I’ve been having a lot of fun playing on RCG’s Facebook page lately… Some of the stories I’ve been linking out to include:
If you have an event or a seattle-related post you’d like to see featured, let me know!
Earlier tonight I calculated some current results comparing the Spring selling Seasons of 2005 through 2009. The results are fairly redundant and not much changed from my bottom call back in February. I did some detailed stats for Woodinville and Greenlake-Fremont 98103, and there are not many changes or surprises. My call of 20% under peak pricing unless it is a short sale or bank-owned property, is continuing to hold, and I expect that to stay the same for at least a couple of years.
In 98103 one surprise was as to volume sold between single family homes and townhomes. With the decline in single family home prices, the volume of those sold did not decline from last year, in fact it increased slightly at the expense of townhome sales. (Caption on the graph should be 98103 Median Sold Price) and that excludes the townhomes. Towhomes are running at $338,000 vs. $429,475 for the same period last year.
I would expect prices to fall at some point doing the 4th quarter, as usual, and then next year’s Spring Bounce period to run at about the current levels.
(required disclosure by NWMLS: Stats are not compiled, verified or posted by The Northwest Multiple Listing Service)
I’ll be heading down to see my three girls and two grandaughters in L.A. on Tuesday. I thought you might like to see Andrea’s recent pics from her photoshoot. Maybe this time I will actually get over to see her doing tattoo art over in Venice Beach. She moved over to the Boardwalk store, so it should be a fun place to hang out in.
Hey Dustin! Weren’t we supposed to get matching tattoos?
Hard to tag this post…I chose the category “diversions” 🙂
This is both a legal question and an ethical issue.
I’ve bumped into this, not in the workplace, but out looking at property : A home that is in process of either a short sale or heading to foreclosure has tenants. It is not that a homeowner does not have a right to rent a home or even part of their home, but when a homeowner is involved in a short sale, is in arrears (default), most lenders require substantial paperwork from the owner justifying their hardship. My guess is that the rental income could be kept under the radar. Many homes in default are the result of job loss or other hardship due to medical reasons or other life issues. In some cases though, defaults are a result of excessive equity withdrawal from serial refinancing.
Homeowners in a short sale are typically not allowed any proceeds from the sale as a condition of approval. But, if the homeowner is receiving rental income from the property, should that money be forfeited to the lender to help cure the debt?
I have not been able to find the languange in a standard Washington State Deed of Trust form, but I thought I read somewhere that rents are collectible by the lender to help cure the debt when a default has occurred. I could be very mistaken.
First Time Buyer Big Red Flag = “I plan to sell in 2 to 3 years”.
Many people are out buying homes right now because of the $8,000 1st time homebuyer credit. Unless the credit is extended, these people have until mid to late October to find a a house and get into escrow, so they can close by the deadline of November 30, 2009 (“before December 1”). My best guess is there will be a 2010 homebuyer credit, but it will be a new one with different parameters, and not merely an extension of the current one. But all we know for sure at the moment, is the homebuyer credit we have at present will expire, if you don’t close by the end of November.
The credit is not the ONLY reason people are out buying homes. The fact that you can more readily buy a “starter home” for $350,000 or less in many areas, is likely a larger part of the reason people are buying. The linked post will show you that in the current market you are almost EIGHT times more likely to find a starter home for $350,000 or less in Kirkland, Bellevue or Redmond, than you were in 2007. In Bothell and Kenmore, homes selling for $350,000 or less represent more than a full third of all homes being sold.
This market is a blessing in disguise…lots of sadness for sellers, but an opportunity for some young families to get into a starter home for less.
My caution is this: I don’t want to hear “I will probably sell it in….”. In the data sample I used in the link above I did not include any homes with less than three bedrooms or less than 1.5 bathrooms. I’m not saying you can’t or shouldn’t move in less than 5 years, I am saying don’t buy a house that you can’t stay in for more than 5 years. When choosing a home, you should have the option to stay in the home, as many people who are suffering today and must sell their homes, are doing so because they have grown out of them.
The moment I hear someone say “this will hold us for a couple of years”, that is a big red flag! The home below was purchased by one of my clients who already had a small baby. It was purchased in a great school district in Kirkland for about $310,000 and it is not likely they will “grow out of it”…well, maybe ever.
Moral of the story: If you can’t see yourself living in the house five years from now…don’t buy it.
Thinking about moving to Seattle? Wondering what the traffic is like around here? Before you look at homes on the internet, I strongly suggest you study the Transportation Layout of the Seattle Area.
