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Sept. 2007 Unusual Month or Moment of Relief For Foreclosure Turmoil
It is the first time in last twelve months, that foreclosure curve for Orange County CA Real Estate had turned its direction. Although, it is premature to say if it is just an isolated monthly statistic or an early sign of stability but for sure it is reassuring
There are buyers looking for the good deals, including REO and Short Sales.
Homeowners who are late or unable to make their payments, they should be talking to their banks to make a different payment arrangement. At the same time they can market their property for short sale, so if numbers do not work with the bank, they have another avenue to avoid foreclosure on there record. Although there are, tax consequences but short sale may reduce lenders losses and hence tax amount for the seller. "Do it your self," technique in this matter could be costly, a professional opinion should be preferred
Data Source: County Records Research
Created By Nameet Dhaliwal
Orange County CA Real Estate
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Still a Slippery Slope
By Nameet Dhaiwal Realtor
Orange County CA
September 15, 2007
Almost a year ago, default notices and trustee sales notices started to rise. Home sales were slower in 2006 as effects of decreased affordability caused by a sudden increase in home prices due to an ample availability of money. Towards the end of the year, there were too many expired listings. Sales continued to decrease, and then the market got hit by a sudden strictness in the credit score guidelines in March 2007, many fell short of refinance or selling their house, ending up with a default notice. July 2007 got a surprise from the Wall Street when investors suddenly realized the risk and stopped buying 100% financed loans, the nations banking system caught it as a surprise causing many banks to file bankruptcy and close their doors to the employees.
Big giants, such as Countrywide, are still facing challenges and many of the institutions, such as Chase Mortgage and Washington Mutual etc., increased their overnight lending rate for jumbo loans, as now they cannot sell, instead would have to portfolio these loans. There has been a big pendulum swing from one being able to get any loan a year ago, to handicapping the today's homebuyers with best credit and good down payment. Effects of Wall Street's panic in last few months will show its effects in coming months.
This whole turmoil is leading to more defaults and trustee sales and more of these properties going back to the lender, becoming REO (real estate owned) are causing a further burden on these institutions. Although Fed admits about being aware of the situation at this time and promising to take needed steps but for may people its day late and dollar short.
Here are the numbers for last one-year foreclosure activity for Orange County CA Real Estate, starting Sept 2006 to August 2007 according to date collected from County Records Research. Every month it is slipping further and causing uncertainty in the market.
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By Namneet Dhaliwal, Realtor
August 1, 2007
July 2007 marks as the worst month for notices of default and trustee sales in past 12 months. There were total of 1800 homes owners who got these notices. Although a small margin of error is possible due to some duplication.
Majority of these homeowners may not end up loosing their homes. However relatively speaking when numbers jump form 592 in July of 2006 to 1800 for July of 2007, there will be more people loosing their properties. There is a surge of short sale and REO listings in the area.
It does not appear to get better any time soon due to sluggish home sales, increasing inventory and tightening lending guidelines.
Date source:
County Records Research
So Cal MLS
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By Namneet Dhaliwal Realtor, Orange County CA
July 12, 2007
The numbers are conflicting with the actual market value of homes.
Many people look at the median sale price to gauge current real estate market trends. Median sales prices can be very deceptive as it only measures the middle point of properties sold above and below that price regardless of the size, age or location of the property. If one month more homes sold in a higher priced neighborhood of the city, it will bring up the median price. In this market with a low affordability index, increased home listings on the market and tighter lending guidelines, many people are having a hard time keeping up with mortgage payments. It has been difficult for an entry level buyer to buy at today’s price, and as these buyers get pushed out of the market the number of lower end home sales are going down hence resulting in a false increase in the median price. Here is an example of a few cities of Orange County CA Real Estate.
