California real estate falters again as California short sales and foreclosures continue to mount. Even as interest rates for California mortgage loans continue to break records each month, new home transactions in the state remain sluggish at best.
California home sales plummeted in July, and many economists had forecasted a robust summer for a state that desperately needs the housing sector to rebound. The downfall of the California housing industry last year was worse than previously reported, according to a key industry report released Wednesday. New home construction in California still contributed $13.8 billion to the state’s economy and employed nearly 77,000 workers in 2009, but that’s 80% lower than the market peak in 2005.
Ladera Ranch is beautiful planned community in South Orange County that has been devastated by short sales and home foreclosures. Ladera Ranch short sales remain at the higher end of the spectrum of the county with an increased number of REO , short sales and foreclosures per 1,000 houses. South Orange County short sales continue to be a problem for banks that own a high volume of loan portfolios in the region.
|Armed with at least $100 million to spend in 2010, Ladera Ranch, Calif.-based G8 Capital has acquired a 19-property loan portfolio of multifamily housing in South Florida. The all-cash transaction closed in less than two weeks for a portfolio of 13 performing loans and six non-performing mortgage notes. The company’s approach with non-performing home loans and underwater performing loans is to work closely with the borrower to assess their situation and identify their interests.|
G8 provides loan workout solutions that may include a short sale, obtaining a deed in lieu of foreclosure or a loan modification. Should G8 Capital become the owner of the home through a foreclosure or negotiated workout, its team makes necessary physical improvements and brings in local property management to stabilize the asset.
Tags: Ladera Ranch short sales
California foreclosure rates continue to rise. California short sales and loan modification programs continue to dominate home financing circles. Sixty miles northeast of the high-rolling corporate campuses of Google Inc. and Intel Corp., housing tracts sit vacant. Many Northern California factories are closed and job centers are packed with local residents searching for new employment opportunities.
|This area makes Southern California’s Inland Empire look like it has recovered and we know that hasn’t happened. The reality is that the inland regions east of San Francisco have plagued housing sectors like Riverside and San Bernardino counties. The inland area of San Francisco that includes San Joaquin, Alameda and Contra Costa counties has become bedroom communities for workers priced out of real estate markets closer to the coast. And just like the Inland Empire, the area was among the hardest hit by the economic downturn as buyers lost homes to short sales and foreclosure as home values continue to prices plummet.|
Housing is perhaps the biggest millstone. During the real estate boom, families that couldn’t afford real estate in San Francisco headed inland, buying homes in towns such as Tracy, Manteca and Brentwood. Dwellings there could cost $500,000 less than comparable properties in the Bay Area, said Michael Locke, president and chief executive of the San Joaquin Partnership, a private economic development company. Builders rushed to put up homes in vast developments, and employment in financial services in the three counties grew by a third in just a few years. Now, building has all but stopped. Home prices in San Joaquin County have fallen 63% since the peak median price of $451,500 in November 2005, according to MDA DataQuick. Prices in Contra Costa County are down 53% from their peak of $600,000 in April 2007.
One in every 135 houses in Contra Costa County received a foreclosure filing in June 2010. In San Joaquin County, that figure is 1 in 104, nearly double the California average. Signs of California foreclosures and economic slowdown are everywhere. At Bethel Island, a Contra Costa County summer vacation area normally busy with tourists and fishermen, boats sit rotting in the Sacramento River. Nearby, a planned residential waterfront development has stalled. The builder completed boat docks before pulling out; an eerie remnant of the luxury once planned there. In Livermore, an Alameda County town, whole shopping developments are empty and home foreclosure notices dot homes. In Stockton, which had one of the highest California foreclosure rates, the median home price of $100,500 fell from $397,000 at the height of the boom, a stunning 74% drop.
