My 2012 real estate predictions

Seeing how we’ve gotten to the last week of 2011, I figured now was a perfect time to talk about what real estate looks like next year, in 2012.  Unfortunately, it hasn’t been the greatest housing market we’ve seen.  Home values in 2011 were still low, more people are renting, and others are having a harder time obtaining credit to purchase a house.  Here are some of my predictions for the upcoming year…

1. Disappointment over missed opportunities.  I think a lot of people might be kicking themselves for not taking the time to refinance their current mortgage or purchase an investment property at a rock-bottom price.  I’m not positive as to how long rates will stay low (could be another few years), but it’s best to strike while it’s hot!  And I’m going to admit that they’re not going to get much lower than they already are.  So if you’re in the market to do either of those things, now is the time!

2. I see trouble brewing with the HARP guidelines.  HARP, again, is the Home Affordable Refinance Program that I had written about previously.  This was a chance for homeowners to be able to refinance and get a lower interest rate, even though their house isn’t worth what it once used to be.  Also, the loan has to be owned by Freddie Mac or Fannie Mae.  A lot of these lenders are not requiring appraisals, which is great for homeowners, but I see another problem.  I have a hard time believing these lenders will be okay without an appraisal because they’re going to be liable for it in the future and if the homeowner defaults down the road.

3. A continuation of low home prices.  This is largely due to the amount of foreclosures on the market that are driving down the values of the surrounding homes.  This isn’t going to change in the next year, as the economy is still struggling to rebound and many people are still unemployed and underwater on their mortgages.  Once all the distressed inventory is sold (who knows when that will be?) we’ll be starting to see a shift with home values steadily increasing.

4) Credit guidelines to remain tight.  For the reasons stated above, such as the amount of foreclosures and short sales and unemployment and a bad economy, the lenders won’t be doing anything to release the grip they have on approving people to purchase homes.  They’re struggling enough as it is with all the delinquent loans that they are being extra stringent in awarding new ones.  I don’t see that changing anytime soon.

Do you agree with my predictions?  Are there any that I haven’t mentioned that you believe will happen?  I’d love to hear your comments!  And a very Happy New Year to all my readers!

Vacant property ordinance considered in Chicago

Chicago City Council is proposing an ordinance that would help clean up those vacant properties affected by foreclosure in the city.  We’ve all driven through neighborhoods only to see boarded up homes, graffiti, broken windows, and unkept lawns.  Bank of America, Wells Fargo, PNC and JP Morgan Chase helped develop the ordinance along with the city.

What is proposed is to have the banks better maintain these properties that are awaiting foreclosure or were left vacant because the bank took ownership after a foreclosure.  They would have to take responsibility for winterizing properties, putting up metal if the plywood was removed twice, and keeping stairs to the entry secure.  If it was found that they weren’t maintaining the properties correctly according to the ordinance, they could be fined each time.

They’re hoping to make this ordinance take effect statewide by proposing it before the State legislature.  For both the State and the banks, they’re also hoping to lower the amount of time it takes a property to go through foreclosure.  Cook County is averaging about two years currently, and they’re hoping to get that down to six months tops.

According to this Chicago Tribune article, “The mayor wanted to be sure we were able to uphold the important maintenance requirements in Ald. Dowell’s ordinance, so we brought the banks to the table to work toward a solution,” said David Spielfogel, chief of policy and strategic planning for the mayor’s office. “In addition to the compromise ordinance, we are working toward a solution in Springfield that will ensure regulatory certainty for municipalities and banks.”

And if everything passes as everyone hopes, the ordinance should take effect by the end of this year.

What are your thoughts?  Good or bad?  I actually like that the banks helped to develop it, especially considering they’re the ones that would be fined if they don’t follow through.  It really holds them responsible and keeps the city from looking like an awful mess.  Leave me a comment or visit me online.

Home values not going up anytime soon

Unfortunately, the news I have isn’t good.  I mean, we all know the real estate market isn’t going to magically improve overnight.  But for those of you that thought the good news is right around the corner and that home values would start to steadily increase, I’m sorry to do this to you.

According to this USA Today article, “Already, more houses are for sale in America than people want to buy, and the roughly 1.6 million homes in the nation’s shadow inventory promise to drag down home prices for years, experts say. States like California, Florida, Illinois, Georgia, and Ohio have the largest shadow inventories, according to RealtyTrac, a firm that tracks foreclosures and delinquent properties nationwide.

“Sale prices are down across the state with none of the area being able to maintain more than a one month growth in sales prices, ” said Bob Niemi, director of the Ohio Mortgage Bankers Association.”

