Tuesday, July 10, 2012


Don't believe it?  Well, believe these 3 headlines from the last 3 weeks of the Orange County Register from April 22 through May 6 (in order of oldest to most recent): 1) FORCLOSURE SALES DOWN SHARPLY  2) IS THE FORECLOSURE CRISIS OVER?  3) HOMEBUYERS SPRINGING TO LIFE THIS SEASON.  There has in fact been a huge shift in Southern California real estate in the last year.  According to statistics gathered by Foreclosure Radar and other sources, California property owners are losing homes to foreclosure at half the pace of 2011.  Part of the reason for the drop is that banks have finally figured out that short sales save them money.  When a property short sells, it's better for everyone.  The homeowner doesn't take such a big hit to his/her credit, they save a little dignity, and it will allow them to re-enter the housing market more quickly down the road.  For banks, the advantage is significant; they generally don't have to rehab the property, they don't have to put utilities in their name and maintain the property while it's being held for sale and they don't have a nonperforming asset on their ledger.  If you don't know what you're looking for when you study the numbers, you might miss it.  The casual glance at the numbers appears drastic.  The month of March saw 86,487 trustee sales scheduled.  That seems like a drastic number.  But 80% of them were postponed, many specifically to allow a short sale to proceed.  So far this spring,  Notices of Default are down 19.7%, foreclosures going back to the bank are down 62% and foreclosure sales to a third party are down 21%.  So, is the foreclosure crisis over?  There may be different interpretations of the data to come to that conclusion, but suffice it to say, foreclosures have definitely peaked.  The final headline regarding homebuyers begs the question, who is buying all these distressed listings?  The answer to that question is, well, everyone.  As the number of foreclosures drop, investor purchases will rise, because the investors come to the market as close to the bottom as they can reasonably figure.  The month of March, for example, Foreclosure Radar reported that 46% of all trustee sales were purchased by investors instead of them going back to the bank to become an REO.  A year ago the significant number was 71%, and that was the number of homes NOT being purchased, but going back to the banks.  Bank owned properties are down 20%, and only 44.7% of listed properties were distressed for March, which means over half the properties listed for sale were equity sellers.


It's true!  Anything under $700,000 is flying off the shelves.  Agents can't keep enough properties listed to meet the demand.  Home sales for the 22 business days ending April 17th (all of April is not yet available), showed total resale houses sold at 1,916 for Orange County, up 16.1% from 2011.  Condominium volume was up nearly 12%.  One zip code in the city of Orange was up 37%, one in San Clemente up 83%.  With interest rates hovering around 4% or even a tad lower, and housing at its bottom for likely this century, it's easy to see why the buyers are out for a spring buying fling!


You may have seen in the paper or a blog that the job numbers were a disappointment in early May for Wall Street.  But not the same for Orange County.  Unemployment actually ticked higher as people re-entered the job market for the first time in months.  Local employers added 13,100 to their payrolls in March, up from 7,900 in February.  But it's also the type of jobs.  These jobs are manufacturing, engineering, high tech, real estate (specifically loan processors, underwriters, etc), and health care, to mention a few.  According to Esmael Adibi, an economist at Chapman University, "It's a very good report in terms of jobs, and the job rate is accelerating.


The KCM Blog had an excellent report of some long held principles of lending, and they deserve to be mentioned here.  Please take this information to heart if you are in the process of getting a home loan for whatever reason.  Because if you don't, your loan may be denied.  Here they are... 1) Don't increase your cash reserves beyond what you stated and proved.  Money needs to be seasoned and traced.  A sudden deposit or gift money that was unannounced could have consequences.  2) Avoid large purchases: your debt ratios have been figured to the penny.  A large purchase could bring them out of whack and cause you to be denied.  3) Don't co-sign for anyone else.  Even though you are just a co-signer, that debt must be figured into your ratios also.  4) Don't change banks.  Your verification was done with your bank, don't make the loan processor start over, it will delay your loan.  5) Don't apply for major credit.  Every time you apply, your fico score changes.  6) Don't close accounts; the lender will want to know where you're going, as in leaving town?  Changing that doesn't bode well.


CNN Money sees this year as THE pivotal year in the downturned market, the year where it starts to slowly turn around.  Daren Blumquist, the vice president of Realty Trac voiced his opinion saying, "We believe 2012 could be a record year for short sales.  What states are the highest for short sales?  In the over 20% category you will find, California, Nevada, Arizona, Colorado, and Georgia.  Expect these states to lead the way out, by processing homes for sale that in previous years would have languished in various stages of default, bogging down banks, and the market.  Finally, the National Association of Realtors says sales overall will be 12.8% higher than a year ago, setting the stage for more stabilization in 2013 and 2014, with appreciation being predicted at 3.2% for 2015.  Could it happen?  What do you think?  Time will tell, but if history tells us anything at all, it's that California appreciates.   

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