Negative Equity!
Date: August 9, 2011
Posted: 08/09/2011 12:00:00 AM PDT
Updated: 08/09/2011 08:23:50 AM PDT
The percentage of Bay Area homeowners who are underwater -- which means their mortgage is higher than the home's value -- edged up from a year ago, as the housing market continues to struggle to get out of its very long slump.
Some 22.8 percent of single-family houses with mortgages were in negative-equity territory during the second quarter, up from 21.1 percent a year ago, said a report released Tuesday by Zillow, a real estate information website.
"Negative equity is growing because you still have foreclosures happening so the housing values are still declining," said Svenja Gudell, senior economist for Zillow. "As home values decline, negative equity will increase."
In Alameda County, 20.2 percent of homes were underwater, up from 17.7 percent, and in Solano County, 55.4 percent of homes were underwater, up from 51.5 percent
Some areas saw improvement. In Contra Costa County, 33.3 percent of homes were underwater, down from 36.6 percent a year ago. And 54.4 percent of homes in San Joaquin were underwater, down from 55.9 percent.
In Santa Clara County, 12 percent of homes were underwater, down from 12.8 percent a year ago. San Mateo County had 13.7 percent of homes with negative equity, up from 10.7 percent.
"Negative equity is still among us. We are still surrounded by it," said a broker-realtor with Tri-City Real Estate Brokers in Fremont. "Some are in negative equity and don't need to sell. Some are in negative equity and need to sell. We're seeing only the ones that need to sell."
Before the number of underwater homes can decline, homeowners need to increase their income so they can pay down their mortgage and equity line of credit, he said. Home values also have to rise.
Bay Area home values for the second quarter fell 6.2 percent from where they were a year ago, but rose 0.8 percent from the first quarter , said the Zillow report.
"We expect a bumpy road ahead. There will be many ups and downs in home values before this is over, and we continue to expect a true bottom in 2012, at the earliest. There are still hazards in the form of a full foreclosure pipeline, high negative equity and fluctuations in demand," Zillow Chief Economist Stan Humphries said in a statement.
Underwater HOMES: Negative equity has worsened in the Bay Area, although some counties saw minor improvements. The chart lists the percent of single family houses in the region whose value was below the mortgage amount.
Region 2nd quarter 2011
Bay Area - 22.8%
Alameda County - 20.2
Contra Costa County - 33.3
San Mateo - 13.7
Santa Clara - 12
Solano County - 55.4
San Joaquin County - 54.4
Region 2nd quarter 2010
Bay Area - 21.1%
Alameda County - 17.7
Contra Costa County - 36.6
San Mateo - 10.7
Santa Clara - 12.8
Solano County - 51.5
San Joaquin County - 55.9
Source: Zillow
Buyer Beware!
Date: June 9, 2011
California - The Sacramento County District Attorney Jan Scully announced today that Carmina McGivern and Sean McGivern pled no contest to felony charges of grand theft. Carmina McGivern, 32, and her husband Sean McGivern, 31, admitted that they embezzled over $66,000 from two victims between March and August 2009.
In March 2009, the victims hired real estate agent Carmina McGivern to assist in their purchase of a residence in Elk Grove. The victims opened an escrow account for the purchase. Over the next five months, the McGiverns falsely claimed that the sale would not be approved unless the victims paid additional monies into the escrow account. The victims complied with the McGiverns’ requests and paid over $66,000 for deposit into the escrow account, but the McGiverns kept the monies for themselves. In August 2009, the McGiverns used the victims’ personal identification information without their knowledge in an unsuccessful attempt to get a
$66,000 bank loan.
Carmina McGivern and Sean McGivern each face up to two years in state prison. Sentencing is scheduled for August 9, 2011 at 8:30 am in Department 63 of the Sacramento Superior Court.
Double-Dipping Prices!
June 2, 2011
Bad news for the housing market cropped up in data released this week, indicating that home prices have double dipped, dropping to new post-Recession lows in March 2011. The disappointing figures scale back incremental gains made in the wake of the 2010 home buyer's tax credit and reinforce the probability of a long, slow recovery for the housing market.
Standard & Poor's Case-Shiller Home Price Index, a leading measure of U.S. home prices, fell 4.2 percent in the first quarter, 5.1 percent below its level this time last year. According to the report, prices are down more than 33 percent from their July 2006 peak, slumping to near mid-2002 levels.
Those figures essentially blot out nearly a decade of home price appreciation and jeopardize an already fragile economic recovery. "This month's report is marked by the confirmation of a double dip in home prices across much of the nation," said David M. Blitzer, chairman of the Index Committee at S&P Indices, in a press release. "Home prices continue on their downward spiral with no relief in sight."
Experts blame stubbornly high unemployment, a surge in foreclosures, and distressed sales for the continued slump, which has discouraged the prospective home buyers needed to soak up the excess supply of available homes.
Despite nascent signs that the economy might be on the road to recovery, the share of homeowners dipped to 66.4 percent in the first quarter of 2011, according to the U.S. Census Bureau, down from its peak of 69.2 percent in late 2004. Homeownership rates are back to 1998 levels, and with a sputtering housing market, experts say that level could dip further.
"Housing is expected to experience little more than a dead-cat bounce in the months to come," said Diane Swonk, chief economist at Chicago-based financial services firm Mesirow Financial. "We are still years, rather than months, from seeing any return to normalcy in this market."
While prices in 12 of the 20 metropolitan areas tracked by the report--including Minneapolis, Chicago, and New York--fell to new recession lows, the nation's capital provided the only bright spot, with home prices up 1.1 percent in March and 4.3 percent over the past year.
