2013 In Review

It's hard to believe another year has come and gone. Looking back, 2013 indeed was a pivotal year for housing markets nationwide. Many markets saw an incredible bounce back, homeowners regained equity and mortgage rates for the most part remained incredibly low. Here's a look back at the highlights that stood out and will help us understand how housing will perform in 2014. 1. Home sales soared for the most part Despite the fact that home sales have hit some seasonal slippage here near the end of the year, it's hard not to remember the amazing summer that took place in many markets. Home sales hit their highest level in over six years in August, and took prices along for the ride. NAR data showed that end-of-summer sales hit an annual rate of 5.48 million in August, the highest pace since February of 2007. 2. Home values inched toward record highs Perhaps even better news for America's homeowners and sellers was that the national median price for existing homesmade major strides in 2013. After a hot summer, the median price was $212,100 in August, up 14.7% from the same month in 2012. 3. Negative equity eased  Of course, one of the best side effects of the rising strength of home values was the easing of negative equity for homeowners. One of the big stories of the fall was data released from RealtyTrac that showed 8.3 million homeowners – or about 18% of homeowners with mortgages – were on track to gain enough equity to sell their homes in the following 15 months without resorting to short sales. Of course, this doesn't mean that 8.3 million homes will come on the market for sale next year. But it does mean a lot more options for sellers who've wanted to sell. 4. Seasonal cooling landed The year was not immune to occasional doses of more sobering news. An expected period of cooling off indeed took place in the fall. It almost had to, given the booming summer that real estate markets experienced. Total existing home sales fell to a rate of 5.29 million in September from August, though it's worth noting they remained 10.7% above year-ago levels. 5. Access to mortgage improved, despite pockets of interest rate increases This month, we saw two great pieces of news that have to do with improving overall access to mortgages. Federal housing officials said they would leave the GSE loan limits as is, which means borrowers in higher-cost areas will still continue to see opportunities for Freddie Mac and Fannie Mae-backed loans. And a report showed that loan eligibility continued to increase for borrowers in the first half of the year. 6. Smaller cities took the lead In NAHB's fall housing index, the builders group found thatsmaller cities are leading the way to a housing recovery. Smaller cities accounted for 43 of the top 50 markets in the NAHB's index released in October, underscoring how much local economies play into housing activity. 7. House flipping made a comeback – at the high end A Reuters story in August investigated a rising trend in flipping homes, revealing that the number of flipped homes valued at $1 million or more had risen nearly 40% nationwide since 2011. RealtyTrac also cited a few specific markets where high-end flipping has become rampant. Luxury flipping was up 867% in Orlando between 2011 and 2012, and increased 456% in Phoenix. 8. 'Boomerang' buyers returned What's a boomerang buyer? A former homeowner who's gone through short sale, foreclosure or bankruptcy in the past few years who is now preparing to buy a home. 2013 saw many more of these folks coming into the market – a good sign as it shows positive sentiment for homeownership from a group of folks who perhaps have the biggest reason to run far far away. Wow, 2013 was exciting, fast-paced and overall really positive for our housing markets. Of course, there's still more work to be done in 2014. Happy holidays from Lisa Faria & Peter Fleming, Realtors

LPF Team, Gilroy LeTip

Lisa Faria and the LPF team are proud to announce their acceptance into Gilroy LeTip.

LeTip International is the world's largest, privately owned, professional business leads organization. Since 1978, LeTip programs have helped over 120,000 members, throughout the United States and Canada, build business success through personal referrals.

LeTip International's structure set the standard in the word-of-mouth referral industry. Members are known for their professionalism, dedication, and loyalty to one another, and to the LeTip Program.

LeTip Chapters meet weekly to exchange qualified leads, build solid business relationships, develop strong presentation skills and become proficient networkers. Only one representative of any given profession is accepted into a chapter, and members are chosen for their occupational expertise.

Lisa Faria of Gilroy, CA LPF team Lisa & Pete

California Home Owners Attention

Troubled homeowners who get a break from their mortgage lenders could face a hefty tax bill next year if a key provision expires at the end of the year, though state laws could determine which borrowers will have to write a check to Uncle Sam.

Homeowners who live in states where mortgages are non-recourse—that is, where they aren’t personally liable for the unpaid balance—may avoid the potential tax hit even if Congress doesn’t act,according to a letter sent by the Internal Revenue Service released by Sen. Barbara Boxer (D., Calif.) on Friday.

