The drop means the number of people losing their homes will start to fall. But some pain from the crisis is sure to persist. Because millions of people are already in foreclosure, deeply discounted houses will put pressure on home prices for years.

“Housing is on a path to recovery,” said Mike Larson, a real estate analyst with Weiss Research. “It’s going to be a very long, gradual process.”

In high-foreclosure cities like Las Vegas, Phoenix and Miami, homes have lost roughly half their values from their peaks. But a report Friday from the Mortgage Bankers Association showed Nevada, Arizona and Florida had some of the biggest declines in new delinquencies.

The figures probably mark “the beginning of the end” of the crisis, said Jay Brinkmann, the trade group’s chief economist.

However, more than 15 percent of homeowners with a mortgage have missed at least one payment or are in foreclosure, a record. Worse, nearly half of all delinquent borrowers were at least three months behind on their payments, up from a typical level of less than 20 percent.

“The bad news is that we still have a big problem,” Brinkmann said. “The good news is it looks like it may not get much bigger.”

That’s because the percentage of borrowers who missed just one payment on their home loans fell to 3.6 percent in the October-to-December quarter from 3.8 percent in the third quarter, according to the Mortgage Bankers Association. That decline was even more surprising because delinquencies usually rise at that time of year due to higher heating bills and holiday spending.

In another encouraging sign, the number of borrowers who had missed at least one payment but were not yet in foreclosure also fell for the first time since the beginning of 2007.

Banks are delaying the foreclosure process, traditionally between four and six months, as they evaluate borrowers for help under the Obama administration’s $75 billion mortgage-relief effort. It lowers borrowers payments to as low as 2 percent for five years and extends loan terms to as long as 40 years.

But experts warn that hundreds of thousands of borrowers will not be eligible or will not complete the process. So far, only 116,300 borrowers out of 1 million who enrolled have had the terms of their mortgages changed permanently.

Despite the government’s efforts, there may be 6 million foreclosed homes that are put on the market over the next three years, according to Barclays Capital.

Timing is key. If banks unload them suddenly, “it will be much more detrimental to the housing recovery than if it’s a slow, gradual bleed,” said Michelle Meyer, a Barclays economist.

On Friday, Obama announced that housing agencies in the five hardest-hit states of Arizona, California, Florida, Michigan and Nevada will receive $1.5 billion in financial rescue money.

It will go to local programs to help unemployed homeowners, “under water” borrowers who owe more than their home is worth, or to give lenders incentives to assist borrowers with second mortgages. The programs will need to be approved by the Treasury Department.

“Government alone can’t solve this problem,” Obama said. “But government can make a difference.”

In a briefing with reporters, administration officials acknowledged that the effort was just a small one. But they said it could help develop broader national solutions. “What we’re trying to do here is foster innovation,” said Herbert Allison, an assistant Treasury secretary.

Property sales in the Sarasota market were 58 percent higher in January 2010 than in January 2009, and pending sales were also strong, topping the 800 mark for the first time since October 2009.
 
In sharp contrast to the first month of last year, January 2010 saw 506 overall sales, compared to only 319 sales in January 2009. In addition, pending sales surged by over 10 percent from December 2009 to a total of 815. The statistic is a strong indicator for the next two or three months of sales, as pending sales are an indicator of current buyer activity. Last January, pending sales stood at only 683.
 
Median sale prices in the Sarasota real estate market dipped in January 2010 for both single family homes and condos. The median sale price for a single family home was $156,250, down from last month’s figure of $170,000, but up slightly over last January’s figure of $149,950. For condos, the median price dropped to $165,000 from last month’s figure of $199,000, and significantly lower than last January’s figure of $220,000. For the last 12 months combined, the median sale price for single family homes was $160,000, while the median sale price for condos was $189,900.
The January median sale prices generally reflect the continuing high percentage of short sales and bank-owned foreclosure sales in the Sarasota market. The January percentage of distressed sales rose to 48 percent, from December 2009′s figure of 42 percent. Two distinct markets remain in force in Sarasota.
 
Normal arm’s length property sales continue to show median sale prices roughly 150 percent higher than distressed property sale prices. Bank-owned sales are bringing in a median price of roughly $80,000, while for short sales the price is roughly $120,000. For normal arm’s length sales in January 2010, properties were sold for a median price of approximately $250,000 – more than double the prices for distressed properties.
 
“Our market is rebounding from the recession, particularly in the category of normal arm’s length transactions,” said 2010 SAR President Erick Shumway. “We are seeing a stark contrast between these two markets, and this probably reflects the fact that some buyers don’t want to wait for additional months often involved in closing a purchase of a distressed property. Also, the condition of normal, non-distressed properties can be far superior to the short sales and foreclosures on the market. Once the number of distressed properties begins to drop substantially, we should see the median sale prices start to recover.”
 
The first-time homebuyer tax credit, extended and expanded to include many other homebuyers on Nov. 6, should continue to help propel sales in the first quarter of 2010. The credit expires in April, and local Realtors® are working hard to ensure their qualified buyers can take advantage of the $8,000 and $6,500 credits.
 
