Don’t bet on a quick recovery

Posted on September 10, 2012 by grim

From the WSJ:

Housing on Mend, but Full Recovery Is Far Off

Home prices during the first half of 2012 posted their strongest gains in six years, the clearest sign that more U.S. housing markets have hit bottom.

But the housing market remains far from normal. Hitting a bottom shouldn’t be confused with a full-on recovery, which looks a ways off.

Today’s rising prices have less to do with surging demand—though hard-hit markets in Arizona, California, and Florida have seen significant investor appetite for distressed homes—than with declines in the number of properties for sale.

Inventories of “existing” homes—that is, ones that haven’t just been built—are at eight-year lows. New-home inventories are lower than at any time since the U.S. census began tracking them in 1963. In some cities, there are one-third fewer homes listed for sale than a year ago.

Here’s why prices are rising: There are more buyers chasing fewer homes, and—critically—fewer distressed homes, such as foreclosures. Low inventory is one sign that housing markets may have reached a turning point because many want to buy at the bottom but few want to sell.

There are several factors behind the low inventory. Banks have slowed their pace of foreclosures. Investors have snapped up discounted properties that they can convert into rentals. Home builders, struggling for several years to compete on price with foreclosed properties, have added little in the way of new supply.

For now, price gains are concentrated at the low end of the market, where inventory declines have been most dramatic. “The market is really drying up in these seemingly distressed markets really quickly,” said Michael Sklarz, president of research firm Collateral Analytics. “They really are scratching for properties to sell.”

Low inventory is benefiting home builders, as buyers grow frustrated by bidding wars sparked by a shortage of move-in-ready housing. “People can’t find inventory that they want, so they say, ‘I’m just going to buy the house down the block that’s brand new. I don’t have to go through the whole torture,’ ” Mr. Sklarz said.
…
An important test comes later this year. In each of the past three years, prices rose in the summer but gave up all those gains and more in the winter, when sales traditionally slow. This year could be different because the supply of homes isn’t piling up.

Absent a shock to the economy, housing is on the mend. But it will be a long time before it returns to normal.

Posted in Economics, Housing Recovery, National Real Estate | 128 Comments

Weekend Housing Pep Talk

Posted on September 8, 2012 by grim

From Barrons:

Happy at Last

Nothing’s wreaked quite the havoc on the U.S. economy, and indeed the national psyche, as the six-year slide in home prices. It wiped out some $7 trillion in household wealth, savaged bank balance sheets, and induced the Great Recession and the tepid recovery.

Yet there are unimpeachable signs that this national nightmare is now over. Home prices are starting to rise, if somewhat haltingly, in most areas of the country. And a number of forecasters predict home-price increases around 10% or so nationally over the next three years, with some metropolitan statistical areas, such as Midland, Texas, and Bismarck, N.D., likely riding the energy-exploration boom to better than 20% jumps in residential-real-estate prices. The turnaround, in fact, appears to be arriving exactly on the schedule that Barron’s laid out this year in a March 19 cover story entitled “Ready to Rebound.”

Of greatest moment, perhaps, was the release two weeks ago of the S&P/Case Shiller Composite 20-City Index that showed a jump in home prices of 2.3% in June over May. Likewise the Case-Shiller National Index in the second quarter rose 6.9% over the first-quarter level, before any seasonal adjustment. And for the first time since the summer of 2010, the National Index actually nosed ahead of the year-earlier quarter’s reading, if only by 1.2%.

“This increase in home prices, unlike the one that occurred in 2009-2010 as a result of the temporary tax credit for first-time home buyers, looks to be for real,” says David Blitzer, chairman of the index committee at S&P Dow Jones Indices. “We probably won’t see a V-shaped recovery in housing, with prices overall going up 20% in the next year. But this rally has legs, and prices will definitely be higher next year.”
…
“It has been six years since the housing market last experienced the gains we saw in the July numbers, with indications that the summer will finish up on a strong note,” says CoreLogic CEO Anand Nallathambi. “Although we expect some slowing in price gains over the balance of 2012, we are clearly seeing the light at the end of a very long tunnel.”
…
Yet some keen observers of the real-estate market, such as Moody’s Analytics’ Mark Zandi, are optimistic that home prices will rise as much as 10% from current levels by the end of 2014, once the shadow inventory is worked down over the next year or so. He points to such factors as the continued rise in effective rent rates (the main competition to home ownership), low mortgage rates, steady though slow improvement in job growth and improving availability of bank credit.

