Thursday, December 29, 2011

MSNBC - Increase in short sales give market a little breathing room

Another article talking about the move away from foreclosures and short sales. Couple of interesting points:
  • Blaming the robosigning scandal for the slowing of foreclosures. This seems simplistic to me ... I think it's simpler than that - banks net more money in a short sale, and they are in business to increase the profits and minimize the losses.
  • Honest assessment of foreclosure vs. short sale credit impact (immediately after talk of "torching" credit ratings) - Fair Isaac says they are the same. And yes - all future movement shows that lenders prefer to see a short sale on the  report, and give loans sooner.
  • Value preservation, and better for the neighborhood. This is a great, and often overlooked point. Not only doing what is best for YOU, but also what is best for OTHERS.
  • Ability to negotiate the settlement pre-foreclosure. Yes, this is true in states without anti-deficiency statutes, but it is also true in states where certain loans are not covered by anti-deficiency statutes (like most HELOC's in Arizona).
  • Vandalism of vacant homes. This is HUGE - massive issue that is not addressed often enough. I cannot tell you how many homes I have seen with AC's and plumbing stolen - in a short sale, the property is typically occupied until the day of closing, at which point the new owner moves in.
All in all, a bit surfacey, but good reading, and obviously I agree with the overall conclusion. Click here to read the full article.

Wednesday, December 28, 2011

Is upside down housing having an effect on the job market?

Nick Timiraos with WSJ has another article shedding light on yet another dark corner of the distressed housing market, namely it's effect on the jobs market. Here is a haunting quote:
Borrowers who are underwater are about 30% less likely to move than those who rent or have equity in their homes, according to a study co-authored by Joseph Gyourko, a professor of real-estate finance at the University of Pennsylvania's Wharton School.
I was interviewed for the article, along with one of our clients who is in this exact situation. Here is a link to the online article. Since you need a WSJ subscription and login, full text included as well.

Housing Imperils Job Gains

Price Slump Keeps Workers Who Want to Relocate Tethered to Their Homes

The prolonged U.S. housing bust is threatening to claim yet another victim: the nascent recovery in the labor market.

New data released Tuesday showed just how bad the housing market remains. Home prices in 20 major metropolitan areas fell 3.4% in October from the previous year, according to the S&P/Case-Shiller Home Price Index. It was the 13th consecutive year-to-year decline.

The job market, by contrast, has finally been showing signs of improvement. The unemployment rate fell to 8.6% in November, the lowest level in more than 2½ years, and recent weekly reports have suggested the trend continued in December. Consumers also remained surprisingly upbeat, according to a report released Tuesday. The Conference Board, a private research group, said its index of consumer confidence jumped in December to its highest level since April.

But now some economists fear the continued slump in housing could short-circuit the recovery in jobs by making it harder for Americans to relocate to find work.

In theory, as the economy improves, people tend to relocate from places where jobs are scarce to areas where companies are hiring. In the current cycle, that means families should be leaving California and Nevada and heading to Nebraska and Texas. Workers with particular skills, such as machinists, accountants or computer programmers, should move to places where those skills are in demand. That would shrink the big pools of unemployed workers in hard-hit areas and help resolve shortages of skilled workers that have held companies back from expanding.

While some relocation continues, economists believe mobility overall has been muted in part because of the housing bust. Low home values have made it much harder for Americans to move because selling a home is so difficult. That is especially true for the 10.7 million Americans—or 22% of homeowners with a mortgage—who owed more than their homes were worth as of the end of September, according to figures from real-estate firm CoreLogic. In hard-hit markets such as Phoenix and Las Vegas, the share of such "underwater" mortgages is much higher, at about 52% and 61%, respectively.

Borrowers who are underwater are about 30% less likely to move than those who rent or have equity in their homes, according to a study co-authored by Joseph Gyourko, a professor of real-estate finance at the University of Pennsylvania's Wharton School.

Economists have generally found that the housing slump has had only a minor effect on the job market until now. That's likely because with unemployment so high across the country, there are generally plenty of unemployed workers already nearby to fill any available jobs.

But that could change as the labor market springs back to life. There are some parts of the country "that people should be thinking of moving to, but they're locked into their current housing situation," said Kenneth Rosen, a housing economist at the University of California, Berkeley. "This becomes a bigger problem as the recovery starts to gain some traction. It's a big issue, bigger than people think."

The weak real-estate market doesn't just discourage unemployed workers from moving to find work. It also makes people who do have jobs less likely to relocate for a promotion or a better opportunity in another city, and therefore less likely to open up jobs in the cities they leave behind.

