California Home Equity is Up, But Distressed Owners Are Still Among Us

Distressed property owners have not disappeared totally.  A review of the Los Angeles County tax records today for the entire Long Beach area shows 257 residential properties in pre-foreclosure status.  Who's represented?  Property owners in all zip codes and while I didn't make an exact count, adjustable mortgages seemed to predominate.  This is unfortunate, because while many more owners are now benefiting from the upward trend in values, many are still affected by loss of job or short term jobs or lower paying jobs in the face of an upward increase in their mortgage, just to name a few reasons.

Owners who have attempted loan modifications may not have met all the hardship requirements, or they do not have enough income to refinance under today's more stringent-i.e., traditional-loan guidelines. And so, like the TV advertisements show us, they "freeze" up, unable to take action, and unable to come to the decision they might need to sell and relocate.  If you or someone you know falls into this category, short of finding a financial benefactor, the choices may be to sell, go into foreclosure, or continue to struggle if you possibly can.  One of the dividing lines for being eligible for loan modification or short sale assistance is whether or not your property value is still (much) lower than what you owe, OR you have experienced a qualified economic hardship.

Under a current California program, an owner may be eligible for up to $5,000 in transition assistance, loan principal reduction, unemployment mortgage assistance, and loan reinstatement assistance.  Also, Bank of America and other banks still offer their transition assistance programs for people in short sales. This program does not do loan modifications--for that you need to go directly to your servicer--but it does offer 4 other types of help.

For more information on this program, go to http://keepyourhomecalifornia.org, a program run by California Housing Finance Agency (CalHFA) with $2 billion in funds through the Hardest Hit Fund of the U.S.Treasury.  The site includes all information about eligibility, the participating servicers, and income requirements.  Over 43,000 California homeowners have been helped. 

Long Beach is Among the Top 10 Markets in the Country

Homes Along Alamitos Bay, Long Beach

The top 10 markets in the country right now are ranked as follows, according to Michael Sklarz, principal of Collateral Analytics and contributing author to Home Value Forecast :

Top Markets

1. Boston-Quincy, Massachusetts
2. Cambridge-Newton-Framingham, Massachusetts
3. Indianapolis-Carmel, Indiana
4. Santa Ana-Anaheim-Irvine, California
5. Oxnard-Thousand Oaks-Ventura, California
6. Raleigh-Cary, North Carolina
7. Los Angeles-Long Beach-Glendale, California
8. Wichita, Kansas
9. Colorado Springs, Colorado
10. San Antonio-New Braunfels, Texas

The high end markets in the Bay Area and around Los Angeles are showing stronger price growth compared to lower priced markets. The buyer profile shows lower loan-to-value mortgages, and are affected less by the current tight underwriting circumstances.   Manhattan Beach has seen prices rise to all-time highs; Los Angeles County may be in the early stages of an upward price cycle.  These markets were included in the top 10  "based on factors such as sales/listing activity and prices, months of remaining inventory (MRI), days on market (DOM), sold-to-list price ratio, and foreclosure and REO activity."

Is this a permanent situation? A company called Radar Logic says that the current rise in prices is unsustainable, and that the entry of so many investors with all-cash may actually be dampening growth, and that this situation will not last with even growth into the future for some time to come.  Diminishing inventories have helped fuel sudden price growth, and "Corporate investors were most active during November in hard-hit markets. In fact, half of all corporate purchases took place in just five markets-ones considered especially affected by the housing crisis. Those markets include Miami, Los Angeles, Phoenix, Atlanta, and Las Vegas," areas where investors paid 25% more in November, 2012 than the same time the previous year.

What's the 2013 Prediction for California Home Prices?

Assumptions:

The PITI is based on the prevailing median price in the

2nd Quarter 2012. The PITI is calculated based on an

 underlying effective FRM interest rate of 3.92%,

 a 20% downpayment,

and corresponding loan amount.

The monthly rent is derived from

RealFacts Q2 2012 estimates for a

3bd 2ba average asking rent.

The California Association of Realtors annual conference was held earlier this month in Anaheim.  The 2013 Forecast extensively covered all phases of the residential market, with a total of 136 PowerPoint slides as part of CAR economist Leslie Appleton-Young's annual presentation. 

