Texas Gal Real Estate

HOUSTON — (April 19, 2011) — In what reads like a carbon copy of the February housing report, local home sales fell slightly in March while the average price of those homes rose. The lower sales volume compares to sales activity in March 2010 that was driven, in part, by the federal government’s first-time home buyer tax credit incentive.

According to the latest monthly data compiled by the Houston Association of REALTORS® (HAR), March sales of single-family homes fell 4.4 percent versus one year earlier. As in February, the popular middle segments of the Houston housing market, consisting of homes priced between $80,000 and $250,000, experienced declining sales while the low and high ends saw an increase in number of sales. Compared to March of 2009, a year without unusual market factors such as Hurricane Ike in 2008 and the 2010 tax credit, single-family home sales were up 6.6 percent.

Luxury home sales boosted the average price of a single-family home for a third straight month. The average price rose 3.3 percent from March 2010 to $217,597, the highest level for a March in Houston. The March single-family home median price—the figure at which half of the homes sold for more and half sold for less—dipped 1.7 percent year-over-year to $150,900.

Foreclosure property sales reported in the Multiple Listing Service (MLS) increased 3.6 percent in March compared to one year earlier. Foreclosures comprised 23.5 percent of all property sales in March. The median price of March foreclosures fell 7.1 percent to $82,000 on a year-over-year basis.

March sales of all property types in Houston totaled 5,509, down 5.0 percent compared to March 2010. Total dollar volume for properties sold during the month declined 2.3 percent to $1.1 billion versus $1.2 billion one year earlier.

“The year-over-year March 2011-March 2010 analysis is a bit skewed in the sense that it continues to reflect a comparison to the period a year ago where the home buyer tax credit encouraged consumers to purchase a home prior to the April 30 deadline,” said Carlos P. Bujosa, HAR chairman and VP at Transwestern. “It is encouraging that properties continue to go under contract at the levels we saw last year, a time when the tax credit was a huge incentive.”

The month of March brought Houston’s overall housing market largely negative results when all listing categories are compared to March of 2010. Total property sales, total dollar volume and median price declined, while average price rose on a year-over-year basis.

Month-end pending sales for March totaled 4,190, down 1.2 percent from last year. That suggests the likelihood of lower demand when the April figures are tallied. The number of available properties, or active listings, at the end of March rose 4.2 percent from March 2010 to 51,091. The growth in available housing pushed the March inventory of single-family homes to 7.6 months compared to 6.7 months one year earlier. That means that it would take 7.6 months to sell all the single-family homes on the market based on sales activity over the past year. The figure still compares favorably to the national inventory of single-family homes of 8.6 months reported by the National Association of REALTORS® (NAR).

The computerized Multiple Listing Service of the Houston Association of REALTORS® includes residential properties and new homes listed by 26,000 REALTORS® throughout Harris, Fort Bend and Montgomery counties, as well as parts of Brazoria, Galveston, Waller and Wharton counties. Residential home sales statistics as well as listing information for more than 50,000 properties may be found on the Internet at http://www.har.com.

The information published and disseminated to the HAR Multiple Listing Services is communicated verbatim, without change by Multiple Listing Services, as filed by MLS participants.

The MLS does not verify the information provided and disclaims any responsibility for its accuracy. All data is preliminary and subject to change. Monthly sales figures reported since November 1998 includes a statistical estimation to account for late entries. Twelve-month totals may vary from actual end-of-year figures. (Single-family detached homes were broken out separately in monthly figures beginning February 1988.)

Founded in 1918, the Houston Association of REALTORS® (HAR) is a 26,000-member organization of real estate professionals engaged in every aspect of the industry, including residential and commercial sales and leasing, appraisal, property management and counseling. It is the largest individual dues-paying membership trade association in Houston as well as the second largest local association/board of REALTORS® in the United States.

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Are loan mods the solution….well, no.

Not if you consider the fact that its widely believed that up to 75% of all loan mods will re-default.

Agents who are speaking with potential short sale sellers, what is one of the top reasons sellers give for not listing their home?

“We want to try a loan modification”

Share this article with your howeowners. Let them know that statistically very few mortgage loan modifications actually work beyond the initial period.

