Month: December 2012

FHA to extend rule permitting loans on ‘flips’ of fixed-up homes

The agency’s policy has encouraged investors to buy foreclosed and deteriorating houses from lenders, then repair them and resell within short periods of time.

December 16, 2012|By Kenneth R. Harney
WASHINGTON — Rehabbers and real estate investors rejoice: You’ll still be able to sell houses to first-time buyers using low-down-payment FHA-insured mortgages next year, even if you’ve owned the fixed-up property for less than 90 days.The Federal Housing Administration has decided to extend its rule permitting loans on quick “flips” of renovated houses beyond the scheduled Dec. 31 expiration deadline. The policy is widely considered one of the key federal government moves that has encouraged private investors in large numbers — often mom-and-pop, small-scale operations — to buy foreclosed and deteriorating houses from lenders, then repair them and resell within short periods of time.Since the plan was first put into place by the Obama administration in February 2010, more than 65,000 renovated homes have been financed using more than $11 billion in FHA-backed loans, according to federal officials. Roughly 23,000 of these properties were acquired and resold with FHA loans within the last year alone.

The idea, according to acting FHA Commissioner Carol J. Galante, is to help “stabilize real estate prices as well as neighborhoods and communities where foreclosure activity has been high” by making it easier for investors to buy, fix up and sell run-down homes that add to urban blight and depress values.

The primary purchasers of the renovated properties are first-time, moderate-income families who might otherwise be frozen out of the market because they don’t have the down-payment cash required for a conventional loan. FHA down payments can be as low as 3.5%.

The Obama administration’s initiative in 2010 represented a reversal of earlier restrictions on flips first imposed in 2003. After scandals in Los Angeles, New York, Baltimore, Washington, D.C., and other large cities over widespread fraudulent flips — in which houses were sometimes resold for double their previous price within days or even hours — the FHA stopped insuring loans on houses whose sellers had owned them for less than 90 days.

Paul Wylie, a Los Angeles-area investor active in renovating distressed properties, welcomed the extension of the FHA policy because “it allows predominantly first-time buyers to compete with cash buyers, investors and others” for houses at affordable prices that have been professionally repaired. In some neighborhoods in and around Los Angeles, many homes that have been rehabilitated for resale within 90 days are what Wylie calls “foreclosure flips, short-sale flips or standard-sale flips.” The FHA is pretty much the only financing available for moderate-income, owner-occupant buyers of these renovated properties.

Bruce A. Calabrese, chief executive of Equitable Mortgage Corp. in Columbus, Ohio, says the essential ingredients in the FHA’s revised approach are its strict controls on appraisals, inspections and chain of title — all designed to ensure “that there is no funny business going on.”

The FHA’s policy requires property sellers to comply with a detailed list of standards. Among the most prominent:

• You can’t play games on ownership. All transactions must be arm’s length with “no identity of interest between the buyer and seller or other parties” involved in the sale. You can’t buy a house from your uncle at a bargain price, hire your brother to do a few quick repairs to it, then resell it for a huge profit to an unsophisticated buyer, supported by a hyped-up appraisal signed by a friend or partner.

• The seller of the rehabilitated house must have clear legal title to it. This may sound elementary, but some flippers during the late 1990s never bothered to acquire title and record it. They took over the property one day, slapped a little paint on the outside and sold it for cash the following day.

• If the selling price is 20% higher than what the house cost the seller, a second appraisal, conducted by a member of the FHA’s panel of approved appraisers, is mandatory to be certain that the improvements made to the property justify the increased price.

• An independent inspection report, conducted by a professional with no connection to other participants in the transaction, is also mandatory when the price jump is more than 20%. If there are repairs that are still needed that could affect the “health and safety” of the purchasers, they must be completed and a re-inspection conducted before the closing.

Bottom line: Flipping under the FHA’s rules should continue to be an important option for buyers of renovated, previously distressed houses and the investors who make it their business to find them and fix them up.

Foreign investors buying homes in O.C

Local agents report an increase in homebuyers from overseas looking for bargains, and some are going abroad to reach out to prospective clients.
    •  JEFF COLLINS / THE ORANGE COUNTY REGISTER Dec 17th 2012

Luxury home agent Rex McKown invested $650 in Rosetta Stone discs to learn Chinese.

Irvine broker Alisha Chen opened an office in Taiwan three years ago to capitalize on the growing interest there in Southern California properties.

Article Tab: billion-buyers-recent-mon
Foreign buyers spent an estimated $82.4 billion on U.S. homes in the 12 months ending in March, according to a National Association of Realtors’ survey of U.S. agents. That’s up 24 percent from $66.4 billion the year before.
RICK NGOC HO, THE ORANGE COUNTY REGISTER

Kim Chang of Bellflower and other agents say they regularly meet foreign clients jetting into Southern California for three- to seven-day homebuying sprees.