“We’ve clearly reached a key psychological shift in home buyers’ psychology, where folks are now starting to worry about missing the boat, rather than fearing whatever house they buy, no matter how attractive the price, can only go down in value,” Zandi explains.

Posted in Economics, Housing Recovery, National Real Estate | 186 Comments

Not on fire, but rents still rising

Posted on September 7, 2012 by grim

From CNBC:

Rent Spikes Begin to Ease

Recent reports have shown home prices rising, especially in the housing markets which were hardest hit in the crash.

Investors, buying in bulk, have been swarming these distressed markets, seeking to take advantage of a thriving new single family rental market.

The strong demand from investors has pushed supplies down, causing prices to rise. But as housing recovers, and more fence-sitters decide to jump in, will the rental market remain strong?

Rents are still rising.

Nationally, rents rose 4.7 percent in August from a year ago, which, while still a gain, is down from the 5.8 percent annual increase in May – making it the slowest rise since March, according to Trulia.com. Some markets, however, are still hot, with rents up around 10 percent year over year. These include Houston and Seattle, Denver and San Francisco.

“Rents had been on fire earlier this year, but some of the hottest rental markets are starting to cool,” said Jed Kolko, Trulia’s Chief Economist. “New construction that started last year is finally coming onto the market, giving renters more choices and some relief from rising rents. Still, rents are climbing in nearly all of the major rental markets.”
…
A new report from Rent.com quantified many of the reasons potential buyers are delaying home ownership: 47 percent are waiting to save a down payment , 11 percent are waiting for the real estate market to stabilize, 22 percent are waiting for their credit to improve to qualify for a home loan, and 20 percent are waiting to feel more secure about their employment situation.

Posted in Economics, Housing Recovery, National Real Estate | 144 Comments

Homes that sell are selling faster (or are they?)

Posted on September 6, 2012 by grim

Caution caution caution… Read this piece with extreme skepticism. “Relisting,” the practice of taking a property off market and almost immediately back on market as a new MLS listing in order to make the property appear “new to market” or to “refresh the listing” is still commonplace. The issue has never really been resolved, and there is no consistent definition for the “days on market” metric, especially if it includes any kind of gap between relisting (if it’s off the market for a day, is it considered the same listing? What about a week? A month?). In addition, if a property changes brokerages during the listing time, the agent surveyed will likely only quote the time at their brokerage. This can all wildly impact the reported “days on market”. Also, the methodology here appears to be less than ideal. Instead of basing the metric on a sample of sales data, it’s conducted as a survey. I believe the question form has a bit of survivorship bias, because it focuses only on homes that sold, and not homes that haven’t sold. Combined with the relisting activity, I have little faith in the accuracy or reliability of the data.

From the AP:

Realtors: US homes selling at faster pace

U.S. homes are taking less time to sell than a year ago, reflecting more homebuyer demand and fewer bank-owned homes and other properties available for sale in some markets.

The National Association of Realtors said Wednesday that the median time a previously occupied home was listed for sale shrank in July to 69 days. That’s down from 98 days in the same month last year.

One-third of the homes purchased in July were on the market for less than a month, while one in five was on the market for at least six months. A home’s median time on the market has been declining steadily since January, the trade group said.

Between 2004 and 2005, the high-flying years of the housing boom, the median selling time of previously occupied homes was four weeks, NAR said. The supply of homes on the market averaged 4.3 months over the same period.

The July figures, which were derived from a monthly survey of the trade group’s real estate agents, are good news for sellers and come as the inventory of homes available for sale has been tightening.

Overall, there were 2.4 million previously owned homes for sale in July, down 24 percent in the past year. It would take about 6.4 months to exhaust that supply at the current sales pace. That’s just above the six-month inventory typical in a healthy economy and 31 percent below the 9.3-month supply in July last year.

“A notable shortening of time on market began this spring, and this has created a general balance between homebuyers and sellers in much of the country,” said Lawrence Yun, the trade group’s chief economist.

Factoring out short sales — when a bank agrees to accept less than what the seller owes on their mortgage — the median time on the market for homes was around six to seven weeks, Yun said.

Posted in Economics, Housing Recovery | 124 Comments

“Don’t be surprised if the all-time low in home prices is in the rearview mirror.”

