John Beckett's Real Estate Blog

Americans who are brave enough to buy a home despite persistent predictions of a double dip in housing may want to contact the federal government, as the recession and financial crisis have turned Uncle Sam into one of the largest owners of real estate in the United States.

Rising foreclosures

The housing bust has led to an unprecedented number of foreclosures in the U.S. In May, 322,920 foreclosure notices were filed against homeowners, and more than 3 million homes have been seized over the last five years from delinquent borrowers. While most homebuyers may assume that banks are the only source of foreclosures, the U.S. government also owns many residential properties because of its role in buying and guaranteeing mortgages. Many of these properties are held because of the conservatorship established in 2008 over the government-sponsored enterprises popularly known as Freddie Mac and Fannie Mae.

Freddie Mac

The Federal Home Loan Corp., or Freddie Mac, owned approximately 45,000 multifamily and single-family homes at the end of 2009. The company put a gross value on these properties of $5.13 billion. Freddie Mac obtained these properties by being the highest bidder at foreclosure auctions when the properties were used as collateral for loans owned by the company, or when owners just transferred the property to Freddie Mac without going through foreclosure. Freddie Mac is furiously attempting to dispose of these homes, and has been fairly successful; the company’s average holding period for real estate is less than one year. The company markets the homes through HomeSteps, where buyers can search by state and city.

Fannie Mae

The Federal National Mortgage Association, or Fannie Mae, is also a large owner of foreclosed property. The company owned more than 86,000 single-family homes at the end of 2009, with a value of $8.5 billion. These homes are concentrated in states that were ground zero of the housing bust, with 28% of its inventory in California, Nevada, Arizona and Florida. Fannie Mae also markets these homes intensively, and sold 123,000 in 2009. The company’s official website to sell homes is called HomePath, where buyers can look up inventory near their location.

Other agencies

Another source of homes owned by the government is the Department of Housing and Urban Development. HUD obtains its properties through foreclosure auctions on Federal Housing Administration-insured loans. HUD has a website at hud.gov Next up is the Federal Deposit Insurance Corp., which owns its inventory through its role in seizing failed banks. The FDIC owns single-family homes but also has a large number of other properties, including industrial and commercial properties and raw land. The Veterans Affairs Department and the Agriculture Department also play roles in financing and guaranteeing home loans, so both own single-family home and other properties. Buyers can look for their dream home through these agencies as well.

Buyer beware

Buyers shopping for homes from the government should be aware of the disadvantages of the process.  Many agencies offer properties “as is,” with no warranties on their condition. There is also little flexibility on negotiating the terms of the contract if the government accepts your offer. Fannie Mae, for example, does not accept offers for houses that are contingent on a buyer selling a currently owned home.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=24796144

The foreclosure crisis hit a new peak in the first quarter, as banks took back the largest number of properties to date. The number of homes entering REO status (short for “real estate owned” by a bank) climbed 35% to 257,944 — the highest quarterly total ever — from 190,543 in the first quarter of last year and 9% from the previous quarter. The increase comes as lenders seized more property that couldn’t qualify under the Obama administration’s Home Affordable Modification Program (HAMP). “There have been delays throughout the system, and it has taken longer for properties to go from delinquency to default,” says Rick Sharga, senior vice president at RealtyTrac. Once rejected for HAMP, however, these properties are now moving to foreclosure at an accelerated pace, Sharga says.

More properties moving through pipeline

Foreclosure filings — from notices of default to bank repossessions — were reported on 932,234 homes in the first quarter of this year, a 16% increase from the same period last year and a 7% jump from the previous quarter. And the pace accelerated near the end of the quarter, with foreclosure filings reported on 367,056 properties in March, an increase of 19% from the previous month and the highest monthly total since RealtyTrac began issuing its report in January 2005. Foreclosure auctions were scheduled on 369,491 properties during the quarter, the highest quarterly total since RealtyTrac began compiling its report. “There have not been a lot of households that have been successful under HAMP,” says Gary Painter, director of research at the University of Southern California’s Lusk Center for Real Estate. “It’s likely that many of the people who could be helped have been helped.” The good news is there doesn’t appear to be a huge wave of properties entering default.  In the first quarter, 304,799 properties received default notices, an increase of just 1% from the previous quarter and a decrease of 1% from the same time last year. Default notices have dropped 11% from their peak in last year’s third quarter.

Troubled states

Nevada continued to have the highest foreclosure rate in the quarter — four times the national average — with one in every 33 households receiving a foreclosure filing, followed by Arizona, Florida, California and states where employment has plummeted, such as Utah, Michigan, Georgia, Idaho and Illinois. Foreclosure filings were reported on 34,557 properties in Nevada during the first quarter, a 15% increase from the previous quarter but a 16% drop from the first quarter of 2009. Foreclosure filings in Arizona were reported on 55,686 properties — one in every 49 households — a 22% increase from the previous quarter and a 13% increase from the same time last year. Florida posted the third-highest foreclosure rate, with filings recorded on 153,540 properties — one in every 57 households — a 7% increase from the fourth quarter and a 29% increase from the same time last year.