Often where you live, involves which side of “the bridge” you work on. This Seattle Area Traffic map gives you an excellent broad overview of how you get to and from. Study the “black traffic clog points” on that map for a two week period at various times each day during that two week period. That will give you a pretty good idea of normal traffic patterns, except for the few times each year when the bridge is closed.
Take a long hard look at Lake Washington. It’s HUGE and worthy of due consideration as to how you are planning to get over or around it.
My perspective centers more around the 520 bridge, and around the north side of Lake Washington, with occasional travel over the 1-90 bridge. Locals always refer to this bridge as “The 520 Bridge”, but if you are looking for info on it, you will find it under “Evergreen Point Floating Bridge” in wikipedia, even though the name was officially changed to “The Governor Albert D. Rosselini Bridge-Evergreen Point” in 1988.
Sometimes people will simply say “the 520”, but more often they will say that when referring to the part of that road that is on The Eastside, vs the floating bridge portion of that “road” going over Lake Washington.
One of the reasons I decided to write on this today, is because I was reading updates to the Pontoon Construction Project posted on The Washington State Department of Transportation website. On a good day, travelling back and forth across the 520 Bridge is not a huge deal. On a bad day (when the bridge is closed or partially blocked by a stalled vehicle) one would have been wise to consider the alternative travel options, when deciding where to buy a home.
My general advice is to buy a home on the side of the bridge where you work, unless there is a really good reason not to do that. Very often my first question of someone who calls me about buying a home here in the Seattle Area, especially if they are moving here for a new job, is “Where are you going to be working?”
Loan modification fever is here. Families all over the U.S. are struggling to make their mortgage payments and many are expressing frustration that their lender won’t modify their loan. Any of us could try to make a rational argument that a lender is better off modifying a mortgage loan instead of foreclosing but this is a simple answer to a complex problem. This blog post will help homeowners understand who is not going to get a loan mod. Hopefully homeowners will be able to then move forward toward other solutions.
Loan modifications are not for people in temporary financial distress. Temporary financial distress is when a homeowner missed a payment for one or two months because of a temporary hardship. Lenders can and do help these folks with a forbearance and repayment plan where the missed payments are made up over time or tacked on to the end of the mortgage. This is not a loan modification, it’s a repayment plan. If your financial distress is only TEMPORARY then asking for a full-on loan mod is wasting your time and everyone elses time. New research out this week from CR shows us that 30% of all delinquent borrowers self-cure without receiving any kind of loan modification. This means lenders who can effectively triage out borrowers likely to self-cure are behaving rationally by setting aside pleas for loan mods.
Long term financial hardship means homeowners need long term financial solutions. A loan modification is only ONE of MANY long term solutions. In order for a homeowner to receive a loan mod, the homeowner must be able to document stable monthly income. Lenders have to re-underwrite the file to make sure that the loan modification will not result in further loss to the lender. This takes time. If a homeowner’s monthly income has dropped so low, to the point where they really can’t qualify to repay the modified loan, this loan modification will not be approved nor should it. (Note: Lender guidelines on qualifications vary and change often, just like the retail side of lending.) This homeowner should consider other options which will be outlined below. It should be beyond clear by now that lenders are not going to voluntarily start reducing principal balances unless forced by gunpoint. The government can try to shame them into it but let’s face it: most corporations are shameless and nothing any of us say and do is going to change this.
Long term financial hardship cases do happen. Case in point. I received an email last night from a homeowner who is on permanent disability. Her husband just got laid off. They are seeking a loan mod. In no way can they afford the $4500/month payment on their interest only loan so they’d like the lender to lower the payment (lower the interest-only rate, extend the term). They are $100,000 negative equity. Sounds rough, doesn’t it? However, they happen to have $250,00 in the bank. This is not a case of financial hardship! A lender would be wasting time and money modifying this loan. These homeowners HAVE MONEY in the bank to continue to make their existing payment for many more months. Besides, looking at the amount of money coming in the door each month, once their money runs out, chance of a re-default is sky high. The only thing a loan mod does for these homeowners is it keeps them in their home for a little while longer. If the husband can become re-employed at his same rate of pay, maybe the chance of default drops a bit, but no lender will modify this loan if there’s literally zero money coming in every month. This lender is making a good business decision to put this file on ice while they continue to pay as agreed each month using their $250K.
I agree with CR: “If it became widely known that lenders routinely reduce the principal balance for delinquent borrowers with negative equity, this would be an incentive for a large number of additional homeowners to stop paying their mortgages.” It would be rational for negative equity homeowners to make the decision to trash their credit score in exchange for a shot at wiping out $50K, $100K+ negative equity if they wanted to keep their home. We shouldn’t hold our breath for lenders to make principal balance reductions en masse.
