Smart money is on a real estate recovery as big government continues its support of the national real estate market during a crucial election year, while increasing demand from real estate investors amidst shrinking inventory creates competition in our local Carlsbad market.
The United States government announced in February a $25 billion settlement with five of the nation's largest banks for their involvement in improper foreclosure practices, origination and servicing of home loans. The settlement intends to provide relief to distressed borrowers as well as the state and federal governments. As of February, the complex agreement includes cash reimbursements, modification of existing loans and even principal reductions in select cases. The challenge facing the 49 attorneys generals (Oklahoma elected not to join the settlement) and the banks over the next 6 to 9 months is deciding who is eligible for the support.
The settlement, which is expected to take up to three years to complete, is receiving its share of criticism. For example, David Skeel, a law professor at the University of Pennsylvania, wrote an opinion column in the Wall Street Journal titled "Mortgage Settlement or Mortgage Shakedown?"
The ultimate result will be an infusion of cash into the economy and further restriction of foreclosures. The settlement can be viewed as part of a series of stimulus packages that are aimed at reversing a down real estate market and boosting a recovering economy.
In November of last year, the Obama administration reinstated the higher loan limits for FHA to the benefit of higher income states like California. Reinstating the higher loan limits allows home buyers to borrow more money (up to $697,500), while putting less money down (3 percent) thus creating more demand for higher price homes. Carlsbad and other higher cost areas benefit. And the historically, record low mortgage rates of sub-4 percent is a result of government intervention. And even though the rates have only been available for less than a year, the real estate market has seen a tremendous surge in investment buying, as the low rates create a leverage capable of achieving above average returns.
In a recent report by ForeclosureRadar, California saw the fourth largest month on record in January 2012 for investment real estate purchases. A reported 3,964 properties and $766.2 million dollars worth of property was sold to those looking for investment returns in residential real estate. The same report noted that foreclosure starts, or the precursor to full foreclosure of a home, is significantly lower than one year ago.
"January's numbers should put to rest any notion that we will see a wave of foreclosures in 2012, at least in the western states that we cover," stated Sean O'Toole, founder and CEO of ForeclosureRadar. "Foreclosure starts remain near record low levels, significantly lower than a year ago, when many banks still had self-imposed moratoriums in place due to the robo-signing scandal. Add to that a foreclosure time-frame of more than 8 months, and there is little chance of a wave this year even if all the banks started the foreclosure process en masse tomorrow."
With the imminent threat of a flood of new suppply of foreclosure homes eliminated and an increasing fever of demand from investment buyers, the real estate market is looking to perform increasingly well in 2012.
Recently calculated statistics from the California Association of Realtors has shown housing affordability in San Diego County rose to record high levels in the fourth Quarter of 2011. The average San Diego working person or family earning $73,220 could afford the median price home of $357,960 that had an average payment of $1,830 a month. And not just in San Diego county. Affordability resonates throughout California as the state saw a record high affordability of 55 percent in Q4 of 2011, based on 20% down payment and a 30 year fixed mortgage.
Tax-Free Short Sale Ends In 2012
This remains the last year of the "tax-free" short-sale. With the Mortgage Forgiveness Debt Relief Act set to expire in 2012, homeowners who short sell their properties or modify their mortgage after this year will find a tax bill from the federal government on the amount forgiven.
Being that this is an election year, the current administration may choose to extend the act to curry favor with the masses. And with the recent $25 billion dollar settlement, homeowners who owe more on their property than its worth, paying interest-only on an adjustable rate mortgage or recently experiencing a financial hardship, should investigate their options of selling their home via a short-sale.
When Can I Buy Again After a Short Sale?
