Foreclosures rise 7 percent in July from June

By ALAN ZIBEL, AP Real Estate Writer Alan Zibel, Ap Real Estate Writer – Thu Aug 13, 1:50 pm ET

WASHINGTON – The number of U.S. households on the verge of losing their homes rose 7 percent from June to July, as the escalating foreclosure crisis continued to outpace government efforts to limit the damage.

Foreclosure filings were up 32 percent from the same month last year, RealtyTrac Inc. said Thursday. More than 360,000 households, or one in every 355 homes, received a foreclosure-related notice, such as a notice of default or trustee's sale. That's the highest monthly level since the foreclosure-listing firm began publishing the data more than four years ago.

Banks repossessed more than 87,000 homes in July, up from about 79,000 homes a month earlier.

Nevada had the nation's highest foreclosure rate for the 31st-straight month, followed by California, Arizona, Florida and Utah. Rounding out the top 10 were Idaho, Georgia, Illinois, Colorado and Oregon. Among cities, Las Vegas had the highest rate, followed by the California cities of Stockton and Modesto.

While there have been numerous recent signs that the ailing U.S. housing market is finally stabilizing after three years of plunging prices, foreclosures remain a big concern. Foreclosures are typically sold at a deep discount, hurting neighbors' home values.

The mortgage industry has been slow to adapt to the surge in foreclosures. Many lenders have needed government prodding to get up to speed with the Obama administration's plan to stem foreclosures.

The Treasury Department said last week that banks have extended only 400,000 offers to 2.7 million eligible borrowers who are more than two months behind on their payments. More than 235,000, or 9 percent, those borrowers have enrolled in three-month trials in which their monthly payments are reduced.

"The volume of loans that are in distress simply overwhelms" those efforts, said Rick Sharga, RealtyTrac's senior vice president for marketing.

Vacancies Still Strain Commercial Properties

Commercial real estate is feeling the pain as retailers cut back on rental space in light of unemployment and a weak economy.

Just this week, Maguire Properties Inc., which owns office buildings in Southern California, walked away from seven of its properties because it couldn’t pay the mortgages and may abandon others, according to rating agency Realpoint.

"The bottom line: defaults are exploding," said Richard Parkus, an analyst with Deutsche Bank. "It's terrible. It's going to be worse than in the early '90s."

Source: The Associated Press, Alex Veiga (08/12/2009)

Foreclosures Still Up in Sun Belt, Midwest

Foreclosure filings in July, including default notices, scheduled auctions, and bank repossessions, were up 7 percent compared to June and increased 32 percent from July 2008, according to RealtyTrac.

One in every 355 U.S. housing units received a foreclosure filing in July, the third time in five months that foreclosures have reached a new high in the four years that RealTrac has been keeping records.

"Despite continued efforts by the federal government and state governments to patch together a safety net for distressed homeowners, we're seeing significant growth in both the initial notices of default and in the bank repossessions," said James J. Saccacio, CEO of RealtyTrac.

For the thirty-first consecutive month, Nevada had the nation’s highest state foreclosure rate with one in every 56 housing units receiving a filing in July. California was second with initial defaults spiking 15 percent compared to June. Other states that make up the 10 highest were: Arizona, Florida, Utah, Idaho, Georgia, Illinois, Colorado, and Oregon.

The 10 states with the highest actual foreclosures were California, Arizona, Nevada, Florida, Illinois, Texas, Georgia, Ohio, Michigan, and New Jersey.

Source: RealtyTrac (08/13/2009)

Economists Pronounce the Recession Over

The majority of economists surveyed by the Wall Street Journal say the recession is over and Federal Reserve Chair Ben Bernanke deserves another term.

Of the 47 economists the newspaper surveyed, 27 said the recession has ended and 11 predict another trough this month or next. The rest refused to commit. But they were nearly unanimous is saying that Bernanke should be rehired.

Gross domestic product is expected to grow 2.4 percent in the third quarter at a seasonally adjusted annual rate. Economists were also heartened by a better-than-expected jobless report in July.