At the closing section, Market Opportunities for 2013, four points were made:  1) Home prices are rising, but still very attractive; 2) Look for return on interest for investment opportunities; 3) interest rates are at historic lows; and finally, 4) first-time buyers: rent v. buy?  Do The Math!.

The current story for many buyers and sellers has twists and turns all along the road, but it's still a time to not be passed up!

For California, the median price of a single family home is projected to rise in 2013 from $317,000 at the end of 2012 up to $335,000 in 2013.  At this point, buyers are more optimistic than sellers about future home prices:  49% of sellers think prices will go down in one year, and 9% of sellers think they will go up.  But while 49% of buyers think prices will stay flat, 25% of buyers think prices will go up.  And those buyers are probably going to be right--last year the projected price increase for 2012 was for a 1.7% increase, but the current projected actual increase by the end of 2012 is 10.9% increase.

Median home price for So Cal Counties

The median home price in Los Angeles County went up over 10% from August 2011 to August 2012, with REO sales making up only 12% and short sales making up 24% of the total sales in August 2012.

Market Update, And More Home Price Directions Are Moving UP

California prices by county

The median price paid for a Southern California home rose to $309,000 in August--that's an overall median for Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties--that's an increase of 10% compared to August 2011, and the highest median price since August 2008's median of $330,000.

Short sales and foreclosures (the distressed property market) are trending downward by 1%-2% from  July and previous months.  That does not mean they are going away, because the distressed property market is predicted to be here for a long time into the future.  The good news is that higher prices mean a lift out of the short sale category for some prospective sellers, or a higher net from a sale to put towards a new purchase. Short sales in the 6-county area were about 17% of sales, but locally, there are specific areas where they are still 50% or more of the market.

Drops in foreclosure inventory,  increases in sales of higher priced properties are part of the increase in home price.  The increase in numbers of properties in escrow is impacted by the lowest interest rates since the 1940s, which are likely to stay that way for some time into the future, this August was the highest August sales in the last 6 years.  The volume of sales however, is still 15% below the average calculated since 1988.

Investors, or "absentee buyers" bought 27% of the homes last month, and buyers paying with cash were 31%, paying a median amount of $235,000, an increased amount from last year.

Credit conditions for buyers, and therefore for sellers, are strict.  Buyers who currently occupy their homes and want to purchase a new one not only must meet all those loan requirements, but satisfy the lender's requirement for at least 30% equity or more in their property. If your property is currently a rental, the property's equity may not be an issue assuming you have satisfied other lender conditions.

Find more local trends for houses and townhouse/condos in Los Angeles and Orange Counties including housing affordability, months of inventory, median sales price (now up at 5.9% at $450,000 for the region covered by this report), and local inventory amounts. Just go to my site for this local regional report that covers cities including Lakewood, Long Beach, Cerritos, Seal Beach, Huntington Beach, Newport Beach down to Aliso Viejo and Rancho Margarita, out to Yorba Linda and Placentia, and many more cities in between.  A more specific report is available by zip code (here is 90713 in Lakewood) or by city--this one is for Long Beach.

For a copy of your local report, please contact me and I will be happy to send it to you.

Some selected prices:  the highest median sales price in the local region:  Corona del Mar at $1,700,000; Cerritos, $499,900; Long Beach, $320,000; Signal Hill, $410,000; Cypress, $422,500.

Click on the link to see Dataquick's Southern California report for August. Do you want to find out your home's current value?

Please go to What is My Home Worth for more information.

What to Know about the Mortgage Settlement with 5 Major Servicers

The Road to Solutions

The $25 billion proposed settlement with five major banks/servicers has not yet been approved by a judge. However, assuming it is as proposed, Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial will agree to stop the practice of robo-signing, to change their loan modification procedures, and to not foreclose on borrowers who are being considered for a loan modification. A single point of contact and adequate staff to handle consumers are also to be established by each bank. Approximately $20 billion is to go to those facing foreclosure--principal loan reduction and refinance--and $5 billion goes towards settling with consumers who lost their homes due to improper foreclosures between 2008 and 2011. Part of the settlement agreement will result in new requirements for short sales, which is supposed to speed them up and eliminate the often lengthy delays. A fact sheet describes cash payments to borrowers who went through foreclosure.

This settlement is not yet finally approved by a judge--a 4-page executive summary describes key points of the current proposed settlement.

