The White House temporarily suspends a rule that imposes a 90-day waiting period before foreclosed homes can be sold to receive government loans.
WASHINGTON (AP) -- The Bush administration is temporarily suspending a 5-year-old rule intended to deter property flippers, as part of an effort to help speed the sale of foreclosed properties.
For one year, the Federal Housing Administration will no longer impose a 90-day waiting period before foreclosed properties can be sold to receive government-backed loans.
The policy was put in place in 2003 to deter property "flipping" schemes, in which buyers are overcharged for foreclosures or other distressed properties. But the surge in vacant properties resulting from borrowers who were unable to afford their mortgages has become a far more pressing concern.
"A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community's recovery," FHA commissioner Brian Montgomery said in a prepared statement.
The new policy "will allow homebuyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes," Montgomery said.
Nationwide, 261,255 homes received at least one foreclosure-related filing in May, up 48% from the same month last year, and up 7% from April, foreclosure listing company RealtyTrac Inc. said Friday.
Wednesday, June 18, 2008
Monday, June 09, 2008
Lenders slash prices to dump foreclosed homes
Article from MSNBC.com
Lenders slash prices to dump foreclosed homes
Lenders slash prices to dump foreclosures, days of multiple offers return
The Associated Press updated 11:18 a.m. MT, Sun., June. 8, 2008
Lenders stung by the housing bust are slashing prices dramatically to rid themselves of an unprecedented number of foreclosed properties, sparking bidding wars in some places that harken back to the market's go-go years and may signal the bottom is near.
The trend is most dramatic in many parts of California, Florida, Nevada and Arizona, where prices skyrocketed during the housing boom and are now falling precipitously. Sales of foreclosures, vacant new homes and other distressed properties now dominate some markets, causing grief for individual homeowners who need to sell for other reasons, like a job in a new city.
Nationwide, one out of every four sales between January and March was a distressed sale, and that figure jumps to more than 50 percent in the hardest-hit areas like Las Vegas, Detroit and distant suburbs of Los Angeles, said Mark Zandi, chief economist at Moody's Economy.com. The number can be as high as 90 percent in some newly built subdivisions, where loose lending standards and speculation ran rampant, real estate agents say.
By setting prices at extraordinarily low levels, say, $175,000 for a house that sold for $350,000 three years ago, banks can spark multiple offers.
"It's not uncommon to have 10 to 20 offers on one house, and for the house to end up selling for more than its market price," said Erin Attardi, a Sacramento Realtor. The strategy, she said, allows the bank to be selective, picking buyers with solid financing or those able to pay in cash.
Over the past year, as the housing crisis accelerated, the number of properties turned over to bank ownership has more than doubled. As of April, there were more than 660,000 such properties in the U.S., up from 254,000 in April last year, according to real estate information company First American CoreLogic.
And there's a risk this isn't the bottom at all.
Investor demand could be swamped by the foreclosures expected to hit the market over the next year.
A record of almost 3 million American homeowners were at least one month late on their mortgages in the first quarter, the Mortgage Bankers Association said Thursday. And another record of almost 450,000 had entered the final stage of foreclosure.
Wherever the turning point, buyers are finding that the deep discounts on bank-owned homes can be a fabulous opportunity, but also a source of anguish. Sally Zuniga, 29, and her husband have been looking to buy their first home outside Sacramento and have been unsuccessful so far due to the intense competition.
"It's been aggravating, frustrating and emotionally straining," said Zuniga, a media buyer for an advertising agency.
This week, the couple put in an offer for a three-bedroom house with a pool that's listed as a "short sale," where the home is sold for less than the amount owed on the mortgage.
They've given the property owner until July 18 to respond — an indication of the longer period it commonly takes for such arrangements to be worked out. Their offer of $195,000 was $6,000 over the asking price, in an effort to make it stand out from competitors.
Some in the real estate industry see such competition as a sign that the housing market's gloom is lifting.
"It's actually stimulated the market," said Janice Ziesig, owner of Z House Realty Group in Orlando, Fla. "Things are moving now — more so than they were."
