Housing News: 11 Trends from 2011

The National Association of Realtors® surveys homebuyers and sellers each year to uncover housing trends and monitor changes taking place in the industry. This year's report highlights a number of trends that haven't been seen in years.

Here are just 11 highlights from the 2011 report.

1. In 2011, 37% of homebuyers were first-time buyers - which was down from 50% in 2010.
2. Last year, 88% of homebuyers used the Internet to search for a home. That number was down slightly from a high of 90% in 2009.
3. The typical homebuyer searched for 12 weeks and viewed 12 homes.
4. The number of buyers who purchased their home through a real estate agent or broker climbed to 89% - a share that has steadily increased from 69% in 2001.
5. Nearly 1 out of 4 buyers said the application and approval process was "somewhat more difficult" than expected…and 16% reported it was "much more difficult" than expected.
6. About half of home sellers traded up to a larger and more expensive home…and 60% traded up to a new home.
7. The top 3 factors influencing neighborhood choice were: the quality of the neighborhood, the convenience to job, and the overall affordability of homes.
8. The typical seller lived in their home for 9 years. That number has increased from 6 years in 2007.
9. Although 61% of sellers said they reduced their asking price at least once, the average home sold for 95% of the listing price.
10. Only 10% of sellers sold their homes without the assistance of a real estate agent. Of those people, 40% knew the buyer prior to the sale.
11. The typical "for sale by owner" home sold for $150,000 compared to $215,000 for the average agent-assisted home sale.

Palm Springs Market Report

Mortgage rates: Week ending 1/19/2012

30-yr. fixed: 3.88% fees/points: 0.8%

15-yr. fixed: 3.17 fees/points: 0.8%

1-yr. adjustable: 2.74% Fees/points: 0.6%

(Source: Freddie Mac)

Calif. house price drop 7th biggest in U.S.

California house prices had the seventh-biggest price drop among U.S. states in November, falling 5.9% from year-ago levels, according to Santa Ana-based data firm CoreLogic.

When distressed houses — bank-owned properties and homes selling for less than their mortgages — are removed from the mix, prices were down 0.9% from the previous November.

On the one hand, California no longer ranks among the top five states with the biggest price drops. But six years into the housing market crash, it’s still in the top 10.

By comparison, the national average price drop was 4.3% including all single-family houses in the nation, and 0.6% when distressed housing was excluded.

Said Mark Fleming, CoreLogic’s chief economist:

“With one month of data left to report, it appears that the healthy, non-distressed market will be very modestly down in 2011. Distressed sales continue to put downward pressure on prices, and is a factor that must be addressed in 2012 for a housing recovery to become a reality.”

In addition, CoreLogic’s latest Home Price Index (HPI) shows …
In Orange County, single-family house prices fell 4.9% from November 2010. That compares to a 4.7% decrease year-over-year in October.
Excluding distressed houses, O.C.’s prices werer down 2.5% (compared to 3.2% in October).
Nationwide, home prices declined 1.4% from October to November, the fourth consecutive month-to-month decrease.
U.S. home prices were 32.8% below the peak of the housing bubble in April 2006; non-distressed house prices were down 23.1% from the market peak.
Nevada had the nation’s biggest price drops in November: Down 11.2% for all houses and down 8.8% excluding distressed properties.
Vermont had the nation’s biggest price gain: Up 4.3% including distressed housing and up 1.5% without it.
Of the 50 states, prices were up in just nine and in Washington, D.C.; they were down in 38 states and unchanged in three.
Of the 100 biggest metro areas, 77 showed year-over-year price declines.
Among the biggest metro areas, Chicago had the biggest price drop: Down 10.5% and donw 1.9% excluding distressed houses.
New York City and environs had the biggest gain: Up 1.3% and up 1.9% excluding distressed houses.
Prices were down 5.7% in Los Angeles County and in the Inland Empire.

Palm Springs Area Foreclosures Drop 13%

From our local newspaper, The Desert Sun:

Foreclosures fell 13 percent across the Coachella Valley in December compared to the same month a year ago, a report shows.

There were 984 mortgage default notices, bank repossessions and foreclosure auctions filed valley-wide last month, compared to 1,123 in November, Irvine-based RealtyTrac reported.

The decrease comes after a 5.7 percent increase in November that ended seven months of double-digit declines.

The December numbers would show an even larger decline of 22 percent if Thermal had not posted a 94.7 percent increase in foreclosure activity. Foreclosures there jumped from 19 to 37 during the month, RealtyTrac reported.

Bret Cohn, a mortgage consultant and senior vice president of Franklin Loan Center in Palm Desert, said the drop in foreclosure activity is partly because of a moratorium that was in place during this past holiday season.

Several large mortgage lenders, along with Fannie Mae and Freddie Mac, announced last year they would not foreclose on delinquent borrowers during the holidays from Dec. 19 to Jan. 2, although legal and administrative proceedings for evictions could continue.

“There is also a lot of pressure coming from the White House to try to work with delinquent homeowners to either work out the loans through modification or allow homeowners to ‘short sell' their homes, rather than go through foreclosure,” Cohn said.

