Archive for December, 2009

Latest Home Price Data Is Good News for Buyers

December 30th, 2009

Homes are now cheap.

No, not everywhere in the country (more about that later). And, even after the latest Case-Shiller data, it’s anyone’s guess when they might actually turn around and start rising steadily again. It could be years.

But if you’ve been thinking of buying a home to live in, the current meltdown is a big opportunity.

You might not know it from the coverage of the latest data. Too many, as usual, are focused on the trees instead of the forest. The 10 and 20-city composite indexes were unchanged between September and October. And the numbers were lower than a year ago, but the rate of decline seems to have slowed: Two facts that are both obvious and practically useless. Indeed the latest survey contains a whole truckload of information for all those who prefer data to knowledge.

But long-term fundamentals are more important than the short-term noise. And it’s generally a mistake to pay too much attention to doomsayers or to overthink these things.

Here’s some home truths.

Real estate prices in the Case-Shiller 10-city index have now fallen by a stunning 30% from their 2005 peak. Nothing like it has been seen since the Great Depression–and, according to some sources, not then either. Obviously

for anyone who bought a home at the peak of the market this has been a disaster. But for those thinking of buying a home now this is exceptionally good news.

And at the same time, mortgage rates have also plummeted. In 2006 you had to pay an average of about 6.4% on a 30-year fixed loan, according to the Federal Reserve. Right now you can get deals for about 5%.

Put the two together, and it’s a winning combination.

The Case-Shiller 10-city data go back to 1987. I ran the numbers comparing the index values, mortgage rates and average weekly earnings. Net conclusion: On average–an important point I’ll return to shortly–buying a home now is as cheap as it was in the mid-1990s, when houses were an absolute steal.

No, the Case-Shiller data aren’t perfect. The biggest complaint is that they are weighted too much towards the coasts and the big “bubble” cities like Miami, Las Vegas and Phoenix.

So I decided to run the same analyses–average prices, mortgage rates and weekly earnings–for the home price data tracked by the U.S. Census. Those numbers go back further than Case-Shiller, to 1972.

You can see the results in the two charts here.

The top chart simply compares the average home price to average weekly earnings. Yes, there has been a clear, gently rising long-term trend: Over many decades people have been choosing to spend more on housing, buying bigger and better homes. But the bubble, and subsequent collapse, still stand out clearly. By this measure, median homes nationwide today are about as cheap–when compared to earnings–as they were in the early 1990s.

Yet back then mortgage rates were around 8, 9 or even 10%.

If you buy an average home today, and take out a 30-year mortgage at 5%, the annual bill for interest and repayment of principal will come to about 19 times typical weekly earnings (If you get the $8,000 refundable tax credit too, it drops below 18 times). As you can see from the bottom chart, we haven’t seen it that low since the early 1970s.

You can hear the objections. Doomsayers ask: What about these waves of mortgage resets coming in the next two years? What about all the unemployment? And the foreclosures? And so on.

These are all valid arguments for refusing to buy homes when they are expensive, or even averagely priced. But the whole point about markets is that they adjust. Prices are now cheap. They reflect this bad news, and more. If you have a stable income, and you can get a 30-year mortgage at 5% or so, and you are willing to drive a hard bargain on a home in this market, this is your time.

Over and over again, history suggests that the best investments are the ones no one wants–gold when it was $260 an ounce, Amazon.com when it fell below $10 in 2002, Hong Kong shares during the SARS “crisis” in 2003, and so on. If an investment feels comfortable, it’s should make you nervous. If it makes you really nervous, that’s probably good.

The biggest objection, or caveat, is one I hinted at earlier. These are average prices. The variations are truly remarkable. Prices in places like Miami, Las Vegas and Phoenix have roughly halved from the highs in early 2006, according to Case-Shiller. Meanwhile in cities like New York and Boston they have fallen by a fifth or less. It’s hard to argue that some of the most resilient areas are cheap. New York real estate prices are still up about 75% since the start of the decade. Maybe they have much further to fall.

But outside of these hot spots, real estate is now cheap.