Source: The Wall Street Journal, Phil Izzo (08/12/2009)

Fed Will Keep Key Rates Low

When the Federal Reserve ends its meeting on Wednesday afternoon, it is almost certain to leave the key rate at or near zero and pledge to hold it there.

That makes it likely mortgages will stay historically low and rates on home-equity and other consumer loans will hug 3 percent.

But it is unclear whether the Fed will continue some programs that have kept mortgages and other consumer debt even lower than the market might expect. One such program involves buying U.S. Treasurys. The Fed is set to buy $300 billion worth of Treasury bonds by the fall. It has bought $235 billion already this year.

"I think they'll let it expire. It seems the mood turned against Treasury purchases in the last couple of months, and there's been some skepticism whether it has worked in bringing rates down," says Michael Feroli, an economist at JPMorgan Economics.

Source: The Associated Press, Jeannine Aversa (08/11/2009)

Commercial foreclosures rocket

Valley is 'at the tip of the iceberg' for notices, expert says

by J. Craig Anderson - Aug. 5, 2009 12:00 AM
The Arizona Republic

More than 2,000 commercial properties in Maricopa County have received 90-day foreclosure notices since Jan. 1, representing $6.3 billion in real-estate loans on which the borrowers have failed to make payments.

That number is staggering when placed in contrast with the average commercial foreclosure rate over the past decade, which has been practically zero.

The problem, sparked by property-value declines and a paucity of refinancing options, has produced a steady flow of distressed commercial properties onto the market, with a heavy emphasis on small and midsize office and retail centers.

Industrial and warehouse properties also have suffered tremendously, due in large part to disappearing jobs. More than 1 million square feet of previously occupied industrial and warehouse space was vacated in the second quarter.

Commercial-real-estate broker Bret Isbel has been tracking actual foreclosure sales in Maricopa County, which can take several months to occur following the issuance of a foreclosure or trustee's sale notice.

The number of notices issued has been holding steady at between 300 and 400 a month since January, but actual foreclosures vary more widely, because it can take months - potentially even years - for a property in default to be repossessed by the lender or sold to a third party.

In Arizona, a lender can foreclose in either of two ways: It can take the borrower to court via foreclosure, or it can bypass the court system and call for a trustee's sale, which is quicker and less expensive but requires the lender to waive certain legal rights.

Isbel said there's no indication that the pace of commercial foreclosures is about to taper off. If anything, it's still building momentum.

"We're at the tip of the iceberg, there's no doubt," said Isbel, of Scottsdale-based GPE Commercial Advisors. "It's just a question of how big it is underneath."

The inescapable problem for many commercial developers is that they've had to maintain the same construction loan payments while lowering rents because of dwindling demand for leased commercial space.

While the federal government has created programs to help homeowners in danger of foreclosure negotiate lower mortgage payments, no such program exists for commercial-property owners, and none is expected.

By and large, commercial-mortgage lenders are not modifying commercial-real-estate loans, even as commercial-lease rates have plummeted as much as 75 percent in some areas.

Isbel said county records show more than 50 commercial foreclosure sales in June, the most recent full month available, with a total mortgage value of about $54 million. Geographically, they're all over the map, including the East Valley, West Valley, Scottsdale and downtown Phoenix.

Declining rent income isn't the problem for all area commercial centers, real-estate data analyst Zach Bowers said.

Owner-occupied projects including "commercial condos," where individual office or retail spaces were sold to small-business owners, are going back to the lenders, said Bowers, of Ion Data in Mesa.

Not unlike their residential counterparts, commercial condos were overbuilt and now represent a disproportionately high percentage of commercial foreclosures, the analysts agreed.

They include medical and dental offices that opened, much like retailers did, in high-growth areas on the fringes now hit hard by residential foreclosures.

"We've been seeing dental properties popping up every week (in county foreclosure records)," Bowers said.

Commercial broker Marc Bonilla, who specializes in selling medical-office properties, said they can still be attractive investments to buyers paying today's lower prices, but that it depends largely on the tenants.

Bonilla, of Colliers International in Scottsdale, recently negotiated the $12.1 million sale of a 40,000-square-foot medical-office project in Peoria.