The property inventory level rose in January 2010 to 6,342 from the December 2009 total of 6,020, an expected increase during the traditional winter months when many snowbirds return to the Sarasota area. But the inventory level remains at near the lowest level since late summer of 2005 and the years prior to the boom period from 2003 – 2005.
 
The months of inventory for single family homes was 11.5 months, compared to 25.3 months in January 2009. For condos, the months of inventory was 14.7 months in January 2010, compared to 38.4 months only a year ago – a remarkable improvement in the health of the real estate market.

Justin Shirley
CEO
Shirley International Realty
941.448.4872
www.JustinShirley.com

FHA on track for busiest year

WASHINGTON – Sept. 2, 2009 – Almost a year after the federal government launched its rescue of the housing market, nearly one in four new mortgages is insured by the Federal Housing Administration (FHA).

With less than a month to go in the 2009 fiscal year, the FHA is on pace for its busiest year.

From Oct. 1 through mid-August, applications for FHA single-family-home mortgages were up 50 percent, to 2.52 million, from the same period a year earlier.

Approvals for purchases, refinancings and reverse mortgages rose 70 percent to 1.67 million.

Eighty percent of the FHA mortgages for purchasing homes went to first-time buyers drawn to the FHA’s low-downpayment requirements, starting at 3.5 percent. Private lenders making conventional loans typically require at least 10 percent down.

The FHA’s market share, about 3 percent in 2006, has swollen to more than 23 percent. With credit still tight, many borrowers could not get a mortgage without FHA help.

FHA loans “are one of the most important sources in this market,” says Mark Zandi of Moody’s Economy.com. “Without FHA, the housing slide would be much more severe. We wouldn’t be talking about a recovery now. We’d still be talking about a crash.”

FHA loans also have become more popular because of the demise of many subprime lenders, which sometimes allowed buyers to purchase a property with nothing down and no documentation of income.

In addition, FHA increased its loan limits at the beginning of the year. Previously, the maximum had been $362,790. The new ceiling raised that to $729,750 in high-cost areas such as Boston, New York and Washington, D.C.

Also fueling demand for FHA-insured loans is this year’s tax credit of up to $8,000 for first-time home buyers.

But as FHA insures more loans, it is also assuming more risk.

Foreclosures on homes with FHA mortgages rose to 1.76 percent in June from 1.6 percent a year ago, and the default rate – for mortgages 90 days or more delinquent – was 6.88 percent, up from 5.57 percent.

“I’m very concerned about risk,” says FHA Commissioner David Stevens, who adds that risk is mitigated in part because applicants today are more solid than those in recent years.

Borrowers with FHA-insured loans now have average credit scores of about 690, compared with about 630 two years ago.

FHA also has tightened lending standards, requiring a 10 percent downpayment for those with credit scores below 500.

Copyright © 2009 USA TODAY, a division of Gannett Co. Inc., Stephanie Armour.

(Fueled by Record Low Mortgage Rates, Home Buying Incentives, & Low Pricing, Cheif Economists for Nar, Lawrence Yun Expects  Existing Home Sales to Rise About 17%)

WASHINGTON – Sept. 1, 2009 – Contract activity for pending home sales has risen for six straight months, a pattern not seen in the history of the index since it began in 2001, according to the National Association of Realtors® (NAR).

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in July, increased 3.2 percent to 97.6 from a reading of 94.6 in June. It’s also 12.0 percent higher than July 2008 when it was at 87.1. The index is at its highest level since June 2007.

Lawrence Yun, NAR chief economist, says housing market momentum has clearly turned for the better. “The recovery is broad-based across many parts of the country. Housing affordability has been at record highs this year with the added stimulus of a first-time buyer tax credit.

“Other buyers are taking advantage of low home values before prices turn higher,” Yun says. “Nationally, the typical mortgage payment now takes less than 25 percent of a middle-income family’s monthly income to buy a median priced home, with payment percentages so far in 2009 being the lowest on record dating back to 1970. As long as home buyers stay within their budget, mortgage payments will be very manageable.”

NAR estimates that about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit. Buyers have little time to act because they must complete the transaction by Nov. 30 to qualify for the credit. Unless extended, contracts signed but not completed by that date will not be eligible – it is taking approximately two months to complete home sales in the current market.

The Pending Home Sales Index in the Northeast declined 3.0 percent to 78.8 in July but is 4.7 percent higher than July 2008. In the Midwest, the index slipped 2.0 percent to 88.1 but is 8.1 percent above a year ago. In the South, pending home sales activity rose 3.1 percent to an index of 103.8 in July and is 12.0 percent above July 2008. In the West the index jumped 12.1 percent to 112.5 and is 20.0 percent above a year ago.

NAR President Charles McMillan says Congress needs to keep the momentum going. “Even with a good recovery taking place, the market is not yet back to normal. With a gradual absorption of inventory, we are on the cusp of a general stabilization in home prices,” he says. “To ensure that housing has a broad stimulus to the overall economy and stays on sound footing, we’re encouraging Congress to extend the tax credit into 2010, and to expand it to all buyers of primary residences. The faster we stabilize home prices, the fewer families will face foreclosure and the quicker the credit can be extended to other sectors of the economy.”

