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A place where you can find out the latest real estate trends, comment and ask questions based on your experiences with the foreclosures market. In addition, we want this blog to develop into a community where you can connect and share ideas with others interested in the foreclosures market.
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June 2006 - Posts

Rise in Home Values Keeps Foreclosures in Check

Economics 301 – Home Price Appreciation and Household Net Wealth

According to the Business & Economic Review June 2006 released last week by the A. Gary Anderson Center for Economic Research at Chapman University, home price appreciation on the national level has been virtually unstoppable since 1980. Reaching a double-digit peak above 14 percent before dropping back to 9 percent over the past six months, the rate of price appreciation is still more than double the norm (4 percent) for the nation over time.

Relying on their economic model, forecasters at Chapman are calling a further retreat in the national rate, however, back to a 5.5 percent rate of appreciation by the end of 2007, still above the national norm, and still a positive sign that the economy is holding its own.

While this is good news for anyone who owns a home, there is a potential downside to this forecast for anyone interested in foreclosure property. And it is one of the reasons that foreclosure activity is expected to remain at a slow upward rate of increase, as evidenced by the latest national numbers reported by RealtyTrac for May 2006.

The run-up in home prices has resulted in a windfall to homeowners - their “household net wealth,” as the forecasters at Chapman call it, has grown by 36 percent in just three years – from $39 trillion at the beginning of 2003 to $53 trillion at the end of 2005. So anyone who has owned a home for more than two years may have a pool of money that can be used to make emergency mortgage payments – thus keeping their home out of the foreclosure pipeline, says Esmael Adibi, executive director of the Anderson Center. If Adibi is right, the pool of potential properties entering into the foreclosure pipeline could shrink. So for at least for the foreseeable future the stock of available foreclosures may remain relatively stable.

This means that invstors or home buyers looking for foreclosure properties will have to remain vigilant, and pursue opportunities quickly and proactively. They may also want to consider expanding their search area beyond current parameters to increase the number of potential properties.

If you haven't already signed up to receive RealtyTrac's FREE daily property alerts, or if you haven't updated your alerts for awhile, now might be a good time to do so.

 

Next: The big “IF” in the equation

Published Wed, June 28 2006 8:00 AM by joelc
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Economic Environment Not Ripe for Heavy Foreclosure Levels

Economics 201 – Inflation

In announcing his findings on the condition of the nation’s economy Wednesday, Chapman University President James L. Doti proclaimed that, in his opinion, the nation is not headed toward either a recession or a catastrophic volume of job losses – both of which were factors in the last great boom in foreclosure activity back in the early 1990s.

This time around, Doti believes the nation is not on the verge of economic turmoil, and the number of jobs being lost is negligible considering that the Chapman forecast calls for the number of jobs created in this country to continue growing, albeit at a slower rate than in the past. One thing that does concern him, however, as well as Fed Chairman Ben Bernanke, is a higher rate of inflation.

Although global market inflationary forces like rising oil prices, a 5 percent decline in the value of the U.S. dollar and an $800 billion U.S. trade deficit may not be concerns for real estate investors, first-time homebuyers and real estate agents eager to get into the foreclosure business, they're of major concern to the Federal Reserve, and putting big-time pressure on interest rates.

The hikes we’re continuing to see in the Federal Funds Rate should be a point of focus for those interested in dealing in foreclosures. The cost of borrowing money can determine whether or not the purchase of a foreclosure property pencils out in favor of a would-be buyer. And higher interest rates also tend to lead to higher numbers of foreclosure properties in the market.

Next time: housing appreciation and the effect of recently acquired household net wealth.

Published Tue, June 27 2006 8:00 AM by joelc
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Foreclosures Inch Higher in May
RealtyTrac just released state and national foreclosure statistics for the month of May. The data show nationwide foreclosures inching up 2 percent from the previous month and 28 percent from May 2005.
“Our May numbers echo the recent report by the Mortgage Bankers Association, which noted that delinquency and default activities were lower in the first quarter of 2006,” commented James J. Saccacio, chief executive officer of RealtyTrac. “While our report confirms that the number of properties entering foreclosure is still significantly higher than it was during the same period of 2005, we’ve now seen two months of decreasing foreclosure rates followed by May numbers that were essentially flat. That three-month trend indicates foreclosure activity has stabilized in most housing markets across the country after spiking sharply at the beginning of this year.”
View the full report and press release.


