Month: April 2010

Home resales rise in March

A national Realtors group reports a 6.8% increase in sales of previously owned homes last month from February, ending a three-month skid.

By Alejandro Lazo, Los Angeles Times

April 23, 2010

Sales of previously owned U.S. homes jumped 6.8% in March, a bright spot for the struggling housing market after three consecutive months of decline.

The increase reported Thursday by the National Assn. of Realtors in Washington appeared to indicate the arrival of the spring surge that real estate agents have been counting on to buoy sales this year. But it remains to be seen whether the momentum can be sustained after a federal tax credit of up to $8,000 for first-time buyers and $6,500 for some current homeowners expires next week.

Sales rose 6.6% in the West.

“I’m fairly sanguine, frankly,” said Michael D. Larson, a housing and interest-rate analyst with Weiss Research. “While the credit expires April 30, more forces are at work here. Home prices are now reasonable in many parts of the country, and financing costs remain low.”

The data are estimates based on activity on the Realtors group’s proprietary multiple listing service and are reported by giving an annual sales pace adjusted each month to take into account seasonal variations.

The March sales pace reached an annual rate of 5.35 million homes, up from 5.01 million in February and 16.1% above the 4.61-million-unit pace in March 2009.

Sales rose 7.1% in the South, 7.2% in the Midwest and 6% in the Northeast on a month-over-month basis.

The national median home price was $170,700 last month, up 0.4% from the same month last year, the Realtors group said.

http://www.latimes.com/business/la-fi-home-sales-20100423,0,7438763.story?track=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+latimes%2Fbusiness+%28L.A.+Times+-+Business%29

California home default cases plunge

By Alejandro Lazo, Los Angeles Times

 April 21, 2010

 The California foreclosure crisis appears to be abating, new data show, as the federal government and big lenders step up efforts to keep troubled borrowers in their homes.

 Mortgage default notices — the first step toward foreclosure — plunged 40.2% statewide in the first three months of the year compared with the same period in 2009, according to San Diego research firm MDA DataQuick.

 Foreclosure sales dropped 1.7% from a year earlier and 16.1% from the last three months of 2009, DataQuick said Tuesday.

 The numbers suggest that the housing market won’t be flooded by a fresh wave of bank repossessions, which had been seen as a major threat to the market’s recovery.

 “It is surprisingly good news,” said Gerd-Ulf Krueger, principal economist at Housingecon.com. “There is still a lot of supply lurking out there, but at this point, it looks like it is pretty much under control.”

 Stuart A. Gabriel, director of UCLA’s Ziman Center for Real Estate, said the declining foreclosure numbers are “consistent with a broad range of indicators that are suggestive of not only a healing economy but the beginning of healing in the housing market.”

 Southern California home prices jumped 14% in March from the same month a year ago, to a median $285,000.

 Even so, economists note that further gains statewide are jeopardized by continued high unemployment, particularly in the Inland Empire and the Central Valley.

 Foreclosure activity remains concentrated in these inland areas, which suffer from above-average unemployment. DataQuick said mortgages were most likely to go into default in Merced, Stanislaus and San Joaquin counties. Conversely, defaults were least likely in the Bay Area counties of Marin, San Francisco and San Mateo.

 “In coastal California, things are looking pretty decent,” said Richard Green, director of the USC Lusk Center for Real Estate. “I still think if you get into the Inland Empire, Fresno, Bakersfield, Modesto, people are really struggling because the unemployment rate is so high — so that people just need help to get out from under.”

 California loan default notices peaked at 135,431 in the first quarter of 2009. Since then, the federal government has put increasing pressure on banks to work with homeowners behind on their payments. At the same time, experts say, banks have recognized that flooding the market with foreclosures weakens the value of the properties they have taken back and must resell.

 Nestor Fabian, 44, and his wife, Ada, 41, are among those who are hoping for a break from their lender.

 The couple bought a four-bedroom, three-bath home in Victorville in 2006 and said they owe Wells Fargo Bank about $305,000 on a property they believe is worth about $128,000. Ada lost her job at a Mervyn’s store about two years ago and has since been jobless.

 “I feel like a prisoner in my home,” said Nestor Fabian, an audio technician who commutes to Pasadena. “Basically, I am asking for any peanuts they can give me.”

 Fabian is trying to arrange a lowered mortgage with Wells Fargo through the Obama administration’s $75-billion effort to help troubled borrowers.