Arrowhead Professional Park, 16222 N. 59th Ave., in Glendale, was not a foreclosed property, Bonilla noted. The owner, Phoenix-based Arrowhead Health Office Properties, sold it to real-estate investment firm Jomike Realty Co., based in New York.

While Jomike technically bought the building, he said, the true investment was in future lease revenue from its occupants.

"Number 1, it was fully leased," he said, "and Number 2, it has tenants that have been successful in this market for a long time."

 

Residential Real Estate Market Update

It has been awhile since I have done an update to the market and where we are heading. Below are some of the graphs that I watch and monitor to advise my clients. If you have any questions feel free to shoot me an e-mail or comment on the blog with your opinions.


Recently in the news has been talk about there being an upswing in new construction and that is a sign of the market turning around. In this graph you can see the number of building permits in Maricopa county and there is the beginning of an upswing, but the market is still far from normal. The market should have about 3000 permits per month and we are just under 1000.

This graph shows the number of foreclosure notices and sales in Maricopa County. We should be around 2000 notices per month, but we are four times that rate. There is no obvious trend that shows a sign of slowing down. The moratorium from the beginning of the year has yielded record sales for this summer. I anticipate that there will be record number of bank owned properties coming on the market in August.

This is a graph of the available homes for sale in the MLS database. 2009 is the strong red line. As you can see we are on a heavy trend of shrinking inventory. The market would have a normal inventory of 30,000 to 35,000 units and we should be there at the current rate by the end of October.

This graphs shows the number of offers accepted per week in a year. The current volume of offers is in the range as was seen in 2004 and 2005. That is incredibly high.

Likewise this graph shows the number of closings per month. It shows closings are in the same range as in 2004 and 2005.
In conclusion the market activity is accelerating and I am seeing in the most competitive price ranges that it is hard to land a contract without having to bid up the price with multiple offers. The window for the "good deals" for investors is closing and the "easy deal" is gone. Depending on how the market adsorbs the coming foreclosures can determine if we are out of the downward cycle by the end of the year.

More Home Owners Underwater as Prices Fall

A report from Equifax and Moody's Economy.com shows that falling prices have left 24 percent of owner-occupied, single-family home owners with mortgage debt greater than the values of the residences.

At the end of this year's second quarter, more than 16 million Americans were in this predicament, an increase from 10 million a year earlier.

Almost 5 percent of owner-occupied dwellings are saddled with mortgage debt worth 150 percent of the property value. Nevada, where 40 percent of owner-occupied homes are "upside-down," is the hardest-hit state, followed by Arizona and California.

Source: Wall Street Journal, Nick Timiraos (08/05/09)

Feds Scold BoA, Wells Fargo on Loan Modifications

The Treasury Department on Tuesday announced that only 9 percent of eligible home owners had been helped by the federal program to modify home loans and prevent foreclosure.

It scolded banking giants Bank of America and Wells Fargo, both of which received federal bailout money, pointing out that these banks have been among the least willing to assist troubled borrowers.

Bank of American modified 4 percent of eligible loans, and Wells Fargo modified 6 percent.

Big banks that did better included JPMorgan Chase & Co., which modified 20 percent of eligible loans, and Citigroup Inc., which modified 15 percent.

The bank with the best results was Saxon Mortgage Services Inc., which helped about 25 percent of its eligible borrowers.

Source: The Associated Press, Alan Zibel (08/04/2009)

Construction Spending Rises, Defies Forecasts

Analysts predicted a 0.5 percent drop in construction spending in June, but they were wrong.

The U.S. Commerce Department said Monday that construction spending rose by a seasonally adjusted 0.3 percent annually in June. That’s positive news, despite the fact that overall spending was still down 10.2 percent compared to a year ago.

The increase was driven by federal government spending, which rose 1.9 percent. This offset a 0.5 percent decline in commercial, nonresidential building, including shrinkage in retail and offices.

Source: The Associated Press, Christopher S. Rugaber (08/03/2009)

Entrepreneur Identifies 10 Do-Business Cities

Entrepreneurmagazine has identified 10 major cities that it says encourage business start-ups.