In the Orlando area, about a third of bank-owned properties receive more than one offer, Ziesig estimates. However, deals are more likely to fall through for foreclosures, she says, and properties often return to the market.
For would-be sellers who need to move soon, it's a particularly painful situation. In many cases, sellers whose houses are now worth less than their mortgage must bring cash to the closing table to pay off the balance of the loan. They can find renters or postpone their moving plans.
Leslie Jordan pulled her family's six-bedroom house outside Orlando, Fla., off the market last month after listing it for nearly a year. She was willing to sell for $415,000, down from her original asking price of $565,000, but wasn't able to reach a deal.
While most of the foreclosures in Jordan's area are on smaller homes, the overall environment of soaring foreclosures and overbuilding has pushed prices down dramatically.
"The buyers, they just want a deal," said Jordan, who had hoped to move to a less-dense area with better schools. "We just have to wait until things turn around."
For real estate agents, helping banks sell off properties is one of the only flourishing businesses these days. But it's not for everybody.
Agents can easily pay hundreds of dollars a month on upkeep — including utility bills, cleaning and lawn care — and must go through the hassle of getting reimbursed by the bank. They sometimes have to evict homeowners, tenants or squatters. And in many cases, they have to deal with vandalism or theft of everything from copper pipes to appliances and air conditioners.
Jeff Dolfinger, a broker in Poughkeepsie N.Y., who specializes in managing and selling foreclosed properties, estimates that about 90 percent of those homes in his market are being bought by investors.
"To them, this is the best real estate market ever," he said. "They'll wait for this turmoil to end and they'll put the properties right back on the market again"
Inevitably, there are tensions between real estate agents and mortgage companies, particularly when a short sale or foreclosure gets tied up in a bureaucratic tangle.
"The lenders don't work on the weekends," which are the busiest time for house-hunters, said Cindy Jones, associate broker with Re/Max Allegiance in Lakeridge, Va. "If you make on offer on a Thursday, the earliest anybody's going to (examine) it is Monday or Tuesday of the following week,"
A quick way for a lender to dispose of properties is through an auction. However, lenders lose an average of 56 percent of a property's value through auctions, compared with a 40 percent loss for ordinary sales, according to a report last month by Fitch Ratings.
Nevertheless, the report found that the use of auctions has been rising as lenders try to cope with rising inventory.
Some are more hesitant to cut prices. Chris Bowden, vice president of HomeSteps, a division of Freddie Mac that handles foreclosure sales, says being too aggressive on price can affect the value of nearby properties, which sometimes are also owned by Freddie Mac.
"We want to make sure that we are getting back every dollar that we can and preserving values in neighborhoods," Bowden said. "Our goal is to try to get the highest value we can for the property, and yet we've got to remain competitive."
Still, with foreclosures continuing to rise, there may be no better option than to follow the market.
"We're reacting to market conditions very quickly," said Cary Sternberg, who heads IndyMac Bancorp Inc.'s bank-owned properties division. "We're in the business of making loans to people. we're not in the business of owning property."
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
URL: http://www.msnbc.msn.com/id/25009827/
Lenders slash prices to dump foreclosed homes
Lenders slash prices to dump foreclosures, days of multiple offers return
The Associated Press updated 11:18 a.m. MT, Sun., June. 8, 2008
Lenders stung by the housing bust are slashing prices dramatically to rid themselves of an unprecedented number of foreclosed properties, sparking bidding wars in some places that harken back to the market's go-go years and may signal the bottom is near.
The trend is most dramatic in many parts of California, Florida, Nevada and Arizona, where prices skyrocketed during the housing boom and are now falling precipitously. Sales of foreclosures, vacant new homes and other distressed properties now dominate some markets, causing grief for individual homeowners who need to sell for other reasons, like a job in a new city.
Nationwide, one out of every four sales between January and March was a distressed sale, and that figure jumps to more than 50 percent in the hardest-hit areas like Las Vegas, Detroit and distant suburbs of Los Angeles, said Mark Zandi, chief economist at Moody's Economy.com. The number can be as high as 90 percent in some newly built subdivisions, where loose lending standards and speculation ran rampant, real estate agents say.
