House Flipping Makes a Comeback

Four years after the collapse of the U.S. housing bubble, flipping homes is back in fashion.

With declining values and many of the foreclosed homes in various states of disrepair, investors are coming back into the market to take advantage of a market where cash is king.

According to the article in the Wall Street Journel, In the states where home prices have fallen the most, many local real-estate markets are dominated by foreclosed property, dragging down the value of neighboring homes. Barclays Capital estimates that banks and mortgage investors have 639,000 foreclosed homes for sale across the U.S., largely concentrated in Florida, California, Arizona and Nevada. That’s equivalent to more than 10% of expected U.S. home sales this year.

Sean O’Toole, chief executive officer of ForeclosureRadar.com, estimates that in November about 21% of homes sold in trustee sales in California went to investors rather than to a foreclosing lender, up from 6% a year earlier. The trend is similar in some other areas with high foreclosure rates, including Phoenix and Miami.

The advantage of such an outcome for the bank is that it gets money for the property right away, even if it isn’t enough to cover the loan balance due. The bank doesn’t need to make repairs to the home, cover the taxes and insurance, or pay real-estate-agent commissions.

The risk for banks is that if they set the minimum bid too low, the home might end up selling for much less than they could reap if they took ownership of it and sold it themselves. But with some 7.5 million U.S. households behind on their mortgage payments or in foreclosure, many lenders are overwhelmed. They’re negotiating with distressed borrowers and figuring out how to sell the growing supply of foreclosed homes.

There are several neighborhoods in Oakland that have been hit hard with the number of foreclosures, and investors are definitely taking notice. About a year ago is was unusual to see homes listed by the investor that they purchased at auction, but these listings are becoming more common.

One road block that I have seen in this process for the investors is many lenders will not borrow to buyers of properties that have transferred ownership in less than 90 days. The only way the investor really has around this issue is to show that they have made improvements to the property and warrent the resale to a new buyer.

The cat is out of the bag so to speak and as long as rates are low and activity especially with the first time home buyers remains brisk, I suspect we will have more listings of properties that are investor owned on the market in 2010.

There is still time to get that Holiday Tree!

There is still plenty of time to get out and get your Holiday Tree if you have not yet! Brent’s Trees is open from 9 am to 9 pm for the next two weeks and is open on Christmas Eve as well.

Located next to Splash Pond Park under the 580 underpass, and situated where the Lakeshore Farmers Market is every Saturday, Brent’s Trees is a convenient location for your holiday greenery needs.

“Tis the Season!

FHA to toughen rules for borrowers

<img title=”Lisa Cartolano2″ src=”http://crockerhighlands-oakland.ca.housingstorm.com/files/2009/10/Lisa-Cartolano2.jpg” alt=”Lisa Cartolano2″ width=”140″ height=”140″ />The Federal Housing Administration (FHA) is proposing raising minimum credit scores for borrowers who receive FHA-backed mortgages, increasing down payment requirements, and limiting the amount of money sellers can provide toward closing costs. The proposed changes are part of an effort to shore up the agency’s finances, which have been hit with rising defaults to its mortgage insurance program.

Historically, the FHA has played a critical role in propping up the housing market by insuring lenders against default after the mortgage market failed. Currently, the agency guarantees approximately 30 percent of all home loans and 20 percent of refinancings. In the past, the FHA has resisted raising down payments or insurance premiums, fearing it would be shutting out qualified borrowers and stunting the housing market’s recovery.

The FHA is hoping that the proposed changes, including requiring that borrowers bring more cash to the closing table, will ensure that borrowers are less likely to default on their loans. Officials at FHA have yet to determine how much cash will be required.

Up-front cash can include down payments as well as other payments. Currently, FHA borrowers can put down as little as 3.5 percent. One lawmaker has introduced legislation that would require FHA borrowers to put down a minimum of 5 percent.

The agency also currently allows sellers to provide up to 6 percent of the home’s value toward closing costs or down payments. Secretary of Housing and Urban Development (HUD) Shaun Donovan has said he wants the maximum permissible level to be lowered to 3 percent, in line with industry norms.

The FHA has decided “for the time being” to raise its minimum credit score requirements for new borrowers. The new requirements have yet to be determined. Presently, borrowers with credit scores as low as 500 may qualify for an FHA loan.

Is it really a bad idea to introduce these stricter guidelines for lending? … in my opinion not necessarily. A 5% down payment is still a nominal amount when you compare to the jumbo market where borrowers need to have 20-30% down. With home prices significantly lower in many of the San Francisco Bay Area locations, 5% is still a number that many could come up with. Also ensure that the borrowers have sound credit is also an indication that that borrower will be less likely to default. Life still happens and even with those with stellar credit and 20% down can find themselves facing diffucult financial situations. This is by no means a panacea, but it does seem reasonable.

To read the full story, please click here:

http://www.washingtonpost.com/wp-dyn/content/article/2009/12/02/AR2009120200025.html

Oakland Holiday Parade Saturday December 5th @ 2 PM

The 10th annual Comcast America’s Childrens’s Holiday Parade will be on Saturday December 5th  starting at 2PM. Curious George. The Raggs. Clifford. Berenstain Bears. Bob from Sesame Street and Santa will all be there to delight children of all ages! The parade starts right near the 12th Street BART station and just west of Lake Merritt and the Crocker Highlands/Lakeshore neighborhood. Click Here for a link to a Google Map of the starting location.   Get out and enjoy one of the premier parades in the country!