I have not worked in loan servicing for many years but when I did, there was a triage system of making sure cases that were going to cost the bank the most money were prioritized over cases that could wait longer. We already know that loan servicing departments are far understaffed for the tsunami that’s hitting them full on. If we want banks to beef up staffing and spend money hiring and training more loss mitigation underwriters, the expense for these costs is going to be priced into new mortgage loans made tomorrow and in the future. Even so, this will take time. Working in loan servicing is a very high stress job. Imagine what it’s like to work 8 to 5 every day with a 1 hour break from lunch and 2, 15-minute breaks…with the rest of your day spent being yelled at by Realtors asking for their short sales to be approved RIGHT NOW. High stress = high turnover. I could never do that job today because I’d yell back and surely get fired.
Homeowners with bonafide cases of lender law violations or predatory lending can and should be prioritized in getting help modifying their loans. These homeowners are better served by hiring competent legal counsel to represent their interests in negotiating fair and just mortgage terms. But that’s not what’s happening today.
Today, it seems that the masses believe they deserve a loan mod based on whatever is going on in their lives. Job loss, reduction in hours, on and on….I know I may sound heartless here but lenders need to make sure you are able to repay a modified loan and that you are eligible for a loan modification under their specific guidelines. Not everyone will qualify.
Options beyond a loan modification:
Move out of the house
If you don’t want to sell the home, perhaps you will be able to rent out your home and cover or almost cover the mortgage payment. Then you can seek out other living arrangements that comport with your ability to pay. When your income adjusts upward again, you can move back in.
Take on a tenant
Maybe you can rent out your basement or spare room to a tenant. I know several people who are doing this just so that they can make their own mortgage payment. Check your local city or county rental guidelines.
Sell the home
If you have negative equity, interview at least three real estate agents who are COMPETENT in the practice of listing and selling short sales. Do NOT hire an agent who has no experience in short sales. If you decide to hire a Realtor who’s your friend or relative and that person has no experience listing and selling short sales, you get what you deserve.
Hire an attorney
Some homeowners seek out a loan modification only to find out that the real problem was far beyond just the mortgage but instead was an abundance of consumer credit card debt. Maybe an appointment with an attorney who represents debtors is in your future. An attorney can fully explain all the reasons for and reasons against letting the home go to foreclosure, as well as all the legal consequences. News today suggests a foreclosed homeowner might even be able to rent back their home from the lender!
Whatever you do, do NOT pay ANYONE cash up front for services before the services are actually performed (with the exception of when you hire an attorney.) If you part with cash to pay a loan mod company, you are setting yourself up to become re-victimized. They will tell you anything you want to hear in order to get your money because they know you are desperate. If you have money, hire your own attorney who will represent you directly. If you do not have money, contact your state’s bar association for a referral to free legal aid.
Also worth saying: Avoid any third party who claims to have a solution to all your problems and asks you to sign anything. Especially if they say, “This is perfectly legal.” Before signing anything hire your own local legal counsel. Foreclosure rescue scams continue to be on the rise nationwide.
Not everyone will qualify for a loan mod and not everyone is going to get their loan mod processed in a timeframe that the majority would consider anywhere near “good customer service.” Loan servicing doesn’t have to provide you with good customer service because you have no where else to go. There is no automated underwriting slam dunk approval system for loan mods. There’s no stated income program for loan mods. Real humans underwrite the file and this takes time. It’s going to take many, many years to work all the bad loans out of the system. We are in for a long ride. If you don’t qualify for a loan mod it might be time to move on to other solutions.
Kary brings up an excellent point here.
“One other agent short sale issue is going to pop up shortly, if it hasn’t already, but it will be a buyer’s agent issue. The $8,000 first time home buyer credit needs a property to close by November 30. Making an offer on a short sale property, without advising a first time homeowner of the risk of not closing by the deadline is probably malpractice. It’s sort of a “suitability” issue for real estate.”
It’s not outside the realm of possibility that falling in love with a short sale today means the transaction may not close by Nov 30, 2009. I suppose there might be a chance that the tax credit will be extended or even expanded. Yet many homeowners with Option ARMs were given verbal assurances that they would be able to easily refinance.
I wonder what life is going to be like inside loan servicing during the month of November, when the pressure will be sky high to get these short sales APPROVED so the buyers can make the closing deadline?