But home buyers are scarce. Homes much closer to employment centers such as San Francisco and San Jose have fallen to the prices Stockton enjoyed a few years ago. “It’s not a bargain if you don’t have a job,” said Stockton real estate broker Rudy Willey. The unemployment rate in Stockton, the county seat of San Joaquin County, is 19.8%. It’s 29% in the nearby hamlet of Garden Acres, higher than any city of its size in Southern California’s Inland Empire. Closer to San Francisco, in the Contra Costa County city of Pittsburg, the unemployment rate is 18%. Some of the jobs have been lost because of closures in the manufacturing and financial services industries, traditionally strong in this area. And as the region’s population cuts back on spending, stores and restaurants are
With sales and property taxes plummeting, cash-strapped cities are hustling to attract businesses. Like many areas, San Joaquin County has an enterprise zone. Businesses that locate there are eligible for tax breaks. Last year the county expanded its zone to 656 square miles. Stockton attracted a power plant and a prison hospital, businesses other communities might not welcome. Gus Duran, the city’s interim economic development director, said he’s trying to woo other businesses by slashing permit and development fees 50%. And Tracy’s City Council has voted to develop an incentive plan to attract retailers to the half-empty West Valley Mall, where a Mervyn’s closure prompted other retailers to flee. On a recent afternoon, in the darkened side of the mall that once held the Mervyn’s, two teenagers groped each other on a bench near the empty stores.
Economists say the employment picture won’t likely get much better until things improve in the East Bay, which supported many inland jobs. The Port of Oakland has shed jobs as cargo traffic fell; import volumes tumbled 14% between the first quarter of 2007 and the same period in 2010, according to the National Retail Federation. The region was also hit by the bankruptcy of Mervyn’s, headquartered in Hayward, and the buyout of Longs Drug, based in Walnut Creek. “Stores don’t last here,” said Edna Jones, a teacher sitting outside a closed Mervyn’s in Newark. “You think something’s open, but it’s gone.”
The Hardest Hit Fund was designed to be complementary to the Home Affordable Modification Program (HAMP) unveiled in 2009, a federal program unveiled in early 2009 to help homeowners modify their mortgages. California loan modification plans are not easy to find as many homeowners have jumbo mortgages that lenders simply are not willing to restructure. The HAMP fund was established by President Barack Obama in February to provide targeted aid to families in the states hit hardest by the downturn of the housing market. The first phase of the program provided $1.5 billion to five states with home price declines of more than 20%: Arizona, California, Florida, Michigan and Nevada Read mor online > The Herald-Sun – Help coming against foreclosures.
Once again Southern California short-sales rose significantly. Orange County short-sales had the smallest rise in short-sales and foreclosures, but they still trended upward which is not a good sign for the local housing markets. The number of transactions in which a home sells for less than the owner owes the bank is up 74% in the region this year, mainly due to a doubling of those California short-sales in the Inland Empire, the Southern California Multiple Listing Service reported. During the first five months of 2010, the four-county region had 12,906 short sales, up from 7,405 in the same period of 2009, Southern California MLS figures show.
Short sales have been rising as mortgage lenders become more amenable to approving deals rather than letting homes go through a costly foreclosure. Last year, when lenders were more gracious with loan relief, short-sales were down, but as banks and lenders started extending less loan modification plans in 2010, we saw a significant increase in short-sales.
|Here’s how the negative housing stats break down in, Los Angeles, Riverside and San Bernardino and Orange County short sales.
Overall, bank-owned home sales dropped to 46.1% to 17,233 this year.
The number of California homes entering the home foreclosure process dropped again during 4th quarter 2009 amid signs that the worst may be over in battered marketing, while slowly spreading to more to the higher priced real estate. There are mixed signals for 2010: It’s unclear how much of the drop in mortgage defaults is due to shifting market conditions, and how much is the result of changing home foreclosure policies among mortgage lenders and loan servicers, a real estate information service reported.
While many of the refinance loans that went into default during fourth quarter 2009 were originated in early 2007, the median origination month for last quarter’s defaulted loans was July 2006, the same month as during the prior three quarters. The median loan origination month during the last quarter of 2008 was June 2006. This means the home foreclosure process has moved forward through one month of bad loans during the past 12 months.