The tax provision currently allows some homeowners—mostly those facing foreclosure—to avoid paying taxes on certain relief that they receive on their mortgages. The IRS considers debt forgiveness to be a form of taxable income. That means homeowners who sell their homes for less than the amount they owe in a short sale could face a tax bill.

In 2007, as the foreclosure crisis spread, Congress exempted some homeowners from counting certain kinds of forgiven mortgage debt as taxable income in order to encourage banks and borrowers to seek foreclosure alternatives. Congress retroactively extended the provision earlier this year, after it expired on Dec. 31, 2012. The provision is set to expire this coming Dec. 31 and there appears to be less urgency in Congress right now to pass an extension.

In the letter to Sen. Boxer, the IRS clarified that certain non-recourse debt forgiven by lenders wouldn’t typically be considered taxable income by the IRS. This means that for most California borrowers, the expiration of the tax provision may not have a meaningful effect.

“California homeowners have struggled through years of economic hardships during the Great Recession,” said Ms. Boxer in a statement Friday. “I am relieved that these families will not face a burdensome tax penalty just as they are trying to rebuild their lives with a short sale.”

In the letter, the IRS wrote that “if a property owner cannot be held personally liable for the difference between the loan balance and the sales price, we would consider the obligation a non-recourse obligation.” As a result, the owner would not have to count that forgiven debt as income.

Other states with laws that prevent lenders from seeking so-called “deficiency judgments” to recoup defaulted debts from borrowers would likely be in the same camp as California, the letter said.

Short sales have fallen sharply as a share of overall sales over the past year as the housing market has rebounded and fewer homeowners have found themselves underwater. In California, short sales accounted for around 12.6% of homes that were resold last month, down from 26.7% one year earlier, according to research firmDataQuickMDA.T -0.43%.

Nationally, lenders have approved more than 200,000 short sales this year through August, according to Hope Now, an industry coalition to promote foreclosure alternatives.

The IRS has more information online about the tax implications of mortgage forgiveness. The National Consumer Law Center has a detailed report on anti-deficiency laws by state.

Summer Ends on a High Note!!

Home sales ended the summer on a high note, reaching their highest level in over six years in August. Prices went along for the ride, with the median price trending nine consecutive months of double-digit year-over-year increases. Recovery meets growth. Now we're making serious progress. According to the most recent data from the National Association of Realtors, total existing-home sales – including single-family, condos, townhomes and co-ops – increase 1.7% to an annual rate of 5.48 million in August. The pace was up from 5.39 million in July and 4.84 million in August 2012. To give you a bit more perspective on how the market is doing overall post-recovery, August sales were at the highest pace since February 2007, when they were 5.79 million. Sales have outpaced year-ago levels every month for the past 26 months. How long can we expect the trend to continue? Will we hit a peak before the end of the year? These are logical questions to which there's never a clear answer. NAR's chief economist said we may be seeing a temporary peak, citing two factors that threaten to slow pace: tight inventory and rising interest rates. There were 2.25 million existing homes available for sale in August – a 4.9-month supply at the current sales pace. This was down from a 5.0-month supply in July. The limited inventory in some markets has created multiple bid situations, meaning some buyers are being priced out. NAR said that 17% of all homes sold above the asking price in August, although 63% sold below list price – showing yet again that in housing, it's all relative to location. Some markets are moving rapidly, while others are still slogging through. In pricing, the national median price for existing homes was $212,100 in August, up 14.7% from the same month a year ago and the strongest yearly gain since October 2005. The share of distressed home sales is shrinking, accounting for 12% of August sales, down from 15% in July and the lowest since monthly tracking began in October 2008. Meanwhile, 8% of August sales were foreclosures, and 4% were short sales. The time it takes to sell a home was little changed in August – 43 days, compared with 42 days in July. However, much progress has been made in the last year, as it took 70 days on the market in August 2012. Overall, it was a fantastic summer for housing nationwide, with some markets enjoying rapid sales with multiple bids and others simply enjoying healthy pace. The question remains of whether we'll see a dip in market activity between now and the end of the year. For some markets, that's likely to happen. But for others – especially where inventory is low but buyers are eager to purchase – we'll likely continue to see growth in both volume and price. Happy fall! LPF Team Gino Blefaria CEO Intero Real Estate Services

Great News for Distressed Properties!!