By setting prices at extraordinarily low levels, say, $175,000 for a house that sold for $350,000 three years ago, banks can spark multiple offers.
"It's not uncommon to have 10 to 20 offers on one house, and for the house to end up selling for more than its market price," said Erin Attardi, a Sacramento Realtor. The strategy, she said, allows the bank to be selective, picking buyers with solid financing or those able to pay in cash.
Over the past year, as the housing crisis accelerated, the number of properties turned over to bank ownership has more than doubled. As of April, there were more than 660,000 such properties in the U.S., up from 254,000 in April last year, according to real estate information company First American CoreLogic.
And there's a risk this isn't the bottom at all.
Investor demand could be swamped by the foreclosures expected to hit the market over the next year.
A record of almost 3 million American homeowners were at least one month late on their mortgages in the first quarter, the Mortgage Bankers Association said Thursday. And another record of almost 450,000 had entered the final stage of foreclosure.
Wherever the turning point, buyers are finding that the deep discounts on bank-owned homes can be a fabulous opportunity, but also a source of anguish. Sally Zuniga, 29, and her husband have been looking to buy their first home outside Sacramento and have been unsuccessful so far due to the intense competition.
"It's been aggravating, frustrating and emotionally straining," said Zuniga, a media buyer for an advertising agency.
This week, the couple put in an offer for a three-bedroom house with a pool that's listed as a "short sale," where the home is sold for less than the amount owed on the mortgage.
They've given the property owner until July 18 to respond — an indication of the longer period it commonly takes for such arrangements to be worked out. Their offer of $195,000 was $6,000 over the asking price, in an effort to make it stand out from competitors.
Some in the real estate industry see such competition as a sign that the housing market's gloom is lifting.
"It's actually stimulated the market," said Janice Ziesig, owner of Z House Realty Group in Orlando, Fla. "Things are moving now — more so than they were."
In the Orlando area, about a third of bank-owned properties receive more than one offer, Ziesig estimates. However, deals are more likely to fall through for foreclosures, she says, and properties often return to the market.
For would-be sellers who need to move soon, it's a particularly painful situation. In many cases, sellers whose houses are now worth less than their mortgage must bring cash to the closing table to pay off the balance of the loan. They can find renters or postpone their moving plans.
Leslie Jordan pulled her family's six-bedroom house outside Orlando, Fla., off the market last month after listing it for nearly a year. She was willing to sell for $415,000, down from her original asking price of $565,000, but wasn't able to reach a deal.
While most of the foreclosures in Jordan's area are on smaller homes, the overall environment of soaring foreclosures and overbuilding has pushed prices down dramatically.
"The buyers, they just want a deal," said Jordan, who had hoped to move to a less-dense area with better schools. "We just have to wait until things turn around."
For real estate agents, helping banks sell off properties is one of the only flourishing businesses these days. But it's not for everybody.
Agents can easily pay hundreds of dollars a month on upkeep — including utility bills, cleaning and lawn care — and must go through the hassle of getting reimbursed by the bank. They sometimes have to evict homeowners, tenants or squatters. And in many cases, they have to deal with vandalism or theft of everything from copper pipes to appliances and air conditioners.
Jeff Dolfinger, a broker in Poughkeepsie N.Y., who specializes in managing and selling foreclosed properties, estimates that about 90 percent of those homes in his market are being bought by investors.
"To them, this is the best real estate market ever," he said. "They'll wait for this turmoil to end and they'll put the properties right back on the market again"
Inevitably, there are tensions between real estate agents and mortgage companies, particularly when a short sale or foreclosure gets tied up in a bureaucratic tangle.
"The lenders don't work on the weekends," which are the busiest time for house-hunters, said Cindy Jones, associate broker with Re/Max Allegiance in Lakeridge, Va. "If you make on offer on a Thursday, the earliest anybody's going to (examine) it is Monday or Tuesday of the following week,"
A quick way for a lender to dispose of properties is through an auction. However, lenders lose an average of 56 percent of a property's value through auctions, compared with a 40 percent loss for ordinary sales, according to a report last month by Fitch Ratings.