The magazine chose cities that provide government incentives, have affordable commercial rents, have public officials who are open to new ideas, and have a population that's growing.

Amy Cosper, editor in chief of the publication, says she thinks Entrepreneur’s research will help other businesses that are searching for a location to start a new business or expand an existing one.

The most entrepreneurial cities identified in the July issue are:

1. Las Vegas
2. Portland, Ore.
3. Orlando
4. San Diego, Calif.
5. Phoenix, AZ
6. Chapel Hill, N.C.
7. Atlanta
8. Madison, Wisc.
9. Youngstown, Ohio
10. Austin, Texas

Source: Entrepreneur (07/29/2009)

Office Vacancies and Rents Are Still Slumping

Office vacancies rose 1 percent nationwide in the second quarter of the year to 15.45 percent, according to Colliers International, a real estate services firm.

The vacancy increase from 14.48 percent in the first quarter cuts across all kinds of property, Colliers said, although prime office space in downtown markets had the lowest increase in vacancy rates.

Rental rates also declined across the board. Since year-end 2008, downtown Class A weighted rents have fallen an average of 10.5 percent.

“Firms have little appetite for expansion and instead remain focused on reducing costs and watching their bottom lines," said Ross Moore, director of economic research for Colliers. "We expect further increases in office vacancy and falling rents for the balance of 2009."

Source: Colliers International (07/28/2009)

Treasury Pushes Bankers on Loan Modifications

During daylong meetings Tuesday, the Treasury Department pressured executives from 25 mortgage companies to promise to work harder to modify more mortgages for troubled borrowers.

The officials agreed orally on a new goal of 500,000 loan modifications by Nov. 1.

The meeting stemmed from concern that the program to modify mortgages will fall far short of the original goal of 3 to 4 million modified loans. As of this week, only 200,000 borrowers were enrolled in three-month trial loan modifications.

"Today's meeting was an opportunity to identify ways to accelerate the program and bring relief faster," Treasury Secretary Timothy Geithner said in a statement.

Bankers who attended the meeting complained that the original announcement of the program led the public to believe that modifications could be accomplished immediately.

"It was very difficult as an industry as a whole to try to live up to those expectations," said Dan Frahm, a Bank of America spokesman.

Source: The Associated Press, Alan Zibel and Daniel Wagner (07/28/2009)

Economists Optimistic That Market Is Upward Bound

Economic recovery is still a few months away, say economists surveyed by USA Today, but two-thirds of them think existing-home sales have bottomed out.

Both housing and automotive markets “have the potential to generate some quite large percentage increases,” says Bill Cheney, chief economist at MFC Global Investment.

Overall, economists say unemployment won’t peak until the first half of next year and credit markets will remain tight.

"I think (the recovery) is going to be anemic," says Allen Sinai, chief economist at Decision Economics. "I don't think consumers have the wherewithal to buy a lot of cars and a lot of houses."

Source: USA Today, Paul Davidson; Barbara Hansen (07/27/2009)

NAR: Existing-Home Sales Rise Again

Existing-home sales rose for the third consecutive month with inventory easing and home prices declining less sharply in June, according to the National Association of REALTORS®.

Existing-home sales — including single-family, townhomes, condominiums, and co-ops — increased 3.6 percent to a seasonally adjusted annual rate of 4.89 million units in June from a downwardly revised pace of 4.72 million in May, but are 0.2 percent lower than the 4.90 million-unit level in June 2008.

Lawrence Yun, NAR chief economist, is hopeful about the gain.

“The increase in existing-home sales occurred in all major regions of the country,” he says. “We expect a gradual uptrend in sales to continue due to tax-credit incentives and historically high affordability conditions. Despite the rise in closed transactions, many REALTORS® are reporting lost sales as a result of new appraisal standards that went into effect May 1 of this year.”

HVCC Issues

A June survey of NAR members shows 37 percent experienced at least one lost sale as a result of the new Home Valuation Code of Conduct, with seven out of 10 reporting an increased use of out-of-area appraisers. Seventy percent of NAR appraiser members said consumers were paying higher fees, while 85 percent report a perceived reduction in appraisal quality.

