But I’m sure you all know what it’s like when you’re driving a country road for the first time and it widens from nearly a one-lane experience of fright to [...]]]> Finally, we’re seeing the balance tip in the financial press, with forecasts of a good—or at least tepid—selling season this spring.

But I’m sure you all know what it’s like when you’re driving a country road for the first time and it widens from nearly a one-lane experience of fright to a broad two-lane ‘highway’ that locals take at about 70 miles per hour. Then, suddenly and unexpectedly, the road goes from smooth concrete to asphalt to gravel, and you pull to the side, wondering what’s up ahead and whether you’ll survive it.

So it is with the economy today, at least where real estate is involved.

Many observers, whose words we find scattered through the financial press, are breaking out the champagne. Derek Kravitz and Alex Veiga, both of whom write prolifically for the Associated Press, recently had this to say, for example: “Five years after the U.S. housing bust sent sales and prices plunging, the spring home-buying season is pointing to a long-awaited recovery. Reduced prices, record-low mortgage rates, higher rents and an improving job market appears to be emboldening many would-be buyers. Open houses are drawing crowds. A wave of foreclosures is leading investors to grab bargain-priced homes.”

Which is all pretty great—smooth driving on a newly-cemented road—but the patches of unimproved gravel continue to intrude on our progress and make the driving feel dangerous.

The most recent completed sales computations, given the apparent improvement in related indicators—especially jobs—were disappointing. For sales completed in March, existing home sales fell off 2.6%, while new home sales were off by 7.1%. Even pending sales brought little solace, since newly-signed contracts dropped by 0.5% in February. (The index for March will be released tomorrow, on Thursday, April 26.)

There are a few mitigating circumstances. For example, there was a striking annual decline of 2.5% in the number of existing homes on the market. And the new home sales looked especially weak because of upward revisions to the number of sales in prior months—40,000 in February, 11,000 in January. Still, these don’t appear to be the sorts of dazzling numbers that would usher in a certain and sustainable recovery.

If I may climb aboard another metaphor, we should recall that the real estate market—like an ocean liner—takes a lot of time to turn around and often brings to mind the surprises that greeted the Titanic, the unsinkable ship, long ago. Our progress toward a truly sustainable market, therefore, is almost always attended by some fits and starts.

But this is not a bad thing for everyone. Certainly, there are those of us who have about run out of the ability to keep holding our breaths, waiting for the ‘All Clear’ signal. Actually, I suspect this economy will continue to generate concerns and uncertainties for many months to come, if not until the cows come home.

Meanwhile, the good part. There is still time, brothers and sisters. We don’t have to rush into the market with our checkbooks in our back pockets, pens at the ready, trying to grab a great deal and good financing before they’re gone. What we have here is a window of opportunity when nearly all the ingredients have come together—even the amount of time needed to engineer a solid transaction. This will surely pass, so the time to act on all of this is now.

And there’s something to watch very closely. Even major financial houses are beginning to see that investing time and energy into streamlining the ‘short sale’ process can potentially save them a lot of money over the cost of disposing of a property in a foreclosure. If they can make this work…if the market moves in favor of short sales (there were apparently more of them in January than foreclosure sales for the first time ever)… we may eliminate the heavy, dark clouds with which imminent foreclosures continue to threaten the real estate recovery.

The difference this time is there is no homebuyer tax credit incentivizing people to buy ASAP. [...]]]> Last month the median price of residential homes in most of the surrounding counties (Placer, Sacramento, Sutter, and Nevada) increased year over year, the first such occurrence of this happening in almost two years.

The difference this time is there is no homebuyer tax credit incentivizing people to buy ASAP. It’s truly the market (low prices and low rates), along with an ever so slightly but consistently improving economy and job market, doing its thing here.