Write to Brett

Arends at brett.arends@wsj.com

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Posted in Housing Crisis

Mortgage rate hikes seen as poison to home sales

December 29th, 2009

By Jay Fitzgerald | Tuesday, December 29, 2009

The Massachusetts housing market may be facing a new challenge next year: higher mortgage rates that could hobble the fragile housing recovery now under way.

Morgan Stanley and Freddie Mac have issued warnings about rising mortgage interest rates, which are now hovering in the 5 percent range for 30-year fixed-rate loans.

Freddie Mac, the government-controlled mortgage giant, recently warned that rates could hit 6 percent in 2010, while a fixed-income economist at Morgan Stanley said rates could spike as high as 8 percent, thanks to heavy government borrowing that could drive up rates for Treasuries.

Karl “Chip” Case, a local housing economist, said he wouldn’t be surprised to see rates increase, if only because the Federal Reserve’s short-term rates are now at zero percent – and there’s nowhere else to go but up.

“It could stall the housing recovery,” Case said of any significant boost in mortgage rates. “It could drive down sales.”

Real estate agents are also worried.

“The market is totally fragile,” said Jonathan Bowen, owner of Jonathan Bowen Real Estate in Hyde Park. “The demand for housing just isn’t there with higher interest rates.”

Today’s rates are historically low, so a bump up to higher levels wouldn’t be unusual.

But the housing market – which many say is virtually on government-backed life support, due to tax credits and low interest rates driven by the Fed – is still considered very weak after stabilizing somewhat in the second half of 2009.

In Massachusetts, single-family home sales zoomed up by 60 percent last month, though prices still haven’t seen a rebound, after falling by about 20 percent over the past year.

“We’re just seeing the market turn around,” said Norm O’Grady, a real estate broker with Prime Realty Group in Brighton. “A jump in mortgage rates will hurt.”

Besides the likely end of the $8,000 federal tax credit for first-time homebuyers in the spring, the Fed is expected to pull back from buying mortgage securities in March, increasing anxiety that the housing market is vulnerable to downward pressures.

Article URL: http://www.bostonherald.com/business/real_estate/view.bg?articleid=1221750

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Posted in Economic Crisis, Housing Crisis

Military Personnel Receive Federal Help on Short Sales

December 28th, 2009

by M. Anthony Carr

Members of the military who find themselves in a short-sale situation now have a new tool via the Homeowners Assistance Program (HAP) through the Department of Defense (DoD).

Congress expanded HAP when they passed the American Recovery and Reinvestment Act of 2009; and now nearly every military personnel involved in a short sale can get financial help through HAP if they find themselves upside down when they must sell because of a mandatory permanent transfer.

The HAP website (http://hap.usace.army.mil) contains several brochures for military personnel and for real estate professionals to help understand the expanded guidelines for those using the program.

Authorized under Section 1013 of the Demonstration Cities and Metropolitan Development Act of 1966, HAP is a law that is managed by the U.S. Army Corps of Engineers “to assist eligible homeowners who face financial loss when selling their primary residence homes in areas where real estate values have declined because of a base closure or realignment announcement.” The American Recovery and Reinvestment Act expands the legislation temporarily for DoD employees caught up in the mortgage crisis. Those who can apply for assistance include:

service members and DOD employees who are wounded, injured or become ill when deployed;
surviving spouses of service members or DOD employees killed or died of wounds while deployed;
service members and civilian employees assigned to BRAC 05 organizations; and
service members required to permanently relocate during the home mortgage crisis.

The assistance is limited to employees who were reassigned within about a 5-and-a-half year period between 2006 and 2012 and the house being considered must have been the applicant’s primary residence. Some of the criteria for eligibility include:

Permanent reassignment requires move of more than 50 miles.
Reassignment ordered between 1 February 2006 and 30 September 2012.
Property purchased (or contract to purchase signed) before 1 July 2006.
Property was the primary residence of the owner
Owner has not previously received these benefit payments.

An online brochure, which can be printed via a PDF file, is available here.

This next paragraph is very important for purchasers of houses where the HAP program is being used.

The execution of this program requires the assignment of the contract to the Department of Defense, via the U.S. Army Corps of Engineers. In essence, the seller conveys the house over to the USACE and then the purchaser buys the house from the USACE all at the same time at the same settlement or escrow table. Your state laws may require a few differences, but this is how it’s executed on the ground level.