 While the Fabians are hoping for relief, many others are still losing their homes. Paula Murray, 65, and her husband, Roger, 58, lost their Apple Valley home to a foreclosure sale in January. They are scrambling to find an apartment before they are evicted June 1.

 But it isn’t easy, Paula Murray noted, because both she and her husband are unemployed and the foreclosure has damaged their credit rating.

 “It hurts me because the government gives all this money to these big rich guys to bail them out, bails out the banks, but the little guy can’t get bailed out,” Murray said.

 In March, the Obama administration unveiled measures aimed at getting lenders to reduce principal balances on problem mortgages and refinance “underwater” borrowers, those who owe more on their home than it is worth. Another provision would allow many unemployed homeowners to get three to six months of reduced mortgage payments while they look for a job.

 Kevin Stein, associate director at the California Reinvestment Coalition, said that although the program has added some uniformity to efforts to modify loans, it remains fundamentally flawed.

 “Its main limitation is it continues to rely on voluntary participation and financial incentives for the banks to do what it is we all want them to do, which is work with families to avoid foreclosure,” Stein said.

 Foreclosures may also be slowing because banks are deliberately putting fewer homes on the market, experts said. It’s now taking homes about 7.5 months on average to go from a default notice to a foreclosure sale. A year ago, it was 6.8 months, according to DataQuick.

 “They may be a little bit reluctant to put homes on the market all at one time,” said Celia Chen, a housing economist with Moody’s Economy.com. “I also think the process is lengthy and there are many homes in the foreclosure process, and so the process may just be clogged up.”

 Across California, 81,054 borrowers received a notice of default in the first quarter of this year, down 4.2% from 84,568 in the fourth quarter of 2009. It was the fourth straight quarter in which default notices declined.

 There were 42,857 foreclosure sales, a decrease of 16% from 51,060 in the fourth quarter of 2009 and 1.7% from 43,620 in the same period a year ago.

http://www.latimes.com/business/la-fi-foreclosures-20100421,0,7066382.story?track=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+latimes%2Fbusiness+%28L.A.+Times+-+Business%29

Rising prices both lure, curse for housing

By JONATHAN LANSNER, OC Register
2010-04-15

Is serious interest really growing in real estate?

According to a new survey of home shopper psyche by Move.com of 1,000 adults, 17.2 percent of potential homebuyers recently told pollsters they plan to purchase a home in the near future as an investment — triple 5.6 percent in March 2009.

That’s an encouraging trend for home sellers — if they didn’t read the rest of the study. Such as:

•49 percent of all homeowners would buy another home today if they could sell their current home for what they paid for it or more. (Don’t many of us wish …)

•Why sell? Need to lower expenses (25.4 percent), top reason given.

69.1 percent of homeowners who delayed selling say they reduced their daily living expenses in order to pay their mortgage.

One could surmise that these 17.2 percent prospective investors are seeing trends like selling prices on the rise.

For example, DataQuick reports that February’s median selling price was 14 percent above year ago — with San Diego owning the largest regional gain at plus-15.8 percent.

In Orange County, the median was up 12.2 percent as selling prices increased in three-fourths of local ZIP codes last month. Just six of O.C.’s 83 ZIP codes had price gains in March 2009.

However, across SoCal, last month was the 21st in a row to see sales up vs. a year ago. Yet the region’s 20,500 transactions closed in March were still significantly below average. March sales have averaged nearly 25,000 during the past 23 years.

“It’s a reflection of just how grim things got that we’ve now had almost two years of sales gains and we’re still 18 percent below the sales average,” said DataQuick President John Walsh.

Brokers have to be happy, at least.

The total amount spent buying Orange County homes through the broker-controlled multiple listing service rose to nearly $1 billion in February, the Anaheim-based Southern California Multiple Listing Service reported. That’s up 19.5 percent from the previous February, a gain due mainly to this past year’s increase in home prices.

Yet price hikes aren’t totally great news for all.

Orange County was ranked as the fourth priciest place to buy a home in America, according to a list of 207 U.S. regions tracked by the “Paycheck to Paycheck” housing affordability report by the Center for Housing Policy.

This report looks at what income is required to buy with very conservative math. That meanest takes $129,850 of income to comfortably afford the median $435,000 Orange County home. “Needed income” for this chart was, as the CHP put it, “the income required to qualify for a mortgage on the median priced home by assuming a 90 percent loan-to-value ratio — that is, a 10 percent down payment plus the use of private mortgage insurance. Monthly payments are calculated to include loan principal and interest as well as estimated taxes and insurance.”