Published Mon, June 26 2006 9:42 AM by darenb
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Economic Indicators Support Slow Gain in Foreclosures
Economics 101 – Interest Rates

Now that we are hovering at the mid-year point, economists are starting to review their projections for this year. And based on the latest available national economic data, indications for the remainder of 2006 through 2007 are consistent with RealtyTrac’s May 2006 U.S. Foreclosure Market Report, which shows a 2 percent increase in foreclosure activity from the previous month. (See full report here.)

The forecasters at the A. Gary Anderson Center for Economic Research at Chapman University have a stellar track record when it comes to projecting the direction of economic activity. The results of their latest analysis, released Wednesday, indicate that a number of factors are at work supporting the notion of a continued increase in the number of properties entering the foreclosure pipeline, although not skyrocketing to levels seen back in the early 1990s.

The key factor of concern to real estate investors, first-time homebuyers and agents looking to get into the foreclosure business is interest rates. Economist James L. Doti, president of Chapman University, expects Federal Reserve Chairman Ben Bernanke to raise the Federal Funds Rate three more times – 25 basis points each time – ratcheting the short-term rate up to 5.75 percent by year’s end before taking a wait-and-see attitude towards future adjustments.

These latest adjustments follow closely on the heels of 16 similar adjustments the Fed has made since June 2004. With these latest adjustments, the Chapman forecast calls for 30-year fixed-rate mortgages to peak out at 7.1 percent before dropping back slightly in 2007.

According to Dr. Esmael Adibi, executive director of the Anderson Center, the people who are going to be hurt the most by these adjustments, and those taking the greatest risk of going into foreclosure, are homeowners who purchased within the past couple of years, have insufficient equity built up, and financed their purchase with either a adjustable-rate or negatively amortizing mortgage, or some other form of creative financing.

Let us know if you think this report is on target. More to come on the Chapman report.

Published Fri, June 23 2006 4:04 PM by joelc
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How to finance your foreclosure purchase? How about your IRA?

If you're looking for creative ways to finance an investment in a foreclosure property, you may not need to look much further than your retirement account.

A good article ran today in Lew Sichelman's Realty Q & A column in MarketWatch. Titled "Buying Investment Property Through Your IRA," the article offers a wealth of information on how to use funds already in your IRA to invest in different types of properties. Among other things, Lew covers some of the tax strategies, limitations and regulations governing these types of purchases.

While the article doesn't discuss foreclosure properties directly, much of the information should apply to any investment property you don't plan to use as a personal residence or vacation home.

As someone who watched his 401(k) shrink to a 200.5(k) during the 2000 dot-bomb induced stock market implosion, the notion of investing retirement funds in real estate assets is something I'm very interested in exploring. If any of you have tried this, I'd love to hear about some of the experiences you've had in the process.

 

 

Published Thu, June 22 2006 5:38 PM by rsharga
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Screech from "Saved by the Bell" in Foreclosure
The Associated Press is reporting that actor Dustin Diamond from television's "Saved by the Bell" is selling T-shirts to help bail his home out of foreclosure.
"Diamond, 29, is trying to sell nearly 30,000 shirts – at $15 or $20 (autographed) each – to supplement the income he makes as a standup comic so he doesn’t have to move from his Port Washington home, about 25 miles north of Milwaukee."
This is different from your typical foreclosure because it doesn't involve a lender foreclosing on a defaulted loan; it involves a landowner foreclosing on a land contract, according to the Milwaukee Journal-Sentinel. And Diamond has to come up with around $250,000 to avoid the foreclosure.

Any advice from you investors out there if the T-shirt sales don't work out?
Published Thu, June 22 2006 3:18 PM by darenb
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Foreclosure Lessons From Long Beach - Part III
Here's the third and final lesson gleaned from a conversation with a customer in Long Beach, Calif., who needed help following up on properties she found on RealtyTrac. See Lesson 1 and Lesson 2.

Lesson 3: Listen carefully and speak concisely when calling the trustee
With the customer listening in, I called one of the trustees listed for a pre-foreclosure property. The customer had previously called the trustee and hung up after hearing the beginning of a generic message, but we listened to the entire message and found out we needed to press "0" to reach an operator. I pressed "0" and we were put through quite quickly to a person who was able to tell us the property had been reinstated by the owner.