Many Realtor contracts contain paragraphs that will not allow the assignment of a contract, so military sellers using HAP may need to strike this paragraph to allow the contract to go through without any hiccups.

An “assigned” contract is one where one party in a sales contract can assign their interests over to a third party before settlement. It would say something like: “this contract is between ‘Mr. and Mrs. Seller’ and ‘Mr. and Mrs. Buyer and/or assigns.’”

With this language, it allows Mr. and Mrs. Buyer to slip in Mr. and Mrs. Buyer-2 at some point in the performance of the contract. It’s legal, and is usually used via a pre-foreclosure contract where one party is finding houses for sale and selling them to a secondary buyer once they get the terms of the contract in place.

Thus, in the use of the DoD’s HAP program, the purchaser needs to understand that at the end of their contract, before they go to settlement, the seller will no longer be Mr. and Mrs. Seller, but the U.S. Army Corps of Engineers.

For details on how the HAP program works, visit here.

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Posted in Short Sale News

Short Sale Commander Version 3.0 is LIVE!

December 22nd, 2009

Short Sale Commander is pleased to announce the release of their latest upgrade, Version 3.0. This upgrade will now allow Homeowners, Buyers Agents, Listing Agents, and Title Companies and others involved in the short sale process ‘Guest Access’ to the files assigned to them.

“Communication with agents and sellers is a significant part of running an efficient and profitable short sale business,” says Erik Lovell, President of ELK Software, the makers of Short Sale Commander. “Version 3.0 will give our users more time so they can build their short sale business and not have to proactively call or email to keep their clients updated.”

Version 3.0 Updates Include:

Guest Access:

Allows users to grant Guest Access to listing agents, buyers agents, sellers or title companies so they can follow along in real time, without having to call or email. Guest Users will see only limited information and the Activity Log comments that you ‘Share’. Guest Users will also be able to add comments directly into the file. No software is needed for them to download and you may add an unlimited number of Guest Users with no extra charge.

You can choose to give Guest Access to anyone in the User Manager and even ‘Preview’ exactly what that Guest User will see before sending them their login information. To read all about Guest Access, please view the HELP features in Activity Log next to the ‘Share’ button and in the User Manger under Guest Access.

Activity Log Enhancements

Along with the ‘Sharing’ of comments for Guest Access, you can now right click on any comment and EMAIL that comment out so you don’t need to re-type or copy and paste. You can also now EDIT any Activity Log entry so you can add or change any previous comment.

Pipeline Enhancements

Files are now highlighted in Yellow when the ‘Follow-Up’ date is within the next 24 hours.

Expanded Email Capability

You can now add a signature to your emails automatically, email BCC and CC have been added and we’ve increased the limit on the size of outgoing emails.

Encrypted File Package Creation

Packages can now be created with encrypted PDF files, which were usually HUDs from title companies, along with non-encrypted files.

This upgrade is up and running, so it will be automatically available when you log in. Please email support@sscmain.com with any questions or comments!

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Posted in Short Sale Commander, real estate technology

Real hope for short sales or just more bank spin?

December 21st, 2009

Are banks finally starting to get it when it comes to short sales?

Or are we just looking at some defensive industry PR as a backlash builds?

Those are my questions as I look over a Bloomberg piece that claims that banks may be finally getting on the short sale bandwagon.

The evidence seems to be a tripling of the number of short sales over the course of 2009, though, at 40,000 transactions, it is still a pretty small number.

The major banks are also claiming they have hired extra staff and rolled out new software to help make short sales happen.

JPMorgan claims to have hired 5,000 people to handle distressed mortgages and has doubled its short sale staff.

Sounds great, thought the timing is awfully suspicious given budding anger, both in Washington and across the country, over bank stalling tactics.

This pretty modest batch of good news comes as the Obama Administration rolls out its own effort to prod banks – with the stick of some timelines and a carrot of more bribes – to embrace short sales as well.

The Treasury Department, which kicks off in April, would pay up to $2,000 to lender and services for every short sale they do. The effort also establishes some clear guidelines in hopes of putting an end to bank stalling tactics as well.

It’s hardly a crackdown, but the industry must know it’s playing with fire not to try and at least talk the talk.

