People who watch housing prices have predicted for months that another deluge of foreclosed homes would soon hit the market - once again crushing Sacramento-area property values.
But the flood of bank repos hasn't materialized. And now, a leading California foreclosure analyst says it probably won't.
"From the things I'm seeing, there's not going to be a wave any time soon," said Sean O'Toole, president of ForeclosureRadar, a Contra Costa County firm that tracks mortgage defaults and foreclosures.
Despite a growing number of loan defaults and delinquencies, O'Toole said banks are now selling more homes than they're repossessing - and political pressure on them to work with homeowners is slowing foreclosure rates. Other market watchers also see banks slowly dribbling out their supply of repossessed homes.
"From all appearances, it does look like they're managing it better," said Charlene Singley, president of the Sacramento Association of Realtors.
If the supply of homes for sale remains in balance with demand, the danger of another sharp downturn in prices is lessened, at least in the short run, O'Toole and others said Thursday.
The prospect of another wave of new foreclosures has long threatened to destabilize a capital-area market precariously balanced by massive repo sell-offs, curtailment of new-home production and buyers enticed by lower prices, low interest rates and tax credits.
Even as disaster scenarios remain easy to imagine, the number of area for-sale signs is now at an encouraging 52-month low.
Still, the downside to this relative steadiness in the near term, O'Toole acknowledged, may be that it will take longer to work through the mortgage crisis and recover.
On Thursday, La Jolla researcher MDA DataQuick offered fresh evidence of the market's tenuous balance.
Regional home sales in September ticked up slightly from August, with 3,454 new and existing homes changing hands in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. Yet September marked a fourth straight month in which sales fell below the same time last year.
That's because recent sales have been unable to match last year's sharp rise as banks unloaded thousands of repos, a phenomenon that also put downward pressure on area home values. O'Toole said banks have cut their statewide repo inventory by 41 percent in the past year.
Now that the repo sales pace has slowed in Sacramento County - from 70 percent of sales in February to 53 percent in September - median sales prices have quickly stabilized.
DataQuick reported a September median price of $176,000 in Sacramento County. Median is that point where half the homes cost more and half less. That was down from a 2009 high of $180,000 in August, but still well above February's housing bust low of $160,000.
Fewer repo listings this year brought another phenomenon not seen since the boom: bidding wars. The phenomenon so frustrated state employee Lauri Lathrop that she finally bought a new house in Elk Grove in September.
"I was putting in offers $15,000 above the asking price, and I was getting outbid," she said Thursday. "I saw this new house and nobody could outbid me. It was like it was mine," she said.
Lathrop obtained a favorable interest rate and an $8,000 federal tax credit for first-time buyers - though she missed the window for a $10,000 state tax credit for buyers of new homes.
Such perks combined with affordability to prod more buyers off the fence this year. Sales of new and existing homes combined from January through September this year total 30,231, beating 29,751 during the same period in 2008 and 26,777 from January through September 2007.
As a result, the number of for-sale signs in El Dorado, Placer, Sacramento and Yolo counties has fallen to May 2005 lows, according to Sacramento researcher TrendGraphix.
The affiliate of Lyon Real Estate counted 6,129 listings in the four counties at the end of September. The numbers have fallen for 25 straight months since peaking at 16,262 in August 2007.
TrendGraphix said 13.4 percent of current listings are bank repos and 27 percent are short sales, in which owners hope lenders will accept a sales price below what they owe. That means 40 percent are so-called "distress sales."
That's scary, but real estate agents like Singley and Carey Covey of Cook Real Estate maintain there is an ample supply of buyers. And sales statistics from the Sacramento Association of Realtors show that banks are faster to approve short sales now than months ago.
As the repo share of the sales mix has continued to decline, short sales rose to almost 20 percent of sales in September in Sacramento County and the city of West Sacramento, SAR reported.
Covey, who specializes in selling bank-owned homes, said he believes the supply of repos will remain steady. But he expects no trouble selling them at such a pace.
"As of right now, we're still short on supply, and there's still a lot of demand," he said.
