Have you waited long enough?

Many people fell on hard times during the recent recession and some lost their homes to foreclosure or had to do short sales. Some may have even declared bankruptcy to get out from under their debt load. Many of these people have been living in apartments or rental properties for the last few years.  So, how long do these people have to wait before they can think about buying another home? The Waiting Period Matrix that my friend and mortgage partner, Steve Bloom, has put together will help answer that question. Click here to see Steve’s matrix.

Of course the question isn't just whether you have waited out the time that the banks want to see before they will consider you; but, also, what did you do during that time. Did you get your life and your finances back in order or did you just keep up your old ways and keep going further into debt? Hopefully you learned from the bad experience of that financial hardship and turned things around in your life. Many people did. Most of the people who were forced out of their homes actually had good jobs, but factors such as reduced overtime or maybe one of the two workers in the family being laid off for an extended period, combined with getting overextended on consumer credit, resulted in them losing their homes.

So where do you need to be credit-wise right now to get back into home ownership? You’ll probably need a 640 or better credit score, in addition to proof of steady employment and earnings. You’ll find it easier to get back in the game if you also managed to save enough for a 20% or better down payment. There are still programs that allow for as little as 3-5% down, but the credit-background scrutiny associated with those programs still might preclude you from using them. If you are a veteran and never used your VA benefits, you might also tap into that resource. The USDA Rural Development Program is still offering great programs for those who qualify on properties that are considered to be rural.

I'm not a mortgage expert; so, the best advice that I can give you is to contact a local mortgage person – I would recommend Steve Bloom (248-224-2321) of A and N Mortgage in this area - and have them take a look at your situation. Even if they tell you that you’re just not quite there yet, they can usually give you good advice on what you may need to do over the next year or so to be ready. You can read more about Steve on on Move to Milford Web site - he is the Featured Business of the Month this month

Once You've got things worked out with Steve and he tells you what you can afford, give me a call and I'll help you find that new home. It won't be easy, because the market is extremely tight on inventory right now, but there are still great houses out there. You just need to be ready to act quickly when you find the one that you want. Get your mortgage pre-approval ready. You've waited long enough, don't waste another day!

Distressed sales down in Michigan...so, now what?

RealtyTrac is a large database company in the real estate business. They track things like home sales in all 50 states and whether those sales were foreclosures or short sales or normal, non-distressed sales. Recently RealtyTrac reported that foreclosures are down significantly across the board; however, there are still areas of the country with fairly significant foreclosure rates. 

I am happy to report that Michigan did not make their top-10 list of states with lingering foreclosure problems. The top five were

• Florida: 1 in every 392 housing units received a foreclosure filing in November (down 23% from a year ago)
• Delaware: 1 in every 480 housing units (up 141% from a year ago)
• Maryland: 1 in every 618 housing units (up 42% from a year ago)
• South Carolina: 1 in every 660 housing units
• Illinois: 1 in every 700 housing units

Rounding out the top 10 are Ohio, Connecticut, Nevada, Iowa and Utah.

In the data that I collect and share every week the distressed homes sales became such a small part of overall sales that I stopped reporting it as a statistic. The data that my company - Real Estate One - collects and shares also shows a significant drop-off in the foreclosure and short sales rates. That’s good news.

Distressed sales, especially foreclosures, depressed the market and devalued entire neighborhoods. Many foreclosed homes were either stripped by disgruntled owners on their way out or vandalized by metal thieves. In the summer many had unkept yards and now they have driveways and porches that are snow covered and uninviting. I don’t know why some lenders haven’t learned yet that keeping up the foreclosed properties on their books will get them the maximum value for the asset.

Short sales have practically dried up in Michigan and I suspect elsewhere as lenders chose to just go ahead with foreclosure if they couldn't arrange a refinance package with the owners. Short sales were always a pain and usually took 4-6 months to complete. I, for one, am not sad to see them go.

