The New York Times has an
analysis of the foreclosure and delinquency situations.
Resource: The New York Times
Equity firms and groups of wealthy investors are having difficulty in finding solid investments so many have turned to flipping. Buying foreclosed properties, fixing them up and then selling them has become the investment of the day.
However the profits from flipping are diminishing as more people seek foreclosed properties. The average difference between a home’s sale price at auction and its actual value was 28 percent in January of ’09 but is now 21.6 percent.
As these investors buy up foreclosed properties, we stand to gain for they help reduce the inventory of low priced properties.
That is the number of lender repossessed properties in July, up 9 percent from June.
Arizona was number two in foreclosure rates behind Nevada in the number one position.
Here is a bit of trivia. A foreclosed home is likely to sell for much less than a similar one having a different cause for sale.
Harvard University and the Massachusetts Institute of Technology conducted a study and found;
- A sale brought on by the bankruptcy of the owner will sell for (on average) 3 percent below the price of a similar home not in a forced sale situation.
- An estate sale caused by the death of the homeowner will yield a price 5 to 7 percent below an unforced sale.
- A foreclosed home will sell for 27 percent less.
Comments Off
The number of California foreclosures is coming down. A couple of reasons; home prices are rising so the number of home owners “underwater” is slowly falling. This reduces the motivation for owners to walk away. Another reason is banks are working harder to approve short sales and loan modifications.
The first step in the foreclosure process is the issuance of a notice of default. Such notices fell nearly 44 percent in the second quarter from the same quarter a year ago, reaching a three year low.
Any good news, especially from a neighboring state, bodes well for us.
Comments Off
Some home owners with extremely good credit are walking. Five percent of mortgage delinquencies are by owners with very high credit scores and roughly 28 percent of them are walking away from their underwater mortgage. This is especially the case in states that suffered the greatest decline in property values and in states with no recourse laws (Arizona).
Comments Off
REALTOR®Mag summarizes data from RealtyTrac and Bloomberg on foreclosures.
- Foreclosures accounted for 31 percent of home sales in Q1.
- Average sales price was nearly 27 percent below the price of homes not in foreclosure.
- Average sales price (nationally) of foreclosed homes was $171,971 in Q1.
- Foreclosure discounts are forecast to stay between 25 and 30 percent.
- Foreclosures are down 14 percent from Q4 and down 33 percent from Q1 of last year.
Comments Off
And speaking of foreclosures, lenders are favoring “deed in lieu” as a way for a borrower to get out of an underwater situation.
Deed in lieu is a process whereby the borrower voluntarily turns the property over to the lender without a foreclosure. This gives the lender immediate possession without the expense and delay of foreclosure proceedings. Some lenders are offering cash incentives to the borrower ranging from $3000 to $15,000 for deed in lieu. Deed in lieu is still a hit on the borrower’s credit rating but not as severe as going through a foreclosure.
Comments Off
Economists at the Federal Reserve Board found that only one in five defaults is ”strategic.” That is, the home owner decides that walking away is the best solution to being underwater on their mortgage.
Once the equity in a property falls to one half of the amount owed, strategic defaults rise to 50 percent. The percentages tend to be higher in “non-recourse states,” Arizona being one.
You can read the report (with lots of statistical formulas for our math buffs)
here.
Comments Off