Local agents and Realtors across the U.S. report a marked increase this year in foreign homebuyers shopping for bargains as the housing market bottomed out.

In Orange County and Southern California, Chinese and other Asian buyers – many paying all cash – have snatched up properties as investments, as vacation or retirement homes or as a residence for children studying at local schools or universities, local agents say.

Canadians have been buying winter homes in Arizona and Florida, according to a report by the National Association of Realtors. Wealthy Mexicans and South Americans have been investing in South Florida and Texas.

Foreign buyers spent an estimated $82.4 billion on U.S. homes in the 12 months ending in March, NAR’s most recent survey of U.S. agents shows. That’s up 24 percent from $66.4 billion the year before.

According to the survey, foreign buyers accounted for nearly 5 percent of all U.S. home sales and almost 8 percent of the amount spent.

The National Association of Realtors estimated that foreign buyers accounted for 11 percent of California home sales.

The California Association of Realtors, however, pegged foreign sales at 5.8 percent of the state’s transactions. Of those, 39 percent of the buyers come from China, followed by buyers from Canada (13 percent), and from India and Mexico (8.7 percent each), CAR reported.

The state group doesn’t break down statistics for Orange County. But local agents estimated that the proportion of Orange County and Southern California sales to overseas buyers is higher than the statewide average.

About 20 percent of the buyers at Irvine’s Lambert Ranch development – which caters to Asian buyers with wok kitchens and floor plans for extended families – are from abroad, said Joan Marcus-Colvin, senior vice president at the New Home Co.

Local agents specialized in working with foreign buyers say they see strong interest among affluent shoppers in China, Taiwan, India and other Asian countries.

“I think they’ll keep coming as long as the Chinese government allows them to wire the money out because people there have so much money,” said Cayenne Kuang, broker and owner of Spectrum Realty in Irvine.

Luxury home agents report a rise in foreign home shoppers at home viewings.

McKown, an agent for Surterre Properties, said foreign shoppers account for 80 percent of the viewings, up from 20 percent eight months ago. Jacqueline Thompson, also of Surterre, says Chinese make up about half of the buyers at home showings.

“I think the Chinese realized the urgency to buy up homes in the U.S. because they see that prices will increase,” Thompson said. “They’re beginning to realize the U.S. is a safe haven to park their money in real estate.”

McKown reported also that foreign buyers purchased seven of 12 homes that sold for $6 million or more this year in Crystal Cove and Newport Coast. Two buyers came from China, two from Saudi Arabia, two from India and one from Japan, he said.

Many foreign buyers are looking for an investment, buying homes to rent out or to live in part time during business trips to the U.S., agents say.

Christina Shaw, who heads the international division of RE/MAX Fine Homes in Newport Beach, noted that foreign buyers feel at home in Southern California because of the moderate climate and the proximity to familiar restaurants, grocery stores and shopping.

“Even if they don’t speak English, they can get around,” said Shaw, who recently met with potential clients in Beijing and Shanghai.

Several agents had clients who bought large, two-story luxury homes in new developments for their children studying at local universities.

The parents may stay there when they visit the U.S., but Century 21 agent Kim Chang of Bellflower said: “You’d be surprised by the number of families that buy homes for the children and the children live here by themselves.”

In China, local agents said, home purchases don’t include the land, which is leased from the government. In Orange County, Chinese buyers get much more home for the money, and it includes the land.

Irvine and the San Gabriel Valley city of Arcadia are two of the most popular destinations for Chinese homebuyers, said Chang, with prices typically ranging from $750,000 to $1 million.

Anaheim Hills, Buena Park, La Palma and Tustin also are popular. Foreign buyers “think the United States is the most safe place for investments, especially for real estate because we have the most laws for protection (of property),” Chang said.

Alisha Chen, broker for Cornerstone Real Estate International in Irvine, has seen her business grow steadily since she opened a satellite office on the outskirts of Taipei, Taiwan, three years ago.

She visits the country at least once a year to give seminars on buying property in the U.S., sometimes drawing buyers from China and Hong Kong.

Chen said she not only finds deals for overseas investors, but also repairs and remodels the homes they buy and rents them out.

Her three-office brokerage currently manages 35 to 40 Southern California properties for overseas investors.

Inland Empire economist John Husing worries, however, that investors – whether from Kansas or Asia – are competing with local residents wanting to buy homes for their families.

“I’ve had any number of young people unable to buy a house,” Husing said. “They were outbid by people buying to rent them.”

Eric Sussman, a senior lecturer at the UCLA Anderson School of Management, said that while foreign investors compete with domestic buyers, driving up home prices, “they’re marginal increases. It’s not a big spike.”

