Perspectives on America, Short Takes on Wealth 109
Real Estate: 17 Days in 2010
Americans credit scores at new lows
NEW YORK The credit scores of millions more Americans are sinking to new lows.
Figures provided by FICO Inc. show that 25.5 percent of consumers nearly 43.4 million people now have a credit score of 599 or below, marking them as poor risks for lenders. It’s unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use.
FICO’s latest analysis is based on consumer credit reports as of April. Its findings represent an increase of about 2.4 million people in the lowest credit score categories in the past two years. Before the Great Recession, scores on FICO’s 300-to-850 scale weren’t as volatile, said Andrew Jennings, chief research officer for FICO in Minneapolis. Historically, just 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico.com. More are likely to join their ranks. FICO: One in four consumers now a poor risk for lenders
This is Jeff Bennett for the Preparedness Podcast, with another installment of Perspectives on America, Short Takes on Wealth 109. Todays topic, Real Estate: 17 Days in 2010
May home prices up, but no sustained recovery
NEW YORK Single-family home prices rose more than expected in May, reflecting robust spring sales spurred by homebuyer tax credits. (Homebuilders raising prices $500 to $1,000 per month)
May is a strong seasonal period for home sales, S&P said, and buyers who rushed into the market to sign contracts by the April 30 deadline for up to $8,000 in tax credits have until September 30 to close loans.
Home prices have essentially moved sideways over the past seven months, however, and are likely to bounce around the bottom for the foreseeable future.
“There is still a huge amount of supply on the market, and it will be a long time before they recover back to where they were before.
Home shoppers taking fresh look at renting
Years of declining values have many rethinking homeownership
When Mark and Joanne Cleaver sold their 3,000-square-foot Arts & Crafts-style bungalow in Milwaukee earlier this year and relocated to Chicago, they did something they hadnt done in 28 years: They became renters.
As a 50-something couple whod moved up the property ladder from a starter condo to a Victorian duplex to a metro Chicago bungalow and then to the Milwaukee home they bought in 2004 they never thought that theyd spend their middle years renting.
But after selling their Milwaukee home in May for $13,000 less than they paid for it, a loss compounded by costly renovations and a 6 percent agent fees on the $280,000 selling price, they decided to embark on what Joanne Cleaver calls a reset of their life and real estates role in it.
We lost two-thirds of our equity, says Mark Cleaver of their Milwaukee home. It definitely soured my view of home ownership.
The Cleavers say they may rent for the rest of their lives. Their monthly costs to live in downtown Chicago are about $200 more than the costs of owning in Milwaukee, but their budget is more predictable no more surprise $20,000 porch repairs or replacement snow blowers. And no taking a bath on the investment.
As the real estate market has turned, so too has the real estate consumer. Many adults are no longer sold on the merits of owning a home. Indeed, some are just as happy to rent and instead of seeing owning as a benefit, they see it as equal to or even less appealing than renting.
Mortgage demand dips on rising rates
Loan requests up second straight week, but just above 13-year lows
NEW YORK U.S. home loan demand cooled last week as rising mortgage rates curbed refinancing requests that had soared to a 14-month high, according to a recent statement by the Mortgage Bankers Association.
Loan requests to buy homes rose for the second straight week to the highest level since the end of June, but hovered just above 13-year lows. Refinancing still represents nearly 8 out of every 10 mortgage applications.
Many consumers doubt that job market improvement is around the bend, and lending standards remain tight, putting home buying out of reach even with borrowing costs near record lows.
Foreclosure activity rising in most metro areas
LOS ANGELES Households across a majority of large U.S. cities received more foreclosure warnings in the first six months of this year than in the first half of 2009, new data shows.
The trend is the latest sign that the nation’s foreclosure crisis is worsening as homeowners battling high unemployment, slow job growth and an uneven rebound in home prices continue to fall behind on their mortgage payments.
In all, 154 out of 206 metropolitan areas with at least 200,000 residents posted an annual increase in foreclosure activity between January and June, according to foreclosure listing firm RealtyTrac Inc., which tracks notices for defaults, scheduled home auctions and home repossessions warnings that can lead up to a home eventually being lost to foreclosure.
The latest figures show the threat of foreclosures is spreading well beyond the top tier of metropolitan areas located in California, Florida, Nevada and Arizona, which have borne the brunt of the fallout from the housing crisis.
Those states saw housing values surge during the housing boom years. When the boom ended, values collapsed and foreclosures soared.
“The face of foreclosure is driven much more now by unemployment than in the past, and it’s moving out from the places where we’ve been focusing on in the last few years.” “The combination of a weak job market and a weak housing market is making it difficult in some of these areas.”
Housing prices are likely to go lower
WASHINGTON – Thought the housing crisis was over? Not quite.
Despite four years of falling prices and recent signs that they were finally bottoming out, homes are expected to lose still more value in many metro areas over the next year.
Parts of the country already pummeled by the housing crisis, like Phoenix, Las Vegas and Miami, will be hit hardest. Even some places that have rebounded or held up relatively well – including New York, Los Angeles and Washington, D.C. – will suffer, as well.
