Archive for April, 2012

Studies have shown (look, just trust me on this — studies really have shown) that while a foreclosure sale can knock down property values in a neighborhood, short sales don’t have that kind of effect.

Ergo, short sales are better than foreclosures.

So it’s good news that RealtyTrac is reporting that short sales are up. Per USA Today:

Short sales — which occur when a lender agrees to a home sale for less than what’s owed — were up 33% in January year-over-year, and preliminary February numbers also look strong, according to market researcher RealtyTrac.

Although the most important tidbit might be this sentence:

RealtyTrac says foreclosure sales, which occur after a bank has repossessed a property, still outnumber short sales nationwide but the gap is closing. (Emphasis mine.)

A likely culprit for the change is the new FHFA rule that requires banks to respond to short-sale requests more quickly. Homeowners have obviously preferred them to foreclosure, but lenders too often dragged their feet or ignored the request.

Of course, the best result will be when short sales and foreclosures both drop to negligible levels. Till then, though, we’ll take a bit of good news.

Trust among banks? Not so much

Back to HARP for a moment. The Home Affordable Refinance Program lets underwater homeowners with solid payment histories refinance at lower rates.

The first version only had a million takers. The second — HARP 2.0 — started in March 2012 and is already working a lot better.

This is all old news, but I put it here for readers unfamiliar with HARP.

Anyway, I found this amusing:

Dan Green over at The Mortgage Reports explains that one of the reasons HARP 1.0 failed was that banks didn’t trust other banks’ underwriting!

[A]s much as HARP’s mortgage guidelines were favorable to homeowners, they included clauses and obligations rife with lending risk.

Specifically, lenders bore the underwriting risks of the HARP applicant’s initial mortgage loan. This meant that if Wells Fargo wanted to do a HARP refinance of a Bank of America mortgage, Wells Fargo would have to assume responsibility for Bank of America’s original mortgage approval.

If Bank of America approved a loan “by accident” or against generally-acceptable underwriting standards, in doing a HARP refinance of that loan, Wells Fargo would be on the hook for the loan if something went bad.

This led to two predictable outcomes. First, banks were hesitant to HARP-refinance another bank’s loans. And, second, HARP failed to reach its potential.

But with HARP 2.0, lenders aren’t liable for any originators’, um, accidents.

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Here’s a chance for you to get your opinions on foreclosures and the housing market to the governor’s ears.

John Powell — broker in Colonial Heights and past VAR president — is on the governor’s Foreclosure Task Force. And he would like to know, straight from Realtors’ mouths, the effects of foreclosure you’re seeing.

For example…

  • The impact of the foreclosure crisis on Virginia as a whole, on individual cities and counties, or on local communities
  • How foreclosures are affecting financial institutions
  • How housing markets — buyers, sellers, inventory, etc. are affected by foreclosures
  • How housing professionals — Realtors, builders, developers, etc. are affected by foreclosures

Let us know! Post a comment on this message on VARbuzz, or on our Facebook page.

The Foreclosure Task Force will take your suggestions into account, and begin gathering information that it will present — possibly with recommendations for action — at its September meeting.

It’s a quick and easy way to share your opinion and know that it can make a difference.

Worth a read: IRAs and real estate

Interesting piece in the Times today about self-directed IRAs, and how some folks are looking to the real estate market for investments.

It turns out there is nothing illegal about using a self-directed account to buy real estate or many other things, for that matter. But this does not mean it is easy. There are dozens of caveats on how to do it, and the specter of running afoul of the Internal Revenue Service looms large. (And to be clear, this is still a niche, with only about 2 percent of the $4.8 trillion in I.R.A.’s in self-directed accounts, according to Equity Trust, one of the big players in the industry.)

One guy they talk with a lot is Roger Voisinet, “a real estate agent and the former men’s hockey coach at the University of Virginia.”

Click here to read it.

Pending home sales jump, beating expectations

NAR’s March Pending Home Sales Index (which counts contract signings, not closings) jumped a whopping 12.8 percent over March 2011. This bodes well for April and May numbers, when most of these (hopefully) will close.

Although I usually hate to look at month-to-month numbers, I’ll make an exception here to point something out: The March PHSI was up 4.1 percent over February, which isn’t unexpected — sales darn well ought to be increasing from Feb to March.

However, that jump was expected to be only 1.0 percent, so this big number is a nice piece of good news.

Also of note, NAR broke down the month-to-month number by region, and ours was up more than the national average (5.9% vs. 4.1%).

Yes, the market is recovering.

Home ownership hits record low, and other bad news

A Gallup poll released yesterday found that only 62 percent of Americans own their own homes — the lowest since 2001 (when Gallup started tracking).

Courtesy Gallup

The poll also found that a bit more than half of Americans — 53 percent — believe their house is worth more today than when they bought it.

