At Home With Betty

Can Shadow Inventory Help Relieve Price Pressure?



Home prices grew at the fastest pace in seven years in 2013. This is good news for property owners, both homeowners and landlords, as they witnessed, on average, a $32,000 gain in housing equity over the past two years.  The equity increase is an immediate financial gain for many.  For others, it marks only a partial recovery.  That is, at the depth of the downturn there were about 12 - 13 million underwater homeowners.  Now, that figure has been essentially slashed in half. 

There is however some bad news along with the quickly rising home values.  Rising home values make it more difficult for first-time homebuyers to make a purchase.  The conditions will be exacerbated by the near-certain case of a rising interest rate environment in the coming years.  In order to lessen the upward price pressure, more inventory is clearly needed.  Homebuilders are raising production, but too late and at too small increments.  Though the most recent housing starts of a 1.1 million annualized pace in November was a solid 30 percent increase from the prior year, the pace is still insufficient.  For all of 2013, housing starts look to finish at 930,000. The long-term, 50-year annual average is 1.5 million housing starts each year.  So the recent past six consecutive years of less than one million new housing units was bound to make an impact on the market.  Existing home inventory is at a 13-year low while newly constructed home inventory is at a 50-year low. 

However, can shadow inventory then save the day in pumping out more homes available for sale?  There are still 2.3 million mortgages that are seriously delinquent (more than 90 days late) or already in the foreclosure process.  This is not counting underwater homeowners, but people who are not paying their mortgage.  Surely, the majority of these distressed mortgages will not ever be made current.  They will instead become REO properties at some point.  Unfortunately, even though 2.3 million seriously delinquent mortgages sound large, they are significantly smaller than what the number had been.  Four years ago, there were 4.3 million in a similar state.  Just one year ago, there were 2.9 million delinquent mortgages.  The bottom line is that we should expect less of an increase in shadow inventory turning into visible inventory. 

Due to differing foreclosure processes, however, some states have a much larger overhang of shadow inventory than others.  In places like Arizona, a homeowner is quickly evicted for being delinquent.  In other places, principally the judicial foreclosure states, the court system has the final say and the overall process tends to drag out for a long time – with a 2 - 3 year time span not uncommon.

What are the judicial states with continuing, plentiful shadow inventory that can hit the market?  Interestingly, they are in states where inventory shortage is not a problem.  Home-price growth has been sluggish and these states still have a shadow looming over their market.  [Price data used is from the NATIONAL ASSOCIATION OF REALTORS®] The following table shows the serious delinquency rates now and at peak (usually in 2008 or 2009, ranked by the latest home price appreciation for each of the 50 states). 

As one can see, where the inventory would be most welcome, there appears just not enough shadow inventory to help relieve home prices.  The top three, fastest-appreciating states of Nevada, California, and Arizona have reduced seriously delinquent mortgages by roughly 60 - 80 percent.   On the opposite end of those states where seriously delinquent mortgages have been cut by only a little (to the tune of 10 percent or so) - namely New Jersey, New York, Vermont, Delaware, Connecticut, and New Mexico – home price growth has been sluggish.  There are few exceptions to the rule.  Washington D.C., for example, has made only slight progress in reducing seriously delinquent mortgages, yet home price growth has been strong, no doubt due to the stronger employment conditions and from the fact that it already had a relatively low delinquency peak figure.



# 1 Reason to Sell Now


The #1 Reason You Should Sell Now


The price of any item (including residential real estate) is determined by ‘supply and demand’. If many people are looking to buy an item and the supply of that item is limited, the price of that item increases.

According to the National Association of Realtors (NAR), the supply of homes for sale dramatically increases every spring. Putting your home on the market now instead of waiting for the increased competition of the spring might make a lot of sense.

Buyers in the market during the winter months are truly motivated purchasers. They want to buy now. With limited inventory available in most markets currently, a seller will be in a great position to negotiate.

by The KCM Crew 

Considering a move to a new town?


