Proof that real estate is local:

The national media has been reporting slowing home sales for the past 2 weeks, but sales of pre-existing homes in the Tampa Bay area increased according to data reported in the multiple listing service. Home sales were also slightly higher than the same time last year.

While increased sales are good for our area, the underlying cause may not be for all home sellers. Foreclosures and short sales still dominate the number of closed transactions, nearly fifty percent of those reported, but represent only a third of the available inventory. This indicates that buyers are still focusing on distressed sales, leaving the average homeowner with little chance of selling their home unless it is priced aggressively.

Noteworthy Stats:

Purchases of foreclosed properties-up 25%

Foreclosure inventory-up 16%

73% of all homes sold were under $200,000

Condo sales were up slightly

Pending sales of properties to close fell

Total number of homes for sale is up

The call from business for less government has a notable exception: the mortgage market.

Bank and U.S. government officials met recently to discuss changing the government’s role in backing the mortgage market. While some disagreed on the level of support needed, the bankers group overwhelmingly agreed that the government should maintain a large role in the $11 trillion market.

Here is their reasoning: If the government pulls out, millions of people wouldn’t be able to convince banks to take the risk of giving them home loans. They said that ending government support could lead to a spike in mortgage rates and that would also deter many potential buyers.  Apparently banks feel it’s the government’s job to insure that people can buy homes.

Bankers also said the time had come to do away with Fannie Mae and Freddie Mac. Rescuing the two mortgage giants has cost the government/tax payers nearly $150 billion so far. One banker suggested Fannie and Freddie should be absorbed by and turned in to a government agency. He suggested that the agency then allow millions of  home owners to refinance their loans in an effort to stimulate the economy. Something the Banks are currently unwilling to do.  There is an incentive to do this. Experts say that the refinancing of loans at the lowest mortgage rates in decades would give Americans an additional $50 to $60 billion to spend as consumers and lift housing prices by as much as 10 percent.

Other suggestions included the government dissolving Fannie and Freddie but provide guarantees that mortgage investors get paid or  have the government collect money from the mortgage industry and set up an insurance fund that could be used to cover losses during a severe downturn. The overall sentiment of the banks: The government should be willing and prepared to cover their losses in any event.

The current real estate market is, without a doubt, the most difficult I’ve seen for sellers, buyers, and agents in my 22 years as a Realtor in the Tampa Bay area.  Just ask Buy Owner who has turned over its assets to an auction firm that specializes in liquidating companies.

 As a seller in the local market, unless you own a property that has a unique feature or location, you must price your home aggressively to compete against short sales, foreclosures, and builders. The majority of sellers cannot compete based on the dramatic drop in home values. Over 25% of homeowners lowered the selling price of their home in July.  Buyers are having difficulty getting financing. Lenders have tighter guidelines and, even those with stellar credit and money to put down are finding it difficult to get an approval. When they are able to obtain an approval and find a home they like, the bank’s appraisers are being ultra-conservative and quash many deals by using the lowest available sales comparables in the area.

 Agents unfamiliar with this type of market, and the challenges presented by it, find that they do not possess the knowledge or skills necessary to overcome the difficulties presented by the maze of obstacles in the current market.  Many agents were indoctrined in a time when buyers were fighting for homes and all you had to do was put a sign in a yard to sell it.  Knowledge had little to do with their success, and in today’s market, they are overwhelmed. 

Whether buying or selling, the process is plagued with problems and delays. The barriers can seem endless and the most important piece in navigating this market is to find a realtor with the experience, knowledge, and persistence it takes to get the job done.

I recently received approvals from third party lenders on two short sale listings. This is typically good news but of late a new barrier to closing these transactions has appeared.

PMI companies (insurance companies that provide protection to the lender in case of borrower default) have begun to demand money from the delinquent borrower in order to allow the short sale to close. There are questions as to the legality of this practice, but I have yet to find anyone that can show this is illegal.

PMI companies typically insure the top 20% of a loan. In my two cases, the companies have asked for 50% of what they are required to pay the lender per the insurance policy.

There a couple of things about this practice that are troubling.

One, is that the lender does not have to file a claim, they choose to.

The second is that the buyer has been paying for this “insurance policy” on a monthly basis.

Last, AIG, recipient of billions of taxpayer dollars, is one of the top 5 private mortgage insurance companies.

If you are doing a short sale, and there is a private mortgage insurance policy, be prepared to shell out additional cash in order to avoid a foreclosure. The PMI companies are hoping to stall payment to the lenders for as long as possible and if that means keeping you from closing your short sale, they will do whatever it takes

Home sales reported in the MLS for the period between June 26th through July 25, 2010 plummeted nearly 30% from the prior reporting period. At a time when sales tend to increase, this is not a good sign. Sales were lower than the same time last year as well. Continued fear of a double dip in the economy and further declines of property values seem to be the forces driving this slow down.

For homeowners not in a distressed situation and attempting to sell in this market, there is another reason for concern. 44% of all closings were either a foreclosure or short sale. This is a dramatic increase. Typically, about a third of all homes sold have been these types of sales. The buyers that are out there are searching for great deals and your typical home seller cannot compete with the rock bottom prices of a foreclosure or short sale.