City | Avg Sales Price 06/07 | Avg Sales Price 05/07 | Avg Sales Price 04/07 | Avg Sales Price 03/07 | Avg Sales Price 02/07 | Avg Sales Price 01/07 |
Buena Park | $599,073 | $606,357 | $564,942 | $572,644 | $537,481 | $535,027 |
BREA | $753,476 | $626,460 | $641,905 | $646,825 | $676,585 | $594,220 |
Fullerton | $718,423 | $691,356 | $686,132 | $658,307 | $669,594 | $593,118 |
La Habra | $523,394 | $624,686 | $580,765 | $586,924 | $567,841 | $497,558 |
Placentia | $627,090 | $542,159 | $671,250 | $630,153 | $572,833 | $560,332 |
Yorba Linda | $904,730 | $893,445 | $793,375 | $800,960 | $834,579 | $828,742 |
Average | $687,697 | $664,077 | $656,394 | $649,302 | $643,152 | $601,499 |
Source SoCal MLS
The majority of these cities except Buena Park and La Habra CA for the month of June 2007 are showing increase in the average sales price. Contrary to this, the fact is that the majority of recently sold homes were actually sold below the last sale of a similar home in the area. In conclusion, the median price alone is not an accurate and true measure of the real estate market.
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Brea Chem, Brea - Announcing a price reduction on CA-1519 Zachary Ct. in Brea. A 2,100 sq. ft., 3 bath, 3 bdrm,2 car attached garage 2 story single family home built in 1996, Now 
MLS® #P565661 $675,000 - Just Reduced - Best Price - Best deal for the buyer. Last closed sale at $715,000. So $40,000 saving today, at this price it will not last.
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Great starter home
• 1,651 sq. ft., 2 bath, 4 bdrm single story "No steps inside the house" - MLS® #P582564 $550,000 - Motivated Seller
South West La Habra, La Habra - This 4 Bedrooms, 2 baths, 2-car garage - single family detached home on a large lot located in prestigious neighborhood of La Habra CA makes it a perfect starter home. New cement driveway, central air, open kitchen, individual laundry room, fireplace and very private backyard. Hardwood floors under the carpet, clean and well maintained home. Great location for working families of Orange County CA and Los Angeles County CA . Bring your best offer.
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Brea Chem, Brea - We invite everyone to visit our open house at CA-1519 Zachary Ct. on May 20 from 1:00 PM to 4:00 PM.
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Number of default properties in Orange County CA keeps on creeping up significantly every month, April 2007 being the highest when compared to last few years. April 2006 there were only 480 homes in default. We do not expect any decrease in these numbers any time soon as we have yet to see the effects of tightening lending practices that will dampens home sales further and will leave a number of financially strangled individuals out of the refinance options.
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Brea Chem, Brea - Announcing a price reduction on CA-1519 Zachary Ct., a 2,100 sq. ft., 3 bath, 3 bdrm 2 story "Flat level first and second floor". Now MLS® #P565661 $699,000 - Just Reduced - Best Price.
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Brea Chem, Brea - Announcing a price reduction on CA-1519 Zachary Ct., a 2,100 sq. ft., 3 bath, 3 bdrm 2 story "Flat level first and second floor". Now MLS® #P565661 $699,000 - Just Reduced - Best Price.
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March 2007, Month of Highest Notices of Default
During last six months of Default Notices tracking March 2007 ranks the highest. There were 1241 homes into default a compared to 814 in Oct. of 2006. This is clearly a result of higher home prices and over spending by borrowers during last few years. Substantial drop in home sales in last quarter of 2006 and early 2007, made it difficult for many people to be able to turn around and sell their house and take care of their late payments.
Situation is worrisome for the Real Estate Industry, as we have not seen the effects of tightening underwriting guidelines yet. It is good for the long term but in a short term scenario it is going to make it difficult for many people to refinance their homes, which in turn can make above number to go beyond ones expectations.
We are keeping a close watch at our local Orange County Foreclosure numbers and we will offer updated information to our visitors at www.namneet.com
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Changing mortgage practices
Up until recently any one could buy a house, even with FICO score of 580, and recent bankruptcy as long as it has already been cleared. Stated income, no documents and no money in the bank - one could still get a kind of loan. Overlending by mortgage industry caused their own failure.