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Metro Detroit home prices up 41%


Metro Detroit home prices up 41% since December 2012


Median home sale prices in the four-county metro Detroit region increased by 41 percent year over year, continuing their upward swing, although sales in the region only nominally increased.

According to data released Monday by Farmington Hills-based Realcomp II Ltd., prices increased from $85,750 in December 2012 to $120,800 last month in the region, which includes Wayne, Oakland, Livingston and Macomb counties.

Wayne County prices increased by 66.7 percent from $45,000 to $75,000, while Macomb (27.7 percent), Oakland (20.8 percent) and Livingston (13.1 percent) counties also improved.

"The market continues to be really hot right now in terms of the lack of inventory, and those prices are continuing to come up," said Karen Kage, CEO of Realcomp.

Yet home sales in the region increased by only 0.2 percent from 4,069 in December 2012 to 4,077 last month, with Macomb (11 percent) and Oakland (9.3 percent) being the only two counties to experience increased sales.

The small increase in sales in the region, however, is an improvement from November, when year-over-year sales were down by nearly 8 percent.

Homes in December also spent fewer days on the market than they did in December 2012, decreasing from 77 days to 49 days last month, according to Realcomp.

"The market is so hot that whatever comes on the market sells," Kage said.

December caps off a year in which the residential real estate market experienced significant gains. In November, median home sales prices increased by more than 41 percent over November 2012 numbers. That followed an October in which the prices increased by nearly 42 percent in the region.

Kirk Pinho: (313) 446-0412, Twitter: @kirkpinhoCDB


Foreclosures on the Down Cycle


Foreclosures Rise in June, But See Big Drop for Year

Completed foreclosures rose 2.5 percent in June from May, CoreLogic reported Tuesday. Its report follows another recent one from Lending Processing Services that showed nearly a 10 percent rise in the national delinquency rate in June compared to May. 

About 1 million homes are in the foreclosure inventory as of June, CoreLogic reports. That does mark a 28 percent decrease in the foreclosure inventory compared to last year. 

Forty-nine states reported a year-over-year decline in foreclosure rates in June. 

"The housing market is clearly on the mend, but we expect the ultimate conclusion of the present housing down cycle to be another several years away,” says Anand Nallathambi, president and CEO of CoreLogic.

CoreLogic reports the five states with the largest foreclosure inventories -- as a percentage of mortgaged homes -- in June were: 

  • Florida: 8.6%
  • New Jersey: 6%
  • New York: 4.8%
  • Connecticut: 4.2%
  • Maine: 4.1%

Daily Real Estate News | Wednesday, July 31, 2013

Couples Choose Homes Before Honeymoons


In these times when starter homes are so hard to find and homes are selling in a day once they are listed, more and more young couples are rushing to the closing table before they make it to the altar.

One in four, 24 percent, of couples between the ages of 18 to 34 couldnt wait for their wedding date and purchased their first home together before getting married. Their parents were much less likely to buy a home together before getting married. Among married adults ages 45 and older 14 percent of. purchased their first home together with their current spouse before they were married. Among all adults,17 percent made a down payment before they tied the knot, according to a new study from Coldwell Banker Real Estate.

While life goals and expectations continue to weigh on young couples, their views of homeownership are transcending their plans of marriage and starting a family, creating a direct effect on the patterns of buying a home altogether, said Dr. Robi Ludwig, a leading psychotherapist and Coldwell Banker Real Estate LLC lifestyle correspondent. What were seeing is that young couples are switching up the order and purchasing their first home regardless of whether or not they have set a wedding date. This is a huge movement within the American culture. While younger generations may be focusing more on their career, and in turn waiting longer to get married and have children, they are not delaying their dream of homeownership.

According to the survey, 35 percent of all married couples purchased their first home together by their second wedding anniversary. Some 80 percent of married homeowners who purchased their home while married said it did more to strengthen their relationship than any other purchase they made together. Only 16 percent of married U.S. adults have not purchased a home together with their current spouse.

