Foreclosures Hit Closer To Home

Until recently, my corner of Los Angeles seemed to be isolated from the foreclosure crisis that has swept across the nation and impacted so many communities. But now, a few bank-owned homes have popped up in the local multiple-listings service (MLS).
A search of my local area returned 97 homes, the cheapest of which was a two-bedroom, one-bathroom house listed at $650,000 and the most costly of which was a four-bedroom, four-bathroom house on a very desirable mountain-view street listed at almost $3 million. The median price was approximately $890,000.
At least four of the homes were identified as being bank-owned, foreclosure or REO. But the pain wasn't spread across the wide range of for-sale homes. Instead, all of the foreclosures were priced between $650,000 and $760,500.
Were entry-level buyers more susceptible to bad mortgages and financial woes? Have local Realtors decided that a "bank-owned" or "foreclosure" label might stigmatize a luxury-level home? Or is some other trend at work here?

How To Sell Your Home in Foreclosure City

By Marcie Geffner - Bankrate
If you're trying to sell your home in a neighborhood that's full of foreclosures, you've probably already realized just how difficult it can be to compete against short sale and bank-owned homes that may be on the market at a substantial discount compared with how much you believe your home is worth. You've probably also realized that today's home buyers are well aware of the power they possess in a market that's heavily weighted toward their interests. So, how can you sell your home in what feels like Foreclosure City?
It's not just your imagination that more homes have been foreclosed on in some communities, most notably in California and Florida as well as some of the Midwestern states. And it's not just neighborhoods of low-cost tract homes that have been affected. Indeed, foreclosures may be found in neighborhoods of any socio-economic status.
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Is Owning a Home Still Cool?

Marcie Geffner - Inman News
Which is more important: To buy a home or to own a home?
The disconnect between the two points of view is evident in the rising rate of loan defaults and foreclosures, some of which are no doubt due to such unexpected setbacks as divorce, disability or job loss, but others of where were the very foreseeable result of foolhardy financial decisions.
True, the loan products were complicated and disclosures weren't as clear as they should have been. But a mortgage isn't a credit card or car payment. It's a long-term financial commitment, and, as has been so often said, it's the biggest and most important financial decision most people will make in a lifetime.
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Foreclosures Leave Family Pets Homeless

Yet another sad outcome of home foreclosures was revealed earlier this month when the U.S. Humane Society issued a statement that reminded people who've lost their home not to abandon their pet. News stories in Baltimore, Chicago, San Diego and other cities reported that shelters had experienced an unusual rise in the number of dropped-off animals and that sick (and even dead) pets had been discovered in vacant homes.
The Humane Society warns that abandoned pets "face a grim future" since many aren't found until they're "on the brink of starvation" and those that do reach a shelter have only a 50-50 chance of being adopted.

Five Alternatives To Foreclosure

Financially strapped homeowners typically face a long hard road from that first late payment to the outright loss of their home, but sadly, most of the people who are on this road never pick up the telephone to call their lender and discuss their personal situation. Some fail to act because they feel uncomfortable or embarrassed. Others have given up hope of a better outcome. But if you're in this situation, it's worth making that call because sometimes there are other alternatives such as forbearance, loan modification, refinancing, a short sale or a deed-in-lieu.
The truth is that anyone can suffer a serious setback in life such as a major illness, disability or unemployment. That means anyone who has a mortgage could one day be facing foreclosure, and even people who feel financially secure today should know about the choices they'd face if they fell into a less comfortable situation tomorrow.

Real estate news isn't all bad

Marcie Geffner - Inman News
Real estate has been awash in bad news. But amid all the negativity, a few bright lights, or proverbial silver linings, can yet be found. There is still some good news for realty brokers and homeowners.
Yes, home prices have declined in many cities across the country. But not everyone needs or wants to sell a home in this market, and some fortunate communities have been affected only lightly or not at all by the downturn. Prices of condominiums and co-ops in Manhattan, to take one example, actually increased in the fourth quarter of 2007, according to reports by several local realty firms.
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Should Mortgage Brokers Be Paid Like Insurance Agents?

One of the root causes of the current crisis in the U.S. mortgage sector is arguably the upfront compensation of mortgage brokers. That's because brokers typically are paid hundreds or thousands of dollars when the loan is originated, but have no stake in whether the lender or investor then collects payments from the borrower for three months or 30 years. Brokers who churn mortgages can earn more income even if the new mortgage offers no true benefit for the borrower.
Insurance agents, on the other hand, may earn small slices of the insured's premiums as long as each policy is in force, and those payments can continue even if the agent never performs any additional services for the insured or the insurer. The upfront commission may still create some incentive to churn policies, but the ongoing revenue creates a counterweight incentive to write good policies that will be renewed year after year.
So, should mortgage brokers be compensated more like insurance agents? It's a provocative idea.