That’s the conclusion of economists, who have been reducing their estimates for home prices as the outlook for the economic recovery has darkened. The number of homes for sale or headed for foreclosure is so high that they think prices will be even lower by next July.
Because housing is such an important engine of the economy, lower prices WILL dim the recovery. When home values fall and people have less equity, they tend to cut back on spending. And as prices decline, potential homebuyers stay on the sidelines, slowing sales even more.
More than 600,000 new homes were sold annually from 1983 through 2007. After the housing bubble popped, sales plunged to 375,000 last year.
Earlier this year, analysts said they thought home prices had finally reached their low point and were ready to start rising slowly in most areas of the country. Now, they think the bottom could be nearly a year away, and many believe that prices will sink 10 percent or more in the Phoenix, Miami and Las Vegas areas over the next year, according to Moody’s Analytics. Those areas have already been scorched by 50 percent or higher declines in home values.
Moody’s predicts that other areas – New York, Los Angeles, San Diego, San Francisco, Denver, Detroit, Cleveland, Minneapolis, Tampa and Washington, D.C. – will see declines of 2 to 8 percent by next July.
Why further price drops for already hard-hit areas, as well as in healthier markets like New York and Los Angeles?
There already is a glut of homes left in each area by the real-estate bust, and more foreclosures are expected as Americans fall behind on mortgage payments. Foreclosures add to the supply of homes for sale, bringing down prices.
In Miami, nearly a quarter of mortgage borrowers have missed at least three months of mortgage payments or are already in foreclosure, according to Moody’s. That’s the highest level in the country.
On top of that, so-called short sales, which happen when lenders let homeowners sell their houses for less than what they owe on their mortgages, are rising. They can drive down the value of neighboring homes, too.
Contributing to the problem is an economy grappling with high unemployment, relatively flat pay and tightened credit, all working to limit the number of people buying homes.
It could be a decade before the average price nationally reaches the peak it hit four summers ago, said Celia Chen, chief housing economist at Moody’s. Even when they do resume rising, prices may not outpace inflation.
Nationally, about 7.1 million homeowners – more than 13 percent of households with a mortgage – have either missed at least one payment or are in foreclosure, according to data provider Lender Processing Services Inc.
PREPARING for the WORST
Fast evictions adding to pain of Phoenix home foreclosures
Homes that fall into foreclosure in Phoenix are sold at a public auction. The highest bidder becomes the new owner. The former owner then has to move out.
Departing owners have five days under Arizona law to vacate the property. But in the overheated foreclosure market that has come in the wake of the metropolitan Phoenix housing crash, some people are being told to get out the same day their house is sold at auction.
In some cases, people aren’t allowed back into their house to collect their belongings. In others, people leave the house for a few hours, and the new owner changes the locks.
Facing aggressive foreclosure buyers who want to resell homes quickly, struggling homeowners often don’t know their rights.
And some homeowners still in the process of seeking a loan modification with their lenders can be shocked to learn their home has been sold at a foreclosure auction when the new owner arrives to kick them out.
Phoenix-area foreclosures aren’t expected to drop significantly anytime soon. Last month, about 940 homes were bought at Valley foreclosure auctions, five times the number sold at auction a year ago. And one reason more homes are going to auction is because lenders are dropping prices so they don’t have to take homes back, evict homeowners and fix houses up to resell.
Since last August, the number of foreclosure homes purchased at auction by investors has been at record-high levels. More investors are aggressively bidding on the lowest-priced foreclosure homes, which means more pressure on departing homeowners to get out fast.
Many homeowners want to be out of the house before it’s sold at a foreclosure auction. But in the Phoenix-area, auction schedules are increasingly unpredictable because of mistakes and sudden postponements made by lenders grappling with large foreclosure backlogs.
The sale of a given home at a foreclosure auction can be postponed several times. Many homeowners now expect delays and are often not prepared when their home sells and the new owner wants them out quickly.
Fred Winston was working with his lender on a loan modification when the Chandler house he had owned for 18 years was sold at a foreclosure auction last November.
“I had given my lender all the financial documents and been told not to worry about losing my home when someone knocked at my door,” he said. “Some guy told me he owned my house and I had to get out that afternoon. I slammed the door in his face.”
Winston is retired and has cancer. Medical bills drained his finances, he fell behind on his mortgage payments and his home headed toward foreclosure. Winston said his lender told him a loan modification was pending and the foreclosure auction had been postponed. Winston owed $300,000. His home sold at auction for $103,000.
When the man appeared at the door and told him to get out, Winston demanded proof of the foreclosure sale and wouldn’t leave his house until he saw it. The new buyer returned with the paperwork later that day. Since it was a Friday, Winston was able to negotiate a few days to pack his belongings and move out.
“No one told me what my rights were,” he said, “and if I wouldn’t have stood up to those people, I think they would have moved me out that day.”
Real-estate agent Brett Barry had a neighbor who lost his north Phoenix home to foreclosure last fall. People from the group that purchased the home at the foreclosure auction showed up at the house right after the sale.