Two California investment advisory firms were charged with improper procedures for short sales today by the Securities and Exchange Commission. Palmyra Capital Advisors LLC, which lists $21.7 million in assets in its ADV disclosure form, profited in three of its managed hedge funds by violating short-selling rules, the SEC alleged. The regulator claimed it found that the firm made California short sales in 2008 in advance of a public offering by Capital One Financial Corp., resulting in improper profits of $225,500.
AGB Partners LLC, which lists $10 million in assets, and its principals, Gregory Bied and Andrew Goldberger, allegedly netted thousands of dollars by shorting in advance of their purchase of stock in a secondary offering, according to the SEC. Both firms agreed to settle the SEC’s charges without admitting or denying its findings.
Palmyra Capital consented to be censured and pay more than $330,000 in disgorgement and penalties. AGB Partners, Mr. Bied and Mr. Goldberger consented to be censured and pay more than $50,000 in disgorgement and penalties. An attorney for Palmyra could not be reached for comment. ABB Partners’ attorney, Hardy Callcott of Bingham McCutchen LLP, declined to comment.
Local realtors continue to report high activity for California short sales and foreclosures. California mortgage rates are starting to rise and many insiders are saying they will be continue to rise unless government extends low mortgage rate programs or starts new ones. Unemployment is continuing to stay around 9% and there are more layoffs from 2 large companies this week and California is faced with more budget cuts to our already strapped state.
What does this mean for California homeowners?
Well with more people losing jobs that will increase home foreclosures and bankruptcy filings that are for sure. Which means home prices could either fall again with the flood of foreclosures or they will stay where they are. We would anticipate them falling if the next round of foreclosures on the market if they are anywhere as big as 2007 and 2008. California Short sales will continue to be strong, we will see about the same amount of standard home sales and as far as homeowners keeping their homes with loan modifications I just don’t have much faith in, I don’t think the amount of successful loan modifications will change that much. Already hard hit areas like San Diego, Inland Empire, and Merced Counties could face more devastation with this news. These areas have started getting better with buyers moving in to foreclosed houses and starting to bring communities back to life.
Minutes of the Fed’s December meeting showed a few members of the central bank’s policy committee thought additional mortgage loan buying might be desirable under more adverse conditions.
California short sales, loan modification agreements and home foreclosures continue to have a significant impact on the California housing sector. The good news was that mortgage refinance applications increased last quarter as a result of strong FHA financing and the Home Affordable Refinance Program that is sponsored by the government. A recent Bloomberg article reported that California home prices declined 7.3% in September from a year earlier, helping boost the number of houses sold, the state Association of Realtors said. The median price for an existing detached house fell to $296,090 from $319,310 a year earlier, the Los Angeles-based group said today in a statement. The California home sales price rose 1.1% from August, the seventh consecutive month-on-month increase.
Sales of foreclosed homes accounted for 42% of existing-property transactions in California in August, research company MDA DataQuick said Oct. 15. The Realtors said the number of existing houses sold climbed 2.1% last month from September 2008, boosted by lower prices and a federal tax credit for first-time homebuyers. “The success of the federal tax credit is clear,” James Liptak, president of the California Association of Realtors, said in the statement. The group supports an extension of the credit through mid-2010 and the removal of its restriction to first-time purchasers.
California, the most populous U.S. state, is on pace for 530,520 home sales this year, based on the rate of transactions last month, the association said. “Efforts by the government to stimulate housing and the economy clearly are impacting the market,” Leslie Appleton- Young, the group’s chief economist, said in the statement. Sales have exceeded 500,000 homes on an annualized basis for 13 consecutive months, she said.
The median amount of time it took to sell a California house fell to 33.6 days in September from 46.2 days a year earlier, the association said. The group’s unsold inventory index for existing, single-family houses dropped to 4.2 months from 6.5 months a year earlier. The index shows the time needed to deplete the supply of homes on the market at the current sales rate. The median price for a California condominium in September was $270,170, down 6.5% from a year earlier and up 3.8 % from August, the Realtors association said. Condominium sales rose 11% from a year earlier and 2.2% from August.