In 2008, 80 percent said the same thing. The drop is likely not only because of the housing-bubble bursting, but because more people bought homes during that period, meaning there are fewer long-time owners to offset the trend.

Here’s a bit of good news: Back in 2006, Gallup found that 52 percent of people thought it was a good time to buy a home. Today that number is 70 percent.

Click here to read all about the poll, including some other interesting findings.

Bad reporting, new-home sales, and the Commerce Department

Behold, nonsense. Here are some headlines today:

  • New Home Sales Slide in March
  • US new-home sales off 7 percent in March, largest decline in a year
  • New home sales plunge in March‎

This is known as bad reporting. The worst comes from Karl Case via Yahoo Finance: “The American Dream Of Buying A Home May Be Over.”

If any of these people bothered to actually check the facts, they’d know better. Instead, you’ve got a whole lotta nonsense.

New-home sales were actually up in March.

And I’m not saying that to paint some sort of rosy picture. (If you read VARbuzz, you know that’s hardly the case.) I say this as A) a former business reporter, and B) someone who actually took the time to read the Commerce Department report.

  1. The Commerce Department actually said that new-home sales were up in March.
  2. It doesn’t matter, because even the Commerce Department says it’s numbers may be wildly off.
  3. In fact, the numbers it reported in February were wildly off and had to be revised: “February’s figures on new-home sales, however, were revised sharply upward to show a 7.3 percent gain, instead of the 1.6 percent decline that was initially reported.”

Let’s look at the facts. And it won’t take long.

  • The Commerce Department reported that sales of new homes were down from February to March by 7.1 percent (plus or minus 20.7%).
  • It also reported that new-home sales were up from March 2011 to March 2012 by 7.5 percent (plus or minus 19.6%).

Everyone’s writing about the first number, which is foolish. Because the first number doesn’t mean much, if anything.

First of all, it’s a month-to-month number, which is well-nigh useless; I’ve said many times that you need to look at annual trends, because monthly changes are normal, often cyclical, and don’t necessarily reflect the long term.

The more important figure is that “up 7.5% over March 2011.”

Second, it’s plus or minus almost 21%. The margin of error is larger than the number itself! What it means is that new-home sales could be down as much as 27.8% or up 13.6%. Useless!

Third, that margin of error is actually important, because Commerce had to revise its February numbers. Originally it had said that February was down 1.6% month to month, but today it said “Oops. February was actually up 7.3%.”

Bottom line: New-home construction looks like it increased in March, but we won’t know for sure until the revised numbers come out and that giant margin of error is gone.

So don’t believe the headlines and lazy reporting.

Home prices up; no, down; no, up; argh!

Ach, there are a lot of home-price numbers out there — some up, some down. Some are month to month, some are annual, some are seasonally adjusted, some are… you get the picture.

Check out this Zillow story (and yes, I know I pick on Zillow). In the space of two paragraphs it has three different figures for home prices:

Nationwide, prices fell 0.8% in February, the sixth-consecutive month of price declines, according to the Standard & Poor’s/Case Shiller index released Tuesday. When adjusted for seasonal factors, prices rose 0.2%.

The latest Federal Housing Finance Agency index shows home prices rising 0.4% for the 12 months ended in February, the first 12-month increase since July 2007.

But then there’s this HousingWire story, which says

U.S. home values edged up 0.5% from February to March, making it the largest monthly increase in six years, real estate data firm Zillow said in its latest home value index.

That’s four numbers from Zillow alone! In fact, it could have added a fifth, because it left out the actual important number. Per the FHFA: “U.S. house prices rose 0.3 percent on a seasonally adjusted basis from January to February, according to the Federal Housing Finance Agency’s monthly House Price Index.”

And HousingWire also has a piece, “S&P/Case-Shiller: Home prices in nine metros reach new lows.

And the New York Times says that “The median sales price of a new home was $234,500 in March, down 1 percent from the February price, the Commerce Department reported.”

At some point people have to stop and realize that trying to follow trends like this is a fool’s game. When there are a dozen different ways (or more) to count something, they all lose a bit of credibility.

And then there are the gadzillions of people making predictions based on these figures! Seriously?

You know what’s going on. You’ve got your feet on the ground, clients on the phone, and — as far as I’m concerned — the only real and honest picture of the market.

The First Quarter 2012 Virginia Home Sales Report has been released and brings good news for the Commonwealth! Several long-term trends indicate that Virginia’s housing market is continuing to stabilize.

As shown above, the pace of home sales in the first quarter of 2012 marked an improvement over both the first quarter of 2011 and 2010.

The median residential sales price has increased 2.4% in Virginia over the past year despite a slight (-0.5%) decline over a three-year time period.

Download the full First Quarter 2012 Virginia Home Sales Report below as a PDF to find out more about how different regions in Virginia fared in the first quarter of 2012.