Of course, the most frustrating thing is that banks, for their own bottom lines, should be getting this.

A short sale is hardly a cure all, but at least the lender walks away with, say 70 percent or 80 percent of the loan. By contrast, foreclosure can be a pretty safe way to destroy a home, its value, and the values of the entire neighborhood as well.

But of course, biting the bullet with a short sale means taking that balance sheet hit now, rather than pushing off the day of reckoning.

It’s an accounting game that’s hard to justify given the mounting cost homes foreclosed on and lives shattered.

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Posted in News

Seasons Greetings

December 18th, 2009

Happy Holidays!

All of us at Short Sale Commander would like to wish you and your families a Happy Holiday Season. We truly appreciate your continued support and patronage.

2010 is going to be a great year for short sales and we have a lot to look forward to!

The Short Sale Commander Team

Our Holiday Support Hours are as follows:

12/21 – 9a – 6p EST
12/22 – 9a – 6p EST
12/23 – 9a – 6p EST
12/24 – 9a – 1p EST
12/25 – CLOSED

12/28 – 9a – 6p EST
12/29 – 9a – 6p EST
12/30 – 9a – 6p EST
12/31 – 9a – 1p EST
1/1 – CLOSED

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Posted in News

Short Sales Need Technology For Large Scale Success

December 18th, 2009

Short sales are a great idea whose time is here, but can the industry handle them? This is the question on the minds of real estate, lending and servicing professionals, as well as many in the Obama administration. The short sale is a strategy with the capability of having broad impact on the nation’s housing and credit crisis, but it is burdened with administrative issues that threaten its potential to be of real help. As the industry wrestles with finding ways to make short sales work in a big way, one fact is rapidly becoming clear: it is a strategy that needs technology to achieve success on a large scale.

On November 30th, a new program was announced by the Obama Administration to help control the rise of foreclosures by standardizing a process providing options for defaulting borrowers. Called the Home Affordable Foreclosure Alternatives program (HAFA), the program is aimed at those who don’t qualify for HAMP modifications or who have fallen out of the mod process along the line. It provides new financial incentives and sets a time limit for completing short sales and deed-in-lieu transactions, with the intention of simplifying the entire process for all involved. I was pleased to be involved in the development phase with the Treasury Department in my role as chairman of HOPE NOW’s MHA Short Sale Committee.

Under HAFA, servicers must offer short sale and deed-in-lieu alternatives before initiating foreclosure, and have 10 days to approve or deny short sale requests. If the request is approved, the former mortgagor must be released fully from the debt, and in a move designed to keep Realtors interested, servicers are no longer permitted to reduce their commission rates on short sale transactions. Servicers are, however, allowed to engage a short sale outsource provider who can participate in the Realtor’s commission, which adds flexibility. The financial incentives include a $1,000 payment to servicers for their efforts, as well as clear economic contributions for subordinate lien holders. In addition, borrowers may receive a relocation expense reimbursement of up to $1,500 if the property is left in good condition. Full details can be viewed here.

It is a great step in the right direction. Once again, however, the problem that has plagued short sale efforts all along — the manual process — is an inhibiting factor. Servicers are still bogged down with huge volumes of cases needing attention, and lacking the helping hand of technology, even the most HAFA-supportive servicer is facing an uphill battle. With traditional paper processes, servicers are left to deal with phone calls, voicemails, e-mails and faxes pouring into banks of fax machines as short sale documents enter the shop. Pages are lost or misplaced, and stacks of papers pile up in in-baskets on manager’s desks around the country. Without technology, workflow is stymied and response time is impacted — while borrowers and their transactions hang in the balance.

With technology, a great many things change. The fax machines no longer overflow with traffic, cases are kept separate and distinct, short sale offers are managed and centralized, and Realtors and borrowers are not inundating the servicer with status requests. Short sale technology platforms provide Web-based solutions that bring workflow and required documents together in a single location for all stakeholders in the transaction. Buyers, Realtors, sellers, lenders, servicers, investors, mortgage insurers and others involved in the short sale have a secure website that shows the real time status of each short sale, the documents still needed and their individual deliverables spelled out. Documents are uploaded, e-mailed or faxed into the electronic case files for viewing and approvals as needed, completely replacing the vertically besieged in-basket with a dashboard that is immediately workable. Work queues are activated, closed and monitored to execute deals quickly – typically in a week or two, as opposed to the six to ten weeks short sales currently take for answers. Under the current paradigm, buyers are generally long gone and properties are in foreclosure well before the answer comes back from the loan’s owner. With the technology, answers can be virtually automatic by pre-loading investor requirements and parameters into the offer management rules engines on the platform.

