Foreclosure Relief: Good for Banks, Not So For Borrowers

Home sales are hitting new lows, the number of homeowners behind on their mortgages is again climbing, as is the number of foreclosures. Housing market misery is widespread—but particularly intense for the troubled homeowners relying on the Home Affordable Modification Program (HAMP), the federal foreclosure relief program.

Criticized both by those who argue for more aid and those who think the lackluster program only delays a needed bank reckoning, HAMP stumbles along, more often simply prolonging the pain of foreclosure than providing a solution.

The dismal new housing numbers—sales of existing homes are 27% lower than a year ago, new-home sales have fallen even more—underline just how little demand there is for all the properties that banks are foreclosing on.

Real Estate Mortuary's Waiting Room

In extending the process, foreclosure relief in many cases simply stretches out borrowers' slow bleed of resources. By keeping borrowers in limbo while letting lenders delay repossessing houses they can't sell, foreclosure aid is now benefiting borrowers less than the lenders who created the mortgage mess. For lenders, mortgage modification is the waiting room in the mortuary, a convenient place to hold borrowers while the banks deal with the overflow of houses already repossessed.

Of some 3 million homeowners behind on their mortgages, only about half are eligible for HAMP. Most of the rest, ironically, don't qualify because their income is too low to handle even a modified mortgage. For those that do qualify, HAMP offers little immediate respite: Homeowners have to immediately start making payments on a trial modification plan.

Some 1.3 million borrowers have gotten the trial modifications, which last for at least three or four months (though many banks have stretched this out for longer). But 600,000 of those have already dropped out, unable to make payments in the trial stage. Another quarter-million are in modification limbo, sending checks to the bank as they wait to know if they'll get permanent adjustments. (Detailed numbers are available in the modification program's monthly reports, here.)

What Happens After Gaining Relief Is Worse

If the wait for a modification is trying, though, what happens to homeowners who do manage to get relief is worse. Most borrowers behind on their mortgages are already overburdened with other debts. After the mortgage reduction, the typical modification recipient, despite an average $513 drop in monthly payments, has to devote 63.5% of his or her income to mortgage payments, other debt, and taxes.

It's not clear how many will default a second time. Treasury officials recently had to withdraw the government's numbers on mortgage modification success rates after they were shown to seriously understate re-defaults. One independent estimate from Barclay's Bank is that 60% of homeowners granted loan modifications will eventually default again.

So does HAMP really benefit anyone but the few borrowers who are able to run the foreclosure aid gauntlet, climb out from under their debts against tough odds and get back to making regular payments on their (still-underwater) mortgages? It does. If HAMP fails to make much of a dent in homeowners' troubles, it does mitigate a real problem for the banks: There are many more houses in foreclosure than today's market can absorb.

"Strategic Non-Foreclosure"

One of the foreclosure cascade's not-so-hidden secrets is that the banks and investors who hold millions of busted mortgages are in no hurry to kick debtors out of their homes. The markets hardest hit by the foreclosure crisis are already stuck with an enormous and growing inventory of repossessed houses, now estimated by Lender Processing Services, which tracks foreclosures, at 1 million to 1.2 million bank-owned homes nationwide.

Banks have steadily slowed down the foreclosure process: The average homeowner in foreclosure now is an amazing 461 days behind in his payments. (You can see that last stat in this report, on page 13). Barry Ritholtz of financial blog The Big Picture calls banks' reluctance to take over houses "strategic non-foreclosure." Taking a leisurely path to repossession lets lenders avoid the costs of maintaining properties they can't sell in a market that remains in free fall in much of the country.


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However, there's a limit: Lenders must eventually make good on the threat of repossession or face an epidemic of homeowners who stay in their houses without making payments. Many houses have been in foreclosure for so long that the banks have little choice but to act, and repossessions are rising.

Mortgage modification lets banks put a brake on the process, keeping up the pressure on borrowers (most of whom will eventually be foreclosed on anyway) without adding to the banks' inventory of foreclosed properties. As they sit in this antechamber, instead of simply writing off their mortgages, the strapped borrowers, given the gift of reduced payments, are likely to squeeze out whatever they can manage in a last effort to keep their homes. It's a study in what Rortybomb's Mike Konczal trenchantly calls the credit "sweatbox" -- under the guise of foreclosure aid.

Another Cudgel in the Hands of Lenders

The last insult added to this mess comes from Fannie Mae, which has promulgated new rules that lock those who don't make the effort to modify their mortgages out of the Fannie-backed mortgage market for seven years. So ultimately this comes full circle, and what started as an effort to help borrowers has become another cudgel in the hands of lenders.