Sitting on delinquencies

Just how many foreclosures move through the foreclosure process and when banks sell them will be key factors in how much more real-estate prices could fall before they recover. Most of these bank-owned properties are not making it onto multiple listing services, analysts and brokers say, despite banks having more of them to contend with. “We have about 860,000 REOs in our database, and only about 30% of them are available for sale on the MLS,” Sharga says. “That means you have another 550,000 to 600,000 that have yet to hit the market.” By keeping this “shadow inventory” off the market, banks are keeping prices unnaturally high in this soft economy, says Leo Nordine, a Los Angeles-area broker specializing in REO properties. “[Lenders] want to keep postponing them for as long as they can,” Nordine says. “Prices have stabilized” in many areas because banks have kept these properties off the market, he says, adding that banks will likely continue to do so until the economy picks up again.

A long, painful recovery

Meanwhile, foreclosure prevention efforts don’t appear to be helping a significant number of borrowers. While 1.4 million homeowners were offered trial modifications under HAMP through the end of March, just 230,000 homeowners had their modifications made permanent. That’s a drop in the bucket compared with the 5.5 million delinquent loans Sharga says are on the books. Acknowledging this poor progress, the government revamped HAMP last month to provide additional mortgage assistance for unemployed job seekers, increase payments to second-lien holders and give some underwater homeowners the chance to refinance into loans backed by the Federal Housing Administration. This could slow the number of homes entering foreclosure, but it probably won’t make a huge dent in the number of properties being taken back by the banks. “Many people are so far upside down [in their home’s value] they are not even eligible,” says Helene Raynaud, vice president of housing for the National Foundation for Credit Counseling. And since HAMP is voluntary, lenders and investors are still deciding which properties they want to take back. “The government is really trying, but there are some issues of accountability and enforcement with servicers.” And, Raynaud says, there are some questions about how many of these modifications will end in redefault, given borrowers’ still-high levels of debt. Very few servicers are requiring these borrowers to get debt counseling, she says. Given these factors, economists expect a steady stream of foreclosures to hit the market for the next several years. But they don’t think it will derail a recovery. “I think we are very close to a recovering housing market,” says Celia Chen, senior director in charge of housing at Moody’s Economy.com. “We expect a slight decline and then flat prices until 2011.” However, Painter says you might want to brace yourself for a bit of a bumpy ride. “I think we are going to see upticks and downticks as the process happens,” he says. “But generally we are going to be stuck in place for a while.”

Read at: http://realestate.msn.com/article.aspx?cp-documentid=23875844

Most people retire in the same town where they spent their final working years, but some seek out a new locale with ski slopes or perhaps ocean views. Of course, budget is a big concern. Many people move close by and move to a smaller home or condo where they have less upkeep. They still want to stay close to their children and stay involved in the business world by consulting and remaining close to their clients. Here are some tips for finding a place that fits your budget and interests.

Cost of living. Moving to a place with lower housing, food and entertainment costs is an obvious way to stretch your nest egg. A lower cost of living is the major factor behind retirement mobility. I don’t know anyone moving from Kansas to Hawaii. Twenty-two percent of Americans age 51 or older who moved between 1992 and 2004 did so to save money, according to a recent analysis by the Center for Retirement Research at Boston College.

Low-tax locales. Tax rates vary considerably by location. Seven states don’t levy an income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. New Hampshire and Tennessee tax only dividend and interest income. And five states have no sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon. Be sure to evaluate property taxes and state and local tax exemptions for seniors.

Health care facilities. Your health care needs are bound to increase as you age. Make sure your prospective retirement spot has adequate health care and elder-care facilities and a doctor who can treat any condition you may have. You can call and see how difficult it is to get an appointment, if you’re on hold for more than 10 minutes or you leave a message on voice mail and you don’t get a call back, then you know.

Proximity to family. Many retirees would like to become more involved in their grandchildren’s lives. Living near family sometimes has another bonus: help with lawn care or transportation for grocery shopping — services for which you would otherwise have to hire someone. Twenty-eight percent of older Americans who have relocated after age 51 did so primarily to be near children or relatives, Boston College found. People often migrate toward someone because they have become more disabled or have lost their spouse and they need some support that they are not getting in their current location. They will move toward their children or some friends to help them with their daily life.

Recreation and culture. When you’re no longer tied to a job, you have the freedom to live in wine country or within walking distance of a beach. Perhaps your ideal retirement spot has plenty of art galleries, golf courses and hiking trails. College towns often fit the bill and host world-class speakers and entertainers, and they often have an affordable cost of living.

Public transportation. Retirees often reach a point when they can’t or no longer want to drive. Consider the cost and quality of a town’s public transportation system and how to get around without a car. AppalCart, a regional bus service in Boone, N.C., for example, provides free local transportation. Retirees who join the Senior Club in Walnut Creek, Calif., ($7 annual dues) are eligible for a minibus service that offers transportation within the city limits for $1 each way.

Weather. To some, it’s important to not have to shovel snow or defrost a car. But warm climates also come with the downside of larger air-conditioning bills. Think about whether you want four distinct seasons. Some retirees can get the best of both worlds by maintaining or renting a residence in the north and then heading south for the winter.

Read the entire story at: http://realestate.msn.com/article.aspx?cp-documentid=23626185