Cohn, other analysts and mortgage experts expect to see an increase in foreclosure activity in the months ahead, however, as long-delayed foreclosure action begins to kick back into gear.

Brandon Moore, RealtyTrac CEO, said the lack of clarity regarding many of the documentation and legal issues that have plagued the foreclosure activity “means we are continuing to see a highly dysfunctional foreclosure process” that is inefficiently dealing with the delinquent mortgages.

At the same time, the office of the U.S. Comptroller of the Currency noted in a report that most applicants who meet the income and other qualifications for loan modifications on their homes already have received assistance.

The OCC reported that the number of loans modified annually rose from 421,322 in 2008 to 939,226 in 2010, then fell to 310,018 through the third quarter of 2011.

RealtyTrac reported about 1.9 million U.S. homes were hit with default notices, foreclosures and other actions in 2011. That was down from 2.9 million in 2010.

About 5.16 percent of homes in the Riverside-San Bernardino-Ontario region had at least one foreclosure filing — the fifth-highest rate of 18 in the most recent national report.

It took an average of 348 days to complete the foreclosure process nationwide, RealtyTrac reported, up from 336 days in the third quarter and up from 305 days in the fourth quarter of 2010.

In California, 3.2 percent of homes logged a foreclosure filing in 2011, down from 4.1 percent in 2010.

Increase in short sales give market a little breathing room

Short sales up, foreclosures down. That's because in many cases a short sale may be the lesser of two evils for banks and homeowners versus a foreclosure.

It's a tarnished silver lining for people at risk of losing their houses and homeowners in neighborhoods blighted by bank-owned properties, but the robosigning scandal that slowed the foreclosure process to a crawl appears to have increased lender interest in short sales.

"Foreclosure sales are pretty devastating," said Faith Schwartz, executive director of Hope Now, a resource for homeowners facing foreclosure. "We'd much prefer a modification, but if [homeowners] don't quality, then the next best alternative is deed-in-lieu or short sales."

Short sales, in which the lender agrees to let the owner sell the home for less than the amount owed on the mortgage, and foreclosures both climbed in 2010, but while short sales rose by 26,000 this year, the number of foreclosures fell by 255,000, according to Hope Now. Short sales, along with deed-in-lieu of foreclosure deals in which the lender takes the deed essentially as payment for the mortgage, still upend families, torch credit ratings and hurt neighboring property values, but they're far less toxic than foreclosures.

Short sales are better for homeowners. They can stay in their homes, and the quicker process means they can begin rebuilding their credit sooner. Credit scoring firm Fair Isaac Co., which developed the FICO score, says foreclosures and short sales slash the same number of points from a homeowner's credit score. Homeowners with short sales may be able to obtain a loan sooner than foreclosed homeowners, though, which can improve their credit.

In some states, mortgage lenders can pursue a delinquency judgement against homeowners for the difference between the amount due on the mortgage and the purchase price at a foreclosure auction. A delinquent homeowner engaging in a short sale has an opportunity to negotiate away the bank's right to sue for that judgement.

The biggest plus for banks is that they stand to make more from a short sale than a foreclosure. According to foreclosure specialists RealtyTrac.com, the average price of a foreclosed home in the second quarter of 2011 was $164,217, while the average price of a short sale was $192,129.

Besides yielding less, foreclosures also cost lenders more in legal and administrative resources. "The incentives against foreclosing are even larger now," Karen Dynan, co-director of the Economic Studies program at the Brookings Institution, said via email. "Servicers are facing enormous staffing constraints because they are trying to deal with so many distressed properties, so it is probably even harder now to find the staff to do the paperwork for the foreclosure."

Lenders are also spending more on due diligence, she said. "Servicers and lenders are being heavily scrutinized right now so they probably are more worried than ever about making a mistake in a foreclosure that could subject them to legal liability in the future."

Neighborhoods also benefit from short sales rather than foreclosures. "Short sales typically sell at less of a discount than foreclosure sales do," Jed Kolko, chief economist at real estate website Trulia.com, said via email. "Also, foreclosed homes often sit vacant while short sales are re-occupied more quickly. For both these reasons, short sales tend to depress neighboring property values less than foreclosures do."

Another issue that plagues foreclosures is vandalism, either from opportunistic criminals preying on vacant homes or from disgruntled homeowners. "It's often not a friendly process so you frequently have cases where people deliberately vandalize homes," Dean Baker, co-director of the Center for Economic and Policy Research, said.

Some economists worry that the drop in foreclosures is less an indication of lenders' willingness to compromise and more a function of a huge backlog of foreclosures that haven't been processed. "Foreclosures are going to be a drag on the market for along period of time," Baker said. Until these distressed homes are resold and assimilated back into the market, real estate prices can't stabilize.

Baker added, though, that lenders facing years' worth of legal wrangling and costs to execute a foreclosure may be more willing to accept a buyer's offer in a short sale.

The other caveat is that short sales aren't an option for all distressed homeowners. Short sales are contingent on the ability of sometimes multiple lenders to agree on a price that a buyer is also willing to pay. For people who took out multiple mortgages or have other liens, this presents a challenge. "It's just a little more complicated when you have more parties involved," Schwartz said.

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