Check out the data (median sales price from March 2011 – March 2012)…

Placer County Homes: 6% increase

Sacramento County Homes: 1.3% increase

Sutter County Homes: 9% increase

Nevada County Homes: 9% increase

Yolo County: Flat (no increase/decrease)

El Dorado County: 5% decrease

This is no guaranty that home prices in Placer, Sacramento, or any other county are on the rise, or that the market is back on track to normalcy, but coupled with all of the news I share with you on a regular basis about declining defaults and foreclosures, as well as other less talked about real estate market data it seems pretty clear to me… A more normal market, a market that will appreciate at a more normal rate going forward (1-6%), isn’t just hopefully thinking, the data tells us it’s already here.

FACT#1: The main fact here is that mortgage servicers will be required to contribute $20 billion to various forms of relief to borrowers. 

FACT #2: Of said $20 billion no less than $10 billion will [...]]]> Some facts about the recent Mortgage Relief agreement between the banks and, well, us…

FACT#1: The main fact here is that mortgage servicers will be required to contribute $20 billion to various forms of relief to borrowers. 

FACT #2: Of said $20 billion no less than $10 billion will be dedicated to reducing homeowner’s mortgage balance that owe more on their mortgages than their homes are worth and are either currently delinquent or at imminent risk of default.

FACT #3: At least another $3 billion will be dedicated to a new refinancing program for borrowers who are current on their mortgages but are underwater. All borrowers who meet some basic eligibility criteria will be eligible for the new refinance program, which will reduce interest rates for borrowers who are currently paying much higher rates or whose adjustable rate loans are due to have their rates increase in the near-term.

FACT #4: The servicers have also agreed to dedicate up to $7 billion in other forms of relief, including forbearance of principal for unemployed borrowers (something already given if your loan is backed by Fannie Mae or Freddie Mac), anti-neighborhood-blight projects, short sale assistance, and special programs for service members who are forced to sell their homes at a loss as a result of a permanent change in station…

FACT #5: As an enticement for servicers to provide relief more quickly, there are incentives for a tangible benefit provided within the first year, on top of that there are additional penalties for any servicer that fails to meet its obligation within three years.

FACT #6: Servicers will receive only partial credit for every dollar spent on some of the required activities, so the settlement will provide direct benefits to borrowers in excess of $20 billion.

FACT #7: In addition to the $20 billion for financial relief for homeowners servicers will make an additional $5 billion in cash payments to the Washington DC and all 50 participating states. That $5 billion will include…

• A Borrower Payment Fund of $1.5 Billion providing cash payment to homeowners whose homes were foreclosed upon from 2008-2011 where the servicers did not follow proper procedures.
• The remaining funds will go to state and federal governments to be used to refund taxpayer dollars lost as a result of servicer misconduct, fund housing counselors and legal aid, and other similar purposes to be determined by each state’s attorneys general. The funds coming to the federal government will mostly go to the FHA Mortgage Insurance Fund, with portions also going to the Veterans Housing Benefit Program Fund and to the Rural Housing Service (USDA).

FACT #8: As part of the deal servicers are agreeing to implement extensive new servicing standards, designed to correct the kinds of conduct that caused a need for this settlement in the first place.

•  Cease past foreclosure abuses such as robo-signing, improper documentation, and lost paperwork through new mortgage servicing standards.
• Require strict oversight of foreclosure processing, including of third-party vendors.
• Impose new standards to ensure the accuracy of information provided in federal bankruptcy court, including pre-filing reviews of certain documents.
• Make foreclosure a last resort, by requiring servicers to evaluate homeowners for other loan mitigation options first.
• Restrict banks from foreclosing while the homeowner is being considered for a loan modification.
• Set procedures and timelines for reviewing loan modification applications, and give homeowners the right to appeal denials.
• Create a single point of contact for borrowers seeking information about their loans and adequate staff to handle calls.

FACT#9: You probably are tired of all these facts! But it’s important to know that Californians are to receive the lion’s share of the relief, $18 billion of the $25 billion!

It was the fifth month in a [...]]]> Home sales in the Sacramento region rose yet again last month, beating the rest of the state (which also rose with us, only not as much). Over 2,400 homes sold across the region in November, up just shy of 12% year over year.