Each month, Alan from Seattle Bubble religiously posts the Notice of Trustee Sale (NTS) numbers for King County. I’m very appreciative of his work because it saves me time each month so thanks again, Alan. Cruising SB last night, I found Alan’s numbers alarming for June: 1615 NTS were filed. Here are more numbers from Alan:
King County Notice of Trustee Sales
6/2009 – 1615
6/2008 – 576
6/2007 – 304
6/2006 – 299180% YOY (280% of last year)
The last few months:
6/2009 – 1615
5/2009 – 992
4/2009 – 938
3/2009: 1089
2/2009: 838
1/2009: 909
12/2008: 660
11/2008: 540
10/2008: 643
9/2008: 607
8/2008: 575
7/2008: 728
If we’re seeing 180% increase year over year with notice of trustee sale filings, then where are the REOs? Well as it turns out, if you compare the trustee deed filings for the same month, you’ll see that a low percentage of Notice of Trustee Sales actually go all the way through the auction process. Here’s comparison data courtesy of Jess and Julie Lyda, which gives us a visual comparing NTS v. Trustee Deeds, which means title changed hands from the owner in default to a new owner. That new owner could be the bank/lender or someone who was the high bidder at the trustee sale. Here’s a link to a larger image of the graph.
So what assumptions can we make given facts that we already know? We already know that banks and lenders are postponing the majority of trustee sales in King County. We don’t have any data as to how long postponements are lasting. If a homeowner is trying for a short sale or loan modification, we do know that the average wait time for banks to process these requests could easily be months based on nationwide reports from Realtors, home buyers and homeowners. We also know that there are many banks who have turned into zombies, waiting for their number to be called and the regulators to show up on a Friday afternoon. Postponing the losses from a foreclosure means the bankers can collect a paycheck for a few more months.
We also know that 50% of all loan modifications re-default by the 6 month mark. This pushes the foreclosure out longer and increases the overall losses to the bank/lender. Another assumption we can make comparing data from Alan and Julie is that hundreds of REOs will be coming back on the market each month, which will put further pressure on home values. Prime delinquencies are starting to surge and so are delinquencies in the upper home price ranges.
With what we know, home values will continue to feel pressure from many angles including higher inventory levels, continued tightening of underwriting guidelines, the lower prices of REO resales and short sales.
More on home price declines:
House Prices: The Long Tail from Calculated Risk
Case Shiller: Anemic Spring Bounce in April from Seattle Bubble
CR explains the difference between a bottom in housing starts and new construction homes and a bottom in residential resale homes in this post; Housing: Two Bottoms.
I’ve been told my interest in using Facebook for marketing is a bit unhealthy, but I’ve been having so much fun, and this week I pushed the limits in some ways that I thought I’d share in the hope we could spark some interesting conversations…
First off, I’ve been really fortunate to work with the team behind a really interesting movie called The Stoning of Soraya M. that’s being released in selected theaters today (and Seattle on July 17th). It’s a controversial movie based on the true story of a woman who was stoned to death in the Iran after being accused of adultly adultery by her husband. To help with outreach for the movie, I built (with some ridiculously well-timed help from Loren Nason of the Future of Real Estate Technology) a Facebook app that let me combine both a live video stream with a streaming facebook chat-style app. The result was an interview with the director where we took questions from the Facebook community. You can see a recording of the video on the Spinnio app page where we hosted the conversation.
However, before I was ready to go live with the app for the movie, I decided to use the Spinnio app to record a weekly radio show that I run with Rob Hahn called the RE:RnD (Real Estate Radio with Rob and Dustin)… Normally, Rob and I record our radio show form opposite sides of the country, but this week, we were both in Orange County for REBCOC. We took advantage of some of the great real estate people in attendance to interview:
You can watch the video here:
But wait, there’s more!!!
I happen to think the technology of streaming video with Facebook Chat is simply too interesting to resist… so I created a page on RCG that combines the live stream from the Seattle Channel with a chat box that lets you comment on the video with anyone else on RCG watching the video. While I doubt this page will get the critical mass to be extremely interesting, hopefully you can see how cool it could be and just where the Facebook chat/status update technology is heading.
Also, I’m somewhat hesitant to throw a generic chat on RCG in a prominent place, but what do you think?
FB.init(“639647c0b027e22dfc546244ab17a875”, “files/xd_receiver.htm”);
(By the way, this works! Feel free to try it out, although be prepared that each comment leaves a “status” update on your profile.)
I’ve never liked the idea of adding a message board because I simply don’t have the time to moderate it, but I have a feeling that this would be pretty self-moderating considering it’s tied to people’s Facebook account… But what do you think? Should I create a place on RCG where you can leave comments and engage in conversations that aren’t tied to any blog post?
