Foreclosed Homes Made Up 28% of All U.S. Home Sales in First Quarter 2011; Housing Prices are Down 33% from July 2006 Peak, with No End in Sight

Let me share something with you. The real estate market is a joke. We cannot get loans for the average American citizen who wants to buy a house because government-backed loans are requiring that the homes have little if no damage ... seems fair right? ... NO. Their requirements are unreasonable. For example, you cannot purchase any home with chipped/pealing paint or damages due to plumbing, electric, etc., or even homes with very little mold in the basement that could be cleaned with bleach. Who is buying these homes? ... the foreign investors mostly ... very sad. Now you would think that the conventional loan market would be more flexible since it is not government backed ... but, NO, it is not. My friend had 50% down and was willing to clean what little water damage in the basement got through a cracked window (and caused little mold). However, the bank said no, she could NOT. The home, I am sure, will be purchased by an investor — whether foreign or domestic — and it will be purchased for probably 1/2 the price because they will pay cash ... so very sad. I have people dying to buy homes but they cannot, and credit has nothing to do with it. It is the foreclosed homes that are going to the investors. Once in awhile a FHA/VA/USDA will slide through the cracks, but not usually. Now the government-backed loans are running out of money ... I had a settlement on a USDA loan and the government ran out of money, so we had to wait until the government gave us money to settle, which was three weeks later ... and then after that I was told not to count on funding for these government-backed loans for long (they cannot promise us anything). That leaves only the rich investors with cash to buy these good deals ... very frustrating. - Camille, Realtor in the Suburbs of the Baltimore-Washington Metro Area

Foreclosing on a Bunch of Snakes

June 2, 2011

MarketWatch - ...Banks currently have about 1.9 million homes on their books or in foreclosure proceedings, according to RealtyTrac, a real estate market researcher.

Imagine all the disrepair, the pet-fouled carpets, the mold, the bugs, the rats and the snakes.

Foreclosures have slowed in recent months, but that trend is largely attributed to legal delays, including banks' dubious use of "robo-signers" on court documents.

Yes, major banks have major problems. But they're still swamped with more foreclosures than they can handle, and Americans are still slithering away from their homes like it's not a snake-like thing to do.

The Mortgage Bankers Association recently reported that about 8.3% of homeowners missed at least one mortgage payment in the January-March quarter. In a healthy market, that figure holds at about 1.1%.

Foreclosed homes made up 28% of all U.S. home sales in the quarter, according to RealtyTrac. And 2011 is on track to be another record year, with about 1.2 million foreclosures expected. This dashes any hope for a housing market recovery any time soon.

Housing Prices Fell in March for Eighth Straight Month

May 31, 2011

New York Times - Housing prices fell in March to their lowest point since the downturn began, erasing the last little bit of recovery from the depths achieved two years ago, according to data released Tuesday.

The Standard & Poor’s Case-Shiller Home Price Index for 20 large cities fell 0.8 percent from

February, the eighth drop in a row. Prices are now down 33.1 percent from July 2006 peak.

“Home prices continue on their downward spiral with no relief in sight,” said David M. Blitzer, chairman of the S.& P. index committee.

Housing is in persistent trouble, industry analysts say, not only because so many people are blocked from the market — being unemployed, in foreclosure or trapped in homes that are worth less than the mortgage — but because even those who are solvent are opting out.

“The emotional scars left by the collapse are changing the American psyche,” said Pete Flint, chief executive of the housing Web site Trulia. “There was a time when owning a home was a symbol you had made it. Now it’s O.K. not to own.”

Trulia, a real estate search engine for buyers and renters that is based here, is a hive of renters, including Mr. Flint.

“I’m in no rush at all to buy,” he said.

He expects homeownership to decline further to about 63 percent, a level the country first achieved in the mid-1960s.

The desire to own your own home, long a bedrock of the American Dream, is fast becoming a casualty of the worst housing downturn since the Great Depression.

Even as the economy began to fitfully recover in the last year, the percentage of homeowners dropped sharply, to 66.4 percent, from a peak of 69.2 percent in 2004. The ownership rate is now back to the level of 1998, and some housing experts say it could decline to the level of the 1980s or even earlier.

Tim Hebb, a Los Angeles systems engineer, expertly called the real estate bubble. He sold his bungalow in August 2006, then leased it back for a year. Since then, the 61-year-old single father has rented a succession of apartments.

“I have flirted with buying again many times over the past few years,” said Mr. Hebb. “Let’s face it, people are not rational creatures.”

But he always resists, figuring housing is still overpriced and even when it stops declining it will stumble along the bottom for years and years. He says there is plenty of time to get back in if he should ever want to.

The market signaled further trouble on Friday when the April index of pending deals was released by the National Association of Realtors. Analysts had predicted the index, which anticipates sales that will be completed in the next two months, would be down 1 percent from March. Instead, it plunged 11.6 percent.

Many of those in the business of building and selling houses believe the current disaffection with real estate will pass. After every giddy boom comes the hangover, they acknowledge, but that deep-rooted desire for a castle of one’s own quickly reasserts itself.

There’s no question that people are reluctant to own, said Douglas C. Yearley Jr., chief executive of Toll Brothers, the builder of high-end homes.

“They’re renting and they’re happy renting because they’re scared.”

Yet those fears will fade, he predicted.

“Most people still want the big house with the big lot in the desirable school district in the suburbs. No one ever renovated the kitchen or redid a room for the kids in a rental,” Mr. Yearley said. “I think — I hope — we’ll be O.K.”

The market’s persistent weakness, however, runs the risk of feeding on itself. Buyers are staying away despite the lowest interest rates and the highest affordability levels in many years, which in turn prompts others to hesitate.