Barry said the couple in the house had a daughter and grandchildren living with them. They were kicked out and had to hire movers and find a hotel all in one day. The buyers, likely concerned the couple might damage something or take the home’s appliances, refused to let the pair back inside the home to get their belongings. So during the two days the movers took to pack up the house, the couple could only watch from the sidewalk while the buyers stood nearby.
Rick Lott of Chandler suffered three heart attacks in less than two years. He lost his job. Medical bills mounted. And he fell behind on mortgage payments. He landed a new, lower-paying job and has tried several times to work out a loan modification with his lender. But so far he hasn’t succeeded.
His home was scheduled to sell at a foreclosure auction in mid-February. Lott planned to go to the auction and ask whoever bought it for more time for his family to pack and move.
On the day the auction was scheduled, Lott left his two adult sons at his home to make sure no one tried to change the locks or move his family’s belongings before he returned.
“A real-estate agent told me my house was bound to sell at auction,” Lott said, “and I should be ready to be evicted the day it sold.”
Less than two hours before the scheduled auction, Lott found out his home wouldn’t go on the block that day. He told his sons they could leave.
But he stayed at home in case the postponement was a mistake, his home did sell and someone tried to kick him out. Lott is now hoping he won’t have to repeat the stressful scenario in April when the foreclosure auction on his home is now scheduled.
The foreclosure-auction process is regulated by Arizona law, but no state or county agency monitors the auctions or the initial eviction efforts by new owners.
“Few people understand the state’s foreclosure laws,” said Jay Butler, director of realty studies at Arizona State University. “A homeowner trying to figure out a loan modification and how to pay their utility bills or find another job isn’t going to have time to figure the laws before they get an eviction knock at their door.”
Arizona Revised Statutes 12-1171 through 12-1183 are the state’s laws for the foreclosure-eviction process.
Michelle Lind, general counsel for the Arizona Association of Realtors, explained how the state’s eviction laws work.
“The buyer of a foreclosure home has to give the home’s former owner notice to move out,” she said. “If after five days the former owner doesn’t move out, the new owner can file with the courts for a forcible eviction.”
A foreclosure home’s new owner can file for a forcible eviction in a local municipal court. If the court grants the eviction request, then the Maricopa County Sheriff’s Office sends a constable to the home to make the former owner leave. In 2009, the Sheriff’s Office was involved in 1,416 forcible evictions, compared with 280 in 2007.
The whole foreclosure auction process is overloaded. Foreclosure cancellations and revocations filed with the Maricopa County Recorder’s Office by lenders are at an all-time high. A cancellation is filed by a lender to stop a foreclosure against a borrower before the home is sold at auction. A revocation can be filed by a lender to repeal or nullify an illegal or invalid foreclosure sale.
If homeowners believe they are losing their home illegally, they can hire an attorney and fight the sale and the eviction.
Little wiggle room
Many new buyers taking over recently purchased foreclosure homes know they can’t legally evict the former owners for five days. And some new buyers don’t want angry people trashing a home, so they might offer more time to move out.
Anyone who is told to leave a home after a foreclosure auction should ask for proof of purchase. But beyond having a window of time to move, there is not much a homeowner can negotiate once the home is sold at a foreclosure auction. The goal is really about making the process less painful.
“Homeowners are scared, and they don’t understand the law. They are listening to bullies at their door telling them they have to be out now,” said real-estate attorney Diane Drain. “But if a homeowner can prepare and leave with some dignity, it will help them recover from a foreclosure faster.”
Homeowners may be able to get more than five days to leave.
Lenders have been offering homeowners facing foreclosure money for cooperation. The program, endorsed by the federal government’s housing plan, is known as cash for keys. Homeowners are typically offered $1,000 or more if they don’t strip or vandalize a home after losing it to foreclosure.
There are also instances of new buyers offering former owners cash to move out quickly and leave behind appliances and other fixtures.
Some new buyers may rent the house to the former owners to give them more time to find another place.
Arizona legislation was recently introduced to allow lower-income homeowners to stay in the house after foreclosure and rent it from the new owner.
John Smith, president of the Mesa, Arizona-based non-profit Housing Our Communities, which helps homeowners facing foreclosure. Smith said, “If people have time to find a decent place to move and can negotiate some help from whoever bought their home, it’s going to make the experience better for everyone involved.”
Your states laws and statutes may differ, but if you are nearing that point of foreclosure, check with your state and know your rights!
Mar. 7, 2010 – The Arizona Republic
July, 2010 has been a H O T month, and there may no cooling in site!
Read up on history! Stock markets collapse on Friday. Bank seizures, closures and holidays take place after business hours on Friday. Do currencies or governments also collapse on Friday? Well its almost Friday. Will the end come on this Friday or will the inevitable collapse hold off for awhile?
I invite you to visit Flying Eagle Gold.com and its sister site, GoldenIRA.net for further information regarding the ways to Protect Your Wealth or, call me, Jeffrey Bennett, at 623-327-1778 for a private consultation. Thats 623-327-1778.
Join us again for another installment of Perspectives on America, Short Takes on Wealth.
Until then, I am Jeffrey Bennett.