When a couple buys their first home, its one of the most exciting new experiences they ever will share together, said Dr. Robi Ludwig. They not only learn about each others wishes and dreams during this process, but they also learn how to be practical with each other and compromise. Buying a home has more of an impact on a couples relationship than any other purchase they will ever make. It bonds two people together and makes them a family.

In the South,. 72 percent of married Americans waited until after they were married to purchase a home, compared to 60 percent of Americans in the Northeast. Over one-third of married homeowners (35 percent) wish they had taken the plunge (into homeownership) sooner than they actually did.

Housing Market Healing, but Recovery Takes Time


Housing Market Healing, but Recovery Takes Time

by Chris Kissell

Published April 09, 2013

For years, thick clouds hovered over the nation's housing market, casting a pall of gloom over homeowners and sellers. But recently, the sun has broken through with mortgage rates being at an all-time low and prices appreciating again.

That is good news. But don't get too excited, cautions J. Andrew Hansz, director of the Gazarian Real Estate Center at California State University in Fresno.

Hansz says it will be "a very long time" before prices return to 2005 levels, and warns that the market is likely to see many ups and downs in the future. He expands on those thoughts in the following interview.

As home prices rise, do you think they'll ever go back to the levels seen in 2005 during the housing boom?

Yes, we will someday see the 2005 prices, but it (will) be a very long time, and (there will be) many more ups and downs in the real estate market. The 2005 prices were fueled by extraordinarily lax lending standards -- standards that I hope we do not see again.

As the inventory of homes for sale shrinks, many homebuyers are willing to pay more than the asking price. However, the appraisal doesn't always support the price the buyer is willing to pay. How big of an obstacle do you think this is for the housing recovery?

Appraiser(s) have a heck of a time in rapidly appreciating markets. Appraisers need to document today's (higher) values using yesterday's (lower) closed sales. The solution is cash. A seller can wait for a cash offer, or a buyer can put more cash into the deal.

Many real estate experts say there's never been a better time to buy a home, as mortgage rates are near record lows, home prices remain attractive and rents keep rising. Do you agree with that notion? Do you think those who keep renting will miss an opportunity to buy low if they don't shop for a home soon?

The key to this issue is expected tenure. Housing transaction costs are expensive. If there is a good chance you will have to move again in one to five years, renting is usually the best option financially. If you expect to be in the property for the long term, low interest rates and current housing prices make purchasing an attractive option.

Is house flipping back?

I don't think "flipping" has ever disappeared. I know of plenty of cash investors who have been taking advantage of deeply discounted distressed properties throughout the housing market downturn. It is when property prices are increasing that flipping becomes popular and a lot of people get into it as a sideline.

Are bidding wars coming back? What should a buyer do if a bidding war erupts over a house -- participate in the impromptu auction, or find another house to make an offer on?

The Fresno, Calif., housing market currently has just 1 one half months of inventory, so we are seeing multiple offers, or "bidding wars." I recommend that buyers be patient -- real estate markets fluctuate and the market will change. Visit a few new-construction developments in the meantime.

We would like to thank J. Andrew Hansz, director of the Gazarian Real Estate Center at California State University in Fresno, for his insights. Holden Lewis, assistant managing editor for, contributed the questions for this interview.

 Bankrate Inc.

3 Reasons to Buy Right Now


3 Reasons to Buy Right Now

Monday, March 25, 2013 The price of a home is the major consideration when deciding whether or not it makes financial sense to purchase a house. Experts are not only projecting that house values will increase in 2013. They are also more optomistic in the level of appreciation they are projecting as the market begins to heat up. Here are some examples:

The Home Price Expectation Survey

The latest survey of a nationwide panel of 118 economists, real estate experts and investment and market strategists reveals they project home values to end 2013 up an average of 4.6% according to the first quarter. This is after they had projected a 3.1% increase just three months ago.

Bank of America

In a report titled, Someone Say House Party?, Bank of America analysts revised their projections upward:

Home prices continue to show momentum amid shrinking inventory and record high affordability, prompting us to revise up our original forecast of 4.7% for home prices this year. We now expect national home prices, as defined by the S&P Case Shiller home price index, to increase 8% this year.