Randy Badia, an engineer for an auto maker, is ready to apply for a promotion to his firm's Michigan headquarters, but he can't easily relocate because he owes more than his Phoenix home is worth.

"I'd like to go back and attack my career aspirations, but being underwater, is it feasible at this point or am I stuck here?" said Mr. Badia, 35 years old, who six months ago passed up a job posting. He owes about $100,000 more than the house he bought six years ago is now worth. "If I didn't have the house, I'd be gone, moving on with my career," he said.

Mr. Badia has considered a short sale, where his lender would have to agree to sell the house for less than what he owes. But that isn't guaranteed to wipe out the $70,000 second mortgage he has on the property. He said he has nearly ruled out renting out the house because he doesn't want to be a landlord from 2,000 miles away.

"A lot of people here are simply staying put," said Greg Markov, the Phoenix real-estate agent advising Mr. Badia. Underwater mortgages "have become a big deterrent to changing jobs."

The issue is increasingly a problem for employers as they ramp up hiring. The extended downturn has made it harder to get both job candidates and existing employees to relocate, said David Barlow, senior vice president and senior consultant at moving company Sirva Inc.

"Without a doubt, it is magnitudes more difficult to get folks to move," Mr. Barlow said. A job candidate's housing and equity situation "is one of the first questions that comes up" in a relocation discussion, he said.

In response, some companies are offering increased benefits, which cover the cost of selling a house for less than the purchase price, according to a survey by Weichert Relocation Resources Inc. But as the cost of such benefits rise, companies are also being more selective. Expensive moving costs more often may "lead companies to consider Candidate B or Candidate C," Mr. Barlow said.

Friday, December 16, 2011

BofA expects 60% to 70% more short sales in 2012

I have often discussed the lenders' move away from the foreclosure / REO model toward a short sale model, and this recent quote from one of Bank of America executives is further confirmation of this trend:
"Bank of America plans a 60 - 70% increase in short sales in 2012. Expand your short sale knowledge. Get training if you don't have the training."  Bob Hora, Bank of America Executive

Thursday, December 8, 2011

Taxing Consequences of Short Sales

While I am not nearly the expert on the subject of taxation after a short sale or foreclosure that my fellow blogger Robert Marsh is, I thought this article was a great introductory overview. And of course, here is the daddy of all articles on the topic, straight from the pages of the ever-exciting

Monday, December 5, 2011

New Year Credit Resolutions for 2012

Can you believe 2011 is almost over? How did those 2011 resolutions go? For me I would say I was moderately successful, in some areas I excelled, in others I failed. At the beginning of 2011 I could not run 13 miles non-stop, but here it is December 2011 and I can, it isn't pretty, but if I am being chased by a lion I know I can run for 13 miles before I collapse to the ground into a ball of jelly. In January I could barely run 2 miles consecutively.

What happens every year? Gyms are packed in January, then by February they are back to normal. When it comes to credit we don't have to commit to daily or weekly goals, just a once a year check-up. Actually, you could still salvage your 2011 resolutions if you slip this in before the end of the year.

Go to the government mandated site to retrieve a copy of your credit report. Any other website offering a free credit report is only baiting you to get your money in some other manner, don't fall for that. If you hear a company advertising a "free" credit report or credit score on television or radio, keep in mind advertising costs a lot, so look for the strings attached to the "free" offer, there will be strings, annoying strings, you will hate yourself for falling into their trap, so don't. Avoid this all together by sticking with the site the government required the three major credit bureaus to create and maintain, Look at all three credit bureau reports to make sure all of your information is correct.

Here are some things to look for:

•Is everything reporting on-time?
•Are there any accounts that I do not recognize?
•Are the accounts I have already paid off reflecting paid in full?
•What available limits are being reported on my credit cards?
•What original dates are reporting on my credit cards?
•Is my address correct?
•Do I have a long lost account I co-signed for that is still active?

These are just some basic things to look for to ensure there are no problems on your report. Keep in mind, DO NOT close any credit card accounts as this will hurt your credit score. If you have an old credit card account that you have not used in a long time call the creditor to make sure it has your correct billing address. Credit cards should be used every 12 months at a minimum to make sure they are not closed down by the issuer.

This is a simple way to put your 2012 New Year's resolution in the books, but if you are an overachiever now you can go to the gym and not have to worry about your credit report. Happy New Year, all the best in 2012!!