California loan modification plans have slowed down short-sales in the state, but the volume of homes sold for less than the balance of the loans is still abnormally high. Scores of delinquent home loans have grown much more dramatically than those falling into foreclosure in recent months, shifting the focus of California home buyers away from REO homes and toward short sales, complex deals in which a lender forgives most or all of the seller’s remaining mortgage balance.
Listing agents have had to learn the ins and outs of such deals since prices began to slide in 2005, and some groups of agents have brought on agents with experience in short-sale negotiations. But the deals have become so cumbersome over the past year that many are ending up with specialists who do nothing but negotiate with lenders. Homes are selling at a pace not seen in three years, thanks largely to lower home prices and tentative signs that the recession may be easing. At the same time, buyers and real estate agents say the buying process takes longer than at any point in memory, often six months or more in the case of short sales.
Such situations have grown more frequent in the past year, as many as two-thirds of all transactions for some real estate agents. Meanwhile, bank-owned properties’ share of completed sales in Southern California has fallen to about 43% from about 57% last summer, according to research firm MDA DataQuick. Short sales have become more frequent in part because market prices are generally lower than at any point from 2003 to late 2008. Nearly 43 % of all mortgages in San Diego County exceeded the estimated values of those homes as of June 30, First American CoreLogic reported last month. In the two-county area of Riverside and San Bernardino, that figure was 57%.
Street Russell, director of enrollment at BGS3, a Louisville, Ky., company that negotiates with lenders on behalf of sellers, said California has come to account for about one-third of his company’s new clients. Sellers’ agents hire the company; it typically collects a fee of 1 % of the price when the sale closes. “You guys are going through such a difficult housing market compared to everyone else around the nation,” Russell said.
Such negotiators can be located in San Marcos, Calif., or San Marcos, Texas. It doesn’t matter because they focus on paperwork and phone calls to lenders, agents said. Negotiators’ selling point is that they free listing agents to focus on listing and showing properties. “I’m on the phone all day long,” said Karen Beer, a short-sale negotiator in Murrieta. Beer, who is also a real estate agent, relies on “co-listing” arrangements and splits commissions with the agent whom the buyer initially contacts. It’s one of several business models for short-sale negotiators and specialists.
Remerge Transaction Coordinators Inc. in Irvine uses the same model as Beer, said company owner Shelly Gorenstein. Remerge’s division of labor involves about seven people for a single short sale, Gorenstein said. One, for example, collects the sellers’ financial information and makes the case for a financial hardship. Such hardships appear to have gotten markedly worse over the last year, while actual foreclosure numbers have risen more modestly, based on reports by CoreLogic. The portion of San Diego County mortgage borrowers whose homes are in foreclosure rose to 2.8 % in June 2009 from 1.8 %, while the Inland Empire’s rose to 5.9% from 3.8%. But nearly 8% of San Diego County borrowers and about 16 % of borrowers in the Inland Empire are at least 90 days behind on mortgage payments without technically being in foreclosure, up from 5.1 % and 10.8 %, respectively. A short sale can be advantageous for such a borrower because it causes a somewhat smaller hit to the borrower’s credit score.
Short sales have always been more complicated and taken longer than other sales because lenders usually verify financial hardship and determine what an acceptable amount to lose on the property is. In many cases, a second lender has loaned $50,000 to $100,000 on a property and is being asked to settle for $10,000 or less. Some lenders also demand that the borrower repay a portion of the remaining balance over several years after the deal closes.
Lenders agree to let owners who can’t make payments sell their house for less than they owe.
Falling home prices are giving rise to a foreclosure alternative that can help people get out of homes they can’t afford.
When home prices were rising, people who lost a job or otherwise couldn’t pay their mortgage, could have sold and moved on. Declining home values mean some can’t sell for enough to pay off the loan. In those cases, short sales are an option.
In a short sale, the lender agrees to accept less than the mortgage balance as payment in full because it’s a less costly route than foreclosure. Both processes result in losses for lenders, but with foreclosures, they have the added costs of maintaining and selling properties. Short sales also spare homeowners the embarrassment of foreclosure and eviction.
