In responding to the monthly REALTOR® Confidence Index Survey, REALTORS® frequently provide written comments on their understanding of the state of the housing market in addition to answering specific questions. This information is generally of a qualitative nature. This month we received over 1,000 comments, which are summarized below along with a sample of the specific comments received.
The most notable comments were on short sales and foreclosures. Short Sales are a matter of extreme frustration to the respondents: the sales appear to involve inordinate delays, and sales frequently fail to close-with the property subsequently going to foreclosure and selling for less than the short sale offer. The foreclosure market is active, frequently with multiple bids although at significantly lower prices than bids for comparable non-distressed properties. Credit, condos, and appraisals continue to have a number of issues, and there is increasing concern over FHA tightening of lending policies in the condo markets.
Appraisals
The Appraisal process continues to be a major problem. Respondents noted that the use of appraisers unfamiliar with a market area coupled with a perceived focus by appraisers on finding lower valued comps presented problems.
• Two of the biggest obstacles that we will face this year are restrictive lending and appraisals coming in low.
• Appraisal challenges continue to plague the housing recovery. Out of area appraisers lack the local knowledge to accurately value a property.
• Appraisal problems because of listings for short sales unapproved at low prices. It alters true buyers’ perception on value as well.
• Appraisals are a nightmare. Appraisers are undervaluing homes, which is hurting the bottom line on housing sales.
Foreclosures
Foreclosures frequently elicit multiple bids. The foreclosures market is very active. Many foreclosures result in cash purchases by investors rather than mortgage financed purchases by first-time buyers.
• Many transactions are either bank owner or short sale transactions.
• Appears more foreclosures may be on the way due to banks inability to work with current mortgagees.
• Appears to be lots of multi-bidding on foreclosed homes priced $60K to $100K.
• Bank foreclosures lest than $250,000 are typically selling in multiple offers for up to 5 percent over list price.
• Appraisers are artificially keeping the market down.
• Bank owned homes selling rapidly, often with multiple bids as buyers are not wanting to wait out the long short sale process.
• Bank owned properties tend to pick cash buyer offers over financed offers even though they are typically lower.
• Investors are buying pup all the affordable homes before they hit the market, leaving us with very little inventory and 15 to 60 offers on a property.
Short Sales
Short Sales continue to pose a problem to Realtors®. Typically short sales are very slow to close, frequently are not accepted by the bank, and by the time they are accepted buyers have lost patience with the process and found a different property. In addition, once a short sale is accepted, financing is sometimes impossible.
• The financial institutions are taking too much time to make a selling decision, causing many buyers to withdraw offers.
• A lot of agents will not show short sales because of the length of time to get an acceptance for a sale.
• A short sale is never short and usually is not a sale.
• A lot of the homes for sale currently are short sales and foreclosures. Many of my buyers are investors.
Credit
Credit continues to be tight. Respondents noted problems with getting paperwork processed in a timely manner as well as unrealistic and/or unreasonable demands for review and verification of credit details. In addition, respondents noted problems with lender requirements for unrealistic credit scores and excessive down payments.
• Buyers are surprise at how the process has changed. Many are dismayed at the lending process and the amount of “Additional Information Requests” that are required. Some are shocked at how little they are approved to borrow.
• Buyers unable to qualify, even with 20 percent or 25 percent down and good credit.
• Credit is tightening until the money cries out. Very worried about this.
• Credit is still tight. The jumbo market in particular.
• Mortgages are difficult to get, but interest rates are great.
• Mortgages are taking from 15 to 120 days longer than lenders tell buyers.
• Mortgages are taking more than 6 weeks sometimes up to 3 months to get a commitment letter. There is always one more document to obtain and sometimes they don’t even know that they have documents on file that they are requesting.
• It does not matter how much paperwork you give them. As soon as they get it they want more.
• The market at the lower end is increasingly active. The upper end of the market is slow, probably due to financing and move up problems.
• $1 million homes starting to go under contract at deep discounts. Traffic picked up significantly in November but mostly low end homes.6
• I am in the Jumbo market, and there is almost no activity. Buyers do not qualify for jumbo loans.
• The upper bracket is a very tough market and sellers for some reason do not want to accept the reality that their home is closer in worth to 2003. They still want to list high!!!
Condos
There are significant problems in selling condos. The collection of ongoing condo fees, excessive concentrations of renters, and loan availability are mentioned as impediments to transactions.
• Condo loans are almost impossible, causing buyers to give up while waiting forever for approval or meeting unreasonable requirements.