This same group also questioned the high cost of local rents, ranking Orange County as the nation’s 4th priciest place to rent.

 

Our region-by-region analysis of Orange County homebuying shows sales gain were not universal …

•Mid-county ZIPs saw 10 percent fewer sales in these 24 ZIPs.

Sales in north-inland ZIP codes rose 6 percent from a year ago.

Beach cities’ ZIP codes had 47 percent more sales than a year ago.

South inland’s ZIPs had a 54 percent boost in sales from a year ago.

All told, countywide sales were up 9 percent vs. a year ago.

 

We know distressed properties have been a hot button for home shoppers. But forever?

The hook is that Orange County homebuyers got a 34 percent price discount when they chose a distressed property vs. overall market prices in January, according to First American CoreLogic. That’s the biggest discount in six months.

Still, distressed properties — foreclosed or “REO” homes sold by banks or “short sales” where banks accept proceeds less than the mortgage due — were 35.1 percent of the O.C. sales market in January, a 30.6 percent drop in share vs. a year earlier.

Here’s a sampling of how that tumble occurred

•Total sales averaged $505,218 – 11.1 percent vs. a year earlier.

A. REO sales averaged $386,112 – 11.1 percent vs. a year earlier.

•Short sales averaged $372,642 – -7.0 percent vs. a year earlier.

Nationally, First American found …

Distressed home sales accounted for 29 percent of all sales in the U.S. in January, highest level since April 2009.

Among the largest 25 markets, Riverside had the largest percentage of distressed sales in January (62 percent), followed closely by Las Vegas (59 percent) and Sacramento (58 percent)

Average non-distressed market-sale price in January was $247,700 but the distressed average price was $161,600.

 

Josh Feinman chief economist of DB Advisors in the America, on the national economic picture: “In housing, the worst of the excesses have been corrected, but a considerable overhang remains that may constrain the revival in a sector that has typically been in the vanguard of recoveries.”

http://www.ocregister.com/articles/percent-244324-sales-home.html

California’s Tax Credit Monies May Go Fast

04/16/2010 from  the CALIFORNIA ASSOCIATION OF REALTORS

The $100 million allocated for California’s first-time homebuyer tax credits may be depleted in about 10 to 20 days or sooner, according to C.A.R.’s Economics team.  California’s Franchise Tax Board (FTB) plans to begin accepting applications on May 1, 2010 for tax credits up to $10,000 for first-time homebuyers and for homes that have never been previously occupied.  However, the total tax credit allocation for all taxpayers is $100 million for first-time homebuyers and $100 million for new homes, both on a first-come, first-served basis.

C.A.R.’s forecast of 10 to 20 days to deplete the $100 million allocation for first-time home buyers is based on estimated May sales figures and other parameters.  It does not take into account the possibility that buyers scheduled to close escrow in April may delay closing until May to take advantage of the tax credit.  If a shift in closings from April to May occurs, the first-time homebuyer tax credits may be depleted even more quickly than indicated above.

Applications for the California tax credit must be faxed to the FTB after escrow closes.  The FTB will update its website when the 2010 application form and other information become available.

Signs seen of a housing rebound in Southern California

By Alejandro Lazo, LA Times

April 14, 2010

The median price paid for a home rose 14% in March to $285,000 from a year earlier, according to MDA DataQuick. Higher-priced coastal markets saw more activity, and fewer foreclosures were for sale.

Southern California’s housing market showed fresh signs of momentum in March with the median price and sales pace improving from the same month a year earlier as buyers hurried to take advantage of a soon-to-expire federal tax incentive, cheap prices and low interest rates.

The median price paid for new and previously occupied houses and condominiums in Southern California jumped 14% in March to $285,000 from the same month a year earlier, according to San Diego real estate research firm MDA DataQuick. The closely watched median — the price at which half the homes sold for more money and half for less — rose 3.6% from February.

In Orange County, the region’s priciest market, the median rose 12.2% to $432,000 as the number of foreclosure properties on the market sank and more homes in expensive neighborhoods were sold.

“There is no question that prices at the lower end of the market have stabilized and are showing some increases,” said Esmael Adibi, director of the Gary Anderson Center for Economic Research at Chapman University in Orange. “While this is welcome news, the word of caution is people should not really see this as the values of homes changing. It is mostly the mix we are seeing change” as sales pick up in more expensive areas.