If we were to conceive a program to persuade borrowers to stick to their obligations and make every effort, no matter how unrealistic, to avoid foreclosure, we could hardly do better than HAMP. The program probably increases what lenders collect before they eventually foreclose -- and may let those lenders slow the process enough to prop up prices as they sell off their inventory.

In this way, it may lead to a more orderly unwinding of the busted housing market. If so, HAMP might accomplish some part of its goal—just not the part that has to do with helping homeowners.

State to hold high-speed rail public meetings in Tampa, Orlando

The Florida Department of Transportation has set public meetings next week during which the agency will present its plans for high-speed rail connecting Tampa and Orlando.
FDOT officials will present an overview to the public of the Tampa-Orlando project, then hold a question and answer session with those in attendance. There will be three meetings from Aug. 31 to Sept. 2 next week in Tampa, Lakeland and Orlando.
Prior to each public meetings, FDOT officials will also be holding seminars for minority-owned and small businesses to learn more about the process of bidding for work on the project. The schedule for both the business and public meetings is here.
Meanwhile, work on the high-speed rail system connecting Tampa and Orlando is ongoing, with surveys, real estate appraisals and soil sampling along I-4. In January, President Barack Obama announced that $1.25 billion in stimulus money would go to constructing the Tampa-Orlando leg.

Miami Condo Sales

Downtown Miami Condo sales were up 110 percent with 1,933 units sold in the first 6 months of 2010. Great downtown Miami condos that sell due to drastic price reductions include Met I, Epic and Icon Brickell, which sold 49 units, including at least one with a $100,000 over-the-odds premium, after LeBron James announced his switch to the Miami Heat. The average sales price of a downtown Miami condo in the first two quarters of 2010 was reportedly $356,100 or about 16 percent higher than in 2009. "Miami Condo sales above the $1 million mark will continue to outpace single-family home sales in the same price category for the rest of 2010 and into 2011. Condominium living is the new lifestyle choice of the wealthy," said Katerina Brosda.

Housing Fades as a Means to Build Wealth, Analysts Say

Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.


The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.

More than likely, that era is gone for good.

“There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”

Instead, Mr. Humphries and other economists say, housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment.

Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch up.

“People shouldn’t look at a home as a way to make money because it won’t,” Mr. Baker said.

If the long term is grim, the short term is grimmer. Housing experts are bracing themselves for Tuesday, when the sales figures for July will be released. The data is expected to show a drop of as much as 20 percent from last year.

The supply of homes sitting on the market might rise to as much as 12 months, about twice the level of a healthy market. That would push down prices as all those sellers compete to secure a buyer, adding to a slide that has already chopped off as much as 30 percent in home values.

