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.

Rent or Buy?

Trulia recently released their second quarter Rent vs. Buy data for the nation's 50 largest cities, including Los Angeles.

To see whats more affordable in your area; see Rent vs Buy.

New Carbon Monoxide Law Takes Effect July 1

Carbon Monoxide

A new bill was passed in the State of California where, by July 1, 2011, homeowners are required to install carbon monoxide devices in their homes. The authors of the bill entitled SB 183, the Carbon Monoxide Poisoning Act of 2010, hope to prevent accidental sickness and deaths relating to carbon monoxide poisoning through detection and education by increasing public awareness.

Who This Requirement Applies To:

• Existing Single Family Residences
• Where appliances burn fossil fuels (e.g. coal, kerosene, oil, wood, fuel gases, and other
• petroleum or hydrocarbon products).
• Where the home has a fireplace or an attached garage

Penalties:

• Notice to Comply within 30 days
• $200.00 fine

For further information related to SB 183 and Carbon Monoxide requirements, please visit these websites:
1. http://www.nfpa.org/assets/files//PDF/Public%20Education/COSafety.pdf
2. www.carbonmonoxidekills.com
3. http://www.homesafetycouncil.org

Information provided by West Coast Escrow.

How Long Is the Wait to Buy After Foreclosure?

A sluggish housing market has caused millions of home owners to lose their home to foreclosure, short sale, or deed in lieu of foreclosure. But once these former home owners get a better handle on their credit, how long do they have to sit on the sidelines until they can secure future financing to buy a home again?

As an article in The New York Times notes “there are plenty of asterisks and conditions” when it comes to how long a borrower must wait after a “significant derogatory event,” like a foreclosure or short sale.

In general, however, The New York Times notes that the longest wait to buy again will come if there is a foreclosure in the former home owner’s past.

Fannie Mae and Freddie Mac have a three-year waiting period following a foreclosure, and a two-year wait following a short sale, deed in lieu, or discharge or dismissal of bankruptcy. However, if borrowers can justify that the circumstance for the foreclosure or bankruptcy occurred because of an illness or job loss — or other “extenuating circumstance” — that may help reduce their wait. But with no such extenuating circumstances, these former home owners may have to wait longer, even up to seven years following a foreclosure or four years after bankruptcy, the article notes.

For loans insured by the Federal Housing Administration, borrowers with perfect credit afterwards also will, in general, have to wait three years after a foreclosure and two years after a bankruptcy is discharged, The New York Times notes.

Following a short sale, borrowers will have to wait three years to secure another FHA loan — however, there are plenty of exceptions. Borrowers will have to wait three years if they were in default at the time of the short sale and had no extenuating circumstances. However, if the borrowers were on time with all their payments a year prior to the short sale, they may have no wait at all and might even qualify for an FHA loan immediately.

“The key is to avoid the foreclosure,” Andrew Wilson, a spokesman for Fannie Mae, told The New York Times. “That is what will help you be eligible for the shorter period.”

Source: “The Post-Foreclosure Wait,” The New York Times (June 23, 2011)

Inspirational Thought

“We are not affected by people, conditions, and things – but we ARE affected by how we think about them.”

-- William Walter

New Listing: Traditional, Charming Home in the Palisades

First showings Tues, June 21st, 11am-2pm. Set perfectly on a sweeping corner, this impeccable Traditional is charming, light and bright. Inviting walkway, wrap-around porch and entry with dutch-door. Large, open living and dining room with wood windows and wood blinds. Recently updated kitchen (with all new stainless appliances), leads to cozy sunroom. Family room opens to private yard with patio areas and historic Melaleuca tree. Ocean peeks from some rooms. Hardwood and tile floors throughout. Absolutely move-in condition.

16539 Chattanooga Place, Pacific Palisades, CA 90272
Offered at $1,150,000

For pictures and information of this and other wonderful properties please go to Michael Edlen's Featured Homes web page.

Fixed Mortgage Rates Continue to Fall

Freddy Mac released today the results of its Primary Mortgage Market Survey, which showed fixed-rate mortgages declining for the seventh consecutive week to new lows amid continuing weak economic and housing data. The 30-year fixed averaged 4.55 percent and the 15-year averaged 3.74 percent.

News Facts

• 30-year fixed-rate mortgage (FRM) averaged 4.55 percent with an average 0.6 point for the week ending June 2, 2011, down from last week when it averaged 4.60 percent. Last year at this time, the 30-year FRM averaged 4.79 percent.
  

• 15-year FRM this week averaged 3.74 percent with an average 0.7 point, down from last week when it averaged 3.78 percent. A year ago at this time, the 15-year FRM averaged 4.20 percent.
  

• 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.41 percent this week, with an average 0.6 point, the same from last week when it averaged 3.41 percent. A year ago, the 5-year ARM averaged 3.94 percent.

• 1-year Treasury-indexed ARM averaged 3.13 percent this week with an average 0.6 point, up from last week when it averaged 3.11 percent. At this time last year, the 1-year ARM averaged 3.95 percent.

Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage. Visit the following links for Regional and National Mortgage Rate Details and Definitions.

Quotes

Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

• "Fixed mortgage rates followed U.S. Treasury yields lower this week amid financial market concerns that the current lull in the economy is continuing. First quarter growth in consumer spending was revised downward by half of a percentage point to 2.2 percent, according to the Bureau of Economic Activity, consumer confidence in May was weaker than the market consensus forecast, and the manufacturing industry slowed for the third straight month in May.

• "The housing market is showing strain as well. The S&P/Case-Shiller® National Home Price Index fell 5.1 percent between the first quarters of 2010 and 2011, representing the largest annual decline since the third quarter of 2009. In addition, the index of pending existing home sales dropped 11.6 percent from March to April, led by the Midwest and South regions where the tornados and flooding occurred."

SOURCE Freddie Mac

Inspirational Thought

"You can either take action, or you can hang back and hope for a miracle...Miracles are great, but they are so unpredictable."

- Peter Drucker

Thinking of Moving This Summer? Here Are Some Helpful Tips

Each year, about 15 million American households move, with the majority changing households between Memorial Day and Labor Day. Unfortunately, this same time period also is peak season for moving company scams.

• To avoid falling victim to common scams, experts in the moving industry recommend consumers do the following:
• Go with a company that has a well-known and recognized name
• Get a referral from friends, family, neighbors, and colleagues
• Ask for an in-home estimate, to ensure accuracy of the estimate
• Don’t always go with the lowest price
• Do not pay up-front fees
• Conduct research on the government website protectyourmove.gov to find out if a mover is licensed for interstate moves by the Federal Motor Carrier Safety Association.
• Get all details of the transaction in writing
• Request a copy of “Your Rights and Responsibilities When You Move,” a brochure created by the Federal Highway Administration that outlines consumers’ rights. Federal law requires movers to give this to customers prior to an interstate move.

Inspirational Thought

"Most people never run far enough on their first wind to find out they've got a second... Give your dreams all you've got and you'll be amazed at the energy that comes out of you."

- William James