When speaking to the trustee, it's important to be brief and to the point. Remember, they can't divulge any details about the foreclosure other than the current status and possibly the estimated opening bid. In this example I just said that I wanted to know about the status of a property in foreclosure and the trustee's rep asked for the property address and then the owner's name, both of which were listed on the property details page on RealtyTrac. Sometimes the trustee may ask for the trustee sale number or reference number, also listed on the property details page under Contact Information.

I hope these practical tips prove useful for those of you out there on the streets buying and investing. Your input is always welcome, either via comment on this blog or via e-mail at editor@foreclosurepulse.com.
Published Thu, June 15 2006 11:43 AM by darenb
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Foreclosure Lessons from Long Beach: Part II
As promised, here is another lesson about successfully searching and pursuing foreclosures based on a recent conversation with a customer who was searching for properties in Long Beach, Calif.

Lesson 2: Call the trustee or lender to get most recent property status
After you find a property that interests you, first call the trustee (for pre-foreclosures and auctions) or the lender (for bank-owned properties) to make sure the property is still in foreclosure before you sink any more of your valuable time into pursuing the property.

Confirming the status is necessary because although RealtyTrac checks if a property is SOLD, there may be a delay before we receive that information and the owner in default could also reinstate the property, meaning it is no longer in foreclosure even though it did not sell. Also, even if RealtyTrac has an auction date listed, it's not uncommon for that auction date to be postponed, something you could only find out from the trustee.

Note: sometimes you have to be persistent to get through to someone who can help you. For example, one of the pre-foreclosure properties that we looked up only had a lender name and phone number, not a trustee name and phone number. We ended up calling the lender number and receiving an update on the property status from a representative there.

More lessons to come ...
Published Mon, June 12 2006 10:08 AM by darenb
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Foreclosure Search: Lessons from Long Beach
A few days ago I spoke to a new RealtyTrac customer who was having trouble tracking down foreclosure property in Long Beach, Calif. She said something like, "Is the information on your site accurate? I haven't had any success in pursuing properties."

So we looked up some of the properties she was interested in, called one of the property trustees and walked away with information that I think will be helpful both for her and for RealtyTrac. I also think a lot of foreclosure buyers and investors using RealtyTrac could benefit from what we learned, so below is the first of several "Lessons from Long Beach."

Lesson 1: Take an area's foreclosure activity into account
When you run a search, look at the number of properties and entered dates to get a big-picture view of the foreclosure activity in the area you're searching. Not all areas have a lot of recent foreclosure activity, and that may mean you'll have to be more patient in your search (make sure to set up daily e-mail alerts) or broaden your search so that you have more properties to choose from.

For example, one search this customer ran was for bank-owned properties in a specific Long Beach zip code. That search yielded just 14 properties, two of which RealtyTrac had since marked as SOLD. The most recent active property was entered on Dec. 30, 2005.

Because of the sparse search results, I advised the customer that buying a bank-owned property in the zip code she was searching would require an extra measure of patience and persistence. But to remind her that it is possible, I also told her about a recent member success story that recounts how a customer successfully purchased a bank-owned property.

More to come ...
Published Thu, June 08 2006 1:41 PM by darenb
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Priced to Foreclose
A new report shows a strong correlation between slow home price appreciation and high foreclosure rates, although it's clear the correlation does not involve a direct cause-and-effect relationship.

The Office of Federal Housing Enterprise Oversight (thank goodness for acronyms) on Thursday released home price appreciation statistics for the first quarter of 2006, which show that U.S. homes are appreciating at the slowest quarterly rate since the first quarter of 2004.

The OFHEO report ranks the 50 states and the District of Columbia based on year-over-year home price appreciation. Many of the states near the bottom of that list -- namely Michigan, Ohio, Indiana, Colorado, Texas and Georgia -- also appeared among the top 10 on RealtyTrac's list of state foreclosure rates in the first quarter.

While these states show that sluggish home price appreciation and above-average foreclosure rates are certainly linked in many areas, other states broke that link. The most glaring example was Florida, which ranked second in home price appreciation but documented the 10th highest foreclosure rate. Other states with similar statistics included Arizona and Nevada.

There are certainly other forces at work in every housing market, influencing both home price appreciation and foreclosure rates. We'd like to hear what you think is the dominant factor impacting your local housing market. Leave a comment or e-mail us at editor@foreclosurepulse.com.
Published Fri, June 02 2006 10:52 AM by darenb
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