Miami Existing Condominium Sales Rise 43 Percent

The Miami real estate market continues to strengthen as a result of increased sales and stabilizing home prices. In the Miami MSA, there was a 43 percent increase in condominium sales in July compared to July 2009 and a 112 percent increase compared to two years ago, when homes sales began climbing, according to the MIAMI REALTORSand the Southeast Florida Multiple Listing Service (SEFMLS).
The sales of existing single-family homes in the Miami MSA dropped eight percent in July compared to July 2009 but were 51.3 percent higher than they were in July 2008. The Miami real estate market experienced rising residential sales since August 2008, posting increases for 23 consecutive months. Condominium sales continue to increase. Statewide sales increased 11 percent for condominiums and dropped 14 percent for single-family homes.
Nationally, sales of existing single-family homes, townhomes, condominiums, and co-ops decreased 27.2 percent from the previous month, and are 25.5 percent below July 2009, according to the National Association of Realtors (NAR).
The median sales price for single-family homes in the Miami metropolitan statistical area (MSA) in July increased three percent to $199,300 compared to a year ago. The median sales price for condominiums in July was $110,500 down 20 percent from a year ago. Statewide median sales prices decreased seven percent to $138,000 for single-family homes and 20 percent to $87,200 for condominiums.
“While sales of single-family homes have slowed down after nearly two years of significant increases, sales of condominiums continue to rise and at a considerable pace,” said Jack H. Levine, 2010 Chairman of the Board of the MIAMI REALTORS. “This shows that there is demand for local properties, which should result in further strengthening into the future. We are encouraged by the performance of the local market and expect continued stabilization.”
Average Home Sales Price Increases
The average sales prices, which have increased consistently over the last few months, for residential properties rose again in July for single-family homes but dropped slightly for condominiums. According to the SEFMLS, the average sales price for residential properties that sold in Miami-Dade County in July increased 8.3 percent from the previous year to $294,479 for single-family homes and decreased 5.8 percent to $212,156 for condominiums.
Days on the Market and Inventory Levels Decrease
The inventory of residential listings in Miami-Dade County according to the SEFMLS has dropped 11.4 percent from 28,956 to 25,659 since July 2009. The number of active single-family home listings is 13 percent lower compared to a year ago, while active condominium listings have dropped 11 percent. Compared to last month, the total inventory of homes increased 1.9 percent. The average days a property stays on the market decreased 10.3 percent to 100 for single-family homes and 11.9 percent to 114 for condominiums.
Nationally, total housing inventory at the end of July rose 2.5 percent from the previous month.
“Demand for local properties, including multiple bidding reminiscent of the boom during the last decade, is driving values,” said 2010 MIAMI REALTORS Residential President Oliver Ruiz. “Median and average sales prices are rising, while condominium prices are expected to follow due to the considerable increase in sales.”
MIAMI REALTORS
The MIAMI Association was chartered by the National Association of Realtors in 1920 and is celebrating its 90th year of service to Realtors, the buying and selling public, and the communities in South Florida. Comprised of four organizations, the Residential Association, the Realtors Commercial Alliance, the Broward County Board of Governors, and the International Council, it represents 23,000 real estate professionals in all aspects of real estate sales, marketing, and brokerage. It is the largest local association in the National Association of Realtors, and has partnerships with more than 60 international organizations worldwide. MIAMI’s official website iswww.miamire.com.

Tampa area home sales plummet 19 percent

TAMPA - The federal home buyer tax credit is over and, boy, does it show.

Sales were down a whopping 19 percent in July, compared to the same month last year. That follows a 13 percent increase in June.

Sales haven't dropped this much since Feb. 2008 when sales dropped 29 percent. Sales in the Tampa-St. Petersburg-Clearwater area haven't fallen at all since May 2009, when sales slid a modest 1 percent.

The credit – up to $8,000 for first-time buyers and $6,000 for repeat buyers – expired in April. That, combined with rising unemployment, is putting a damper on home buyer demand.

Economist worry it could get worse because the July data still reflects some of the boost given by the credit. Those taking advantage of the tax credit have until the end of September to close those deals.

There were 2,283 homes sold in July in the Tampa-St. Petersburg-Clearwater area, compared to 2,822 last year. The median sales price was $130,500, down 9 percent from $143,100 last July.

Nationally, sales fared even worse. Sales fell to the lowest level in 15 years.

The National Association of Realtors said July's sales fell by more than 27 percent to a seasonally adjusted annual rate of 3.83 million.

Florida Realtors to get $16 million for BP oil disaster

Florida real estate professionals will be eligible to receive payments for damages from the $20 billion oil spill fund established by BP, says Florida Realtors. Certain real estate claims for lost sales and loss of income were not included in the original rules established by Kenneth Feinberg, administrator of the Gulf Coast Claims facility. That changed after he had several meetings with Realtor organizations from Florida, Alabama, Mississippi, Louisiana and Texas. Feinberg agreed to a make special allocation that initially includes $16 million for damage claims from Florida. The allocation is available to all real estate professionals with active licenses at the time of the loss, not just Realtors. Florida Realtors have contracted with an independent national claims adjustment firm, Indiana-based NCA, to handle the claims.

Florida home sales fall, condo sales rise in July

Florida’s real estate market has been on a roller-coaster ride, with statewide sales of existing single-family homes falling 14 percent in July, to 13,589 from 15,762 a year ago.

A month ago, Florida Realtors reported statewide existing home sales in June had risen 15 percent, year-over-year, marking the 22nd consecutive month that sales activity had increased.

"The homebuyer tax credit expiration added a double dip to what has already been a harrowing ride in the Florida housing market," said Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness, in a news release. "As we move past this second dip, which is evident in the July data, the continued recovery of the state's housing market will be contingent upon the improvement of the fundamental underpinnings of the housing sector.”

Existing home sales also fell in all three South Florida metropolitan areas, with Fort Lauderdale taking the biggest hit – down 21 percent, to just 720 homes sold, from 907 in July 2009.

The median price there fell 5 percent, to $207,500 from $219,000.