So this shadow inventory is going to keep home prices down for a while.  As I was flipping through TV channels yesterday morning, I caught wind of CNBC reporting the same news.  Banks had previously been taking extra long to process foreclosures because of problems they had with paperwork and their hope to keep as many homeowners in their homes as possible.  Because of that, it had held up a lot of new foreclosures from going on the market.  But that influx is what USA Today is dubbing “shadow inventory.”  And that’s going to keep prices down.

The market can’t handle all of the foreclosures and short sales on top of the current inventory.  It for sure doesn’t help sellers get the value they need/want out of the homes they’re trying to sell.  And even for buyers trying to score a great deal, it’s not clearing the inventory fast enough.  

So as I’ve stressed in the past, if you don’t need to sell, don’t.  It’s not worth it watching your home sit on the market just to try to buy something.  However, if you are looking to purchase an investment property or two, I cannot recommend a better time to buy!  I can be reached online.

Foreclosures down, backlogs up

Well, I’ve got good news and bad news.  And the bad news can even be interpreted as good news for some.  Good news: foreclosure rates across the country are at a 3-year low, according to MSN Real Estate.  Bad news: Courts are so backlogged by the foreclosure filings that it’s taking a year or more for foreclosures to be processed on some homes.  And that can be good news for those underwater on their mortgages, as they can live in their home for even 2 years in some states without being evicted and without a mortgage payment.

RealtyTrac Senior Vice President Rick Sharga says that “This is really all part of the robo-signing paperwork issue.  Almost none of this is related to a decline in distressed properties. ”  It’s just that Courts can’t keep up with all the paperwork.  And Sharga is unsure whether we’ve reached our peak of foreclosures or more filings will occur once the banks and Courts start catching up.  Even new hirings aren’t helping the banks move the process along any quicker.  And that’s also bad news for buyers interested in foreclosure or bank-owned properties.  The waiting process can still take a while for someone to review all the paperwork.

I just mentioned how some homeowners can live in homes for 2 years prior to being evicted.  In some states, like New York and New Jersey, it’s taking the bank an average of 800 days to finalize a foreclosure once the process has started.  And now the government is going to charge lenders for handling foreclosures improperly.  They’ve also passed regulation requiring 14 mortgage servicers to hire more staff and have a single point of contact for a homeowner dealing with a foreclosure or loan modification.

Nevada leads the country with the highest foreclosure rate.  1 in every 35 homes has received a foreclosure filing.  Arizona and California round out the top 3.  And, unfortunately, Illinois also is included in the top 10, along with Colorado, Idaho, Utah, Georgia, Michigan, and Florida.

And analysts say it can take years for all these foreclosed homes to clear the market brining home values up again.  But it could take even longer because of the backlogs in the courts.  Fannie Mae and Freddie Mac even said they’re going to slowly trickle foreclosures into the market instead of releasing them all at once.  While this is beneficial to home values now, it just means it will take even longer for the housing market to stabilize.

What do you think?  Should banks be allowed to control when foreclosures hit the housing market?  Please leave me a comment or visit me online.

Courts could change future of foreclosures

A big decision by a Massachusetts court last week could change the way foreclosures  are viewed in this country.  Because of a lack  of signed paperwork, the Supreme Court in Massachusetts ruled that two banks couldn’t legally foreclose on homes.

Mortgage paperwork needs to be physically signed if title can properly be transferred  from one party  to another.  In the foreclosure process, the loan can get transferred numerous times before being sold to investors.  It’s very possible (as in this case) that paperwork misses getting signed from one transfer to another.

One of the justices stated in their ruling that the party that wants to foreclose most hold the mortgage at the time of sale to actually have the authority  to foreclose on the property.  This is the first ruling by a state high court regarding banks being able to foreclose without proper paperwork saying they hold the mortgage.  Since cases were filed in many other states around the country regarding this same issue, many were waiting to hear about what Massachusetts decided first.

And now it’s possible that the plaintiffs in this case own their home free and clear.  No more mortgage payments and no issues of foreclosure.  So what does this mean?  Make sure to find out if  all paperwork is in order before leaving your home.  You will definitely want to consult with an attorney to help you with this.  Keep all paperwork received from your lender in a file, as well as information about anyone you spoke to on the phone, the conversations you had, and dates and times.  This will be a paper trail for your benefit if an issue ever arises. 

I couldn’t agree more with the Supreme Court here.  Nobody should be allowed to take possession of your home unless they truly hold the loan.  It’s true that you technically aren’t the owner of a home unless you have a zero balance on your home.  But there needs to be paperwork in place regarding a transfer of title if it ever comes to that.