So, right now; the hot topic of conversation in real estate in Michigan is not about distressed sales; it’s about lack of inventory and rapidly rising prices. Builders are throwing up new homes as fast as they can (maybe there’s a red flag in that statement somewhere) and resale homes in good condition and priced properly are selling in a matter of days or weeks, rather than months. That’s good if you’re a seller; but, not so good if you’re a buyer. Buyers need to be prepared to act quickly by making a good offer (sometimes above the asking price) on any house that they find and like.

I still get requests from would-be buyers to find them a great deal on a foreclosed or short sale house. I have to tell them “that boat already sailed.” You may still be able to find a home that needs some work and thus has a price to reflect its condition; but, finding that $300,000 jewel laying in the $100,000 weeds is a thing of the past. Get over it and move on. Let's look for that house that's priced at $160,000, but which could be worth $200,000 if you put some work into it.

Foreclosures hit all-time high

The sky is falling! It’s the Apocalypse! Oh, whoa is me! The foreclosure rate hit an all-time high in January of 2.04% of all mortgages the worst in the 36 years that foreclosure records have been kept. And there appears to be no end in sight. One reason it may take so long is that there seems to be no end in sight for falling home prices, even though yesterday I blogged that the end is near - different experts and different outlooks. Today the headline was about the worst evr foreclousre rate, which is a hard fact and not an opinion.

"Declining prices are clearly the driving factor behind foreclosures, but the reasons and magnitude of the declines differ from state to state," said Doug Duncan, the Mortgage Bankers Association's Chief Economist said in a recent prepared statement.

The foreclosure rates for prime and subprime adjustable rate mortgages both more than doubled compared with a year ago, from 0.41% for prime ARMs to 1.06% and from 2.70% for subprime ARMs to 5.29%.

But it was subprime ARMs that contributed most heavily to the nation's soaring foreclosure rates. Many of these loans come with low introductory rates that reset higher, often to unaffordable levels, in two or three years. Although they represent only 7% of all outstanding mortgage loans, they accounted for 42% of foreclosure starts during the quarter.

Delinquencies stood at 5.82% of outstanding mortgages, up from 5.59% during the three months ended September 30, 2007, according to the MBA. In the last quarter of 2006, the rate was 4.95%.

So is this it? Are pigs about to fly? Should we all grab our ankles and kiss whatever we can reach goodbye? Somehow, I don’t think so. Let’s see if a minor twist (I hesitate to call it a spin, because the politicians have forever tainted that word) can put this in a new perspective. Let’s try a different opening headline. Instead of a screaming 36-point, front page headline of “Foreclosed homes hit worst level ever at 2.04% of all mortgages.” Lets see how this plays out – “97.96% of all home mortgage holders doing OK and able to pay.” I guess it just doesn’t grab the headline writer the same way. It’s sort of like the Headlines on Crime statistics that scream “262 People Killed in Metro Area Last Year.” It just has more pizzazz than”3,672,344 people not killed in Metro Area Last Year.”

We’ve become a society where the only thing that makes the news is bad news. Somebody killed somebody. Somebody robbed somebody. Somebody’s house burned down. Even worse, we now have a news media that trips over itself to go film the reaction to the tragedies of life, by thrusting microphones into the faces of grieving people and asking them how that make them feel. If the networks could figure out how to go along on the murders and robberies and other crimes they would and would turn it into a reality show.

So, is the real estate news bad? It sure is, but it is not apocalyptic and it is temporary and real estate will come out on the other side of all of this as still being one of the best investments that a person can make. What we are seeing now is the result of a lot of people making bad decisions or getting caught up in bad timing. Many reached for too much and let themselves be talked into stupid mortgage loans and now they are paying the price. Many others got caught up in the wrenching economic changes that Michigan is undergoing and got laid off at a time when finding new employment is very tough.