NAR’s Housing Affordability Index (HAI) stood at 158.5 in July – below the peak set in April but still 36.0 percentage points higher than a year ago. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.

Yun expects existing-home sales to rise through the fourth quarter. “Unless the tax credit is extended, no one should be surprised to see home sales drop in the first quarter of next year,” he said. “However, the fundamentals of the housing market and the economy are trending up, and we expect home sales to generally pick up in the second quarter of 2010. The buyer psychology may be shifting from, ‘Why buy now when I can purchase later,’ to ‘I don’t want to miss out on a recovery.’”

© 2009 FLORIDA ASSOCIATION OF REALTORS®

Real estate auctions: Top bid no guarantee of a sale

CHICAGO – Aug. 31, 2009 – The atmosphere is electric, the deals can be dazzling, and the process can turn a bidder into a home buyer seemingly in a matter of minutes.

But as interest in real estate auctions grows, bidders are finding out it pays to read the fine print, be prepared and realize that it’s best not to hire the movers until the deal, not the auction, is sealed. Not everyone who “wins” at an auction walks away with a new home.

Consider Cicero resident Karina Castaneda, who happily left an auction in late June thinking she’d just purchased her first home.

She had the winning bid on a four-bedroom, 2 1/2 -bath town home at Enclave at Galewood Crossing on Chicago’s West Side. Her bid and the associated fees totaled about $120,000. She put up $5,000 of earnest money at the auction, signed the necessary documents and a few days later was e-mailed more forms to sign.

Then she received a phone call from auctioneer Rick Levin & Associates that the developer, Red Seal Homes, was not accepting her bid. Confused, Castaneda said she called Red Seal and was offered a different unit for a price closer to $200,000.

She declined and felt wronged.

But language in the contract gave the developer the ability to reject her bid, even though it was the highest bid. Now, Castaneda is back in the market for a home and hasn’t ruled out auctions, because of the price breaks they offer.

“I figure, what are my chances that it will happen twice?” she said.

Brian Hoffman, Red Seal Homes’ vice chairman and chief financial officer, did not return phone calls for comment.

Thursday’s auction of the former Chicago post office demonstrates the care that needs to be taken by bidders. Despite advertising that the building would be sold “absolute,” meaning to whoever made the highest bid, a potential bidder went to court to postpone the event, arguing that language in the contract was unclear and made it sound like the winning bid could be rejected. The auctioneer, Rick Levin & Associates, disagreed with the interpretation but agreed to remove the language, and the event proceeded as scheduled.

The use of auctions as a sales technique has been growing all year, and auction companies expect the late summer and fall to yield a bumper crop of events since foreclosure moratoriums have expired and home builders have grown more desperate to shrink their inventory.

As interest in auctions has grown, the industry is trying to better educate potential bidders about what it admits can be a complicated process, particularly during the heat of the moment at fast-paced events.

Auction companies are posting pictures of properties and open-house dates on their Web sites. Copies of an auction’s terms and conditions and the sales contract are usually available there too.

Auctioneers also are trying to do more due diligence themselves, to help sellers appropriately price properties so they will sell, rather than the auctions just being used as a marketing tactic.

Bank foreclosures may provide the best opportunities for consumers, because lenders are anxious, said Paul Rogers, managing broker of Inland Real Estate Auctions, who thinks the uptick in auctions is only just beginning.

“A lot of these banks were sitting on these bad deals and hoping these things were going to turn around, and now they realize the problems aren’t going to go away,” Rogers said. “They want to structure these deals so the properties and the problems go away.”

A concern about falling comparable prices also is prompting more developers, and the lenders who hold their loans, to consider selling their best homes at auction this fall before more distressed properties enter the auction system.

“People that sell now will do better than if they sell later,” said Michael Fine, executive vice president of Sheldon Good & Co. “As the better properties get sold now, the lesser properties will be left, and that will drag down comparisons.”

Enrique Martinez decided now was the time to buy through an auction. The Downers Grove resident had never been to an auction but was intrigued by one advertised for 40 new units at Seven Bridges Condominium Residences in Woodridge.

He went to see the property three times and participated in a mock auction run by event organizers to try to get comfortable with the process.

Late last month, during what he described as a “nerve-racking” afternoon in a hotel ballroom in Lisle, Martinez had the winning bid of $200,000 for a 9th-floor golf-course-view unit that originally was priced at $420,000. The closing went without a hitch.

Altogether, the developer closeout auction, in which 13 of the 40 units were to be sold subject to a minimum bid, resulted in 24 sales.

Now, Martinez is deciding whether he should keep the condo as a weekend getaway or rent it out.

“Even if the values go down, I don’t think I can lose money,” he said.

Copyright © 2009 Chicago Tribune, Mary Ellen Podmolik. Distributed by McClatchy-Tribune Information Services.