Time is the enemy, particularly with the new opportunities afforded by HAFA. Servicers have 10 days to respond when presented with a short sale offer, and when left to manual processes, ten days goes by very quickly. Short sale technology platforms condense timeframes in several ways. Information from servicers flows directly from their systems into the technology, eliminating re-keying delays. Decisions are accelerated by rules automation, and with investor parameters already set with the platform, approvals can happen with great speed. Third party requirements such as title and valuations are ordered and received automatically, and notifications are sent regarding next steps and due dates. In short, by eliminating the waiting times and centralizing the documents, nothing is delayed by a lack of organization and nothing is misplaced among towering stacks of waiting files.

Short sale technology is extremely cost effective. The platforms are available via the Web, and as such, represent little or no impact on the existing technology resources of the typical lending or servicing enterprise. It is another bookmark on the web browser, offering great accessibility for service providers and stakeholders alike. Software as a Service means no servers to maintain, no software packages to keep updated and no upfront costs to put the technology to work. Servicers can monitor all of their cases from a single dashboard, as can lenders, investors and MI companies.

As a concept, short sales are working. A year ago, they represented only about 12% of the sales activity in the national market, and today they are about 20%. With the arrival of the HAFA rules, we can expect to see a lot more short sale opportunities to arise for sellers and buyers, with significant financial benefits to those who help them succeed. Incentives to servicers and investors might well run over a billion dollars in 2010, with technology’s help.

Employing short sale technology is the simplest and best way to make sure that short sales succeed on the large scale – which is precisely the scale required to have the positive effect on the national recovery that the government is looking for. Thousands have already been helped, and millions more await.

Jim Satterwhite is executive vice president and chief operating officer of Infusion Technologies, the parent company of National Quick Sale, a short sale technology platform provider and component servicer. He has over 20 years in the mortgage servicing and default industry, holding senior executive positions with several top-tier servicing operations, the Resolution Trust Corp, and JP Morgan Chase. He continues to serve on multiple industry advisory committees, as well as regular involvement with the MBA, HOPE NOW and industry-related governmental policy.

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Posted in Short Sale News, real estate technology

Luxury Homeowners in U.S. Use ‘Short Sales’ as Defaults Rise

December 17th, 2009

Dec. 17 (Bloomberg) — Homeowners with mortgages of more than $1 million are defaulting at almost twice the U.S. rate and some are turning to so-called short sales to unload properties as stock-market losses and pay cuts squeeze wealthy borrowers.

“The rich aren’t as rich as they used to be,” said Alex Rodriguez, a Miami real estate agent with JM Group USA Inc., whose listings include a $2.9 million property marketed as a short sale because the price is less than the mortgage, leaving the bank with a loss. “People have reached the point where they can’t afford the carrying expenses of a $2 million home.”

Payments on about 12 percent of mortgages exceeding $1 million were 90 days or more overdue in September, compared with 6.3 percent on loans less than $250,000 and 7.4 percent on all U.S. mortgages, according to data from First American CoreLogic Inc., a Santa Ana, California-based research firm. The rate for mortgages above $1 million was 4.7 percent a year earlier.

As defaults on the biggest mortgages rise, borrowers such as Steve Holzknecht are turning to short sales to exit loans that now are larger than the market value of the house. In such a transaction, the lender agrees to accept less than a 100 percent payoff on a mortgage to expedite the property’s sale.

Holzknecht, 53, last month cut the asking price for his 7,280-square-foot home in Kirkland, Washington, by $550,000 to $1.25 million, lower than the balances of his two mortgages. Holzknecht, the former owner of Four Suns Inc., a Seattle luxury homebuilder that went out of business two months ago, constructed the Craftsman-style home in 2000. He declined to identify his lenders or the amount he owes.

