on Capitol Hill. It creates a better market for homes to be priced as they should, helps the buyer afford what he or she can, and allows the homeowner to have piece of mind for an upside down mortgage if they can not qualify for a loan modification.

Treasury Secretary Timothy Geithner's Public-Private Investment Program, or PPIP will provide up to $1 trillion in financing and guarantees to private investors to kick-start the frozen credit markets.  The Public-Private Investment Program will purchase real-estate related loans from banks and securities from the broader markets. Banks will have the ability to sell pools of loans to dedicated funds, and investors will compete to have the ability to participate in those funds and take advantage of the financing provided by the government.

By offering leverages and guarantees, the Treasury will start lending $75 to $100 billion to encourage investors to buy non-performing loans to help frozen credit markets.  Here's the breakdown.  To help private investors buy pools of non-performing loans,  The FDIC will insure the majority of the purchase price of the deal, the Treasury Department will finance 50% and investors will be responsible for for 7%. 

A key part of that regulatory framework will give the government new resolution authority to take over troubled institutions that would pose a threat to the entire financial system if they failed.   Under the new powers being sought by the administration, the treasury secretary could only seize a firm with the agreement of the president and the Federal Reserve.

Mark Zandi, an economist at Moody's Economy.com, estimated that the government will need an additional $400 billion to adequately deal with the toxic asset problem, seen by many analysts as key to finally resolving the banking crisis.  Zandi said the administration has no choice but to rely heavily on government resources because of the urgency of getting soured real estate loans and troubled asset-backed securities off the books of banks so that they can resume more normal lending to consumers and businesses.
We will wait and see how promising the PPIP will be in jump starting frozen credit markets and helping the economy out of recession.  Positives are expected overall for our real estate market along with loan modifications and an increase in approved short sales from lenders.

Has the Housing Market Bottomed?

The housing market has possibly bottomed in many market areas of the country and we may see a good 2009 after all.  The National Association of Realtors said Monday that sales of existing homes grew 5.1 percent to an annual rate of 4.72 million last month, from 4.49 million units in January. It was the largest sales jump since July 2003.  Buyers are getting everything thrown at them including the kitchen sink to purchase homes and now they are coming out of their safe havens and doing so.  Between the 8,000 no-pay back tax credit, foreclosures, short sales, builder incentives and deep discounts by both builders and homeowners, what are buyers waiting on?  Not to mention historically low, low interest rates.  The Federal Reserve last week moved to reduce already low rates by printing $1.2 trillion and pumping it into the economy through the purchases of mortgage-backed securities and Treasury debt.

Lawrence Yun, NAR chief economist, said first-time buyers accounted for half of all home sales last month, with activity concentrated in lower price ranges. "Because entry level buyers are shopping for bargains, distressed sales accounted for 40 to 45 percent of transactions in February," he said. "Our analysis shows that distressed homes typically are selling for 20 percent less than the normal market price, and this naturally is drawing down the overall median price."

Regional Breakdown
Yun says a recovery in the West is much stronger than expected. "Strong sales gains in the West are led by California, where the median listing price is beginning to rise for the first time in three years," he says.

Here's how existing-home sales fared across the country:
Northeast: jumped 15.6 percent to an annual pace of 740,000 in February, but 14.9 percent below February 2008. Median price: $251,200, down 4.8 percent from a year ago.

Midwest: increased 1 percent in February to a pace of 1.04 million but 14 percent lower than a year ago. Median price: $131,000, which is 7.8 percent below February 2008.

South: rose 6.1 percent to an annual pace of 1.74 million in February but 11.2 percent below February 2008. Median price: $146,700, down 10 percent from a year ago.

West: increased 2.6 percent to an annual rate of 1.2 million in February and remain 30.4 percent higher than a year ago. Median price: $204,600, which is 30.3 percent below February 2008.

Source: The National Association of REALTORS

Individual investors can now bid on notes on a new website, BigBidder.com.  Newport Beach, California-based BigBidder.com throws out the traditional business-to-business model of buying and selling mortgage debt notes.  BigBidder.com offers open access to qualified investors to purchase individual or pools of notes secured by real estate.  Investors can bid on mortgages, deeds of trust, land contracts throughout the county.

Buying and selling notes have been a way for investors and institutional firms to make money for decades.  Offering online auction of notes is a move towards an innovative way for many to profit and help in rebuilding the secondary mortgage market.  The creators of BigBidder.com, the LFC Group of Companies, have spent decades in the commercial and residential online real estate auction businesses.  Paul Lyons, SVP at LFC, explained, "For years institutional firms and savvy investors have bought and sold notes for profit and to maintain cash liquidity. Were breaking away from the traditional paradigm with this powerful tool allowing individual qualified investors and small investment consortiums to diversify their portfolios by investing in notes via a fair and transparent retail process."

John Kohler, managing director at 12th Street Capital, a secondary market investment firm specializing in mortgage-backed securities (MBS), said, "BigBidder.com fills a void in the market for notes. The BigBidder.com business model is unique in the way it delivers price discovery to the individual investor, which is key to getting their participation. And I think institutional sellers will see BigBidder.com as an efficient way to reach that broader retail audience and improve liquidity in their product."

"This past month we participated in the Mortgage Bankers National Servicing show, where most of the leading bank servicers were in attendance. Here is some insight through the first two months of 2009.

A National Perspective: Distressed Properties
A study of the top 26 foreclosure markets revealed that foreclosure inventories are equal to 77 percent of MLS listings. In "bubble markets" with volatile prices, foreclosure inventories represent up to 89% of listings. Looking at the same 26 markets its estimated that foreclosure inventories alone represent between a 14.4 and 34.7-month supply of housing. The National Association of Realtors estimates that foreclosure and short sales represented 45 percent of existing-home transactions during the fourth quarter. As a result of the current economic climate, all indications are that its going to take a long time for this discounted inventory to clear, even with foreclosures representing a growing percentage of transactions.
Scoring Foreclosure Property Deals: Short sales are a new trend

As foreclosure inventory continues to grow, banks are becoming more and more interested in pursuing short sales. The largest banks and thrifts are substantially increasing their short sale activity. From Q3 2008 to Q4 2008 short sale transactions were up 61 percent. We are seeing short-sale property discounts ranging from 10 percent to 20 percent. Clearly, lenders want to recover as much of the mortgage amount as possible, but selling at a discount in this range typically still saves them money versus letting the home fall into foreclosure.
Insights from the Mortgage Bankers National Servicing Show

It was clear at the show that most servicers are expecting a significant influx of REOs in Q2 and Q3 as moratoriums begin to lift. With the large inventory levels, asset managers are applauding REO agents that are using any differentiating approach toward actively marketing their REO listings. We are seeing that loan modifications programs are rapidly expanding. Banks are proactively looking at their default portfolios and segregating loans into those that qualify for a loan modification, those that are likely candidates for short sale and those where foreclosure appears to be the only course of action for recovery. With this new shift, asset managers are expanding their business by getting into the business of processing short sales. We expect that this will bring new efficiency to the short sale process and likely a reduction in the typical length of time it takes to close these transactions."