Existing home sales in Miami slid 8 percent, to 593 homes sold in July from 643 a year ago. The median price, however, edged up 3 percent, to $199,300 from $192,700.

And, in West Palm Beach, existing home sales fell 7 percent, to 802 from 859, with the median price slipping 8 percent, to $226,000 from $245,200.

Existing condo sales fared better, rising 11 percent statewide, to 5,557 from 4,991. However, the median price plunged 20 percent, to $87,200 from $108,500.

Miami saw existing condo sales jump 43 percent, to 837 from 585. But the median price slid 20 percent, to $110,500 from $137,600.

West Palm Beach condo sales bumped up 16 percent, year-over-year, to 791 from 679. But the median price of an existing condo fell 15 percent, to $93,400 from $110,500.

Fort Lauderdale was the only South Florida metro area to see condo sales fall. It was down 12 percent, to 813 from 927. The median sales price of a condo there fell 8 percent, to $74,000 from $80,800.

Nationwide, existing home sales plunged 25.5 percent, year-over-year, in July, to a seasonally adjusted annual rate of 3.83 million units from 5.14 million in July 2009, and 27.2 percent from a downwardly revised 5.26 million in June, according to the National Association of Realtors.

“Even with sales pausing for a few months, annual sales are expected to reach 5 million in 2010 because of healthy activity in the first half of the year,” said Lawrence Yun, NAR’s chief economist, in a news release. “To place in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years.”

Sales are at the lowest level since the total existing-home sales series launched in 1999, and single-family home sales – accounting for the bulk of transactions – are at the lowest level since May 1995.

The national existing-home median price for all housing types was $182,600 in July, up 0.7 percent from a year ago. Distressed home sales, accounting for 32 percent of transactions in July, up slightly from 31 percent in July 2009 and unchanged from June, according to NAR



Read more: Florida home sales fall, condo sales rise in July - South Florida Business Journal

Plunging home sales could sink recovery

NEW YORK (CNNMoney.com) -- With home sales plunging to their lowest level in 15 years, economists warn that a double-dip in housing prices is just around the corner, threatening to further slow the overall recovery.

Existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Much of that drop is attributed to the end of the $8,000 homebuyer tax credit.

0
diggs
diggEmail Print CommentThat credit brought buyers out in droves, as they tried to sign home contracts before the April 30 deadline. Now, two months later, sales are 34% below April's tax incentive-induced peak.

"Home sales were eye-wateringly weak in July," said economist Paul Dales of Capital Economics. "It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, things could get a lot worse."

The sales pace of all homes -- single-family homes, townhomes, condominiums and co-ops -- is at the lowest since NAR began tracking the figure in 1999. Sales of single-family homes, which account for a bulk of the transactions, are at the lowest level since May 1995.

Inventory has also continued to climb, rising 2.5% to 3.98 million existing homes for sale. That represents a 12.5-month supply at the current sales pace, the highest since October 1982 when it stood at 13.8 months. A six-month of supply is considered normal.

5 most affordable cities to buy a house
The combination of weak demand and glut of homes has put downward pressure on prices.

And as the recession proved, the housing market and the broader economy are closely intertwined. When housing prices collapse, so does the overall wealth and confidence of Americans.

"Falling housing prices strain the overall confidence in the economy and discourage Americans from spending," Dales said. "They also mean that banks lose money on their investments and curtail lending, meaning there is less money out there to invest and boost the economy.

The NAR report showed that the median price of homes sold in July was $182,600, up 0.7% from a year ago. Just under a third of homes sold during the month were distressed properties.


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Though prices have yet to fall back, Dales expects they will decline about 5% from current levels over the next six months.

On the bright side, Dales said while a drop prices will put a dent in the economy recovery, it won't lead to another recession.

"The bulk of the downward adjustment in housing prices has been achieved over the last several years, so we're not headed for a complete disaster," said Dales. "We're going to see a double-dip in housing prices, but not a double-dip in the overall economy."

Sales by property and region: Sales of single-family homes sank 27.1% in July compared to the prior month, while condominium and co-op sales tanked 28.1%.

The Midwest fared the worst last month, with sales dropping 35% to an annual pace of 800,000 units in July. that's 33.3% lower than a year earlier.

Resales in the Northwest dropped 29.5% from the previous month to an annual pace of 620,000 units.

They fell by 25% in the West and 22.6% in the South.

Plunging home sales could sink recovery

http://money.cnn.com/2010/08/24/real_estate/existing_home_sales/