Common Plight

“It’s not uncommon to see this situation on the high end of the market — homes selling for less than it would cost to build them,” said Holzknecht’s agent, Joe Flick of Roanoke Group in Seattle. The property came on the market eight months ago priced at $1.85 million, he said.

Porter Michael Peterson, a 33-year-old linebacker for the National Football League’s Atlanta Falcons, bought a mansion near Tampa, Florida, four months ago for $1.1 million — almost half the amount of the mortgage taken out by the sellers three years earlier, according to real estate records. Reggie Roberts, a spokesman for the Falcons, didn’t return a call seeking comment.

Short sales almost tripled to 40,000 in the first six months of 2009 from the same period a year earlier, according to data from the Office of Thrift Supervision. The bank regulator doesn’t break out short sales by size of mortgage.

Upside Down Mortgages

“You are just starting to see the tip of the iceberg with luxury short sales,” said Adrian Heyman, owner of Property Advisors, a real estate broker in Scottsdale, Arizona. “A lot of wealthy people are upside down in their mortgages and they just can’t afford the second or third vacation home anymore.”

There are 114,000 home loans of more than $1 million, according to First American. About a quarter of all mortgaged homes in the U.S. have loan balances bigger than their current value, known as being upside down or underwater, the data company said.

The Dow Jones Industrial Average lost more than half its value as it tumbled to a 12-year low in March. The number of U.S. households with a net worth of more than $1 million, not counting primary residences, fell to a five-year low of 6.7 million last year from a record 9.2 million in 2007, according to Spectrem Group, a Chicago-based consulting firm.

The financial-services industry was among the hardest hit by the recession. While Goldman Sachs Group Inc. set aside a record $16.7 billion in the first nine months of the year for employee bonuses, some Wall Street executives will see pay cuts, according to Johnson Associates Inc., a New York-based compensation-consulting firm.

Distress

Year-end bonuses for people at hedge funds, asset- management firms and insurance companies probably will drop an average 20 percent, the firm said.

“There’s a lot of distress,” said Tracy McLaughlin, co- owner of Morgan Lane Real Estate in Ross, California, north of San Francisco. “You have hedge-fund guys whose funds evaporated and a year-and-a-half later they’re still not working.”

The entry-level segment of the housing market was aided this year by an $8,000 first-time buyers tax credit that pushed resales to a 6.1 million annual pace in October, the highest since February 2007, the National Association of Realtors said in a Nov. 23 report.

President Barack Obama signed a bill last month extending the program into next year. The new version keeps the first-time buyer benefit and makes a smaller credit available to some move- up buyers. It can’t be used for homes priced above $800,000.

Luxury Market Left Out

The Federal Reserve set out in January to lower fixed mortgage rates by purchasing $1.25 trillion of bonds backed by home loans. The 30-year fixed rate for so-called conforming loans that can be bought by Fannie Mae and Freddie Mac dropped to an all-time low of 4.71 percent in the week ended Dec. 4, according to McLean, Virginia-based Freddie Mac, the second- largest U.S. mortgage financier. The rate rose to 4.81 percent last week.

The Fed purchases haven’t affected the high end of the market because they exclude so-called jumbo loans. Mortgages above the $729,750 limit set by Congress for the nation’s highest-priced markets cost almost 1 percentage point more than conforming loans, according to Keith Gumbinger, vice president at HSH Associates, a mortgage-data company in Pompton Plains, New Jersey. That’s quadruple the historic spread.

“There is no refinance market for you if you are underwater and outside the Fannie and Freddie framework,” Gumbinger said. “High-end neighborhoods are all suffering from the same problems of diminished income at a time when there is little equity to work with.”

Trapped by Market

Masoud Bokaie, co-founder of engineering firm BORM Associates Inc. in Irvine, California, owes $2.6 million on a 3,664-square-foot house with marble floors and granite counters about 10 miles (16 kilometers) away in Newport Beach. He’s waiting to hear whether lenders Luther Burbank Savings and Wells Fargo & Co. will approve a short sale.

He received an offer last month “close to” the loan balances, said Shirley Cameron, his agent at Coldwell Banker Platinum Properties in Irvine, who declined to specify how much. Bokaie said he doesn’t want to pay $7,000 a month in net costs including the property’s mortgages and taxes when real estate values in the area continue to tumble.