“Clearly the process needs to be revised, but the most logical approach is to use appraisers with local expertise, industry designations, and access to local data, who make a physical examination of the property and use apples-to-apples comparisons with nearby home sales,” Yun says. “In many cases, normal homes are being compared with distressed homes sold at a discount, which often are in subpar condition – this is causing real harm to both buyers and sellers.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 5.42 percent in June from 4.86 percent in May; the rate was 6.32 percent in June 2008. Mortgage interest rates have trended lower in recent weeks.

Inventory Declines

Total housing inventory at the end of June fell 0.7 percent to 3.82 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, down from a 9.8-month supply in May. Raw inventory totals are 14.9 percent below a year ago.

“This is another hopeful sign — if we can keep the volume of sales above the level of new inventory, prices could stabilize in many areas around the end of the year,” Yun says.

An NAR practitioner survey in June showed first-time buyers accounted for 29 percent of transactions, unchanged from May, and that the number of buyers looking at homes is up nearly 12 percentage points from June 2008.

NAR President Charles McMillan notes that there are very good opportunities. “Despite some of the challenges, the housing market continues to demonstrate signs of recovery,” he says. “The temporary first-time buyer tax credit is clearly helping people make a decision and is contributing to the overall stimulus impact, but since it’s taking longer to close transactions, many would-be beneficiaries may not be able to take advantage of the credit before the Dec. 1 expiration date."

The national median existing-home price for all housing types was $181,800 in June, which is 15.4 percent below June 2008. Distressed properties, which accounted for 31 percent of sales in June, continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes.

Single-family home sales rose 2.4 percent to a seasonally adjusted annual rate of 4.32 million in June from a level of 4.22 million in May, and are 0.2 percent higher than the 4.31 million-unit pace a year ago. The median existing single-family home price was $181,600 in June, which is 15.0 percent below June 2008.

Existing condominium and co-op sales jumped 14.0 percent to a seasonally adjusted annual rate of 570,000 units in June from 500,000 in May, but are 3.1 percent below the 588,000-unit level in June 2008. The median existing condo price was $183,300 in June, down 18.9 percent from a year ago.

By Region

• Northeast: Regionally, existing-home sales in the Northeast rose 2.5 percent to an annual pace of 820,000 in June, but are 4.7 percent below a year ago. The median price in the Northeast was $249,400, down 5.9 percent from June 2008.
• Midwest: Existing-home sales in the Midwest increased 0.9 percent in June to a level of 1.10 million but are 1.8 percent lower than June 2008. The median price in the Midwest was $157,000, which is 9.1 percent below a year ago.
• South: In the South, existing-home sales rose 4.0 percent to an annual pace of 1.81 million in June but are 3.7 percent below a year ago. The median price in the South was $163,200, down 11.9 percent from June 2008.
• West: Existing-home sales in the West improved by 6.4 percent to an annual rate of 1.16 million in June, and are 11.5 percent higher than June 2008. The median price in the West was $214,800, which is 24.9 percent below a year ago.

Source: NAR

Investors Drive Foreclosure Prices Up

Home shoppers in parts of the country with lots of foreclosures are finding it increasingly difficult to buy. Investors are bidding up prices thousands above the original asking price.

Federal legislation slowing the number of foreclosures is adding to the problem by reducing the number of homes on the market. For instance, in Las Vegas, one of the areas where the bidding problem is greatest, home inventories are down 10 percent since March, according to the Las Vegas Association of REALTORS®.

When a bidding war erupts, the problem is particularly difficult for traditional buyers because investors are usually cash purchasers. They can bid up a property without concern whether the appraisal will prevent them from getting a loan.

Experts say the problem is not unlike the situation at the height of the housing bubble.

"This market is about as abnormal as the hypermarket that we came out of a few years ago," says Jay Butler, director of the Realty Studies program at Arizona State University.

Source: The Associated Press, Jonathan J. Cooper (07/20/2009)