All of this will pass. Will we return to the good ole days? Let’s hope not. That’s what got is in this mess to begin with. Let’s all just hope for stability, for things to level off and allow everybody to catch their breath. I think that is on the horizon and so do a lot of pundits and economists. Then we can all sing a rousing chorus of “the sun’ll come out tomorrow.” Of course the media will still be grasping at the negative with headlines like “Sun abandon’s U.S. – darkness descends upon the land.”

T'was the night before Christmas...

T'was the night before Christmas and all though the house the only creature that was stirring was one little mouse. The house was locked up tight as a drum, for six months before the sheriff had come. The water was turned off and so was the gas, no power for lights, it was dark when you passed.

This house is empty and located next door, it's been abandoned for months, a real eye-sore. When up on it's roof there arose such a clatter I looked out my window to see what was the matter. And there in the moonlight I could see on the roof that thieves had climbed up to plant there a spoof. Merry X-Mas the sign said that they had erected, with Santa in a bathtub, and he looked quite dejected. Eight tiny reindeer were ahead of his "sleigh", made from bits of the plumbing, duct tape, and hay.

I chocked back a snicker, that would have been bad. "This is awful," I thought and really quite sad. What a terrible ending for such a nice place, the family that lived there had left in disgrace. The dad lost his job and started to drink, mom filed for divorce and they started to sink. The kids were caught up in the terrible mess. Now, they're all long gone and the house in distress.

The house had been ransacked and stripped until bare, even the plumbing was taken, there was nothing left there. It had once been a home, a place of delight. Now it's a shell, empty, a blight. And what of the people who once had lived there? What had hapened to them, did anyone care?

And I thought to myself as the thieves drove away, it could happen to anyone, so be thankful today. Foreclosures are sad things and should not be made light; but pray for the people, not the houses tonight. Merry Christmas to all and to all a good night.

Help is on the way?

Harumph, harumph, harumph! This mornings Detroit Free Press had a big headline - Foreclosure help on the way - that one might have taken to be a story about helping out those who are facing foreclosure. The story came out of the recent meeting in Detroit about the foreclosure mess that was attended by a bunch of US mayors. Reading the story, it quickly became obvious that these folks were focused upon how to help themselves as much as anything. The "help" that was mentioned in the headline was a proposed database service that would allow residents to find out who actually owns the foreclosed eyesore next door, so that they will stop bothering city employees with calls to find out to whom they should complain. How convenient and self-serving is that? Harumph!

Of course there was also a nod towards letting the foreclosed homeowner use this same database to find out who to try to deal with about the foreclosure and lots of harumphing about credit counseling and workouts, but little in the way of programs to restructure the bad loans that most people facing foreclosure have been victims of - ahhh, the old I'm the victim defense. Everyone seems to agree that the majority of foreclosures are being caused by poorly structured loans (mostly adjustable rate mortgages) that have now ballooned out of control and put the homeowners at risk of loosing their homes. There seems to be no consensus however in how to work this all out. Harumph.

We appear to still be in the finger pointing and find someone to blame stage of this crisis, with many still pointing to the greedy, or stupid, homeowners and saying that it is their fault that they borrowed 110% against their homes; so, let them default and wallow in their own mess. Others, of course, blame only the mortgage companies for offering such loans without any controls and little concern for the ability of the homeowners to pay later. Both views have some merit; but, neither argument does anything to resolve the current crisis. I can't believe that the homeowners want to default and lose their homes; nor, that the mortgage companies want to take over more foreclosed homes and sell them at a loss. If that is true, it seems to be a no-brainer that the two sides should work together to restructure these loans and keep the homeowners who are able to pay a reasonable mortgage in the homes. That's just not happening widely enough right now. Harumph, harumph.