Trulia and another real estate site, RealtyTrac, commissioned Harris Interactive to take a poll last November about when people thought the market would recover. A third of the respondents chose 2014 or later. But in a new poll, released this month, the percentage giving that answer rose to 54 percent.

The sharp decline in prices since 2006 has meant a lost decade for many owners. But what may prove even more discouraging to potential buyers is academic research showing that the financial rewards of ownership were uncertain even before the crash.

In a recent paper, a senior economist at the Federal Reserve Bank of Kansas City found that the notion that homeownership builds more wealth than investing was true only about half the time.

“For many households in many years, renting and investing the saved cash flow has built more wealth than homeownership,” the economist, Jordan Rappaport, concluded.

Economics affects potential owners in other ways. A house is a long-term commitment that many are loath to make in uncertain times like these.

“What I’m hearing from people is that they don’t want to be tied to a particular geography, which inclines them to renting,” said Mr. Flint of Trulia.

San Francisco is one of the country’s most expensive cities, so renting has a natural appeal here. But the Associated Estates Realty Corporation, which owns 13,000 apartments in Georgia, Indiana, Michigan and other Midwest and Southeast states, also is seeing more people deciding to rent.

“We have more of what we call ‘renters by choice’ than I’ve seen in the 40 years I’ve been in the apartment business,” said Jeffrey I. Friedman, chief executive of Associated Estates.

For decades, the company has asked former tenants why they were moving out. During the housing boom, as many as a quarter of those moving on said they were buying a house. In 2009, the percentage of new owners fell in the first quarter to 13.7 percent, the lowest ever. Last year, as the economy improved, the number rebounded. This year, it fell back again, to 14 percent.

Builders clearly believe that the future includes many more renters. So far this year, construction of multiunit buildings is up 21 percent compared with 2010, while single family-homes are down 22 percent. Sales of new single-family homes are lower than at any time since the data was first kept in 1963.

Susan Lindsey, a San Diego software programmer, was once eagerly waiting for the housing market to crash. She said she would have no guilt about swooping in on some foreclosed owner who had bought a place he could not afford.

With prices now down by a third, however, she is content to stay in her $2,500-a-month rented house. She prefers to invest in gold, which she has been buying since 2003.

“I could afford a median-priced house, no problem,” said Ms. Lindsey, 48, as she headed off for a holiday weekend in Las Vegas. “But I would be paying more to live in a place I like less.”

Home-price Index at Lowest Point Since 2006 Bust

May 31, 2011

AP - Home prices in major areas have reached their lowest level since the housing bubble burst in 2006, driven down by foreclosures, a glut of unsold homes and the reluctance or inability of many to buy.

Prices fell from February to March in 18 of the metro areas tracked by the Standard & Poor's/Case-Shiller 20-city index. And prices in a dozen markets have reached their lowest points since the housing crisis began. Prices in March rose only in the Seattle and Washington, D.C., metro areas.

The nationwide index fell for the eighth straight month. Most economists think prices nationally will drop at least an additional 5 percent by year's end. They aren't likely to stop falling until the glut of foreclosures for sale is reduced, employers start hiring in greater force, banks ease lending rules and would-be buyers regain confidence that a home purchase is a wise investment.

"Folks are having so much difficulty in getting financing for a home," said Mark Vitner, senior economist at Wells Fargo. "It may be early next year before prices hit bottom."

Another obstacle to a rebound in prices: A delay in processing foreclosures. Homes in foreclosure sell for, on average, 20 percent discounts. When they do, they pull prices down further. But many foreclosure sales have been delayed while federal regulators, state attorneys general and banks review how those foreclosures were carried out over the past two years.

Once those homes are eventually foreclosed upon, they will trigger a further price drop in many markets.

The 12 cities now at their lowest levels in nearly four years are: Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland, Ore., and Tampa.

The Case-Shiller index measures sales of select homes in the 20 largest markets compared with January 2000. For each metro area it reviews, the index provides a three-month moving average price. By measuring sales prices of the same homes over time, the index seeks to pinpoint market values and conditions.

Homes account for about a third of household wealth.

So when prices fall, they have "important spillover effects on other sectors of the economy," said Yelena Shulyatyeva, an analyst at BNP Paribas.

The housing sector is struggling even as the overall economy is in the midst of a steady but slow recovery.

That won't change soon. Roughly 92 percent of homeowners say it's a bad time to sell their home, according to the latest Thomson Reuters/University of Michigan index of consumer sentiment.

Some of the sharpest price declines have occurred in cities hit hardest by unemployment and foreclosures, such as Phoenix, Tampa and Las Vegas. They are flooded with homes sitting vacant, awaiting buyers. Many banks have agreed to allow homes at risk of foreclosure to be sold for less than what is owed on their mortgages. That trend has pulled down prices.

Coastal areas, such as San Francisco, San Diego, Los Angeles, Washington and Boston, have fared comparatively better in the past two years. They have been aided by healthy local economies and low unemployment, desirable city centers and limited space for new housing.

But the damage is now spreading to areas that had long escaped the worst of the crisis. They include once-thriving markets, such as Dallas, Denver, Minneapolis and Cleveland. Economists regard them as housing bellwethers — metro areas that are reliable indicators of where national prices are headed.

Denver and Dallas are on pace to hit post-housing bust lows in the next few months.

In the seven years before its peak in July 2006, the home-price index surged 155 percent. Since then, it's fallen 33 percent.

"We look for further declines to be registered in the quarters ahead," said Joshua Shapiro, chief U.S. economist at MFR Inc.

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