Real estate needs to let go of old thinking

By Marcie Geffner - Inman News
Letting go is hard to do, but giving up outmoded ideas and behaviors is exactly what's needed throughout the real estate sector today. Home buyers, home sellers and homeowners need to let go of unrealistic expectations, while Realtors, mortgage brokers, lenders, home builders, real estate technology companies and even real estate journalists need to let go of dysfunctional business practices that aren't applicable to today's markets.
Home sellers need to let go of multiple offers, bidding wars rising-market pricing, quick sales and contingency-free purchase contracts. They need to be ready to negotiate both the price and terms of the deal, and they need to open their minds and wallets to home repairs, redecorating allowances, lease-to-own contracts and other buyer-friendly strategies.
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New Tax Breaks a Relief for Homeowners

By Marcie Geffner - Bankrate

Homeowners found three attractive tax breaks among their holiday presents, thanks to the federal Mortgage Forgiveness Debt Relief Act of 2007, which was enacted in December.

The first tax break concerns forgiveness of debt, which occurs when a lender forgoes repayment of principal and/or interest the borrower owes. Typically, discharged debt is considered ordinary income to the borrower for income tax purposes. The new law allows taxpayers to exclude this amount and thus escape the tax liability.

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Interest rate freeze harms more than it helps

Marcie Geffner - Inman News
U.S. Treasury Secretary Henry Paulson has defended the Bush Administration's plan for lenders and loan servicers to freeze monthly mortgage payments for selected homeowners who aren't able to afford the reset interest rates on their adjustable-rate mortgages and said the plan may be expanded to include prime as well as subprime borrowers. His defense comes as no surprise not only because he helped to broker the deal, but also because the plan is more about politics and governance than actual aid for homeowners. Indeed, the current plan, which was announced in early December, seems designed to benefit a relatively small group of people at the expense of both their neighbors and the broader economy that the plan is supposed to protect.

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Real estates stocks tanked in 2007

Marcie Geffner - Inman News
There's no soft way to say it: Investors who consistently favored real estate and mortgage-related stocks lost their shirts in 2007. As a group, the 10 companies on a short list of such stocks lost more than half their value in the just-ended one-year period.
The two hardest hit groups among the 10 companies were mortgage lenders and home builders. Countrywide Financial and IndyMac Bancorp were caught in the subprime loan tsunami that swept through the sector in the second half of the year while builders were stung by weak housing markets that resulted in lower prices and higher inventories of unsold new-built homes.
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Housing Downturn Hits Car Sales

More evidence of the housing sector's ability to affect the broader U.S. economy surfaced last week when domestic automakers reported 2007 sales of only 1.6 million cars and light trucks, a 2.5 percent drop compared with total domestic vehicle sales in 2006 and the lowest level since 1998. Auto industry executives and economists said the outlook for 2008 was equally bleak.
Competition from foreign carmakers and gasoline at $3 per gallon are obvious causes, yet the housing market downturn has hurt as well, according to news reports. Homeowners can't tap equity as easily to purchase vehicles, higher mortgage payments can cut into cash available for other durables, and credit problems can make financing a new vehicle more difficult or costly. Moreover, Realtors are a major market for leased cars, which turn over every few years, and home builders are a major market for light trucks.
The effect of housing's woes on car sales is yet another indication that housing isn't an isolated island with the U.S. economy.

Real Estate: The Ultimate Fantasy

Real estate and fantasy fiction may seem like a strange combination of subjects for a blog, but doesn't real estate always start with someone's fantasy? Just think: Housing developers and home builders must create a vision of each community, subdivision and home they want to design and build just as home buyers must dream of the home they want to buy and renters must imagine the apartment they want to rent. Until we create those visions, we can't decide where we want to live or what our home will look like.
And that creativity continues even after we take up residency. Every home remodel or room redecoratation involves a creative idea. What we dream of is what we create, whether it's a story about dragons and wizards or a home full of colorful and comfortable furnishings.

Signs of the Real Estate Times

Two new signs that appeared this week on a 10-unit condominium project in my neighborhood speak volumes about the current state of new-home sales.

The block of condos was built out to the property lines on a corner lot that used to contain two 1,100-square-foot homes built in 1941. The units start at 1,800 square feet, and each is three stories with several small bedrooms, a city view and lots of closets. The building has below-ground parking. There is no outdoor space apart from small concrete balconies.

The condos were under construction for more than two years and placed on the market several months ago. There is no evidence that any of them have been sold.

That disinterest on the part of buyers hasn't surprised my neighbors since the condos have been priced in line with the smaller single-family homes that we own. We wonder why anyone would opt for a condo rather than a house with a two-car garage and a backyard large enough to add on the extra square footage.

The curious pricing and soft housing market likely explain the new two signs, which read: "Townhomes for Lease" and "We Are Hiring Agents to Represent Our Homes."