“What’s the point when the market is going in the other direction?” Bokaie said in an interview.

The U.S. median home price was $173,100 in October, 25 percent lower than its July 2006 peak, according to the National Association of Realtors. Prices fell 7.1 percent from a year earlier, the slowest pace of the year.

More Declines Expected

“The reason the low end stopped falling is because the government stepped in with affordable loans,” said Scott Simon, managing director at Pacific Investment Management Co., a Newport Beach-based investment firm that runs the world’s largest bond fund. “There is no political will to bail out a million-dollar house.”

Luxury home prices probably will drop another 5 percent before reaching a bottom in September 2010, according to Sam Khater, senior economist at First American.

Those declines may lead to losses on jumbo mortgages that dwarf the “haircut,” or discount to full value, that banks take on short sales or foreclosures of moderately priced homes, said Rodriguez, the agent with JM Group in Miami.

“When the bank takes a loss on a $3 million property it’s a lot bigger than the loss on a home with a $150,000 mortgage,” Rodriquez said.

To contact the reporters on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net; Dan Levy in San Francisco at dlevy13@bloomberg.net

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Posted in Housing Crisis, Short Sale News, real estate short sales

The Biggest Real Estate Flops of 2009

December 16th, 2009

The high-end real estate market hit new lows this year as multimillion-dollar properties failed to attract buyers even after huge discounts.

by Jason Notte

New-home sales rose 24% and pending home sales jumped 32% in October from a year earlier, but estates with wine cellars, infinity pools and servants’ quarters saw their prices drop 7%. Basketball star Shaquille O’Neal and rapper 50 Cent were among the bigger names to take losses or pull their homes off the market.

Some luxury sellers are still weathering the storm. While the former home of the Detroit Lions took perhaps the biggest beating of the year, the former mailing addresses of Leona Helmsley, Nicolas Cage and Bernie Madoff still have no takers. Here are five property duds whose oversized infamy was matched by their inflated price tags:

1. Dunnellen Hall

Location: Greenwich, Conn.

Price: $60 million

When we first wrote about this property in October, the price had been recently slashed from $75 million. That doesn’t seem bad until you consider that it hit the market at $125 million last year. Nevermind that Leona Helmsley billed her husband’s Manhattan real estate firm for renovations to the estate’s 14 bedrooms, two pools, multiple cottages and million-dollar dance floor with funds and later did time for it. This Jacobean manse is a monument to the sluggish luxury home market in Greenwich, where sales during the first nine months of 2009 were down 46% from the same time last year.

2. Nic Cage’s homes

Locations: New Orleans; Bel Air, Calif.; Rhode Island; New York; the Bahamas; Bath, England

Price: Roughly $56 million combined

When you’re more than $6 million in the red and forced to unload nearly every home you own, suddenly a starring role in The Bad Lieutenant: Port of Call New Orleans doesn’t look so bad. Even if it’s the business manager’s fault, as Cage claims, his homes have been moving like items in a Wal-Mart (WMT) pre-holiday sale — quickly and cheaply. His two homes in “port of call” New Orleans were appraised at $3.7 million and $3.45 million, but only fetched $4.5 million combined at a foreclosure auction last month. Meanwhile, his Bel Air mansion was on the market for $35 million before its price was dropped to $17.5 million. It sold for an estimated $15 million. His $9 million apartment in New York fetched $7 million, and he still may need to sell his $8 million castle in Bath, his $12 million home in Rhode Island and his $9.49 million home in Las Vegas just to make ends meet.

3. Emerald Caye

Location: Turks and Caicos

Price: $48.5 million

As shaky as the luxury housing’s foundation is, it’s firm bedrock compared to the drowning private island market. This 30,000-square-foot property on 2.32 acres of island accessible only by a remote-controlled swing bridge was on the market for $75 million last year, but cut its price 35%. As tough as it must have been to discount a three-story library, 6,000 bottle wine cellar, home theater, fitness room, two swimming pools, tennis and volleyball courts, two boat slips and two guesthouses, that’s just the way things have been for private island sellers this year.