The seat of the federal government and home to numerous universities, agencies, and nonprofits, D.C. has been fairly well insulated from the housing crash, says Mark Meyerdirk, principal broker at Washington, D.C.-based real estate firm Urban Broker LLC. "People in D.C. feel very comfortable with the market and are optimistic about the economy recovering," he says. "Job growth has been great here the past 13 months, so with those promising numbers the consumer confidence here is maybe greater than in other markets."
Seattle was the only other metro area to see a monthly increase--a modest 0.1 percent uptick--but prices in the Pacific Northwest city remained 7.5 percent off levels recorded a year ago.
Industry experts have noted that declines have become more regionalized over the past year, with the greatest price drops sinking markets in the Southeast and Southwest, as well as industrial Midwestern states such as Michigan and Ohio. But while areas swamped with foreclosures continue to grapple with the excess supply of homes for sale, areas less afflicted with distressed properties have seen bidding wars for turnkey properties, Swonk says.
"When the housing bust hit, there was really nowhere to hide," Swonk says. "But as the housing market hits what some are calling a double dip, what we're seeing is there are some places to hide. You are seeing pockets like Washington now doing OK."
Although Washington may be the only metro area seeing a significant bump in home prices, many experts expect price declines to level off in the third quarter. When demand will pick up and reignite the fizzling housing market is another matter. "We feel we're about 12 to 18 months away from price stability," says Ken Shuman, head of communications at real estate information website Trulia. "The first sign of recovery would just be stability, not even price upswing."
Foreclosure Prevention Failure!
June 9, 2011
WASHINGTON, DC — The Obama administration is blaming the three largest U.S. mortgage lenders for the failures of its foreclosure-prevention program. It says they've done little to help people at risk of losing their homes. Wells Fargo, Bank of America and JPMorgan Chase & Co. have failed to help enough people permanently lower their mortgage payments so they can stay in their homes, the Treasury Department said today. The three lenders have received about $24 million from the government last month for the program.
Based on those lenders' lackluster success for the first three months of 2011, the government has removed financial incentives it had given them. They amounted to up to $1,000 per permanent loan modification. About 843,000 homeowners have dropped out of the program as of April. That's more than half of the roughly 1.6 million homeowners who have started with the program on a trial basis over the past two years. Treasury said the three lenders incorrectly determined that many people were ineligible for the program.
Another firm, Ocwen Loan Servcing, was also cited as needing substantial improvement. But it was not subjected to the same financial penalties as the other three companies.
Six other firms - American Home Mortgage Servicing, CitiMortgage, GMAC Mortgage, Litton Loan Servicing, OneWest Bank and Select Portfolio Servicing - require moderate improvement. But Treasury said they will not lose their cash incentives.
The program was launched in 2009 and was intended to help those at risk of foreclosure by lowering their monthly payments. Borrowers start with lower payments on a trial basis. But the program has struggled to convert them into permanent loan modifications. Homeowners say the program has been a bureaucratic mess. Many say they were disqualified after banks lost their documents and failed to return their phone calls. Banks blame homeowners for failing to submit needed paperwork.
Those homeowners who are accepted into the program receive interest rates as low as 2 percent for five years. They can repay their loans over a longer period. The median savings for those who remain in the program is about $526 per month.
The Treasury Department said that when the program began, most of the lenders did not have the needed staff or resources to help the many homeowners seeking lower mortgage payments.
Foreclosure Investments!
While the demand for foreclosures continues to grow, real estate investors face a host of challenges when it comes to closing the deal on distressed properties.
(J.P. Morgan Chase banking unit foreclosed on a home [pictured left] near Rexburg, Idaho, that is infested with garter snakes.) Two families have fled the house in scenes reminiscent of horror-film classics. One turned to a local TV station in 2006 to document the infestation, complaining of not being able to sleep at night. The video is still available on YouTube and is doing absolutely nothing for sales. The backlog of foreclosure inventory currently in the system coupled with the two to three million more expected to flood the market in the coming months is the primary contributing factor to depressed home prices. The psychological effects of foreclosures have also taken their toll on would-be buyers as they contemplate purchasing a home in this market.
"Thirty percent of people have known someone who's either gone into foreclosure, was forced to do a short sale, or has applied for a loan modification," Shuman says. "When you take a look around the room and 3 out of 10 people have done that, you tend to think twice about 'Do I want to be a statistic?'"
With home prices at historic lows and distressed properties selling at discounts of 35 percent or more in some parts of the country, scooping up bank-owned bargains has become increasingly lucrative for real estate investors. "If you have some money, the smart thing is to buy [foreclosures] as investments," says Jim Gillespie, CEO of Coldwell Banker Real Estate. "Once they hit the market, [they] sell pretty quickly because they're priced so strong."
Buying a foreclosure can be a long and arduous process, according to Stephanie and Jay Herbert, who waited three months for the keys to their foreclosure purchase. After the bank accepted their offer, the Herberts were told the bank didn't actually own the property and therefore couldn't sell the house. "We had sold our stock and had this chunk of money because we had to pay 20 percent down," she says. "Then, all of the sudden we were told the bank couldn't get the title because they didn't own the property. It was really disappointing." The Herberts learned this after paying for inspections and spending hours preparing to renovate the property. Eventually, the Herberts got the house, but not before plenty of back-and-forth between the bank and real estate agency. "It was just a big mess. Buying the foreclosure was the biggest pain," Herbert says. "It was a great price, but not a good experience."
Buyers can also run into problems when it comes to financing foreclosures. Qualifying for a loan is tough in this market, but it can be even harder if the mortgage is for a distressed property because lenders have higher standards for the homes they finance these days. "Your credentials need to be much stronger," says Keith Gumbinger, vice president of mortgage information website HSH.com. "Expect to put down 25 or 30 percent on the property and expect to pay higher fees to get your mortgage."
Snake Foreclosure!
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