Defaults have increased in higher-priced neighborhoods, motivating some sellers to put their homes on the market in those areas, DataQuick analyst Andrew LePage said.

The overall jump in the region’s median reflects a rebound from the depths of the financial crisis a year ago, when fears of another Great Depression abounded and a glut of foreclosed homes hit battered markets such as the Southland. Those fears have receded, fewer foreclosures were in the region’s sales mix last month, and more homes in higher-priced coastal markets were sold, contributing to the price jump.

“It’s almost like a boom-year figure,” said Ed Leamer, director of the UCLA Anderson Forecast. “But the numbers over the last several years have been influenced by the number of bank-owned properties, and the banks were selling their homes at rock-bottom prices.”

Southern California’s sales pace also improved last month from March 2009, up 5%, but not as robustly as usual for a March, DataQuick said. A total of 20,476 houses were sold in March, up from 19,506 sold in the same month a year earlier, but that was about 18% off the historical average.

Expectations remain mixed about housing’s future as a series of government initiatives to bolster sales and stabilize values expire. Experts also remain concerned about a potential wave of foreclosures despite the Obama administration’s efforts to keep struggling borrowers in their homes.

Foreclosure sales accounted for 38.4% of the Southern California resale market in March, down from 42.3% in February and 54.8% in March 2009. Foreclosures as a percentage of Orange County’s resale market stood at 22.7% in March, the lowest of any Southland county and the lowest percentage since January 2008.

“Right now the question is not whether the housing market is in recovery. The real question is how sustainable that recovery is, and that is where the gray area resides,” said Christopher Thornberg, principal of Beacon Economics. “The market is being driven by government policy and not by fundamentals, and now the government is starting to back off.”

Last month the Federal Reserve ended its $1.25-trillion mortgage-bond-purchase program, and many economists expect interest rates to begin to rise as a result. The program, which has kept interest rates at rock-bottom levels, helped the Fed buy nearly all the mortgage bonds from housing finance giants Fannie Mae and Freddie Mac, replacing most private investors.

Also, the Federal Housing Administration, which has stepped up its support of low-interest mortgages for first-time buyers, has tightened its lending standards.

At the end of this month, a federal tax-credit program for first-time buyers and for some current homeowners is scheduled to expire. The program provides as much as $8,000 to first-time buyers and as much as $6,500 to current homeowners.

Last month California lawmakers decided to add to the stimulus package and approved a credit of up to $10,000 for first-time home buyers and those buying newly built homes. The credit will take effect May 1.

Haydee Cuervo, 33, and her husband, Yuri, 34, are hoping to take advantage of those tax credits as they sell their home in Arleta and close on a property in Granada Hills. They bought their Arleta home in 2001 and have built equity despite the decline in home prices. With two daughters, ages 6 and 3, Haydee Cuervo said it was time to look for a house with a bigger backyard and on a quieter street.

“We want a big treehouse and a play area, and the place that we found has a really cool private backyard,” Cuervo said. “The new house was not only a better location for us, but it was kind of what we wanted for our girls.”

http://www.latimes.com/business/la-fi-home-sales14-2010apr14,0,7259535.story?track=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+latimes%2Fbusiness+%28L.A.+Times+-+Business%29

NO MORE STATE TAX ON FORGIVEN DEBT

 

April 13, 2010 From The California Association of Realtors

Distressed homeowners no longer have to pay California state income tax on debt forgiven in a short sale, foreclosure, or loan modification.  Enacted into law yesterday, Senate Bill 401 generally aligns California’s tax treatment of mortgage debt relief income with federal law.  For debt forgiven on a loan secured by a “qualified principal residence,” borrowers will now be exempt from both federal and state income tax consequences.  The existing federal exemption is for indebtedness up to $2 million, whereas the new California exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.

“Qualified principal residence” indebtedness is defined as debt incurred in acquiring, constructing, or substantially improving a principal residence.  It includes both first and second trust deeds.  It also includes a refinance loan to the extent the funds were used to payoff a previous loan that would have qualified.

The tax breaks apply to debts discharged from 2009 through 2012.  Californians who have already filed their 2009 tax returns may claim the exemption by filing a Form 540X amendment.
 
Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may nevertheless be exempt under other provisions.  Most notably, taxpayers who are bankrupt are exempt from debt relief income tax.  Also, taxpayers who are insolvent are exempt from debt relief income tax to the extent their current liabilities exceed current assets.

For more information about mortgage forgiveness tax consequences, go to California Franchise Tax Board’s Mortgage Forgiveness Debt Relief Extended webpage and the Internal Revenue Service’s Mortgage Forgiveness Debt Relief Act and Debt Cancellation webpage.  The full text of Senate Bill 401 is available at www.leginfo.ca.gov.

Watch out for fraudulent short sales

By Kelli Hart, OC Register

2010-04-09

The Department of Real Estate is issuing warnings about fraudulent short sales, blogger Marilyn Kalfus reported recently.

It notes that in April, the federal government will offer financial incentives to provide short sales through the Home Affordable Foreclosure Alternatives program, with requirements including a shorter time frame to respond to offers, debt forgiveness, and government payments to homeowners (for moving) and lien holders alike.

Short sales, in which properties are legally sold for less than what’s owed on the mortgage as long as the lender agrees, have been on the upswing this year. The DRE says it’s also been alerted to fraud surrounding short sale transactions.

Some examples:

•Short Sale flipping by unlicensed people using straw buyers “In some cases, unlicensed short sale ‘facilitators’ hone in on homes that are on the verge of foreclosure and persuade the lenders to accept lowball purchase offers, often times by using straw buyers, questionable or self-interested broker price opinions or appraisals, and by failing to disclose that a sale at a higher price has previously been put on the table or negotiated.”

•Multiple lenders and lien holders, and payments outside of escrow “Where more than one Lender or lien holder is involved, the negotiations are complicated. Second and other subordinate lien holders often hold up the short sale transaction, and seek to extract the largest possible payment in consideration for releasing their lien. Often times there are monies secretly paid outside of escrow, without the knowledge of the senior lien holder. This is a sure sign of fraud. Such undisclosed payments are likely illegal. The economic substance of and all payments in the short sale transaction should be disclosed on the HUD 1 statement. There should never be dual or multiple contracts, only one of which shows the true purchase price.”

•On its site, the DRE lays out a case showing how an unnamed company has violated California law by practicing real estate without a license, collecting advance fees in violation of the law and profiting through false pretenses at the expense of a federally insured institution by misrepresenting the value of the home to the lender. “This may constitute federal loan fraud, which is a serious felony offense which is punishable by imprisonment and fines.” Read the details of the case HERE.

 

A Newport Coast man who committed mortgage fraud and filed for bankruptcy without telling authorities he bought two Ferraris and a Lamborghini was sentenced to five years in federal prison Monday.

Lorenzo Espinoza, 43, also was ordered to pay the Department of Housing and Urban Development restitution of more than $614,000, blogger Marilyn Kalfus recently reported.

In sentencing him, United States District Judge Stephen V. Wilson said Espinoza demonstrated ‘extreme greed.’

Espinoza pleaded guilty in 2006 to conspiracy to defraud HUD, bankruptcy fraud, money laundering and failing to pay federal taxes. Prosecutors said he didn’t pay them for more than a decade and owed more than $5 million in taxes, interest and penalties.

Here’s how the U.S. Attorney’s office described the crimes:

•Espinoza and his associates fraudulently purchased nearly 100 residential properties.

•The properties were sold at inflated market values to straw buyers. Espinoza and his associates made the down payments and in some cases submitted bogus tax forms and paycheck stubs with the loan applications.

•When the straw buyers defaulted on the home loans and the lenders foreclosed, HUD reimbursed the lenders for their costs. HUD’s losses came to $2 million when it sold the homes for much less than the fraudulent purchase prices.

The news release stated:

“In addition to defrauding lenders and HUD, Espinoza committed bankruptcy fraud in 1999 when he filed for bankruptcy and failed to tell the United States Trustee that he owned a Rolex Daytona watch, two Ferraris and a Lamborghini. In late 2002, Espinoza laundered the proceeds of his bankruptcy fraud when he sold the Ferrari automobiles for $127,500.

“Espinoza also pleaded guilty to willfully failing to pay income tax, admitting that he did not pay $199,053 due for the 1996 tax year. In court papers filed in relation to the sentencing, prosecutors pointed out that Espinoza had not filed tax returns for well over 10 years and owes the Internal Revenue Service more than $5 million in taxes, interest and penalties.”