WSJ Article on Government Backing of Short Sales

The Obama adminstration announced this morning an amazing program to assist in the processing of short sales. The article can be read here:

http://online.wsj.com/article/SB125963239592170665.html?mod=WSJ_hps_sections_news#articleTabs%3Dcomments

Short Sales occur when the proceeds of the sale of real estate to pay off the mortgage, accrued interest, penalties and customary closing costs including the Realtor® fees. I began working in short sales in 2004 and have assisted dozens of agents in the intervening years. Negotiating short sales vary in difficulty from lender to lender. Some provide open communication and allow preliminary documentation to be added to a seller’s file in advance of a contract to sell. Others will not allow the seller or Realtor® to broach the subject without a bona fide contract in hand. This is also a fluid market. Procedures and criteria that resulted in an approved short sale several months ago, may not meet the lender’s requirements today.

In a nutshell, the Obama administration is proposing to soften the blow to all parties involved in the short sale. Homeowners may receive up to $1500 if the sell their home with a short sale. Mortgage serving companies will receive $1000 from the government if they approve a short sale. Second lienholders, who are often problematic in the short sale process will receive up to $3000 if they approve a short sale. Investors who hold the first mortgage will receive $1000.

 All in all the feds are proposing to contribute $6500 per short sale to ease the situation. Is this a bad thing? The knee jerk reaction from many will be why compensate the seller $1500? In many cases, certainly those where the home was a primary residence, the home owner is in an awful predicament. If the traditional short sale is concluded, the seller walks from the closing table with nothing. Ideally the $1500 will go towards moving expenses so that personal property is not simply abandoned which would continue the downward spiral.Looking at the real estate market as a whole, this is good thing to stabilize the market. I can report from first hand experience, that short sales will net greater proceeds than homes that are foreclosed and then sold from the lienholder’s REO portfolios. In every case the differential was greater than $6500.  As long as this crisis continues, America is far better off absorbing short sale losses than the far greater damage caused to surrounding properties due to lowered values of foreclosed homes.

Voting has started for this years Holiday Decorating Contest at the Asheville Regional Airport

Vote for the entry from Coldwell Banker Kasey Real Estate at:

http://www.flyavl.com/announcements/2009-11-23-annc-holiday-contest.html

We are raising money for the Carolina Rescue Mission in Asheville and the Hendersonville Rescuse Mission.

Our entry is truly a beautiful tree with a natural theme.

Buncombe Foreclosure Update

While we are clearly seeing the trend of increased sales of new and existing homes in Western Carolina continue for the third consecutive month, foreclosure continues to cloud the outlook for a complete market recovery.  More than 1155 property owners in Buncombe County have found themselves facing foreclosure. This is a 32% increase over 2008. More than 373 property owners have lost their real estate to foreclosure year to date. This is a staggering 63% increase.

As the Associated Press reported last week, many homeowners with good credit are facing foreclosure due to job loss or job reduction. The article contrasts this with the early days of the economic crisis when sub-prime loans were the alledged root of the growing problem. The AP article points out that job growth is the only long term cure.

I agree with the writer that job growth is key element to a bonafide recovery. I disagree that the root of the problem is or was sub-prime loans. Yes, risky loans contributed to the problem. I am convinced, based on my work with distressed property owners, that the lack of healthcare played as big or bigger roll in the meltdown. Only job creation and affordable healthcare will solve the problem.

Coldwell Banker Kasey Real Estate Enters Asheville Regional Airport Authority’s Holiday Decorating Contest

Asheville Regional Airport Authority has an annual contest where businesses can decorate Christmas Trees with cash prices awarded to sponsored charities based on online judging.

Coldwell Banker Kasey Real Estate sponsored the Western Carolina Rescue Mission and Hendersonville Rescue Mission. Coldwell Banker Kasey, the brokers-in-charge and agents from the Asheville and Hendersonville offices participated in raising the entry fee for this year’s tree. Judging will be available online next week at www.FlyAvl.com. Prices will be awarded for 1st, 2nd and 3rd place along with most original.

The theme of Coldwell Banker Kasey’s tree was “A Natural Christmas”. Our entry is adorned with bittersweet vine, holly, cranberries, dried okra, ostrich plumes and other collected items.

Coldwell Banker Kasey Real Estate Agents and Their Entry for This Year's Contest

Pictured above left to right are Nancy Price, Larry Ellis, Colleen Snyder, Melonie Tyner from Coldwell Banker Mortgage, Mary Owensby, Jeremiah Marske, Sandy Blair, Miriam McKinney and myself, Bill McMannis.

We are all proud of this year’s entry and hope our efforts will bring cheer to the Western Carolina and Hendersonville Rescue Missions. Please visit the airport’s website to cast your vote.

WNC Absorption Rates for October 2009

I compile Absorption Rates on a monthly basis and just completed my October’s statistics. By comparing the last two months with the same period for 2008, even the most pessimistic skeptic will admit that the market is improving.

Starting with Lots up to ten acres, inventory is down a bit from September. Overall in WNC, we see the Absorption Rate (aka: months of inventory; current inventory divided by recent month’s sales) dramatically drop from more than ten years to just over eight years. Keep in mind that even during good times there was a huge inventory of unsold lots. This improvement is encouraging. It is interesting to look at the sales price to list ratio. Lots are CLOSING for just under 80% of list price overall for WNC and just over 85% for Buncombe County. Henderson County’s results are way off at 67%. We will have to see if this is a one time fluke.

Resales of existing homes inventory is holding steady in Buncombe County with reductions in Henderson County and WNC overall.