Chang, the Bellflower agent, noted that there’s much more to selling to overseas buyers than to domestic home shoppers.

“For foreign buyers, you have to not only be a Realtor, you have to be the best of friends. You have to be a tour guide,” she said. “You have to be everything.”

Register staff writer Kelli Hart Kehler contributed to this report.

 

Nearly 7,000 OC homes face foreclosure

December 17th, 2012,  by 

 OC Register

Just more than 6,700 Orange County homes were in some stage of foreclosure in October, figures from housing tracker CoreLogic and the U.S. Census Bureau show.

While that’s down 42 percent from a high of 11,500 homes in the foreclosure pipeline in November 2009, the number of distressed homes still is 20 times greater than before the housing slump hit in 2005.

 

Nationwide, 1.3 million homes were in the foreclosure process, and nearly 97,000 California homes faced foreclosure, CoreLogic figures show.

“There still are a lot of people who are hurting,” said Ken Mutter, senior vice president of NeighborWork Orange County, a nonprofit group that counsels homeowners facing foreclosure.

The process starts when a delinquent homeowner receives a formal notice of default and ends when the home is auctioned off to satisfy the unpaid debt.

CoreLogic provided data going back to January 2000 showing the  percentage of Orange County homes with a mortgage in some stage of foreclosure. The Register then used U.S. Census figures to determine the number of homes in foreclosure from 2005 to October 2012.

Homes in the foreclosure pipeline declined sharply starting in March, falling 28 percent over a seven-month period as lenders began modifying more loans or allowing more owners to sell their homes “short” of the amount needed to pay off the mortgage.

Area Foreclosure Inv. Pct. Aprox. Total
U.S. 3.2% 1,322,529
Calif. 1.8% 96,754
Orange County 1.5% 6,722
Los Angeles County 1.9% 22,476
Inland Empire 2.7% 17,977
San Diego County 1.5% 6,950

“The banks and the lenders are working harder to do loan modifications,” Mutter said. “The other thing that we’re hearing is banks are doing more short sales. That’s good in that the homes are going on the market. But it’s not good news for the homeowners because they’re still losing their home.”

Mutter said some borrowers are in the foreclosure process for 18 months or longer.

Many more borrowers are behind on their mortgage payments but have yet to enter the foreclosure process, CoreLogic figures show.

As of September, more than 19,000 Orange County homes – 4.3 percent of local mortgages – were 90 days or more behind on payments, CoreLogic’s latest figures show. That includes homes in the foreclosure process and bank-owned homes. That number is down from 36,000 in early 2010.

O.C. house prices up 16%, Realtors report

December 18th, 2012,  by 

OC Register

Click to enlarge

The California Association of Realtors reported steep gains for Orange County house prices and sales last month.

The median price of a detached, single-family Orange County home rose 15.9 percent from November of last year, to $565,020.

Sales were up 30.1 percent from year-ago levels. The association said 1,531 houses changed hands in November, up from 1,177 closed deals in November 2011.

Realtor numbers track DataQuick Information Systems’ housing numbers reported last week.

According to DataQuick, Orange County’s median detached, single-family house price – or price at the midpoint of all sales — increased 14.1 percent from year-ago levels to $525,000. The sales total was 1,841 units, up 23.1 percent. (The median price for all houses and condos in November was $450,000, DataQuick reported.)

DataQuick sales figures tend to be higher because the research firm gets its figures from the county Clerk-Recorders’ Office. The Realtors derive their figures from multiple listing service databases, which don’t include all sales.

Sales and price data for November. *Annualized projection
Area Median Price 1 yr. ch. Sales 1 yr. ch.
Calif. houses $349,300 24.8% 518,290* 2.7%
Calif. Condo/Twnhms $278,520 26.0% 4,473 13.0%
Orange County $565,020 15.9% 1,531 30.1%
Los Angeles $337,080 15.7% 3,706 10.6%
Riverside County $239,610 19.8% 1,957 -2.6%
San Bernardino $152,000 12.4% 1,092 -8.4%
San Diego $403,990 13.3% 1,897 15.7%
Ventura $453,760 10.5% 579 41.9%
S.F. Bay Area $588,800 25.9% 3,726 12.2%
Sacramento $194,700 18.2% 1,469 -4.9%

Orange County’s inventory of homes for sale – measured in months needed to sell all listings – was 3.3 months, the Realtor group said. That’s down from seven months in November 2011.

The average time needed to close a deal fell to 52.6 days last month, down from 80.7 days the same month last year.

Statewide, the median house price increased 24.8 percent to $349,300, while the median price of a California condo increased 26 percent to $278,520.

The Realtor association warned that higher house prices in California are tied in large part to a shift to higher-priced home sales because the supply of cheaper homes remains tight. As the number of foreclosures dropped, home sales have declined in lower-priced markets; mid- to higher-priced homes posted strong increases, the group said.

