Author: ft Editorial Staff

“Shadow inventory” could further depress home prices

Banks are holding between 30-60% of their REOs off the market, inventory known in the industry as shadow inventory. In the Bay Area, for example, banks repossessed 51,602 residential properties between January 2007 and February 2009. Only 30,823 were listed and resold during that same period, leaving 20,779 (40.3%) unaccounted for. With anywhere between 80,000-100,000 shadow-inventory homes in California, it’s obvious that the foreclosure numbers are being artificially depressed by the banks holding on to these REOs. Whether it’s due to a bank system overwhelmed by the sheer number of homes they need to process to get them market-ready, or due to lenders deferring sales in order to turn a blind eye to the real extent of their actual losses, we can definitely expect more homes to hit the market and further depress home prices. How much those prices drop will depend on whether the banks are and will continue to strategically hold back some of their REOs so as to not flood the market. first tuesday take: The delay in getting properties foreclosed, some 800,000  to go in California during 2009 through 2013, will delay the recovery. Just as investors thankfully rolled into the market of single family residences (SFRs) as buyers to rent or flip the properties, they will soon, with equal force, feel uncertain about the future as the dumping of the coming flood of properties...

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San Diego rental market appears more recession-resistant

As reported, two quite different economic points of view exist on the San Diego rental market rates. A USC Lusk Center for Real Estate’s first-time survey of the San Diego residential rental rates indicates rental rates are stable and will rise during the next two years. In contrast, a local San Diego economist finds in his survey that rents are lowering, but at a lesser pace than in most large rental communities in California. While most of Southern California saw rents go down and occupancies drop, San Diego appears to be holding fairly steady thanks to the local military bases, higher educational institutions, and the still strong biotech, health care, and telecom industries. Vacancies are up slightly, but that nemesis of the mathematical abstraction of the average (read ‘median’) rent actually rose a little to $1,340 in San Diego. San Diego is forecast to likely continue to outperform in this sector, despite tenants leaving apartments to take advantage of low-priced REOs and households doubling up to share expenses. first tuesday take: The huge issue for both these economists is the phantom rentals which have not yet hit the market and will do so during 2009 through 2012. Extensive numbers of new condominiums must be occupied, and they will not likely be sold to buyer-occupants anytime soon. Then there are the REO properties which are finally being acknowledged as the...

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Baby boomers are upside-down

An estimated 30% of homeowners ages 45-54 are upside-down on their mortgages as their overall net worth plummeted during the last five years from an average of $172,000 down to $94,200. first tuesday take: The San Francisco Chronicle should have known better than to post this article written by The New York Times. The journalist, unaware of the differences between New York’s recourse laws versus California’s antideficiency laws, misleads California property owners into forgetting about their legal right to walk away from their property using their put option, forcing the lender to buy the property for the loan amount. [See our first tuesday article, “Mortgages, negative equities, and foreclosures”] Re: “Baby Boomer nonsavers hit by the housing slump” from The New York Time via The San Francisco...

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24 charged in RICO mortgage fraud scheme

Twenty four people were charged with conspiracy, racketeering, bank and wire fraud, and money laundering in relation to a “straw buyer” mortgage fraud scheme masterminded by a documented gang member. Several licensed real estate professionals were involved, including: •    Stanley Gentry of San Diego, real estate broker; •    Billie Bishop of La Mesa, escrow officer; •    Diana Jaime of Chula Vista, public notary; •    Jorge Cortez of Chula Vista, real estate sales person; and •    Esteban Valenzuela of Sun City, real estate appraiser. Tax preparers and various employees of Ivy House, Inc., the Real Estate Center of Southern California, and the Real Estate Center of La Mesa were also involved. For the entire list of defendants and the charges against them, click here for the official Department of Justice Press Release. Re: “Gang member accused of leading mortgage fraud scheme” from The Los Angeles...

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More changes from the Department of Real Estate

Just giving all our readers a head’s up: in addition to the fee changes looming for Department of Real Estate (DRE) licensees, the DRE is planning to change some of the continuing education and testing requirements as well.  While these are all still proposed changes, it is rare that the DRE will ever offer up proposed changes without following through.  So be prepared! Take a look at our April 2009 DRE Digest for more details on the upcoming...

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Zestimates are great conversation starters with sellers and buyers. Zillow has done more for our bottom line than NAR ever has or will. Don’t fight the current of the river, learn to run with it. Disruption is inevitable in any industry that is fragmented or inefficient. Granted, it does feel like armchair experts and platforms are plentiful in real estate these days, but when the tide rolls out we will see the value proposition of the truest professionals in this industry shine once again.

Justin Bonney, on Zillow’s impact on the real estate industry

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