Most of the reported sales were under 200K, and homes priced over $400,000 accounted for less than 7% all houses sold. Bad news for higher end property owners who would like to sell.

The end of the tax credit offered to first time home buyers and move up buyers did not create a huge rush of buying activity, but it appears to have dampened the appetite of the less than enthusiastic buyers that were out there.

There has been much debate over a practice many local real estate agents have been utilizing in order to boost their income. Two Connecticut real estate agents used it to profit from the housing bust and are scheduled to be sentenced in federal court after pleading guilty to fraud.

The crime: persuading lenders to approve the sale of homes for less than the balance owed – (a short sale) — without disclosing that there were better offers. They then flipped the houses for a profit. The scam is called “flopping”. In this scheme, these real estate agents assess a home for less than its market value and convince banks to accept a sale at that level. The agent or their “buyer” conceals from the lender that they have secured a higher offer and then quickly resells the property for a profit.

The FBI and mortgage finance company Freddie Mac have warned that such schemes may be spreading after a plunge in values left homeowners owing more than their properties are worth. The scams threaten to deepen losses for lenders that are increasingly agreeing to short sales as an alternative to more costly foreclosures.

The people involved in this “flopping” scam continue to deny that they are doing anything illegal. The fact that the two agents in Connecticut are being sentenced in a federal court in August should tell them something.

For the fourth month in a row, closings on homes in the Tampa Bay area have increased. This is a typical trend and in my opinion does not reflect increased activity because of the expiring tax credit.  Overall, sales were up 6% over last months numbers. They are 28% higher than the same time last year but I believe that increase was generated by falling home prices for the most part. We seem to be getting close to the bottom and Buyers are feeling a little more comfortable with making a home purchase. Other interesting numbers: Two thirds of pending properties are short sales. While additional incentives for banks to accomplish these transactions have been put in to place, they continue to drag the process out and have proven to be uncooperative.  There are 30% more foreclosures currently on the market than there were last month.  Foreclosures and Short sales accounted for 38% of sold properties over the period tracked while representing 29% of the available inventory. Most of the homes that sold were under $200,000. 

Home prices have shown little change so far this year according to a housing index released Tuesday. It’s an indication that the housing market continues to struggle despite recent improvements.The Standard & Poor’s/Case-Shiller home price index showed that prices of single-family homes were down 0.5 percent between February and March, the sixth consecutive month-over-month decline. The housing market remains unsettled and while it may be in better shape than this same time last year, recent trends show signs of some renewed weakening in home prices. Nationally, sales of previously owned homes jumped nearly 8 percent in April compared with the previous month, and prices were up about 2.3 percent compared with the same period last year.The recent weakness in prices is disappointing given record-low mortgage rates and a homebuyer tax credit that helped boost sales through the first few months of this year. The tax credit expired last month, and home sales are expected to decline in its absence.It does not appear that we have turned the corner on home prices.There is still an oversupply of homes on the market. Foreclosed properties and short sale properties selling at a discount continue to bring down home values.The housing glut, foreclosures, and short sales will continue to drive prices down another 6 to 8 percent before reaching bottom in 2011 according to experts.

Home sales for the period between March 26th thru April 25th, 2010 were up slightly according to statistics reported in the MLS. Closed transactions were up about 9%. Not the huge jump anticipated by some given the upcoming expiration of the home buyer tax credits being offered.  

Short sales and foreclosures accounted for a third of all closed transactions. This seems to indicate that owners of non-distressed properties are becoming more realistic about the value of their homes and are adjusting accordingly. 

Pending homes sales were up, but over 50% of the homes under contract are short sales. They may or may not close, and despite efforts to push the banks to speed the process, delays continue and buyers are shying away from them.

The inventory remained about the same but the amount of foreclosures available is up 30% over last month. These properties are generally under priced and will affect values of other homes in their areas.

The next few months will tell us a lot. In order to qualify for the tax credit buyers must close by June 30th. If there is a huge jump in closed sales I will say it was a success. If not, well, I’ve said all along….buyers are more concerned with price then a tax credit.

Home sales reported in the MLS for the period between 2-26-2010 and 3-25-2010 showed a slight decrease over the prior reporting period. A little unusual given that sales tend to increase this time of year. Three quarters of the properties sold were under $200,000. Short sales and foreclosures continue to represent over a third of all closed transactions.  There are currently almost 27000 homes listed for sale in the Tampa Bay area and the active home inventory is up for the first time in over 4 months. The upcoming deadline for the tax credit offered to first time home buyers and move up buyers was suppose to have created a rush of buying activity. Pending sales did increase dramatically over the past month. Up about 18% over January’s pending sales.

 Here’s the problem…. 58% of the homes listed as pending closings are short sales. The majority of these will probably never close from what appears to be lender indifference and inexperienced realtors.  Next month will tell us more, but as I have said before, buyers are not feeling pressured by the end of the tax credit being offered. They want a good deal and are still not convinced that the overall market has bottomed out.