It was the fifth month in a row of over 10% gains in sales volume, with sales in Sacramento County up just shy of 13% in November alone. Placer County, less hardly hit by the downturn had been leading the way in previous months saw homes sale increase by only half a percent. A small bump but a continuing trend upward.

Most of the demand across the board was for moderately priced homes with volume being in the $200,000 and under range. Homes in the $200-300,000 range stayed about the same while sales of homes costing over $300,000 actually slowed a bit.

Foreclosure rates are still higher than we want them to be (I’d like it to be at 0) however you’ll remember in previous posts that the number today is not what matters, it’s actually almost meaningless when it comes to predicting future distressed sales, the number we need to look at is actually how many homeowners are defaulting on their mortgage payments, a number that is dropping more and more every month.

The “news” knows that what sells is fear, scary doom and gloom is what gets the most readers and hits to their website. And, while the picture is not the prettiest, it’s a lot prettier than it was in the not to distant past and much prettier still than the pictures the promoters of fear want to sell you.

In just January of this year that number was closer to [...]]]> At the end of October there were 6.3 million homeowners currently behind on their mortgage in the US. A big number, right? However the data shows that this number has been on a steady decline for the last two years.

In just January of this year that number was closer to 6.9 million. The January before (2010) the number was 8.1 million!

We’ve talked about this before (here are a few links: 3.18.11, 7.29.11, 9.6.11)  but I like to share the real data whenever I can. All we hear in the media is doom and gloom, how there are so many foreclosures and no one can pay their mortgage, etc. As a reminder, the most accurate way to predict foreclosures in the future is people missing payments today. Likewise as less and less people are missing mortgage payments (to the tune of 2 MILLION less in the last two years) the future foreclosure number is going to go down.

We’re seeing the benefits of this already in the Sacramento/Placer markets as housing inventory is at about a 2 month supply. A more “normal” or healthy market has about a 4 month supply of homes at any given time. I’m also seeing the home values of many of my clients, from midtown Sacramento to Roseville, see the values of homes they bought in the last year or so RISE (not a huge rise, but that is better than declining or even being just flat).

This doesn’t mean a reversal of fortune, that people who bought in 2006 are going to see the value of their homes rise to the level it was back then any time soon, but it’s a start.

Bringing you the good news, with real numbers, that you don’t get anywhere else!

Greg Cowart

Currently the MMI Fund’s capital reserve ratio is 0.24% [...]]]> This month the FHA has reported to Congress that the MMI Fund (Mutual Mortgage Insurance Fund), the backbone of its mortgage programs and what makes FHA mortgages possible, is going to return to its mandated capital reserve level faster than previously expected.

Currently the MMI Fund’s capital reserve ratio is 0.24% but that it would return to its mandated sooner than actuaries last predicted. “As was the case last year, the new actuarial study shows that FHA is expected to sustain significant losses from loans insured prior to 2009, and thus its capital reserve remains below the congressionally mandated threshold of 2% of total insurance-in-force,” an FHA official said. “However, the actuaries’ report concludes that, barring a further significant downturn in home prices, the MMI Fund will start to rebuild capital in 2012, and return to a level of 2% by 2014; outpacing last year’s prediction.”

“In the midst of a tough housing market the FHA MMI Fund continues to be actuarial sound.

“Because of the Obama administration’s strategy to protect the FHA Fund – tightening of risk controls, increased premiums to stabilize near-term finances and expanded loss mitigation assistance to avoid unnecessary claims – this past year’s endorsements had the highest credit quality ever recorded and will yield historically high levels of net receipts in the years ahead.”

The availability of FHA loans is a high part of our housing market and economy, both nationally and locally, and the health of the MMI Fund is also an important part of the housing market and greater economy. This is good news for both of those thing as well and, while we won’t see a more normal real estate market or economy for a while still, more and more news like this tells us the tide is turning!

~Greg

P.S. The FHA has never received any sort of taxpayer bailout! The MMI Fund keeps it solvent and without the need for any sort of congressional assistance. Truly an American success story…