By Jim Wasserman
<!--& /mi/pubsys/story/bug, format=>q{ [/mi/pubsys/story/bug] } &-->
Published: Friday, Oct. 16, 2009 - 12:00 am | Page 1A
Last Modified: Monday, Oct. 19, 2009 - 3:14 pm
Doug's Take: Well, anyone who is involved with the real estate market in the Sacramento area would say a loud "Duh" after reading the title. Over the past 6 months it's been new buyer, after new buyer that is also figuring this out first hand. One major factor that is showing the market has stabilized and that inventory is extremely low, the number of "regular" sales and flips have increased over the last few months. Two years ago we had way too much inventory, now we have too little. i think by some point next year we will reach a more equilibrium in terms of supply and demand. I hope. :)
clear skies,
doug
Some encouraging news on the extension of the $8000 tax credit...while it is not a done deal (as it still must be reconciled between the House and Senate and then voted on for final approval), it's looking good. And it's not only looking good for the extension, but there are some additional enhancements to the credit in the works as well. Yesterday, the Senate reached an agreement to extend the $8000 tax credit for first-time home buyers. They also added a $6,500 tax credit for other primary home purchasers, meaning not just limited to first time home buyers. They also raised the qualifying income limits in a very meaningful way - singles were increased from $75,000 to $125,000, and joint taxpayers from $150,000 to $250,000. Buyers must have executed purchase agreements in hand by April 30th, and then will have until June 30th to close. More details are likely to come, and changes could be made as reconciliation and voting takes place.
Proposed Plan Would Give Repeat Buyers Reduced Tax Credit
STEPHEN OHLEMACHER, Associated Press Writer
October 28, 2009
Senators agreed Wednesday to extend a popular tax credit for first-time homebuyers and to offer a reduced credit to some repeat buyers.
The tax credit provides up to $8,000 to first-time homebuyers but is set to expire at the end of November. The Commerce Department said Wednesday that new homes sales fell 3.6 percent in September, and some industry representatives blamed uncertainty about the tax credit.
Senators agreed to extend the existing tax credit for first-time homebuyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev.
The tax credits would be available to homebuyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, according to a summary of the legislation being circulated among lawmakers.
Sen. Chris Dodd, D-Conn., has been negotiating for several weeks with Sen. Johnny Isakson, R-Ga., to craft an extended tax credit for homebuyers that would pass the Senate.
Lawmakers didn't release a cost estimate for extending the tax credit, though similar proposals were projected to cost about $10 billion.
Industry representatives said uncertainty about the tax credit is hurting new home sales. September's decline was the first since March.
It takes 45 days to 60 days to close on a house, making it unlikely a sale made today would be consummated by the end of November, said Lucien Salvant, spokesman for the National Association of Realtors.
"Buyers right now have an incentive to hold off, not knowing whether the credit will be extended," Salvant said.
About 1.4 million first-time home buyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.
Doug's Take: The House will still need to approve this bill before it can go into law. i'll keep you updated but it sure sounds like we are getting close to an extension of the tax credit and it might have some sort of credit for non-first time buyers as well.
clear skies,
doug
By Jeanne Sahadi, CNNMoney.com senior writer. October 14, 2009
Some want to expand the tax credit for homebuyers. Supporters say it could stem price declines. Critics say it would just be a costly, temporary fix.
Congress is considering proposals to greatly expand a soon-to-expire $8,000 tax credit for first-time homebuyers -- potentially applying it to all but the wealthiest homebuyers.
Supporters say doing so would further boost home sales, stabilize housing prices and generate jobs. Opponents say extending and expanding the credit would be a waste of money and only temporarily stave off further price declines.
The credit now can be claimed by anyone buying a home who has not owned one for three years and who closes the deal by Nov. 30.
Beyond extending that deadline, some lawmakers want to make the credit available to all homebuyers who meet income eligibility requirements. And some want to increase the amount of the credit from $8,000 to $15,000.
Currently the first-time home buyer credit is available in full to those buying their primary residence who make $75,000 or less ($150,000 for joint filers). A partial credit is available to those making between $75,000 and $95,000 ($150,000 to $170,000 for joint filers).
The case for expanding the credit
Through mid-September, 1.4 million tax returns had qualified for the credit, according to the IRS.
Some portion of those returns, which the IRS couldn't specify, represents buyers who took advantage of an earlier version of the tax credit, which was only worth $7,500 and has to be repaid over time.
By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors.
Mark Zandi, chief economist of MoodysEconomy.com, favors extending the current credit until June 1, 2010, and making it available to all home buyers regardless of income or at least to everyone except those at the highest end of the income scale. He estimates the cost of doing so wouldn't exceed $30 billion over 10 years.