One in four borrowers is underwater

A recent article in the Wall Street Journal reports that despite recent indicators that the housing market is improving, a new report shows that one in four mortgage borrowers are underwater, meaning they owe more on their mortgage than their home currently is worth. According to First American CoreLogic, nearly 10.7 million households had negative equity in their homes in the third quarter, accounting for about 23 percent of all U.S. homeowners.

Most homeowners, however, still have equity, and nearly 24 million owner-occupied homes do not have a mortgage, according to the U.S. Census Bureau. A study by credit-scoring company Experian shows that approximately 588,000 borrowers strategically defaulted on their mortgages last year, even though they could afford to pay—more than double the number in 2007.

Homeowners with negative equity are more likely to strategically default if they live in a state where the bank cannot pursue their assets in court, according to a study by the Federal Reserve Bank of Richmond. California is an example of a state with anti-deficiency laws protecting homeowners from personal liability under certain circumstances.

“Borrowers who are less than 20 percent underwater are likely to maintain their mortgage if their loan is modified and the payments reduced,” said an official with Citigroup’s mortgage unit. “Beyond 120 percent, the most effective modification is a complete loan restructuring, including a principal reduction.” Loan modifications will be key in providing incentive for many homeowners to stick out this tough market.

Many of the lower price point neighborhoods in Oakland were heavily hit with foreclosures, particularly in the later of 2007 and into 2008. Many of the higher priced neighborhoods were not heavily affected by the influx of foreclosures, but there are some signs that the market in theses neighborhoods are changing as well. For example in the Crocker Highland and Lakeshore area of Oakland the average price per square foot in October of 2008 was $407. In October of 2009 the average was $394. The average price per square foot reached the lowest at $240 in January of 2009.

As stated above most homeowners do have equity in their homes. But the phycology of the real estate market is often affected by what the focus is on. How the banking industry responds to homeowners who are finding it hard to find a reason to stay in their homes because their mortgage is $200,000 over the value of the home, will in my opinion, have an impact on the real estate market in 2010.

Crocker Highlands Boy Scout Pack 295 Helps Alameda Food Bank

Boy Scout Helping to Collect Cans for the Alameda Food Bank

The Crocker Highlands Boy Scout Pack 295 helped to canvess the Crocker Highlands Neighborhood for food donations for the Alameda Food Bank to help provided those in need with food over the holiday season. Thanks to the help and hard work of the Troop 295 boys and their parents , the troop was able to contribute over 2500 can (items) to the Alameda Food Bank!!!

The weather and the economy made it more challenging for the Scout effort, but Pack 295 came through and thanks to the hard work and generosity, many families in the Bay Area will be having a happier Holiday season.

Great job Pack 295 and thank you to the generous donations from the neighbors in Crocker Highlands!

A very Happy Thanksgiving

Mortgage Rates Remain Below 5%

The Sacromento Bee Reports rates on 30-year mortgages stayed below 5 percent this week but remained above the record set earlier this year, Freddie Mac said Thursday. The average rate for a 30-year fixed mortgage fell to 4.83 percent, down from 4.91 percent last week, the mortgage company said. Last year at this time, 30-year mortgages averaged 6.04 percent. The Federal Reserve has pumped $1.25 trillion into mortgage-backed securities to try to lower rates on mortgages and loosen credit. Rates on 30-year mortgages traditionally track yields on long-term government debt. It will be interesting to see if the mortgage rates hold and how it will affect the real estate market for 2010.

First Time Home Buyers Seminar at Bench and Bar in Downtown Oakland

A Mixed Market For CA Real Estate in 2010

CAR President Jame Liptak recently reported that California’s housing market continued its strong sales rebound this year, resulting from the continued pace of distressed properties coming to market. This follows two years of double-digit sales declines in 2006 and 2007. Looking ahead, we expect sales to moderate to a more sustainable pace.”

“After experiencing its sharpest decline in history, we expect the median price to rise modestly next year,” Liptak added. “2010 will mark the beginning of the ‘new normal’ for California’s housing market. This ‘new normal’ likely will feature a steady stream of sales driven by distressed properties in the low end of the market, coupled with moderate home-price appreciation.”
 
“Housing in California has become a tale of two markets,” Liptak said. “The low end continues to attract first-time buyers and investors, with a resulting shortage in the number of homes for sale. Sellers at the high end, however, continue to be challenged by the ability of home buyers to secure financing as well as their concerns about where prices are headed. While demand from first-time buyers for low-end properties will continue throughout next year, sales could be impacted if discretionary sellers do not return to the market by the second half of 2010.

“With distressed properties accounting for nearly one-third of the sales in 2010, inventory will be relatively lean, under six months during the off-season months, and a roughly four-month supply during the peak season,” said C.A.R. and Vice President Leslie Appleton-Young. “We expect the median price to decrease slightly through the remainder of 2009 and into next year, then rise before leveling off next summer. For the year as a whole, home prices are forecast to reach $280,000.”

“Although it appears at this time that lenders are closely monitoring the flow of distressed properties onto the market, there could be an exertion of downward pressure on home prices should a heavier than expected wave of foreclosures come to market next year,” she said.

“The wild cards for 2010 include foreclosures, loan resets, the labor market, and the California budget crisis, as well as the actions of the federal government,” Appleton-Young said.

Click here to read the full article

Median Home Price In CA 1970-2009

Median Home Prices have fallen to levels seen in the early 2000’s. Statistically over time, real estate in CA has appreciated in value and considering real estate as a long term investment, in this current market, is the best bet for most home buyers.