Nevertheless, the report found that the use of auctions has been rising as lenders try to cope with rising inventory.
Some are more hesitant to cut prices. Chris Bowden, vice president of HomeSteps, a division of Freddie Mac that handles foreclosure sales, says being too aggressive on price can affect the value of nearby properties, which sometimes are also owned by Freddie Mac.
"We want to make sure that we are getting back every dollar that we can and preserving values in neighborhoods," Bowden said. "Our goal is to try to get the highest value we can for the property, and yet we've got to remain competitive."
Still, with foreclosures continuing to rise, there may be no better option than to follow the market.
"We're reacting to market conditions very quickly," said Cary Sternberg, who heads IndyMac Bancorp Inc.'s bank-owned properties division. "We're in the business of making loans to people. we're not in the business of owning property."
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
URL: http://www.msnbc.msn.com/id/25009827/
Friday, June 06, 2008
Economic Highlights for the Week Ending June 6, 2008
MONDAY, June 2nd
It is widely expected for the Fed to remain on hold at the June 24-25 FOMC meeting. Just how long the Fed will remain on hold is another matter as policymakers try to juggle weak economic conditions with rising inflation. Traders believe there is a 60% chance the Fed will start to unwind policy easing as soon as December. The trajectory of the data between now and then will nail things down more precisely.
Construction spending faltered again in April, based on weakness in the residential sector however, overall spending declines were slightly less than expected. Construction spending fell 0.4% in April compared to an expected 0.6% decline. With nonresidential construction spending more volatile and budget strains on state and local governments affecting public sector spending, overall construction spending is expected to remain weak through this year and the first part of 2009.
The ISM index increased to 49.6% in May from a 48.6% reading in April. The level of the index suggests that manufacturing activity nationwide continued to contract last month but at a slower pace than in previous months. An index reading over the 50% level indicates expansion in the sector. Details in the data showed still weak employment, slightly improved production and higher input prices.
TUESDAY, June 3rd
Fed Chairman Ben Bernanke, in remarks to the International Monetary Conference, said that the Fed is aware of the implications of changes in the value of the dollar on inflation and will work with the Treasury to monitor foreign exchange markets. The Chairman was referring to the 16% drop in the dollar against the euro in the past year and its impact on inflation. Bernanke also signaled that the FOMC is done with policy easing for now and that interest rates are well positioned to promote growth and stabilize prices.
WEDNESDAY, June 4th
The MBA mortgage applications index fell 15.3% to 502.3% for the week ending May 30. Purchase application volume remains soft dropping 5.4% on the week to bring the yearly decline to 23.1%. The refinance index plunged 25.7% last week in response to higher rates. With this decline, refinancing activity is down 14.9% from its year ago level. Application activity for both refis and purchases is trending lower under weak home sales and tougher loan standards.
The ISM non-manufacturing index slipped to 51.7% in May from a level of 52.0% in April. A reading over the key 50% level indicates expansion in the service sector. Construction, government, financial and other service industries grew moderately last month amid rising price pressures and declining employment. Given residential construction weakness and turmoil in the mortgage market, service sector activity is expected to remain soft going forward.
THURSDAY, June 5th
Chain store sales rose 3.0% in May from May of a year ago, on a same-store basis according to the ICSC index. May’s stronger-than expected gain led by sales at wholesale, discount and drug stores. Sales at apparel and department stores declined sharply. Consumers are spending, albeit cautiously as they contend with high gas prices, debt burdens, falling home values and weak job growth.
Jobless claims decreased 18k to 357k for the week ending May 31. The decline could be related to the Memorial Day holiday. The pace of layoffs remains elevated but has stopped accelerating indicating soft labor market conditions.