• Condo market would be much stronger if FHA loans were allowed on all complexes and information on condo law approval being marketed to general public and target of first time buyers and college grads.
• Condo mortgages are extremely hard to come by.
• Condominiums in certain areas are having difficulty selling due to requirement and risk reduction in the banking industry.
• Condos have been difficult to sell if they are not FHA approved.
• Condos in general are tough to sell because of the high rate of delinquency in the payment of association fees and because of mortgage credit requirements.
• Condos under $300 K are in high demand due to the first time buyer tax credit.
• High HOA fees are killing the condo market.
• I sell condominiums and it is VERY difficult to get financing.
• I am SO concerned about the new ruling for condominiums: there can only be 30 percent FHA loans in a complex. The government will be causing more foreclosures.
• Some of the property management companies are having problems because owners are not paying common charges because of the weak economy.
FHA Policies on Condos
A number of respondents expressed concerns over FHA policies concerning condos.
• A special problem for Condos and Townhomes is that many are not preapproved by Freddie Mac or FHA and it is nearly impossible to get a loan for these properties.
• Almost impossible to finance condominiums.
• Currently uncertainty over condo sales due to FHA approval issues concerning condo complexes.
• Can’t sell condos. Most buildings don’t qualify with new FHA standards.
• FHA guidelines are becoming very strict. Very hard to obtain financing for some buyers.
• FHA is requiring documentation for loans that I have never encountered before.
• FHA is tough. We had a client close a credit card during the mortgage process. Closing the card also closed their credit history. FHA denied the loan because FICO score dropped.
• FHA mortgage credit difficult to get approved Takes 45 to 60 days to close. Documentation requirements excessive.
• Condos located in large high-rise buildings often do not qualify for FHA loans because of higher renter/owner ratios.
• The restrictions that lenders are putting on condos are hurting the market. I live in a condo and we don’t qualify for FHA and some units have been on the market for over 2 years.
Changing Buyer Preferences
• Preference for smaller because of higher utilities, maintenance and competition with investors.
• There is no urgency for our buyers to move; therefore, buyers wait for “the bottom”.
• A larger number of Seniors are staying in their homes rather than moving to a Senior community, in hopes that the prices will go back up some at least before they Have to sell.
• This perspective may never see the light of day, but there’s more bad news to come. The effect of the looming commercial default has the potential for increasing real estate losses.
• Buyers are looking for smaller homes now because of the energy bills.
• Buyers are purchasing for the first time but are still looking for prices that are not there. They are up against investors that will pay cash versus asking the seller to pay closing costs.
• Buyers have higher expectations for quality and condition than previous years. Prefer close to town and accessibility to services with low tolerance to taxes.
• Buyers still unrealistic-they get a great bargain and still try to bleed the seller/bank. They think since it’s a buyers’ market THEY can impose their demands.
• Due to media-induced expectations, today’s buyers have very high expectations and want updated properties for greatly reduced prices. Repair negotiations are a huge challenge today as a result of buyer feelings of entitlement and work orders from FHA.
• Formal living rooms and dining rooms are going out of style because it is unused living space.
Tax Credit
The tax credit was frequently mentioned as helping the lower end of the market-that part of the market that is most active.
• First time buyers are causing houses between $80K and $125K to sell quickly. Keeps prices up in that price range.
• First time buyers taking advantage of tax credit the predominant buyer. Most do not want to get involved in short sales because they may miss the deadline, further affecting short sale values. Financing requirements are sometimes ridiculous.
• First time home buyers due to incentive program is what is driving the market.
Additional Market Commentary
• All the buyers my husband and I have taken out in the last six months are facing multiple offer situations. There have been in the $100-$150 K range.
• All my potential buyers want a STEAL.
• All the activity is in single-family residences at the low-end. This is a SELLERS market. The rest of the Market is DEAD.
• Buyers are asking for “deals”-they’re mostly looking to try to “steal” something.
• Many of our sellers still think it is 200 5 and the decline in prices doesn’t apply to them. Good, strong, even cash offers come and they turn them down.
• Buyers expect an absolute bargain and that sellers will take whatever is offered.
• Sellers are pricing at very close to exactly what they are willing to take, and buyers are still expecting to get houses at 60 cents on the dollar.
• On the majority of homes I’ve been out to do a listing presentation within the past six months the prospective sellers are not pleased with the amount I tell them they can expect to receive as offers. Homes are worth barely what they paid for them in the past 3 – 4 years.
-By Jed Smith, Managing Director, Quantitative Research
very interesting post. thanks for sharing.