What is exciting is the dramatic drop in inventory of New Home Sales. In Buncombe County we have less than eleven months inventory of new homes. This is the lowest level in more than two years! Henderson County’s inventory is steady and WNC Overall has dropped.

If you would like a copy of this report, which is not available anywhere else, call our Coldwell Banker Kasey Real Estate duty agent at (828) 684-4339 and ask for a copy of Bill McMannis’ Absorption Rate Report for October.

Year to Date Update on Buncombe County Foreclosures

I just updated the spreadsheet I maintain to track foreclosure activity in Buncombe County North Carolina. While there are many indications that the real estate market is in recovery, the foreclosure statistics are a lagging indicator and as of today, is not a rosy picture.

 I track the recording of two documents at the Buncombe County Register of Deeds. These are Notice of Appointment of Substitute Trustee and Foreclosure Notice. The Notice of Appointment of Substitute Trustee, or simply Substitute Trustee, is the first public notice that a property owner is facing the foreclosure process. The Foreclosure Notice is recorded to give public notice that the foreclosure process concluded with the property owner losing title to the real estate.

Year to date, 1107 property owners have found themselves in the foreclosure process in Buncombe County. This is a 30% increase compared to the same period in 2008. We see that 354 properties have been lost to foreclosure. This is a stunning 59% increase compared to losses in 2008. Earlier in the year properties lost to foreclosure were up 71%. The little bit of good news is that we are seeing moderation.

Of those who entered the foreclosure process, 32% ultimately lost the property. For the same period in 2008 we witnessed 25% of those in foreclosure saw the conclusion with loss of property.

Simply put we have more people in foreclosure and more of those are losing their real estate.

Buncombe County Home Sales Up 17.30% For October 2009

In preparing for my sales meeting scheduled for tomorrow, I made a quick analysis of lot and homes sales comparing October 2009’s preliminary results to October 2008. The results are exciting.

Lot sales in Buncombe County are up 41%.

Resales of existing homes are 23% overall. Single Family is up 14.6%, Condos are up an astounding 92% and townhomes are up 75%.

New construction sales were flat, but I attribute this to foreclosed new construction being sold from banks’ REO portfolios and then classified as resales.

Overall homes sales in Buncombe County are up 17.3%. My more indepth analysis will follow later in the week, but this is certainly good news.

Pleasant Surprises In the Revised Homebuyer Tax Credit Bill

I am surprised and delighted as I read the details of the revised first-time homebuyer tax credit bill. The revised bill, that is awaiting President Obama’s signature, not only extends the existing $8000 first-time homebuyer tax credit, but expands the program for other buyers as well.

The biggest thing that impresses me with the current bill is that is appears to have been thought out! Do not laugh. Having personally lobbied on the state level for a bill to alleviate a tax imposed by a treasury ruling, it can be amusing and frightening the things that can get lost in the rush to push through a bill. What immediately jumps out is a reasonable timetable. For buyers to take advantage of the tax credit, they must have the home “under contract” by April 30 and close by July 1. This should minimize rushing a closing after a home is put under contract. I personally would hate to see buyers waiving inspections or surveys because they did not have an adequate due diligence period between effective contract date and the deadline for the tax credit.

The expansion to buyers who have owned homes is well thought out. If a buyer has owned a home for five consecutive years of the past eight years, they qualify for a $6500 tax credit. This means if someone purchased a home in 2001, sold it in 2007 and rented the past two years they would qualify for the $6500 tax credit.

There are income limits and the credits do NOT apply for homes costing more than $800,000. Details for limitations will appear in a post next week.

In the meantime, buyers should rejoice that the opportunity has been extended and equitably expanded. Sellers should plan to see increased demand.

September 2009 Foreclosure Statistics

With Buncombe County’s unemployment rate for August 8.3%, it should come as little surprise that homes entering the foreclosure process or lost to foreclosure are running well ahead of 2008’s statistics.

As of the end of September, 977 property owners found themselves in the foreclosure process. This is up 28% compared to the same period last year. If we want to looks at 2007, 2008 and 2009 graphically, it looks like this:

Clearly it is a record year for property owners in distress.

Roughly 31% of all homes that enter the foreclosure process are lost to the lender. Year-to-date in Buncombe County, 302 properties have been seized by the lienholder. This is an astonishing increase of 58% compared to 2008.  This is more astounding when we consider that 248 were lost in all of 2008, which seemed like a very tough year at the time.

Our graph for cumulative losses or properties year-to-date is as follows:

Perhaps the best news is that increase of homes lost to foreclosure compared to 2008 is actually down from last month. While properties lost to foreclosure cumulatively stand at 58% greater than last year, as of a month ago we were above 71%.

First Time Homebuyer Tax Credit to Be Extended?

I guess it was inevitable. The $8000 First Time Homebuyer Tax Credit which is slated to expire on November 30, 2009 may be extended.

I was a huge fan of this program when it began as my previous posts explained, but I was unenthusiastic regarding the program that would allow buyers to “borrow against” the credit to cover closing costs. I am convinced that using the credits to cover closing costs is an expensive second mortgage and the buyers could find themselves getting in over their heads with this easy form of credit. Homebuyers overextending themselves is the crux of our economic predicament.

Should the credit be extended? The grapevine says area home sales are improving, though my perusal of the statistics say otherwise. I personally would like to the credit run its course and expire on December 1. First, the program will lose its urgency if the sunset is extended. Second, I want to see if we still need the incentive. Let’s see how the market is after the holidays. Perhaps we will not need the credit. If we do, a new program can be put into place in the spring.