A short sale will damage a person’s credit score, but Fair Issacs, keepers of the widely used FICO credit score, says the impact depends in part “on the composition of the individual’s credit profile.”
“We really think it is a much better experience for everyone concerned,” said David Knight, who handles short sales nationwide as a vice president with Wells Fargo & Co.’s mortgage servicing unit in Fort Mill.
The San Francisco bank, which recently bought Charlotte’s Wachovia, is one of the nation’s largest mortgage lenders and servicers. Knight declined to provide specific figures but said Wells’ short sales have “probably tripled” in the past 18 months as unemployment has risen and home prices fallen. They’re more common in former bubble markets, where prices shot up and fell harder than in areas such as Charlotte.
Short sales aren’t always advertised as such, so there’s no way to get a complete count. Unlike foreclosures, there also are no consistent indicators of short sales in public records. But local Realtors say they’ve seen an increase. Job loss, unexpected bills and job transfers, coupled with lower home prices, are all factors driving the use of short sales.
“They’re really coming on in this last year,” said Joe Clorite, a Realtor for 20 years, who is with Keller Williams Realty’s University office. “People are in over their heads.”
Nationwide, short sales are up about 20 percent in the past six months, said Mark Pearce, N.C. deputy commissioner of banks. That’s based on figures collected from mortgage servicers by a multistate foreclosure prevention group Pearce is part of. The group has not yet publicly released the data.
“Short sales are going up fairly significantly,” Pearce said. “They’re better than foreclosures.”
Homes losing value
Struggling to make their monthly mortgage payment, Meleta and Gerald Wideman called their lender for help.
“Once we got behind, they said we could do a short sale to get out of the loan,” she said.
The couple, with two children, moved to Charlotte in 2006 from Chicago after visiting family and deciding they liked the area. They bought a new house in Oakbrooke, a subdivision north of uptown. They paid about $140,000.
Their troubles began the first year. They were school bus drivers and couldn’t find summer work. She found a year-round job working with blood donors, but her overtime has been cut. They are Seventh Day Adventists, and say their faith prohibits work on Saturday. All the year-round jobs he’s been able to find require Saturday work.
Seeing no way around it, they listed the house for sale. The asking price, $99,900, is well less than what’s owed. Nearby homes have shed value, too. A foreclosed home across the street sold two years ago for $143,000. On Friday, its listing price was $92,700. Another foreclosure is listed for $117,900, down from the $140,000 paid less than two years ago.
Meleta Wideman says they’re looking for a place to rent in the Charlotte area.
“I’m scared to leave because the economy is so bad,” she said. “I’m working full time. We know we can eat.”
Closing can take longer
A big drawback of short sales is added red tape that means closing a deal can take months, a potential turn-off for sellers, buyers and Realtors.
Clorite has had a house listed in Oakbrooke since May. He went through the months-long process of finding a buyer, getting a short sale approved. At the last minute, the buyer’s financing fell through, so the house is back on the market.
“There is more cooperation, but they are still far behind,” Clorite said of lenders handling short sales.
The Oakbrooke owner he represents is a California investor who thought he got a good deal in 2006 when he paid about $155,000 for the new house.
The investor, who asked not to be named, said he has been unable to get a reliable tenant. He’s lost money, paying for extensive repairs as well as the mortgage, taxes and insurance. Now rents are going down. The house is listed for $120,000, likely to sell for less.
“It’s better to just cut the losses and dump the property,” the investor said.
Clorite believes he has another buyer, but again, he’s waiting on lender approval.
Short sales take time because everyone being short changed must approve the deals. That includes the mortgage holder, others with liens such as home equity loans and investors backing the mortgages. They may negotiate among themselves on how much of the loss each will accept.
Lenders have become more efficient, Pearce said, but the sluggish process can still turn away buyers.
“They’re not going to wait when there are so many homes being sold for lower prices these days,” he said.