Capital Economics

According to a report in DSNews, Capital Economics also upgraded their prediction:

Strong demand and tight inventory have brought existing home sales back to normal levels, and further gains are possible, according to the latest market report from Capital Economics. Additionally, market conditions may prompt lenders to loosen the purse strings slightly and lend a little more freely.

These conditions, combined with broader economic indicators, lead Capital Economics to revise its previous forecast of a 5% price gain this year up to 8%.

Morgan Stanley

In an article from HousingWire, Morgan Stanley joined the party:

Strong momentum in home prices as well as housing activity gave Morgan Stanley analysts enough confidence to upgrade their home price appreciation projections to roughly 7% (from 5%) for 2013, according to its latest global securitized credit report

The momentum in most metrics of housing activity is running well ahead of the pace we had expected, said James Egan, Jose Cambronero and Vishwanath Tirupattur, analysts for Morgan Stanley.

Not only are prices projected to appreciate. Experts are actually revising their projections upward as demand maintains its momentum.

To view the original article, click here:

Price, Proximity to Work and Design Are Key Concerns for Home Buyers


Price and proximity to work are key concerns for first-time home buyers, while trade-up buyers tend to be most focused on the design of the home and the neighborhood, according to Characteristics of Home Buyers, an analysis of the recently released 2011 American Housing Survey (AHS) by the National Association of Home Builders (NAHB).

The biennial survey, which is conducted in odd-numbered years by the Census Bureau, covers about 6.8 million home sales that occurred in 2009 and 2010. NAHBs analysis additionally compares the homes that buyers purchased with what they say they want using results from What Home Buyers Really Want, a new consumer preference survey published by the association.

Among first-time home buyers, price was the most frequently cited reason for selecting a particular house, with a 38 percent share. At 30 percent, proximity to work was the most frequently cited reason for choosing a specific neighborhood, says David Crowe, NAHBs chief economist.

The majority of trade-up buyers (36 percent) cited the design of the home as the primary reason for selecting a particular house, with 28 percent citing the looks and design of the community as the reason for choosing a specific neighborhood.

More than 90 percent of the sales reported in the 2011 AHS were existing homes, a significant increase from previous years. Sales of new homes were very low in 2009 and 2010 due to the unique circumstances surrounding the Great Recession and the housing market crisis. We expect that situation to turn around as the housing market recovery takes hold, says Crowe. More than half (55 percent) of the people surveyed for What Home Buyers Really Want, NAHBs consumer preferences study, said they would prefer to purchase a new home rather than an existing home.

Theres good reason for that preference. New homes provide buyers the opportunity to choose finishes, fixtures, flooring and more. And they are apt to have the other elements that buyers want including open design, up-to-the-minute kitchens and baths, and features such as a laundry room and walk-in pantry that help with organization and storage.

There is also growing interest in single-story homes, and energy efficiency continues to be a concern. In fact, nine out of ten buyers surveyed would prefer to purchase a home with energy-efficient features and permanently lower utility bills rather than to buy a home without those features that costs two to three percent less.

New homes today definitely fit that description, and as a group are the most energy- and resource-efficient homes ever built.

Increasing numbers of homes nationwide are being constructed to the ICC 700 National Green Building Standard (NGBS), which is the only residential green building rating system approved by ANSI as an American National Standard. These homes have lower operating costs due to cost-effective energy and water efficiency practices and the use of lower maintenance materials.

Additional NAHB analysis of information from the 2011 AHS shows that energy costs are about 10 percent lower in new homes, even though new homes tend to be larger. The average annual cost of energy was $2,478 for all single-family homes and $2,240 for those built after 2008, which were new when the information was compiled. Average maintenance costs were 56 percent lower for new homes. Average annual maintenance costs for homes built after 2008 were $241 compared to $547 for all single-family homes.

No matter what their preference for location or style, financially qualified buyers are likely to find a new home with the features they most want, says Crowe. The housing market is strengthening in most areas of the country, and home builders are eager to help buyers achieve or further their homeownership goals.
From Ris Media.

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