Posted on September 5, 2012 by grim

From the WSJ:

Here’s More Evidence That Home Prices Have Hit Bottom.

In each of the last three years, home prices have increased in the spring and summer, when more people are buying homes, before giving back all of those gains and then some in the fall and winter, when activity cools.

But it is beginning to look like that might not happen this year, absent a major stumble for the economy.

Home prices in July were up by 3.8% from one year ago, the largest year-over-year jump in six years. Moreover, prices have shot up by 9.6% from February, when they registered their lowest levels of the housing downturn, according to CoreLogic data released Tuesday.

This adds evidence to the case that U.S. home prices may have hit bottom earlier this year. Even though prices will soften in the autumn, “we have a much better supply and demand dynamic” than in previous years, said Mark Fleming, chief economist at CoreLogic.

So when people say they believe home prices haven’t reached a bottom—that this year’s seasonal gains will be wiped away by January or February of next year—here’s the relevant question: Will home prices fall by 9.6% in the next six months?

Anything, of course, is possible. Home prices fell in the winter—what Mr. Fleming calls the “offseason”—in each of the last three years to record a new low. But they have not fallen by 9.6% in any six-month span since March 2009, which was when the U.S. economy was still in recession.

That’s the good news. Here’s the bad news: While the year-over-year comparisons look good right now, the economy—and workers’ wages—aren’t growing fast enough to justify this kind of increase on a sustained basis.
…
As we’ve written many times before, the strong rise in home prices this year owes as much to sharp declines in inventory as it does to demand-side improvement. Banks have been much slower to take back and list foreclosed properties, easing pressure on home prices but leaving a bloated “shadow inventory” of potential foreclosures.

These homes will weigh on markets for years, though there’s less evidence that they will be dumped on the market at once. While the shadow inventory may not lead to a big drop in prices that some have feared, it will probably keep a lid on future home-price gains.
…
The bottom line: Don’t be surprised if the all-time low in home prices is in the rearview mirror. But this doesn’t mean a full-on recovery is here, and there’s little evidence that the current pace of improvement can continue. For now, home prices appear to be bumping along a bottom.

Posted in Economics, Housing Recovery, National Real Estate | 109 Comments

North Jersey Contracts – August 2012

Posted on September 4, 2012 by grim

(Source GSMLS, except Bergen which is NJMLS)

Pending Home Sales (Contracts)
——————————-

Bergen County
August 2011 – 589
August 2012 – 707 (Up 20% YOY)

Essex County
August 2011 – 258
August 2012 – 348 (Up 34.9% YOY)

Hunterdon County
August 2011 – 92
August 2012 – 124 (Up 34.8% YOY)

Morris County
August 2011 – 333
August 2012 – 475 (Up 42.6% YOY)

Passaic County
August 2011 – 145
August 2012 – 260 (Up 79.3% YOY)

Somerset County
August 2011 – 220
August 2012 – 322 (Up 46.4% YOY)

Sussex County
August 2011 – 106
August 2012 – 150 (Up 41.5% YOY)

Union County
August 2011 – 245
August 2012 – 305 (Up 24.5% YOY)

Warren County
August 2011 – 80
August 2012 – 107 (Up 33.8% YOY)

Posted in Housing Recovery, New Jersey Real Estate | 121 Comments

Blame the kids

Posted on September 3, 2012 by grim

From the Star Ledger:

Millennials are slow entering the housing market

The Millennial Generation, those born between the end of the ’70s and the start of the ’90s, have crossed into adulthood. They are taking up the mantels passed down from generation to generation.

But for varying reasons, they have been slower than others to enter the home-buying market. And if they don’t buy, Generation Xers can’t move up, and if they can’t move up, then Baby Boomers can’t downsize.

“First-time home buyers hold the key,” said Gary Large, president of the New Jersey Association of Realtors. “There’s no doubt about that, but households in the lower-age bracket are finding it’s more difficult for them to buy now.”

Megan O’Haus, 26, and Ron Redzia, 27, may be typical.

They met in high school and are planning an Oct. 12 wedding. They wanted nothing more than to return from their honeymoon in St. Lucia to their own home.

“We’ve been looking since February,” O’Haus said. “We’ve already been pre-approved. We just didn’t have any luck.”

The couple rents an apartment and was “as budget-conscience as possible,” O’Haus said. She’s a public relations account executive, and Redzia is an auto technician at a Porsche dealership.