Perhaps the federal government should let FEMA take over this crisis. They have lots of experience with housing. After all, those are the clowns who bought thousands of trailers for Hurricane Katrina victims and never delivered them and then sold them off at a huge loss. They also carted several truckloads of ice around the country for months while never figuring out how to get it to Katrina victims (eventually they let the ice melt into a pond that needed some additional water, thus performing a valuable public service). If we put FEMA in charge of repossessing foreclosed houses the victims of the foreclosures would never have to leave. In fact, they might even get a lifetime supply of ice. Of course the FEMA folks would have to work under the over all direction of HUD, so that President Bush could appear on TV and say, "you're doing a heck of job Alphoso," to the HUD Secretary.

So, help is on the way. Harumph! The mayors have figured out how to get out of the way of this mess, so they can go home, now. Watch for the new foreclosure database in your area. Then, you too can look up who the deadbeats in your neighborhood are and sit out on your front porch going, "Tut, tut", when they walk by pushing their belongings in a shopping cart. Hey, I didn't get a harumph from you over there.

Foreclosures and taxes

I've run into the interesting situation lately where some buyers that I've been working with have found some really nice foreclosed homes that they thought that they could buy, only to find out that the taxes put them way over their financing limits. That's particularly true at the low end, where young, first time buyers are perhaps trying to buy more home that they could normally afford by looking at foreclosed homes. They go out and get "pre-qualified" for a mortgage that is right at the top of what they can aford and then start looking for houses at that price.

I have shown lots of foreclosed home that were $300-400K homes a year ago that are now selling in the low $200K's. Sounds like a great deal, and some are - the ones that weren't thrashed by irate previous owners. The kicker that comes into play to prevent some of my buyers from taking advantage of these deals are the property taxes. In Michigan, as I suppose occurs elsewhere, the property taxes continue to be based upon the last appraised value (the one that still reflects a $300-400K home value) and not the foreclosure sale price. So, that deal at $200K may actually bring a tax bill with it as if the buyer paid $400K.

This shouldn't come as a great surprise, since the current taxes are listed right out in public on the MLS tickets. I try to point that out to clients, but many are in their own little worlds with visions of owning this great, new house. It's only when their mortgage person finally totals up the monthly payment, with taxes and insurance included, that they finally realize that another dream has been dashed. I've resolved to be even more diligent, up front with clients to make sure that they understand the tax situation. Local governments aren't likely to give anyone a break on the taxes, since they need the revenues and they hope that new owners will quickly get the places back to the condition that justified the old taxes anyway. So the old saw - "Look before you leap" - now applies to the taxes that your wonderful foreclosure find might have trailing along with it.

Feeding Frenzy

I suppose that this is just the American market economy working as it is supposed to work,but lately thee seems to be a feeding frenzy as buyers, many of them young, first-time buyers, rush to pounce on foreclosed properties. Even my new neighbors are a part of that action, They bought the house behind me out of foreclosure. We certainly welcome them, since anyone new there will likely take better care of the property than the previous owner.

I've noticed that about half of my buyer customers are asking me to find them a foreclosed property. They aren't even looking at regular properties for sale. That feeding frenzy mindset is skewing the market even more. The last two foreclosed houses that I've helped put bids in on have had multiple bids; while regular homes on the market sit idle, with little to no viewing activity. The other thing happening is that buyers are using the foreclosure prices as a guideline for all bid prices on houses, resulting in lots of "low-ball" offers on homes that aren't in foreclosure. It's hard to explain to a seller that he/she shouldn't be insulted by the offers at 80% of asking price - it's just how thew market is right now.

So, what's ahead? I've afraid that the frenzy so far was just the chum in the foreclosure waters. The biggest wave of ARM re-sets is just ahead and it is predicted by many economists that this wave will result in even higher levels of foreclosure. So the frenzy may just get worse, before it gets better. It's all part of the market mechanism, of course, so I'll just have to get used to showing foreclosures to buyers. Our company even has a dedicated Web site now just for foreclosed properties - http://www.ourforclosurehomes.com go there if you're looking for a foreclosed property. You can find a link to that property on my Web site -http://www.themilfordteam.com. I'll see you out there. I'll be the one in the shark cage with the chum bucket.