Nick Hexum of reggae-rock band 311 put his 5.5-acre island in the Florida Keys on the market for $10 million in 2006, but cut the price to $3.85 million this year. The still unsold 1,235-acre Nafsika Island in Greece’s Ionian Sea was offered by the Onassis family for more than $21 million before its price was cut in half.

4. Any Bernie Madoff home

AP Photo

Locations: The Hamptons, Manhattan and Palm Beach, Fla.

Prices: $9.4 million, $8.9 million and $7.9 million

Unlike Cage, Madoff is at least assured a home once all his property is sold. From the cozy confines of his federal prison cell in Butner, N.C., Madoff watched as his creditors got $9.41 million from the sale of his Montauk, N.Y., home in October. That was more than the $8.75 million asking price, but it falls short of repaying the $65 million he took (never mind the more than $21 billion in investor losses).

Madoff’s 4,000-square-foot condo in an Upper East Side co-op has been reduced from $9.9 million to $8.9 million, while the 8,700-square-foot Palm Beach house Madoff valued at $11 million was offered for $8.49 million before dropping to $7.9 million.

5. The Pontiac Silverdome

Location: Pontiac, Mich.

Price: $583,000

When Hulk Hogan bodyslammed Andre the Giant here during Wrestlemania III in 1987, it probably didn’t hurt nearly as much as the stadium’s selling price hurt Pontiac. The enclosed stadium, the home of the Detroit Lions and Pistons, cost $55.7 million to build before opening in 1975. Adjusted for inflation, that would be $220 million today.

With all due respect to Michigan’s struggles with the auto industry, a used car salesman would make more selling a 1975 AMC Gremlin than the 0.01% return Pontiac got when a Canadian developer won the Silverdome auction with a $583,000 bid last month. This was the home of Super Bowl XVI.

Reported by Jason Notte in Boston.

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Posted in Housing Crisis

Bank of America goes to Equator for Short Sales Processing

December 15th, 2009

by Winston Westbrook on December 14, 2009

Have you dealt with Bank of America or Countrywide during this golden age of real estate? If you have, I am sure you received nothing but stellar service from them right? If you have received great service Equator from them you better start blogging about it and praising who you dealt with at Bank of America and Countrywide, because all I hear from people around the country is that they are the worst in the business to deal with on short sales, let alone everything else.

Files go missing, are ignored, are misdirected and may even be burned. Some may even be on a bus in Istanbul, for crying out loud! On top of everything else, if you want to just talk to someone about your file, you’ll face super long hold times. It is my opinion that it has been nothing but a nightmare to deal with this institution as an broker, agent, investor, customer or human being.

I recently got word that Bank of America is switching the processing of it’s short sales to a company called Equator Financial Solutions; they were formally called Reo Trans (REOTrans.com). I assume that B of A/Countrywide liked the system that Equator had in place and decided to make the switch.
Will Equator Financial Solutions streamline the short sale process for Bank of America / Countrywide?

This is yet to be determined, but moving the processing of these files to anyone other than themselves, is a welcome sigh of relief for the the industry, for sure.

If you currently have a short sale file that been assigned a negotiator, your file will continue to be processed through the old system. If your file has not been assigned a negotiator then it will most likely be converted over to the new system at Equator.

One Very Important thing to know is that Bank of America is changing their legacy (banks that were acquired by or merged with B of A) loan numbers to a new 9 digit number. Without this new number you cannot initiate the short sale process in the new system. Customers should have or will be receiving this number shortly; contact customer service for the new account number if you have not yet received it.

In the meantime I recommend you go set up an account with Equator if you are:

* Agents: You will now be able to upload and start the short sale process directly online with them. You can also benefit by getting access to do BPO’s and possible listings.
* Investors/Buyers: Signing up with them allows you to get a heads up on current and future listings in your area. We always want the upper hand, right guys? Don’t forget it’s a free service; other companies charge an arm and a leg, so take advantage of the e-mail alerts.

Hopefully this new system will help bring short sale closing times down considerably. Nothing but a win win situation for all.

Good luck in all you do America!
http://www.biggerpockets.com/renewsblog/2009/12/14/bank-of-america-goes-to-equator-financial-solutions-short-sales-processing/

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Posted in Short Sale News

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