More of this decision can be found here. I can be reached via my Web site.

For sharing by owner

So I was driving to an appointment this week and noticed a big sign in front of a house.  I was expecting it to read “For Sale” or “For Rent.”  As I got closer, I noticed it read “House to Share.”  I have never seen that before.  I mean, I’ve seen ads on Craigslist and other sites for people renting out rooms or tenants looking to rent one house with a few different people.  But I’ve never seen someone advertise it out front of their home.  While I haven’t seen the signs before, it seems as if house sharing is becoming a lot more popular.  Given the current economy, it’s a great way to save money.

I actually had a neighbor who invited their current neighbors to move into their home after they sold their home, which they were having trouble keeping up with the mortgage payments.  With all the foreclosures these days, people unable to keep up with payments and unable to refinance, this is a potential to save a lot of money.

In fact, there’s even national organizations that help with this.  One is the National Shared Housing Resource Center. They are the place to visit find or to help start something in your community to match people looking to share housing.  One of their board members is quoted as saying, “Whenever I talk to somebody either back east or in the midwest, I mean, we pretty much have the same kinds of issues throughout the country, where people can’t afford their housing, whether it is someone who is seeking housing or if they have a home, you know, they really are looking for somebody who can help share those costs and share those utility costs as well.”

So for those looking to save money, it’s a great way to do it.  You can split housing payments and utilities.  For those with pets and kids, it’s even a way to have someone else available to help out while the other one shares with the chores, for example.  There are some risks, of course.  If you don’t know a possible tenant (or even if you do), it’s important to do a full background check including credit report, possibly criminal background check, get references.  You want to make sure they’re going to pay you each month.  You’ll also want to have an executable contract in place, like a lease.  That way if they don’t live up to their end of the bargain, you can follow the proper procedures for eviction.  While it’s hard to do that for family or friends, it’s just as important.

I’m curious to know if you know someone sharing a home or are thinking about doing it yourself.  I can imagine that it’s becoming a lot more common, especially among family members.  Those taking in an aging relative or combining households with a sibling.  But what about you readers who have done it with complete strangers or even just acquaintances?  Please leave me a comment or contact me online to share your stories.

I can imagine that the MLS might open up a new category for just rooms available in the near future, given what the economy is doing to people’s bank accounts and the housing situation.

The next problem with the housing market

I read another fascinating article in the Chicago Tribune again this weekend.  Fascinating.  I was telling family, neighbors, and friends about it.  Fascinating.  As if the housing market isn’t in enough trouble as it is.

So the article discusses the ethics of being a homeowner in this time, during the recession, in this housing market.  Foreclosures are all over.  Short sales are overwhelming the banks.  So what’s the problem now?  Homeowners who have no trouble paying their mortgage, those who can afford to, are walking away from their homes.  They call it “strategic default.”  This is what it’s come down to.  With home values at an all-time low and days on the market going up with increasing numbers, people are sadly walking away from their homes.  They can’t sell.  They can’t rent.  What they’d get for their home if they sell is half, or a quarter, or three-quarters of what their home is actually worth and what they still owe on their mortgage.  So what do they do?

The article talks about a man who lives in Florida who has two properties, both with Bank of America.  He told them he’s going to stop making payments because he can’t sell or rent at a price that would cover his payments and he wants to move out of state.  Since the bank refuses to work with him on a modification or a refinance or adjust the terms of his loan, he’s walking away.  Again, what’s a guy to do?  He said he felt guilty at the beginning.  He’s quoted as saying, “It [the guilt] all stopped when I saw them take $90 million in executive bonuses.  They take bailout money and do nothing for the little guy. They wouldn’t do anything for me.”

I can’t agree more with this homeowner.  I’ve talked about clients who couldn’t refinance or those whose modification wouldn’t go through.  And here the banks are accepting bailout money left and right, upping their salaries, and they won’t work with clients to help them stay in their homes?

So this is going to be a huge disaster.  We already have lenders taking months to respond to buyers interested in a short sale.  They’re just going to have a whopping increase in their inventory now.  Response time will be on the rise, inventory will too, and people who do this won’t get back into the market to buy something new because their credit will be ruined from walking away.  So it’s going to be harder for people to sell or for values to get back to where they should be.

As I said, I feel for these people.  They’re in a tight spot.  But at the same time, it’s going to make the housing crisis an even bigger crisis.  How do we get out of it?  The only remedy I see is more lenders willing to work with their clients and modify existing loans.  It will keep more people in their homes and help the entire market.  Readers, what do you think?  I’d love to hear your thoughts.  Please leave me a comment or visit me online.