It's important to know that FNMA and Freddie Mac loans are not included in this settlement, and that over half the loans in California in recent years are held by them.  To find out, go to their respective websites and use the Loan Lookup Tool.

California's Attorney General obtained $18 billion specific to California for benefits, and amounts allocated to counties.

It will probably take another 6-9 months for banks to reach out to owners they believe fit into this settlement, and the banks are given 3 years to fully execute the settlement.  As of March 16, Katherine Porter, a UCI Law professor, has been appointed to oversee the California settlement.

Borrowers may call the contact numbers below, but be aware information right now may be incomplete because the administration of this program has not yet begun.

• Ally/GMAC: 800-766-4622
• Bank of America: 877-488-7814
• Citi: 866-272-4749
• JPMorgan Chase: 866-372-6901
• Wells Fargo: 800-288-3212

If you or someone you know is unsure of your best option, the first thing to understand is that a refinance, loan modification, short sale, deed-in-lieu or foreclosure is a "waterfall" to be taken in sequence.  The borrower, to be successful, must spend the considerable time required and be prepared to gather the necessary documentation regardless of which option you work with--this cannot be stressed enough.  While contacting banks was a very frustrating and confusing process just 2 years ago, major servicers are much more streamlined, and now with this Settlement, face even more requirements to help borrowers.  Each servicer now has information on their websites about short sales, deeds-in-lieu and foreclosure, and a very informative and useful one is found at www.bankofamerica.com/hometransition .  Think twice before choosing the ultimate option of foreclosure without checking out the others first, and do this at the earliest possible date.  Additional resources are at http://www.juliahuntsman.com/homeowner-property-assistance.html

The borrower is also strongly advised to reach out to an experienced Realtor professional, legal and/or tax advisor, to reduce the time spent in this process and to have an important resource to guide them.

Website on the Settlement:  http://www.nationalmortgagesettlement.com/help

Distressed vs. Equity Market in the Long Beach Area

There seems to be a perception (among some people) that high end or "luxury" areas are somehow immune to short sales and foreclosures--but that's not true. The subprime loans, originally targeted for "B" and "C" borrowers, eventually made their way into the "A" borrower range, the borrowers most often buying in the high end price range, because of the tempting terms offered by lenders at the time.  Other factors for distressed sales in those areas are that the accumulated market conditions caused job layoffs or other income reduction, and/or the market value drop caused a short sale or foreclosure in a forced relocation for a borrower otherwise current on mortgage payment. In the high end market areas, many sellers with equity who could not sell simply delayed their plans and took the home off the market if it didn't sell.  But others who needed to sell proceeded with a short sale listing, hoping to find a buyer.

• For all of 2011, in the 90803 zip code (Naples, Belmont Shore, Bluff Park, Belmont Park, Belmont Heights), approximately 28% of single family homes in the $440,000 to $1.4 million market sold under distressed property conditions. Out of 172 single family home sales listed in the MLS, 47 were designated as a distressed property sale, most of those being short sales.   Condos distressed sales for 2011 were 37 out of 122, or 30% of the condo market in 90803.
• In the 90814 zip code (Alamitos Heights, and adjacent areas), 34% of single family homes in the $400,000-$900,000 range sold as distressed properties in 2011.

These figures are lower than Long Beach as a whole for 2011, where according to the MLS, 46% of all single family homes sold in Long Beach sold under distressed property conditions.  (These figures for all areas may be lower than the true picture, because some properties are listed as "standard sale" when in fact they are recently foreclosed properties being re-sold by banks which impose their own contract conditions upon the buyer--so they really aren't a standard sales according to standard Realtor contract terms.)

• In Cerritos, approximately 33% of single family homes listed in the MLS, or 77 out of a total of 231, sold as distressed properties in 2011.
• Lakewood's distressed single family home sales in 2011 constituted 47% of all single family home sales, comparable to the entire city of Long Beach for distressed home sales.

There really isn't any place that is immune to this category of transaction, certainly not in Southern California. For a consultation about your residential property value, and what you may be able to do, please contact me, or visit my website at www.juliahuntsman.com at "Help for Homeowners".  Don't be one of the potential sellers who does not investigate all options, the bank would really rather have a sold property, a modified loan, a re-finance, rather than a foreclosed property--it helps their values as well.