As of June 2010, Fannie Mae modified the waiting period after certain foreclosure events. Those homeowners who have completed a successful short sale can repurchase in as little as two years with a 20% down payment and sufficient credit scores. Homeowners should check their credit via a service such as Equifax.com to confirm their current score and, more importantly, that their former home loan shows "debt settled" with the correct month. There have been reported instances where the successful short-sale was not recorded correctly on the credit report thus keeping the buyer from being able to secure financing on a new home., By Tyson Lund
The United States government announced in February a $25 billion settlement with five of the nation's largest banks for their involvement in improper foreclosure practices, origination and servicing of home loans. The settlement intends to provide relief to distressed borrowers as well as the state and federal governments. As of February, the complex agreement includes cash reimbursements, modification of existing loans and even principal reductions in select cases. The challenge facing the 49 attorneys generals (Oklahoma elected not to join the settlement) and the banks over the next 6 to 9 months is deciding who is eligible for the support.
The settlement, which is expected to take up to three years to complete, is receiving its share of criticism. For example, David Skeel, a law professor at the University of Pennsylvania, wrote an opinion column in the Wall Street Journal titled "Mortgage Settlement or Mortgage Shakedown?"
The ultimate result will be an infusion of cash into the economy and further restriction of foreclosures. The settlement can be viewed as part of a series of stimulus packages that are aimed at reversing a down real estate market and boosting a recovering economy.
In November of last year, the Obama administration reinstated the higher loan limits for FHA to the benefit of higher income states like California. Reinstating the higher loan limits allows home buyers to borrow more money (up to $697,500), while putting less money down (3 percent) thus creating more demand for higher price homes. Carlsbad and other higher cost areas benefit. And the historically, record low mortgage rates of sub-4 percent is a result of government intervention. And even though the rates have only been available for less than a year, the real estate market has seen a tremendous surge in investment buying, as the low rates create a leverage capable of achieving above average returns.
In a recent report by ForeclosureRadar, California saw the fourth largest month on record in January 2012 for investment real estate purchases. A reported 3,964 properties and $766.2 million dollars worth of property was sold to those looking for investment returns in residential real estate. The same report noted that foreclosure starts, or the precursor to full foreclosure of a home, is significantly lower than one year ago.
"January's numbers should put to rest any notion that we will see a wave of foreclosures in 2012, at least in the western states that we cover," stated Sean O'Toole, founder and CEO of ForeclosureRadar. "Foreclosure starts remain near record low levels, significantly lower than a year ago, when many banks still had self-imposed moratoriums in place due to the robo-signing scandal. Add to that a foreclosure time-frame of more than 8 months, and there is little chance of a wave this year even if all the banks started the foreclosure process en masse tomorrow."
With the imminent threat of a flood of new suppply of foreclosure homes eliminated and an increasing fever of demand from investment buyers, the real estate market is looking to perform increasingly well in 2012.
Recently calculated statistics from the California Association of Realtors has shown housing affordability in San Diego County rose to record high levels in the fourth Quarter of 2011. The average San Diego working person or family earning $73,220 could afford the median price home of $357,960 that had an average payment of $1,830 a month. And not just in San Diego county. Affordability resonates throughout California as the state saw a record high affordability of 55 percent in Q4 of 2011, based on 20% down payment and a 30 year fixed mortgage.
Tax-Free Short Sale Ends In 2012
This remains the last year of the "tax-free" short-sale. With the Mortgage Forgiveness Debt Relief Act set to expire in 2012, homeowners who short sell their properties or modify their mortgage after this year will find a tax bill from the federal government on the amount forgiven.
Being that this is an election year, the current administration may choose to extend the act to curry favor with the masses. And with the recent $25 billion dollar settlement, homeowners who owe more on their property than its worth, paying interest-only on an adjustable rate mortgage or recently experiencing a financial hardship, should investigate their options of selling their home via a short-sale.
When Can I Buy Again After a Short Sale?
As of June 2010, Fannie Mae modified the waiting period after certain foreclosure events. Those homeowners who have completed a successful short sale can repurchase in as little as two years with a 20% down payment and sufficient credit scores. Homeowners should check their credit via a service such as Equifax.com to confirm their current score and, more importantly, that their former home loan shows "debt settled" with the correct month. There have been reported instances where the successful short-sale was not recorded correctly on the credit report thus keeping the buyer from being able to secure financing on a new home., By Tyson Lund