As the housing market heals, foreclosure inventory is depleting quickly, CoreLogic reported Thursday.

In July, about 949,000 homes were in some stage of foreclosure, down 32 percent from 1.4 million a year ago. Foreclosure inventory also showed a 4.4 percent decline from June. Year-to-date, foreclosure inventory is down by 20 percent.
Currently, about 2.4 percent of homes with a mortgage are in foreclosure inventory, the lowest level since March 2009.
In addition to shrinking foreclosure inventory, CoreLogic also reported steep declines in completed foreclosures and serious delinquencies.
According to the data provider’s estimate, about 49,000 properties were lost to foreclosure in July, down 25 percent from 65,000 in July 2012.

From June to July, completed foreclosures fell by 8.6 percent from 53,000 in the prior month.
At 5.4 percent, the serious delinquency rate decreased to the lowest level since December 2008, according to CoreLogic. The rate represents fewer than 2.2 million mortgages.
“Continued strength in the housing market will contribute to our outlook for ongoing improvement in the stock of distressed assets through the end of this year,” said Mark Fleming, chief economist for CoreLogic.
According to CoreLogic, the decreases were apparent across the country, with every state reporting an annual decline in foreclosures.
“Not surprisingly, non-judicial states have come the farthest the fastest in reducing shadow inventory and lowering delinquency rates,” noted Anand Nallathambi, president and CEO of CoreLogic.
Florida took the lead again as the state with the highest number of completed foreclosures. Over the last 12 months, about 110,000 homes were lost to foreclosure in Florida. California followed with 65,000 completed foreclosures. Other states in the top five were Michigan (61,000), Texas (45,000), and Georgia (41,000).
Florida also held the highest percentage of homes in foreclosure inventory, at 8.1 percent. New Jersey’s foreclosure inventory rate of 5.9 percent put it at second, with New York (4.7 percent), Connecticut (4.0 percent), and Maine (4.0 percent) filling out the top five.
However, in 36 states, foreclosure inventory sits below the national rate of 2.4 percent.

Mobile technology dominates home buying process, REALTOR® survey finds

LOS ANGELES (July 17) – Demonstrating the proliferation of mobile technology into nearly every facet of our lives, more than eight out of 10 home buyers are accessing home information on their smart phones and computer tablets, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2013 Survey of California Home Buyers.”

“With more and more consumers using mobile devices and mobile technology, such as apps and social media platforms, buyers are increasingly using their smartphones and computer tablets to view comparable house prices, search for properties, take photos, and create videos of homes and amenities, as well as research communities and real estate agents,” said C.A.R. President Don Faught.  “As a result, home buyers today are more informed and have a greater sense of control over what could be a daunting process.”

The survey found 85 percent of buyers used a mobile device during the home buying process, with the majority of buyers (70 percent) accessing the Internet from their smart phones and 15 percent accessing it from their tablets. 

While the majority of buyers (61 percent) found their home through an agent, the percentage who found their home online more than doubled from 16 percent in 2012 to a record high of 37 percent in 2013.

Almost one-third (30 percent) of buyers rated Realtor.com as the most useful website, followed closely by Zillow at 28 percent.  Broker and agent websites were also helpful in the home buying process as buyers increasingly seek local expertise and information.

The use of social media in the home buying process continued to increase, with three-quarters of buyers now using it, compared to 52 percent who used social media in 2011.  Buyers primarily used social media for buying tips and suggestions from friends (43 percent), neighborhood information (42 percent), and to view their agents’ Facebook pages (41 percent).  The use of social media as a form of communication is expected to grow, with 91 percent of buyers saying they are receptive to receiving information about the home buying process from their agent via social media.

The survey also found that buyers spent nearly six months considering a purchase before contacting an agent, nearly twice as long as last year. They took more time investigating homes and neighborhoods before contacting an agent, spending just over seven months on researching, compared to about 1.5 months last year. Additionally, buyers spent nearly 10 weeks looking for a home with their agent, a week longer than last year. More than eight out of 10 buyers (85 percent) made offers on other homes, and one-third said they settled for the best option given the limited supply of houses.

“The lengthier consideration time and home search illustrates the impact of low housing inventory and increasing home prices,” said Faught.  “These factors caused buyers to weigh their options more carefully before making their home purchase.”
           