All above do not apply any more; lenders are changing their guidelines daily. We are heading back to traditional lending. For many banks, borrowers need to have decent FICO score, first time borrowers will need money down 5-10 percent even with a score of 700. Because it is difficult to borrow money, we can call this a tight money market, in this case caused by stricter underwriting guidelines. Many borrowers are sitting on the sidelines waiting for the market to stabilize.
As lending guidelines revert to the late 1990’s and early 2000’s, even with some downward slide in the pricing, it will be much harder to qualify for a loan. It was easier to have a 10 percent down payment of 200,000 in late1990’s vs. now, saving 10 percent of 600,000 to buy the same house. Yes, salaries have gone up since then but gas and electricity, including the cost of renting, has gone up as well.
Buyers who want to buy in the near future and do not have a high cash balance, should prepare themselves for this tight money market and should start taking the necessary steps to be able to qualify when they are ready to buy.
Buyers home work
Down payment
Start saving some money for the down payment, for 100% financing does not exist. Think of yourself as a homeowner starting right now, the money that you would have used to pay the mortgage could go straight into your savings account starting now.
Credit Score
Get a full three Beuro credit report as soon as possible, some places will give you a Free Credit Report. Look for any late payments, delinquents, or collection accounts, etc. Talk to an advisor to see how to resolve those issues, so when it comes time to buy a house you will have a much better credit score, saving you money in the long run in interest rates.
Establishing history
Establish at least five credit lines, if you already have these, keeping the length and history of these is very important. If you have five credit cards, two of which have bad credit and three of which have good credit, do not close all of them. By closing them you will be left with no credit history, or if you close credit cards with good history you are then left with a 100% bad credit history.
Employment
If employed with a company, work history in the same work line for two years is valuable. If self employed, your business should to be registered and your yearly taxes should be able to support your income.
Amount to borrow
Do not be house poor, buy with in your means. When buying your first house think long term. Although nothing is fool proof, a reasonable optimistic approach is a very valuable tool in life. If you are a new graduate and will be getting a decent raise and promotion in your career or will be adding spousal income, you can afford to overstretch your finances. On the other hand, if you have matured in your line of profession and have hit the salary ceiling, stay within your limits.
Getting a loan
There is so much advertisement on the radio, internet, billboards, etc. for cheap money and no closing cost. Many borrowers become confused and fall for one only to find out the truth later when signing the loan documents. Just remember one thing: a dollar costs a dollar, if some one is offering a dollar for 98 cents, they are going to make those two cents somewhere else in the loan. Ask your mortgage originator if you qualify for FHA program. Choose someone who is honest about all the fees and is knowledgeable and professional. You do not need to pay any upfront fees to anybody. Ask for a copy of GFE (Good Faith Estimate). Pre qualify in advance.
Its all about being responsible
If you want to be homeowner, be responsible, discipline your self, pay all your bills on time, and do not be late with payments. Keep a tab on your credit score; you may have to put off that dream vacation or a dream car for some time to save up money. In the end, it will be worth it just to be able to call somewhere your own ‘Home Sweet Home’.
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Higly Upgraded House
• 2,100 sq. ft., 3 bath, 3 bdrm 2 story Built in 1996 "Flat level first and second floor" - MLS® #P565661 $720,000 - Make an offer
Brea Chem, Brea - A Highly upgraded, corner lot, 3 bed, 3 full bath 2 car garage, 2100 sq. ft, built in 1996. It comes with upgraded travertine tile in bathrooms, maple wood flooring, and plantation shutters throughout the house, custom paint. Family kitchen with eating area and island, oak cabinets, granite counter tops, very open feel with cathedral ceilings, separate living room and family rooms, fireplace in living room. Nice back yard with koi pond and built in barbecue. Be a Brea CA Real Estate Owner.
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Who is to Blame?
