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Why Drop in Foreclosures Is Bad for Housing Market

Sat, 21 Jul 2012 16:35:02 +0000

In a normal housing market, lack of supply is generally considered a good thing. When demand outweighs supply, home prices rise and homeowners gain equity. Like so many things in this historic economic recovery, that premise doesn’t exactly apply.

This housing market has been running on distress for the past year, as investors rush to buy foreclosed properties in order to take advantage of today’s hot rental market. Sales of millions of foreclosed homes pushed home sales higher, off the bottom in fact.

Now that supply of distressed properties is drying up, and pulling overall home sales down with it. Sales of existing homes dropped unexpectedly in June, down 5.4 percent from the previous month, according to a new report from the National Association of Realtors.

Home sales were particularly hard hit out West, where there is the largest concentration of delinquent mortgages and foreclosed properties. Overall sales out West were down 3.6 percent in June from a year ago according to the Realtors, but in the $0-100,000 price range, they were down nearly 36 percent.

“More than 50 percent of all existing home sales have been to “investors” and “first timers” — thin and volatile cohorts relative to repeat buyers — looking for low-end properties to rehab and occupy or rehab and rent/flip respectively. These two cohorts have carried the market for three years,” California-based mortgage analyst Mark Hanson noted.

The distressed share of home sales fell to 25 percent, while it had been running at a third for much of the past year. The first-time home buyer share also fell to 32 percent, down from 34 percent the previous month and from a normal range of 40-45 percent. First-timers are having particular trouble obtaining home loans.

So why is the supply of foreclosures so low when there are so many hungry investors waiting to pounce? There should be plenty to go around, given that the total U.S. delinquency rate is at 7.2 percent, representing 5.57 million loans either delinquent or in the foreclosure process, according to Lender Processing Service’s June Mortgage Monitor.

The answer is the process.

This from Fannie Mae’s most recent quarterly report:

“Our foreclosure rates remain high: however, foreclosure levels were lower than they would have been during the first quarter of 2012 due to delays in the processing of foreclosures caused by continuing foreclosure process issues encountered by our servicers and changing legislative, regulatory and judicial requirements.”

New laws in Nevada, criminalizing faulty foreclosure processing ground that state’s foreclosure machinery to a near halt. Foreclosure filing there down 61 percent annually in the first half of this year according to RealtyTrac.

California just passed a new law requiring mortgage servicers to prove they have the right to foreclose by showing title of the loan. That is sure to create huge delays, as many of these distressed loans were sliced and diced and sold off in strips to investors during the housing boom.

NAR chief economist Lawrence Yun also noted that many foreclosure transactions are either getting delayed or not clearing at all due to title issues, a new phenomenon.

“This is due to increasing legal risk,” said Yun, noting a 10-15 percent fallout rate, up from a negligible rate just months ago.

In addition, major bank servicers are now complying with a $25 billion mortgage servicing settlement with the U.S. Department of Justice and state attorneys general. Part of that is offering principal reduction modifications to delinquent borrowers. Bank of America
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] alone put 200,000 delinquent loans on hold while it sends out letters offering to slash loan balances.

A lack of supply, even of distressed homes, should help settle this housing market, but the trouble is that regular buyers, move-up buyers, are, in large part, unable to participate in this recovery. Negative equity (including second liens) and near negative equity (less than 5 percent equity) is trapping an estimated 30 million potential repeat buyers in their homes, according to Hanson.

— By CNBC’s Diana Olick
— CNBC Producer Stephanie Dhue contributed to this report.

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/48243400?__source=RSS*blog*&par=RSS

Sounding the Waters: Is the Bay Area Prepared for Sea Level Rise?

Fri, 09 Dec 2011 13:54:34 +0000

Sounding the Waters: Is the Bay Area Prepared for Sea Level Rise?

A new documentary attempts to find the answer

Sea level rise will irrevocably change life near the San Francisco Bay. That’s the premise of RISE: Climate Change and Coastal Communities, a documentary that starts airing this week on KQED Public Radio. Producer Claire Schoen sets the stage on a personal note.

Jan Sturmann

Climate scientists predict that sea level rise and extreme weather will cause flooding of San Francisco’s Financial District by 2050.

By Claire Schoen

“Mom, can you please can it with the climate change lecture – just for once,” my children complained. At ages 22 and 26, my politically correct, Berkeley-raised kids are well educated in all things scientific and political. But… “Enough already,” they cry.

And I confess that their complaint has some validity: I can bring up the topic of climate change in pretty much any conversation.

But really, what other topic is there?

I do care deeply about war, immigration and famine. But all of these are affected by climate change which is a major cause of increasing drought, which in turn will create more and more wars to be fought over less and less arable land, pushing greater numbers of people to become environmental migrants the world over. This is not science fiction. And it is not the future. It is happening right now and it is being meticulously measured. The scariest part is that scientific estimates and predictions of the rate and intensity of climate change continue to be proven too low. It’s all happening bigger and faster than the models have shown. And it will get worse if we don’t radically slow our greenhouse gas emissions worldwide and figure out how to adapt to the impacts of climate change that are already too late to halt.

This past year has certainly been an eye-opener in the U.S., with a record-breaking number of record-breaking weather events:

The Mississippi and Missouri Rivers both experienced catastrophic floods this year, affecting cities and towns along both waterways. There were evacuations in Memphis. The Corps of Engineers was forced to breach levees on the Mississippi, intentionally flooding one area in order to save a more populated one.

Chicago has experienced two intense storms classified as 100-year events – in the last three years.

14 states are experiencing one of the worst droughts in U.S. history. The entire state of Texas which is now in its 6th year of exceptional drought, has been designated a natural disaster area.

Tropical storms in Vermont devastated inland towns.

Since when is Vermont located in the tropics?

While no specific weather event can be attributed to climate change, the pattern of increasingly extreme weather is exactly what climate scientists are predicting.

So what does this mean for those of us living around the lovely San Francisco Bay?

We have relentlessly filled in the edges of the Bay – 40% of it – transforming wetlands into real estate and then covering them with homes, shopping malls and industrial parks. Climate change threatens this land, once considered a 100-year flood plain, with flooding every 10 years, every year, perhaps every high tide, as rising sea levels and extreme rain, wind and waves come together to form a perfect storm – again and again.

Upon embarking on the RISE project, my first act was to print out sections of a map of the Bay coastline, provided on the Pacific Institute website. It identifies those areas that are part of the 100 year flood zone. Pieced together, the map covers an entire wall of my studio. I quickly pinpointed my house. Whew – I’m safe. But not really, as my bank, airport, highway, sewage system and the houses of many of my friends are situated in the flood zone. Truly we are all in this boat, together.

Will Travis, of the Bay Conservation and Development Commission provocatively suggests that what we need to build today are not houses, but campgrounds. Our stay at the edge of the rising tide is a temporary one. Yet, foolish animals that we are, we make big plans, instead, to develop entire new communities, the Redwood City Saltworks and Treasure Island, both sitting at sea level. Today’s sea level.

So, if not campgrounds, then what? The hard truth is that we don’t know what to do. But it’s time to come together to figure it out. To this end, I’m going to keep talking. Cause kids…it’s all about climate change.

Part 1 of RISE, entitled “Sounding the Waters,” airs on KQED 88.5 FM on Thursday, December 8, at 8 pm. Parts 2 and 3 air January 12 and February 9, respectively.

Article source: http://blogs.kqed.org/climatewatch/2011/12/08/sounding-the-waters-is-the-bay-area-prepared-for-sea-level-rise/