They put bids on four homes. “One was our ideal home in West Caldwell,” she said. They offered the full asking price on each of them, but were outbid, even after countering with $15,000 more.

Then there was a dry spell as the three-year-long stagnant market turned around and inventory shrank. Their search continued until last week when they found a three-bedroom, one-bath ranch in Oakland. They hope to close a week after they return from St. Lucia.
…
“The people who are 25 to 34 now are not the same people who were 25 to 34 a decade earlier,” said Jeffrey Lubbell, executive director for the Center for Housing Policy in Washington. “Times have changed. For this generation, half of their working life has been during a period of greater economic uncertainty.”

But a nationwide study by the real estate firm ERA found a majority of millennials haven’t lost their optimism.

“Most young people who rent through us,” said Joe Boniakowski, of the E.A. Boniakowski Agency in Greenbrook, “who have a good education and a job, they ask to be kept on a list because they’re interested in buying a home eventually.”

The dream hasn’t changed, but tastes and the economy have.
…
Matt Francello and Erika Pavlecka are both 29 and work in the Nutley school system. He’s a gym teacher in the high school and the head freshman football coach. She’s a 6th grade teacher. They met in college, rent a one-bedroom apartment in Lyndhurst and plan to marry Nov. 9.

But they aren’t house-hunting.

“We made a decision that we’ll stay where we are,” Francello said. He pointed to the costs of owning a house. “Property taxes alone would equal what we pay in rent,” he said.

“I work hard. I teach, I coach, I have a cash job chaperoning parties, but it never seems enough,” he said.

For them, the dream of owning a home isn’t dead — it’s just deferred. “I’d like to think that (home ownership) is in our future,” he said, “but when we decide to do that, I want to be able to make a significant down payment.”
…
James Hughes, dean of the Edward J. Bloustein School of Public Policy at Rutgers University, said when the economy crashed, some millennials lost faith in what they had been taught growing up.

“Housing used to be viewed as a super piggy bank,” Hughes said. “The traditional mantra was that home prices only go up. Young people were told ‘get on that train as soon as you can.’ That’s history now in the minds of some.”

He notes other generational changes that have affected home-buying trends.
“We’ve seen an extended period of adolescence,” he said. “Over the past four or five years, we’ve seen more young people are living longer at home with their parents, or renting with a large number of roommates to keep costs down.”

Hughes said part of the reason is that, for recent college graduates, the job market isn’t very good.

Posted in Economics, Housing Recovery, New Jersey Real Estate | 89 Comments

Otteau: July Market Update

Posted on September 1, 2012 by grim

From Jeff Otteau’s Monthly MarketNEWS Update:

July Purchase Contracts Rise 24%

The New Jersey housing market turned in another strong month in July with home purchase contracts increasing 24% compared to the same month last year. YTD purchase activity through July 31st has increased 23% over last year with no signs of a slowdown. The July increase is the tenth consecutive month that sales have increased since a modest 1% decline in September 2011.

Complimenting the rise in purchase activity is a 17% decline in Unsold Inventory this year. There are presently 59,700 homes being offered for sale in New Jersey which is the lowest inventory since 2005.

Based upon the current pace of sales, today’s unsold inventory equates to 8.9 months of sales compared to 13.3 months 1 year ago. Hudson County has the lowest unsold inventory in the state with 6.2 months followed by Bergen County with 6.4 months. At the other end of the spectrum are Atlantic and Cumberland Counties with 18.0 and 24.8 months, respectively.

The combined effects of the 17% decline in unsold inventory with a 23% increase in purchase demand are rebalancing the dynamics of the housing market toward price stability in 2012. Early signs of this improvement can be seen in median home prices which declined by 0.5% in Q2 2012, the slowest pace since Q1 2011. Median prices actually increased in 9 of the state’s 21 counties during Q2 suggesting that statewide prices will increase in the second half of the year.

Posted in New Jersey Real Estate | 68 Comments

1 in 11 homes sold in NJ a foreclosure

Posted on August 31, 2012 by grim

From the Record:

One in 11 NJ homes sold in second quarter were in foreclosure

One in every 11 sales in New Jersey in the second quarter involved a foreclosed property, compared with almost one in every four nationally, RealtyTrac reported Thursday. The number of foreclosed sales in the state was down almost 40 percent from a year earlier.