Zandi's reasoning: Foreclosures are expected to rise next year because of rising unemployment, and that will drag home prices down further. Extending and expanding the credit will help mute that decline. And by June, there's a chance the job market will have stabilized.
"The most fundamental argument for the credit is that nothing works in the economy if housing is falling -- it hurts household wealth and credit becomes tight," Zandi said. "[The credit] is a good insurance policy. It's vital to stem the housing price declines."
To kick start economic activity, Zandi believes lawmakers should set aside an amount of money for an extended credit and tell potential home buyers "first come first served."
The National Association of Home Builders would like the credit extended for all of 2010.
"We estimate that this would increase home purchases by 383,000 in the next year and help mitigate the foreclosure crisis by whittling down inventory," NAHB Chairman Joe Robson said in a statement. "This stimulus alone would create nearly 350,000 jobs over the coming year, which is exactly what the economy needs right now."
A study funded by the industry-supported Fix Housing First Coalition found that the current credit helped stimulate demand for homes at the lower end of the price spectrum.
"An expansion of the tax credit would spur an increase similar to what occurred in the lower end of the market, by motivating buyers in the 'trade-up market' to purchase a higher priced primary home," said Kenneth Rosen in testimony before Congress. Rosen runs the consulting group that conducted the study and is chairman of the Fisher Center for Real Estate and Urban Economics at the University of California in Berkeley.
The case for letting the credit expire
Opponents of extending and expanding the credit worry that such moves offer poor bang for the buck and won't stem housing declines.
"Everything spent on this program will ultimately have to be paid for later through higher, economically harmful taxes," Ted Gayer, co-director of economic studies at the Brookings Institution, wrote in a Brookings blog.
Assuming there are 5.5 million home sales in 2010, Gayer said, expanding the credit to all homeowners "is poorly targeted because it would give a credit to 5.5 million homebuyers who would have bought a home anyway."
The current credit was estimated to cost federal coffers $6.64 billion over 10 years. But Gayer notes that the cost is likely to be much higher since more people than expected took advantage of it but only about 15% of people wouldn't have bought a house otherwise.
It would cost an estimated $16.7 billion if the credit is extended until the end of June 2010 and made available to single filers making up to $150,000 and joint filers making up to $300,000. Those are the parameters that Sen. Johnny Isakson, R-Ga., and Sen. Chris Dodd, D-Conn., are proposing in an amendment they introduced to a bill the Senate is expected to take up this week.
Another argument against an extension: It would only temporarily boost home prices and potentially set up those using it for a fall. That's because home prices are likely to decline once the credit expires and interest rates ultimately trek north, according to Dean Baker, codirector of the Center for Economic and Policy Research.
"Temporarily propping up house prices, so that a new set of homebuyers can incur losses, is a policy of questionable merit," Baker said in a CEPR column.
The sooner the market adjusts the better, Baker said. He did offer one caveat: "We may want to step in to prevent prices from overshooting on the downside in a select group of markets where this is a real possibility."
Zandi said that's already happened in a number of markets, and that an extended credit might help turn around the deflationary psychology in those markets where buyers are worried about catching a falling knife.
Homeowners not wanting to refinance into a new 30-year loan, and intending to pay off their mortgage loan early, should consider making biweekly payments rather than monthly mortgage payments. Sending in half the monthly payment every two weeks instead of once a month will cancel out years of mortgage payments later on because it speeds up paying off the principal. A homeowner who makes biweekly payments on a $500,000, 30-year, fixed-rate loan with a 6.5 percent interest rate would shorten the loan by five years and pay $150,000 less in interest over the life of the loan.
Doug's take: this is an excellent technique for homeowners to take with their mortgage. In fact, some lenders have payment programs available that make this even easier. Ask your lender today if a twice a month payment plan is available. If not, you'll just have to be organized and make the extra half payments your self. Doesn't cost you anything. Only saves you lots of money!!!
clear skies,
doug
ActiveRain Corp. is not responsible for the accuracy of the site's content (which is written by members of the ActiveRain Real Estate Network) and does not endorse the views of the real estate agents, mortgage brokers, and others listed here.
Powered by the ActiveRain Real Estate Network
© 2009 ActiveRain Corp. All Rights Reserved
