foreclosures

Signs of Bottoming In The San Fernando Valley?

DataQuick has reported that Southland home sales are up overall, and the same trend can be seen in the MLS data from the Northwest San Fernando Valley. Indeed sold prices have actually increased by 1% from a year ago. Also, since the gap between the “for sale” price and the “sold” price is now within 10%, which is considered to be a good sign for increasing sales, as the sellers’ expectations have gotten within striking distance of the buyer’s. This chart also appears to reflect some influence from the federal first time homebuyer tax credit and the pressure to close before it expired (although it has now been extended in a slightly different form).

Also check out the lower chart for a dramatic view of the shrinking inventory. This reflects the buyers’ frenzy that snapped up many of the better priced properties during the middle of the year (most of which were distressed.), For whatever reason, much of this inventory has not been replaced with new inventory. The moratorium on foreclosures may have had some impact on this number, as had the “shadow inventory” — properties that the banks have not foreclosed upon, for reasons of their own. Many are expecting more of these properties to be put on the market over the coming year.

foreclosures

Obama Administration Moves to Incentivize and Standardize Short Sales

Short sales are great, in theory. They can be a win-win-win situation – the seller gets rid of an unaffordable house; the buyer gets a great deal, and the bank avoids the costs and delay of another foreclosure and possible eviction. But, up until now, the short sales process has been somewhat of a mess. The lack of transparency and what often appear to be arbitrary bank decisions has turned the process into a deal killer. When it takes more than three months to even hear back on an offer, all but the most committed buyers have moved on down the road. Indeed, in many markets, a three-month-old offer is no longer close to the original market price, as a result of depreciation.

Fortunately, as part of a recent amendment to the Making Home Affordable Program, the Obama administration has instituted a new “Foreclosures Alternatives Program” designed to streamline and standardize the process by which banks agree to short sales and deeds-in-lieu of foreclosure. (A deed-in-lieu is an under-utilized arrangement in which the owner simply conveys title back to the bank in order to avoid a foreclosure.) Not only does the FAP offer some (admittedly rather minor) incentives to banks to permit short sales and deeds-in-lieu, but, according to NPR’s Morning Edition on June 2, 2009, the Obama administration intends to create “standards around the application and approval process” and publicize those standards within a month.

If it pans out, this will be great news for buyers, would-be short sellers, and the market as a whole (to say nothing of frustrated real estate agents!) It would be great if we could simply all agree to live by a set of fixed rules and reduce the uncertainty and transaction costs which have bogged down short sales and lead to unprecedented numbers of foreclosures. (Did you know that each foreclosure has been estimated to reduce the value of every property within an eighth of a mile by .9 percent? This usually equates to a couple of hundred thousand dollars in lost equity for the neighborhood. That isn’t good for anyone, least of all for the banks’ bloated REO inventory.)