The foreclosed properties sold for an average $213,000 in New Jersey, a 37 percent discount to market values, according to RealtyTrac, a California company that tracks the foreclosure market. Nationally, foreclosed homes sold for an average $170,000, a 32 percent discount.

Foreclosure activity stalled in New Jersey for much of last year, after questions arose about lenders’ treatment of homeowners in distress. Lenders’ representatives were accused of “robo-signing” legal documents — signing them without verifying their accuracy — in their rush to evict homeowners.

New Jersey foreclosure activity has recently begun picking up steam after a legal settlement and court decision involving robo-signing earlier this year, and more troubled homeowners are expected to lose their homes to foreclosure this year.

In New Jersey, foreclosures take more than 2 1/2 years, on average, in part because they have to go through the courts. In about two dozen other states, lenders don’t have to go to court to foreclose on a property.

Posted in Foreclosures, New Jersey Real Estate | 133 Comments

Fed: Modest improvement in housing markets

Posted on August 29, 2012 by grim

From the Fed:

Beige Book – August 29, 2012 – Second District–New York

Construction and Real Estate

Housing markets across the District have shown further signs of modest improvement since the last report. The housing market in the Buffalo area continued to show strength through mid-July, though activity has dropped off in recent weeks–to a greater extent than the seasonal norm. Northern New Jersey’s housing market has bottomed and is showing scattered signs of improvement, according to an industry expert. This contact also maintains that internal market fundamentals are favorable: low and declining inventories, pent up demand, high affordability and a steady reduction in the foreclosure pipeline Manhattan’s co-op and condo market has been fairly active since mid-year, relative to the normal seasonal pattern of slowing. In particular, there has been strong activity at the very high end (for “trophy properties”) and also for entry-level apartments, driven in part by low mortgage rates. There has been more significant improvement reported in Brooklyn and especially in Queens, where an inventory glut has evaporated surprisingly quickly, according to one contact. New York City apartment rents have continued to rise across all segments, and Albany’s rental market has strengthened noticeably, with rents running 7 percent higher than a year ago.

Financial Developments

Small- to medium-sized banks in the District report a noticeable pickup in overall loan demand. Particularly widespread increases in demand were reported for both residential and commercial mortgage loans, while demand for consumer loans was little changed. As was the case in the last report, demand for commercial & industrial loans decreased. Bankers also indicate steady demand for refinancing. Virtually all contacts report no change in credit standards across all loan categories. Respondents indicate continued decreases in spreads of loan rates over costs of funds for all loan categories–particularly commercial & industrial loans and commercial mortgages. Respondents also note continued declines in the average deposit rate. Finally, bankers report declining delinquency rates, particularly on commercial & industrial loans and residential mortgages.

Posted in Economics, Housing Recovery | 120 Comments

Reasons for optimism?

Posted on August 29, 2012 by grim

From NJBIZ:

Housing data give reason for optimism

The weak housing market has long handcuffed the economic recovery, but new data released today suggest a housing recovery may be gaining steam.

The latest S&P/Case-Shiller Home Prices Indices show home prices nationally were up 1.2 percent in the second quarter versus 2012, and up 6.9 percent from the first quarter of the year. In the New York metropolitan area, June home prices rose 2.1 percent over May of this year, though that represented a 2.1 percent downshift from a year ago.

Jeffrey Otteau, president of Otteau Valuation Group Inc., in East Brunswick, said New Jersey’s housing market is in a similar, relatively good spot.

Otteau’s firm found median home prices in New Jersey down half a percentage point in the second quarter versus the previous quarter, but he said the rates of decline have been shrinking. He said home prices tend to be a backward-looking indicator, because there is typically a two- to four-month lag between the time an existing home sale price is negotiated and the time the deal closes. The lag is even longer for new home construction.

“It’s really a look in the rearview mirror of where the housing market was,” he said.

Other indicators from the second quarter show positive movement. Home purchase contracts, for instance, were up 18 percent in the first half of this year versus 2011, according to Otteau. The stock of unsold inventory in New Jersey is at its lowest seasonally adjusted average since 2005, he said.

Another good sign is that foreclosures don’t seem to be making a major dent thus far. New Jersey had the second-largest backlog of unresolved foreclosures of any state, Otteau said, and if those homes all hit the market at once, it could depress prices and create a glut of excess housing. So far, he said, the release of foreclosures into the market has been relatively slow, and alternate resolutions — such as short sales or investors converting foreclosures into rental units — have helped keep homes off the market.