FRIDAY, June 6th
Payroll employment declined by 49,000 jobs in May compared to an estimated 60,000 drop. This was the fifth consecutive decline in payrolls for a total job loss of 324k since the first of the year. Weakness was broad based with only education, health services, leisure, and government sectors of the economy adding to the payrolls. The unemployment rate jumped to 5.5% in May from 5.0% in April due to a large increase in the workforce combined with sub-par job creation.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12209.81 12638.32 -428.51 or -3.39%
NASDAQ 2474.56 2522.66 -48.10 or -1.91%
WEEK IN ADVANCE
The employment report pushes back the timetable for when the Fed will be able to start raising rates. Inflation remains the wild card if it does not ease under slower economic conditions. The consumer price index due out Friday in the coming week will identify the current level of consumer inflation.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
It is widely expected for the Fed to remain on hold at the June 24-25 FOMC meeting. Just how long the Fed will remain on hold is another matter as policymakers try to juggle weak economic conditions with rising inflation. Traders believe there is a 60% chance the Fed will start to unwind policy easing as soon as December. The trajectory of the data between now and then will nail things down more precisely.
Construction spending faltered again in April, based on weakness in the residential sector however, overall spending declines were slightly less than expected. Construction spending fell 0.4% in April compared to an expected 0.6% decline. With nonresidential construction spending more volatile and budget strains on state and local governments affecting public sector spending, overall construction spending is expected to remain weak through this year and the first part of 2009.
The ISM index increased to 49.6% in May from a 48.6% reading in April. The level of the index suggests that manufacturing activity nationwide continued to contract last month but at a slower pace than in previous months. An index reading over the 50% level indicates expansion in the sector. Details in the data showed still weak employment, slightly improved production and higher input prices.
TUESDAY, June 3rd
Fed Chairman Ben Bernanke, in remarks to the International Monetary Conference, said that the Fed is aware of the implications of changes in the value of the dollar on inflation and will work with the Treasury to monitor foreign exchange markets. The Chairman was referring to the 16% drop in the dollar against the euro in the past year and its impact on inflation. Bernanke also signaled that the FOMC is done with policy easing for now and that interest rates are well positioned to promote growth and stabilize prices.
WEDNESDAY, June 4th
The MBA mortgage applications index fell 15.3% to 502.3% for the week ending May 30. Purchase application volume remains soft dropping 5.4% on the week to bring the yearly decline to 23.1%. The refinance index plunged 25.7% last week in response to higher rates. With this decline, refinancing activity is down 14.9% from its year ago level. Application activity for both refis and purchases is trending lower under weak home sales and tougher loan standards.
The ISM non-manufacturing index slipped to 51.7% in May from a level of 52.0% in April. A reading over the key 50% level indicates expansion in the service sector. Construction, government, financial and other service industries grew moderately last month amid rising price pressures and declining employment. Given residential construction weakness and turmoil in the mortgage market, service sector activity is expected to remain soft going forward.
THURSDAY, June 5th
Chain store sales rose 3.0% in May from May of a year ago, on a same-store basis according to the ICSC index. May’s stronger-than expected gain led by sales at wholesale, discount and drug stores. Sales at apparel and department stores declined sharply. Consumers are spending, albeit cautiously as they contend with high gas prices, debt burdens, falling home values and weak job growth.
Jobless claims decreased 18k to 357k for the week ending May 31. The decline could be related to the Memorial Day holiday. The pace of layoffs remains elevated but has stopped accelerating indicating soft labor market conditions.
FRIDAY, June 6th
Payroll employment declined by 49,000 jobs in May compared to an estimated 60,000 drop. This was the fifth consecutive decline in payrolls for a total job loss of 324k since the first of the year. Weakness was broad based with only education, health services, leisure, and government sectors of the economy adding to the payrolls. The unemployment rate jumped to 5.5% in May from 5.0% in April due to a large increase in the workforce combined with sub-par job creation.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12209.81 12638.32 -428.51 or -3.39%
NASDAQ 2474.56 2522.66 -48.10 or -1.91%
WEEK IN ADVANCE
The employment report pushes back the timetable for when the Fed will be able to start raising rates. Inflation remains the wild card if it does not ease under slower economic conditions. The consumer price index due out Friday in the coming week will identify the current level of consumer inflation.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
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