Monday's Inspirational Thought

"There is no right way to do the wrong thing."--Anonymous

REOs, Short Sales, and Shadow Inventory

Some people believe that Pacific Palisades, like many other areas around Los Angeles, has not reached the bottom level of its current market price point. They comment about the bank REO (Real Estate Owned) pressure on prices, short-sale activity, and an assumed large volume of similar financially-distressed owners whose properties will soon need to be sold.

Anecdotally, this has not felt to be the case for many months. We have noted multiple offers in many cases, sales levels being maintained, and inventory not increasing significantly in comparison with the rate of sales. For example, at the current rate of sales of Palisades homes, there is less than a seven month level of inventory of homes available, which equates to a market that is fairly balanced between buyers and sellers.

In order to try to ascertain whether the financially-distressed property numbers might have a greater future impact, we have analyzed the past year of local sales, with the following findings.

The REO market has been relatively small in the Palisades. Only 10 homes have been listed in the past 12 months in the Palisades, with two remaining on the market today. Those that sold averaged five percent higher than the prices at which they were listed. There are currently approximately 14 additional homes owned by lenders, which obviously will be put on the market for sale. However, with approximately 140 homes for sale at present, at the rate that these REOs come on market, there is very little impact on the overall marketplace.

The remainder of the “shadow inventory” consists of approximately 35 homes which have been scheduled for repossession by banks at public auction. Many of these may eventually become REOs. However, a significant number of these will be successfully sold as negotiated short-sales.

A review of the last 12 months’ local short-sale activity showed that 24 homes were listed and four of these have already sold, with four others in solid escrows. Some of the remaining active short-sale listings have accepted contracts which are in initial stages of being negotiated with the lenders.

If all of the Palisades homes that are currently bank-owned (or in the process of being such) were to come on the market, it would equal approximately 35 percent of the number of homes currently for sale. This is substantially less in magnitude than in the various areas of the country where short sale and REO activity is 50 percent or more of the market, and the shadow inventory is also considerable. So far this year, only eight percent of the sales in the Palisades have been REOs or short sales! Naturally, only time will tell. However, it would appear to take a great deal of increased financial pressures for our local market to be greatly impacted by REOs or shadow inventory.

Monday's Inspirational Thought

"Most people are about as happy as they make up their minds to be."

- Abraham Lincoln

Real Estate Market Update- February 2011

As we begin a new month, and take a look at the palisades market so far this year, a few interesting observations can be made.

There have been 238 local homes sold in the last 12 months, which averages 20 per month. As of February 28, 2011 there are 47 homes in escrow, which appears to be consistent with the last 12-month rate of sales. There are 103 active listings as of February 28. At what appears to be the current rate of sales, this equates to slightly more than 5-month level of inventory.

Since most real estate economists agree that a market is roughly in balance between buyers and sellers when the inventory is about 6 months level, in theory the Palisades is once again slightly favoring sellers. It is far too soon to guess if this is a trend beginning much sooner than expected, though it is interesting to observe.

It is also interesting to note that the median price of homes that have closed escrow this year is below $1.6 million, as compared to $2 million for the first two months last year.

Notice to Homeowners: Grant Deed Copy Scam

5 Strategies to Rebuild Your Credit after Foreclosure

If you’ve been through a foreclosure, you may wonder if there is hope for you to become a homeowner again. The answer is yes, but it will take a while. [...] Here's what you need to do to rebuild your credit to qualify again for a mortgage.

Pay your bills on time: The FICO score, the dominant credit score used by lenders, gives the greatest weight to payment history, so make sure you consistently pay your bills on time. “Stability is the key,” said Craig Jarrell, president of the Dallas region of IberiaBank Mortgage Co. “Have you demonstrated that you are now capable of owning a home and paying the bills, and have recovered from whatever circumstance caused the original foreclosure?”

Review your credit report: You’re entitled to a free credit report once every 12 months from each of the three national credit bureaus—Experian, TransUnion and Equifax. You should get a copy and check it for any inaccuracies.

To get your free credit report, go to http://www.annualcreditreport.com. “Make sure it is about you and only you,” said Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. “If you find errors, dispute them. If you discover old debts, it will weigh in your favor to satisfy them. Paid late looks better than not paid at all. Make sure that debts older than seven years have rotated off your report, as these could be dragging your score down unnecessarily.”

Check your mortgage: You want to be sure that you don’t still owe anything on your old mortgage. Sometimes proceeds from a foreclosure sale aren’t enough to cover what’s owed on the mortgage, which would leave you owing the difference.

"Make sure there is a zero balance reflected, and if you are responsible for a shortfall, make arrangements to repay the remaining balance," Cunningham said.

Many lenders are willing to settle that "deficiency judgment" for less than what's owed because "it's better than getting no money at all," Jarrel said.

Apply for credit: In particular, apply for different varieties of credit. “Credit scoring models value having different types of credit,” Cunningham said. “Having some revolving accounts, typically credit cards, and some installment fixed-payment loans, such as a car payment, can improve your score.” But don’t apply for too much credit at once. “This can appear as though you’re desperate for credit and perhaps make lenders less inclined to extend credit to you,” Cunningham said. “Further, too many credit inquiries can have a negative impact on your credit score.”

Don’t fall prey: Watch out for credit repair companies that promise to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job—after paying a fee for the service. “The truth is, that no one can remove accurate, negative information from your credit report,” according to the Federal Trade Commission. “It’s illegal.” Only the passage of time can assure that negative, but accurate, information on your credit report will be removed.

When it comes to repairing your credit, there are no quick fixes, the experts say. What lenders want to see is responsible financial behavior over time.

“Know that time is your friend, as the farther you move away from the financial distress, the less negative impact it has,” Cunningham said. “Follow with responsible behavior with your new credit, and you’ll soon have a solid credit file.”

As published in The Dallas Morning News, 2010.

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