Posted in Housing Recovery, New Jersey Real Estate | 122 Comments

June Case Shiller Day!

Posted on August 28, 2012 by grim

From the WSJ:

Why Home Prices Are Rising: The ‘Distressed Share’

Tuesday’s measure of June home prices from the S&P/Case-Shiller 20-city index is likely to turn positive when compared with one year ago for the first time in two years, according to a forecast by Zillow Inc.

Prices have risen this summer for a simple reason: more buyers have chased fewer properties. But the drop in supply and the boost in demand isn’t the only reason that Case-Shiller is now turning positive. Another related factor is that the share of non-distressed home sales is rising and the share of distressed sales—foreclosures and short sales, mostly—is falling.

The decline in the distressed share is important for the housing market, and especially for home-price indexes like Case-Shiller. Because banks are faster to cut prices to unload inventory than are mom-and-pop sellers, home values can fall further as the share of distressed sales rises. This was the case throughout 2008, as home price declines were in virtual free fall amid a cycle of rising foreclosures.

A report last week from economists at Goldman Sachs tries to quantify the share of the decline in home prices that can be attributed to the rise of distressed versus non-distressed homes. They conclude that this “mix shift” is responsible for around one third of the 34% decline in home prices since 2006.

While distressed homes normally account for around 5% of all home sales, the distressed share reached a peak of nearly 50% in early 2009, as the housing market unraveled. The share normally falls during the stronger spring and summer months, when there are more mom-and-pop home sellers, while it rises during the seasonally weaker autumn and winter—though it hasn’t gone as high as 50% since 2009.

The share of distressed sales is still high by any historical comparison. But importantly, it is falling when compared with one year ago, which is a big reason why home prices, as measured by the Case-Shiller index, are rising again. In June, the share of non-distressed sales, meanwhile, was at its highest level since August 2008, according to CoreLogic Inc.

In May 2012, around 25% of all homes were distressed sales, down from 31% one year earlier, according to Goldman. Moreover, Goldman estimates that banks are losing less money on distressed sales than they have in the past, in part because banks are pushing short sales more aggressively. The average distressed home sold at a 20% discount to comparable non-distressed homes, an improvement from discounts of 25% to 30% earlier in the crisis.

With distressed homes yielding smaller discounts and fewer distressed sales coming on the market, home prices have stopped falling. In May, for example, the Case-Shiller index showed that prices were down by 0.7% from one year ago. Without the change in the distressed share, prices would have been down by 2%, Goldman estimates.

Posted in Economics, Housing Recovery, National Real Estate | 91 Comments

Foreclosures? No big deal.

Posted on August 27, 2012 by grim

From HousingWire:

Studies find home prices and crime rates not greatly impacted by foreclosures

Furthermore, foreclosures have been portrayed as death knells for neighboring property values, but a recent working paper from the Federal Reserve Bank of Atlanta says home prices, for the most part, are only marginally impacted by distressed homes.

In fact, the time period when property values are most affected by a nearby distressed asset is when the borrower is still in the property, but seriously delinquent, according to Kristopher Gerardi, Eric Rosenblatt, Paul S. Willen, and Vincent W. Yao of the Atlanta Fed Bank.

The research report attributes this anomaly to the fact that delinquent borrowers are struggling with cash flow and less likely to keep up with property maintenance. Delinquent borrowers also hold their homes at arms length when they feel a foreclosure is imminent, so they stop investing in properties.

But this pessimism toward maintenance changes when the bank later steps in or when the home is sold off again to a new owner who invests in the property.

“We find that while properties in virtually all stages of distress have statistically significant, negative effects on nearby home values, the magnitudes are economically small, peak before the distressed properties complete the foreclosure process, and go to zero about a year after the bank sells the property to a new homeowner,” the report said.

Overall, the research findings suggest foreclosures and delinquencies don’t have as much of an impact on neighboring home prices as many would expect.

When looking at just seriously delinquent loans and REOs, Fed Bank of Atlanta researchers found that homes within 0.10 miles of a distressed property only experience a 0.5% to 1% value decline on average.

The actual value loss is “likely to go unnoticed by the typical seller who does not have many distressed homeowners living nearby,” the researchers concluded.