Lenders are tightening their underwriting guidelines, requiring increased FICO scores for qualification, getting rid of sub-prime loans, but for now it is too late in the scheme. It was surprising to see that big lending companies, who have top notch financial ad visors, could not understand or foresee the after math of their creativity. It will take a while to clean up the mess created by poor underwriting guidelines. Recent actions by Freddie Mae and other institutional lenders should been taken and implicated few years back. A great number of people did not only get the teaser adjustable rate with 100% financing, interest only but also got negative amortization loans with higher margin rates. Some did not plan and others did not understand and later found out the surprising increase in the payment. A large number of borrowers knew what they were getting into but never thought that this market could change and they could end up side down in their finances.
Stated income is another name for deceptive lending practice that was knowingly allowed by lenders. Borrowers with 100% financing took their chances, became a part of this deception based upon the desire to own a house, or a bigger house. These were the guidelines with loop holes created by the banks and the big institutional lenders who lowered their underwriting standards and allowed the borrowers to sink in the debt.. Loan officers and borrows both became a part of it as well. Lenders knew that borrowers were having trouble with the amount of monthly payment and had to go for interest only adjustable with 100% financing. But they failed to see after effects of their lending practices and its affect on borrower facing significant jump in payment within one, two or three years unless these borrowers were expected to have an additional income by big promotion or addition family member pitching in for the payments other than hitting a jackpot.
Initially, refinancing was done to get a lower rate especially by the home owners who bought during higher interest rate period. But later refinancing became a fashion, people took money out of their house to fulfill the demand of their life style and became house poor. As the prices went up they were able to take out more money and live rich.. All the money that was taken as home equity line of credit funneled back into the system giving a boost to the economy and creating more jobs. This is one reason that we are hearing about sub-prime mortgage saga also threatening prime market.
Now take a look at 80-20 loan of 100% financed mortgage, when borrower fails to make the payment the first looser is going to be the 2nd lender. This could cause a 20% loss in the market value because 1st will not allow any payment to the 2nd until their money is paid. Mortgage companies who carries the 2nd has a very poor case of foreclosing and even if they do second would have to pay the 1st to be the owner of the property that is already not worth same as it was last year or a year before. These 2nd mortgage companies possibly don’t have the capability to do so either due to their own financial troubles. This is where investors have to either step in or loose on the loan they bought from these lenders.
Internet had a great role in creating a desire to buy a house for any one who could find some kind of financing creating a demand and increase in price. It is also going to have great role in slowing down the market, creating an increased level of discomfort to buy immediately as word goes out there much faster than 1990’s. Day after day we are hearing about demise of one sub-prime lender after the others. Some big names are going bankrupt or closing their doors. These companies made money and flourish when prime rate was bottom low. Foreclosure rate is up already even though it is not as bad as 1990’s. But think about all of late payment borrower, causing these lending companies and banks to sink, when these enter into the default period, situation can get ugly for the real estate market.
In recent years real estate related jobs made 52 percent of total job growth in last five years according to Orange County Register. When Down turn in lending empties people pockets, preventing them form remodeling, effecting builders to cut down their production of new homes hence affecting the construction side of real estate job market. Slower sales could affect the Realtors, loan officers and brokerages further deepening its effect on the jobs depending upon this industry.
Some may argue about the recent upward trend in sales and shrinking inventories of Orange County, California Real Estate and having great job growth in 2006. Some borrowers are rushing to buy while they can qualify for sub-prime loan before it becomes obsolete. All the action in the financial market has not shown its significant effects on the consumer side up until now. Don’t forget that market yet have not hit the prime listing season for 2007. As lenders are starting to tighten their underwriting guide lines, it will further shrink the number of qualified buyers in the real estate market that may not help to absorb the upcoming inventory. All of the above are indicators to the sluggish sales and a downward trend on the price for 2007 and even spilling this into 2008.
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Brea West, Brea - We invite everyone to visit our open house at 1524 Kinsler Ct. Brea CA- on February 25 from 1:00 AM to 4:00 PM.
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