Additional findings from C.A.R.’s “2013 Survey of California Home Buyers” include:

• Buyer optimism about the future direction of home prices continued to grow, with the majority of buyers (60 percent) believing prices will go up in five years and 36 percent seeing prices rise in one year, up from 41 percent and 25 percent, respectively, last year.
• Buyers cited price decreases (38 percent), favorable prices/financing (12 percent), and the desire for a better location (10 percent) as top reasons for purchasing a home.
• Reflecting the prevalence of tight lending standards, buyers experienced extreme challenges in obtaining financing.  On a scale of one to 10, with 10 being extremely difficult, buyers rated their difficulty in obtaining financing at 8.6 on average, the highest in the survey’s history.
• Higher down payments are the market norm these days, with buyers putting an average of 25 percent down on their home purchase.  The average down payment has been greater than the traditional 20 percent since 2009.
• Ninety-one percent of buyers obtained a fixed-rate loan, up from 84 percent in 2011, reflecting low rates and the desire for certainty as the market gets back to basics.

Check us out at www.LPFteam.com

The Federal Housing Administration (FHA) is allowing borrowers who went through a bankruptcy, foreclosure, deed-in-lieu, or short sale to reenter the market in as little as 12 months, according to a mortgage letter released Friday.

Borrowers who experienced a foreclosure must wait at least three years before getting a chance to get approved for an FHAloan, but with the new guideline, certain borrowers who lost their home as a result of an economic hardship may be considered even earlier.

For borrowers who went through a recession-related financial event, FHA stated it realizes “their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”

In order to be eligible for the more lenient approval process, provided documents must show “certain credit impairments” were from loss of employment or loss of income that was beyond the borrower’s control. The lender also needs to verify the income loss was at least 20 percent for a period lasting for at least six months.

Additionally, borrowers must demonstrate they have fully recovered from the event that caused the hardship and complete housing counseling.

According to the letter, recovery from an economic event involves reestablishing “satisfactory credit” for at least 12 months. Criteria for satisfactory credit include 12 months of good payment history on payments such as a mortgage, rent, or credit account.

The new guidance is for case numbers assigned on or after August 15, 2013, and is effective through September 30, 2016.

House flipping heats up in the High End Market

If house flippers flooding all ranks of the real estate market eight years ago was the sign of the impending market downturn, then what does it mean that investors are embracing high-end flipping today?
Reuters this week ran a story that looked at a growing trend in the flipping of high-end homes. “Flipping” is the term we give when someone buys a house at a low price, usually invests a bit – or a lot – of money in remodeling, then sells for a nice profit.
Flipping was once a street sport where you’d find just about anyone regardless of investing or real estate experience partaking in markets across the U.S. But it faded out pretty quickly when the downturn hit the housing market.
Even Jeff Lewis, star of Bravo’s “Flipping Out” has since pivoted to a design services model.
It’s back – but in a different form. And it could mean better things for the market rather than being an ominous sign for rampant speculation and decline.
This time, what Reuters reports is more flipping with luxury homes. According to Reuters, the number of flipped homes valued at $1 million or more has risen nearly 40% nationwide since 2011. It’s important to note that RealtyTrac defines a flip as a home that’s been purchased and sold within six months.
RealtyTrac cites a few specific markets where high-end flipping is rampant. Luxury house flipping was up 867% in Orlando between 2011 and 2012, and increased 456% in Phoenix. To get a deeper sense of what these percentages mean, the number of flipped high-end homes in Orlando went from 3 to 29 during this time, from 27 to 150 properties in Phoenix, and from 10 to 73 properties in Las Vegas.
What’s driving this activity?
Well, as one source tells Reuters, the opportunity in flipping at the low end has all but dried up. And despite more risk with more dollars at the high end, the investments have paid off handsomely for those investors who know what they’re doing.
I like to look at it as another example of why real estate is never just one story. With so many markets each centering on different local economies and so many different levels of each of those markets – low to high end – it’s almost impossible to make blanket statements about the state of housing.
But it’s easy to see how the growth in investment at the high end is a positive overall. If nothing else, the confidence investors must have going into these high-end deals is a wonderful strength that eventually will help strengthen overall confidence in the greater housing market.
Gino Blefari & LPF Team