What homeowners don’t understand is that they will often be required to forfeit many ‘rights’ they may have. For example, we have seen loan modifications that literally make it so if the homeowner misses (or is late) on ONE payment during the trail mod their home is rushed into foreclosure, don’t stop at GO. Additionally, its a rare mod indeed that actually cancels out the negative equity. In other words, the mod may lower the payment temporarily but, the negative equity is still there.

Another fun fact, most mortgage loan modification are only for 3-5 years with a balloon payment often times including ALL that they still owed including their late fees, missed payments….etc

And don’t forget, homeowners have to qualify for a loan mod. Its treated like a fully documented loan application. Many homeowners won’t qualify for the home that they are currently living in!

Loan Modifications are clearly not what people think. Understand what mods are and aren’t…counsel your homeowners so they know what they are signing themselves up for.

Its no wonder why, up to 70% of all loan mods fail…..

Source: SNL.com

Economists and analysts predict redefaults will severely plague loan modifications, including one projection that 70% of all modifications will fail.

In a recent report projecting the level of shadow inventory in the housing market, Standard & Poor’s analysts noted that they assumed a 70% redefault rate on loan modifications in the study.

Diane Westerback, S&P’s managing director of global surveillance analytics, told SNL that the previously reported 30% to 40% redefault rates typically only count borrowers after two or three months of payments. A year after the modification, Westerback expects redefaults to hit between 60% and 70%.

See Above comments for just a few of the reasons why loan mods fail…

“I’ve always taken the position that if a guy pays for a year, he’s really made it. If he makes a few payments, you don’t really know,” she said.

Fitch Ratings on June 16 issued similar projections, albeit only for subprime and Alt-A loans in RMBS. The rating agency projects modifications on those product types to redefault at a 65% to 75% range, while prime loans in RMBS are expected to redefault at a rate of 55% to 65%.

Fitch said the government’s Home Affordable Modification Program appears to be “falling far short” of its stated goals, with Managing Director Diane Pendley noting in a news release that changes to the program mean “final determination of the program’s ultimate effectiveness will continue to be delayed.”

Where does all of this go….what happens to all of these failed loan modification? Millions of those homes will become short sale listings.

Agents, are you finally ready to learn the new ways to list and sell short sales? Chances are you have learned the very basics of how to do short sales…maybe, you have even successfully closed a few short sales. Its obvious that helping homeowners avoid foreclosure by selling their home as a short sale is one of this markets greatest opportunities.

The most recent mortgage metrics performance report released by the Office of the Comptroller of the Currency and the Office of Thrift Supervision showed stronger performance as of the 2009 fourth quarter than Fitch and S&P expect. Redefaults three months after modification have fallen to 14.7% for modifications completed in the 2009 third quarter from 35.1% for 2008 third-quarter modifications.

The report posted two redefault rates for a year after modification: 60.7% for 2008 third-quarter modifications and 57.9% for 2008 fourth-quarter ones.

A spokesman for the Office of Thrift Supervision told SNL that a new mortgage metrics report will be released in the next week or two, with the agency shooting for a June 23 release date.

A pair of economists told SNL that they do not consider a 70% redefault rate on loan modifications outlandish.

James Hamilton, a professor of economics at the University of California, San Diego, told SNL that concerted efforts to keep unsustainable loans out of foreclosure will translate to high redefault rates over the near term.

“I think I would rather err on the side of using too big a number,” Hamilton said.

In fact, Hamilton might be more pessimistic than Westerback, whose expectation of an up to 70% redefault rate is based on historical trends. “To the extent that we were modifying loans that historically you would have just given up on, that would make you suspect that the ultimate failure rate on those modifications would be higher than the historical rate,” Hamilton said.

Dean Baker, co-director of the Center for Economic and Policy Research, is not any sunnier on the outlook for loan modifications. On the 70% redefault projection, Baker told SNL that “it certainly doesn’t strike me as an absurd number. It’s certainly a very high number, but it’s not obviously unreasonable.”

Rather than historical trends, Baker attributes his pessimism on loan modifications to a naggingly high unemployment rate and chronic negative equity exacerbated by a renewal in falling prices.

Even on permanent HAMP modifications, Baker said, “I think you’re still going to be at a high redefault rate. Again, it’s both the weakness of the economy and you have so many people who are going to be underwater on their mortgages. You have limited incentive to struggle and pay your mortgage if you’re underwater. And that’s the situation a lot of people are going to be in.”