“Perhaps the most important conclusion that one should take from this analysis is that the effects of foreclosure and distressed property in general on the prices of neighboring homes are fairly small,” the team asserted in their final report.

Posted in Foreclosures, Housing Recovery | 97 Comments

Weekend Open Discussion – Deadly Foreclosures Edition

Posted on August 24, 2012 by grim

From the LA Daily News:

Studio City woman says fetid pool in foreclosed home gave her West Nile virus

Debbie Davis first noticed the algae-green pool behind the foreclosed house next door last spring and knew it could spawn West Nile virus.

So for months the Studio City resident called code enforcement, public health and bank officials hoping to clean up the stagnant threat.

Instead, alleged squatters moved in. The swimming pool stayed dirty. And the Red Cross called last week to inform her the blood she had tried to donate was indeed contaminated — with the deadly West Nile virus.

“There it is, a sludge pit,” said Davis, peering over the fence at the pool-turned-pond in the 3600 block of Bellfield Way. “And the likely cause of my virus.

“The problem is, I’ve reported the pool to everybody.

They’re completely unresponsive.”
…
In May, she contacted the Los Angeles County Public Health Department, which dispatched an environmental specialist. The specialist emailed to say she’d seen the dirty pool, and had referred the issue to city code enforcement and county mosquito abatement.

That month, a city Building and Safety inspector tacked up an order to the property owner — in this case the trust and bank — to clean the pool or face increasingly stiff fines.

Despite the threat, Bank of America never cleaned the pool.

Then in early July, what looked like two squatters moved in, at which point the neighbors began calling the city attorney, prosecutors and police.
…
Meanwhile, up the small cul de sac high about Ventura Boulevard, another family awaits word on West Nile virus. Seventeen-year-old Javin Reid suffered a terrible rash and fever this week and submitted a blood test for the virus Monday.

Like Davis, his parents Kristen and Tony Reid have contacted bank and public health officials for months, without word on a fix for the dirty pool.

“We’re frustrated,” said Kristen Reid, 46. “And we’re really confused. There’s a public process in place to take care of pool violations.

“It’s a simple thing: it’s public health,” she said. “It’s clear that the pool is dangerous. They should take care of it. People are getting sick.

“The system is completely failing.”

Posted in Foreclosures | 108 Comments

I ain’t afraid of no ghost

Posted on August 23, 2012 by grim

From the WSJ:

Shadowboxing With the Recovery in Home Sales

The salvo of distressed home sales that was supposed to sink the housing recovery hasn’t shown up yet. Perhaps it never will.

The National Association of Realtors said Wednesday that sales of existing (translation: previously owned) homes rose 2.3% in July from May. And, as it has for several months now, the NAR said sales might have been higher if it wasn’t for a shortage of inventory.

It counted 2.1 million single-family homes on the market in July, down from a peak of 3.4 million in July 2007 and near the levels of a decade ago. Foreclosure sales accounted for 12% of total sales versus 17% a year earlier.

The NAR’s statistical acumen has a less-than-sterling reputation; in December, it said that it had overestimated home sales by 14.3% from 2007 to 2010, but what it is saying about inventory and foreclosure sales jibes with what regional real-estate associations and other sources have been saying. With household formation picking up, and new single-home construction running at half its level of 50 years ago (when the U.S. population was half the size it is now), inventory constraints could get tighter.

The major caveat is that there’s an unknown amount of “shadow inventory”—homes that are owned by banks, destined for foreclosure, and so forth—out there. As more of those homes hit the market, they could depress prices, restrain construction and put the nascent housing recovery that lately has been one of the brightest spots in the U.S. economy at risk.

It is worth remembering that worries that shadow inventory would buckle housing are no longer new. The delay merely may be that issues like banks’ unwillingness to accept losses and hamstrung courts have led to unanticipated holdups in distressed homes coming on the market. Or there may be other things going on.

One possible factor is that rather than getting put on the block, many distressed homes are getting converted by banks and investor groups into rentals. Indeed, the number of homes that were rented out in the second quarter was 685,000 higher than a year ago, according to the Census Bureau.

Another possibility: Many distressed homes may not have turned up on the market because they aren’t really sellable, either because of the condition they have fallen into or the neighborhoods they are in.
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The shadow inventory problem is starting to look like a shadow of its former self.

Posted in Economics, Foreclosures, Housing Recovery, National Real Estate | 130 Comments