The Foreclosure Issue

We all need to face this, foreclosures are not going away anytime soon.  Alan Zibel of the AP confirmed this week that the Great Recession has brought with it high unemployment which is putting the squeeze on people trying to make their mortgage payments.  These aren’t people who bought something they couldn’t afford with a subprime loan.  These are the people losing their jobs and can’t make payments on A-paper (see 30-year fixed conventional) loans.  Add this to the many Option ARM loans resetting next year (and even more in 2011), and you’d be hard pressed not to admit that foreclosures won’t be a factor until 2012.

Kathleen Howley of Bloomberg throws her two cents in by adding that there are also increased losses on FHA loans.  To be fair, FHA loan guidelines are MUCH more strict than anything we saw in the subprime market.  Default is occuring due to high unemployment (and underemployment).

The Foreclosure Bidding War Continues

If you’ve been in the market to buy an affordable home (one that would require a conforming loan) this year, more than likely you’ve encountered the wonderful world of the “Bidding War”.   When I was working with a client late last summer/early fall, we were just about at the beginning of the major meltdown period, and the world was very different.  He was bidding on a condo in Palm Desert and was the ONLY person bidding on it.  The good old days of immediately going into the negotiations with the bank!  REO’s seemed to have maintained this status until mid-January of ’09 when the market turned on a dime and it was impossible to get an accepted offer without getting into a major bidding war, which brought back the not-so-wonderful-memories of being a buyer back in 2004.  The only difference back then was you were dealing with regular owners and not a bank.  Back then it was all about qualifying for a stated income/stated asset loan to allow you to enter the “war” and inflate the property value.  When the bidding wars returned last January, I thought I was going crazy and missing something, but then I started reading articles that my fellow agents on the buy side were experiencing the same thing.  There was an excellent article about this in the Transcript yesterday. It also appeared in Yahoo! News (hat tip to reader Joe for the Yahoo! link).  You can read it here.  Although the main couple in the story is in Phoenix, you can be sure that the exact same thing has been happening in Southern California for months.   I don’t see things changing anytime soon, so this is where you should be prepared to do multiple offers (as long as you disclose it) and hope you’re in the right place at the right time.  Otherwise, get ready to put offers in on a short sale and be patient, and patience is the key word!

Possible Thaw in the Jumbo Market?

If you are a realtor and/of a loan officer in San Diego County, a must read Monday through Friday is The Daily Transcript, our daily business newspaper since 1886.  One of the most valuable tools in he paper is the section showing all residential and commercial sales, usually 10-20 days from the present date.

A few weeks ago, I start noticing something I hadn’t seen in about 18 months, a number of homes over $1.5 million in La Jolla started to move in higher numbers.  For the last 18 months or so, the vast majority of properties in La Jolla that were moving were condos, and ones on the “lower” end.  I thought that it might be some fluke, but that I read in the Transcript an article that JP Morgan Chase and Citi were expanding the number of jumbo loans they were funding.  Then on July 10, Andrew at Blownmortgage.com penned an article, “Will Jumbo Loan Refinancing Stage a Comeback?”.

We actually have two markets in San Diego, the “jumbo” and “conforming” .  A conforming loan is $417,000 or less, and that market has a 2.2 month inventory.  In a normal market, it would be 6 months.  The low end has been snatched up quickly over the last six months, but the “jumbo” market is top heavy, with a very large inventory.  Up until recently, it had been almost completely frozen.  I’m still skeptical of improvement, especially since there are a high number of jumbo ARMs that are resetting this year, but there does seem to be a tiny stream of light shining on the jumbo market right now.  Whether this is a blip or the beginning of a trend, time will have to tell.