Double-digit sales gains in coastal counties — 22.1 percent in San Francisco, 10.6 percent in Los Angeles and 41.9 in Ventura, for example – were offset by sales declines inland. For example, Kern County’s sales fell 21.4 percent, Merced’s fell 28.8 percent and the Inland Empire’s fell 4.7 percent.

Sales gains for the state as a whole increased just 2.7 percent in November.

The group said that 518,000 California houses would sell in a year at November’s sales pace, up from 504,000 at the November 2011 pace.

O.C. housing: Prices up 10%, sales up 25%

December 8th, 2012,  by 

 OC Register

Highlights of DataQuick’s Orange County homebuying report. For the 22 business days ending Nov. 21 — the latest numbers — Orange County’s real estate market saw prices rise 10 percent in a year as sales jumped 25 percent.

  • Median selling price for all residences of $451,000 — that is up 10.0% vs. a year ago.
  • Total Orange County sales of 3,236 residences closed in the latest period — that is up 24.9% vs. a year ago.
  • Resales of single family homes were up 24.1% vs last year; condo sales rose 25.9% vs. year ago. Builders’ new homes sales were 29.2% higher in the same period.
  • Note: 46 of 83 Orange County ZIPs had both rising sales and prices in the period. Is your ZIP one of those neighborhoods? To see, CLICK HERE!

And more analysis ….

  • $451,000 median selling price is 30% below June 2007′s peak of $645,000.
  • Current price is 0.2% below 2011′s peak (May and July) of $450,000; 13% above end of 2011′s median ($400,000.)
  • The most recent median is 22% above the cyclical low hit in January 2009 at $370,000 — so the median has recouped 29% of the $275,000 price drop from the peak.
  • Compared to cyclical low, single-family house median is 24% higher ($418,250 in January 2009); condo median is 21% higher ($252,000 in March 2009.) Builder prices for new homes are 48% above June 2009′s $424,000 bottom.
  • The median selling price of a single-family home is 29% less than their peak pricing (June ’07). Condos sell 35% below their peak in March 2006. Builder prices for new homes are 28% below their February ’05 top.
  • Single-family homes were 70% more expensive than condos in this period vs. 72% a year ago. From 1988-2011, the average house/condo gap was 58%.
  • Builder’s new homes sales were 7% of all residences sold in the period vs. 6% a year ago. From 1988-2011, builders did 14% of the Orange County homeselling.

Here’s the breakdown of recent activity by key category; included is how the latest results compare to the average monthly sales pace from 1988 through 2011:

Slice Price Price vs. year ago Sales Sales vs. year ago Sales vs. ’88-’11 avg.
Houses $520,000 +14.3% 2,096 +24.1% -6.0%
Condos $305,000 +15.1% 923 +25.9% 8.0%
New $625,500 +10.6% 217 +29.2% -57.6%
All O.C. $451,000 +10.0% 3,236 +24.9% -10.0%

CoreLogic: OC home price up 6.4%

December 9th, 2012,  by 

 OC Register

Orange County home prices increased 6.4 percent in October from the year before, the fifth straight monthly increase tracked by housing numbers giant CoreLogic.

 

Month % ch
Jun-11 -4.5%
Jul-11 -2.7%
Aug-11 -4.1%
Sep-11 -5.5%
Oct-11 -4.9%
Nov-11 -4.9%
Dec-11 -4.7%
Jan-12 -4.2%
Feb-12 -4.5%
Mar-12 na
Apr-12 -1.2%
May-12 -0.6%
Jun-12 0.1%
Jul-12 1.9%
Aug-12 3.1%
Sep-12 4.5%
Oct-12 6.4%

The increase was the largest since home prices stopped dropping in June and started going up again. Before that, prices dropped for at least 12 straight months.

The CoreLogic Home Price Index, released last week, follows reports for October from two other housing trackers: DataQuick reported that Orange County home prices jumped 12.3 percent in October, while the California Association of Realtors reported a 15.3 percent price increase.

CoreLogic Chief Economist Mark Fleming has said that his firm’s numbers are more reliable because they’re based on comparisons between prices for the homes sold in October with the previous sales prices for those same homes.

DataQuick and the Realtor numbers compare the median price of homes sold in October to all homes sold in the previous October. Such price comparisons can be skewed by changes in the type and size of homes sold.

In addition, CoreLogic’s October HPI showed:

  • Orange County home prices were up 0.7 percent in October from September.
  • When distressed properties such as foreclosures and “short sales” are excluded, prices for the remaining homes were up 6.5 percent from October 2011 and were up 1 percent from September.
  • Nationwide, home prices increased 6.3 percent in October, the eighth consecutive price increase.
  • In California, home prices increased 9 percent.