Bay Area Foreclosures Continue to Decline

Foreclosures and default notices, which deluged California and the Bay Area just a few years ago, have now slowed to a trickle as the economy and the housing market stabilize.
Rising home prices, increased job creation and government foreclosure-prevention efforts caused mortgage distress to plummet in the Bay Area and California in the third quarter, a real estate service reported Tuesday.

"We are getting close to normal, to the extent we can define normal in a boom-bust state," said Andrew LePage, an analyst with San Diego's DataQuick, which produced the report. "Assuming the economic recovery stays on track, this is the final mop-up stage of the foreclosure mess - with the caveat that there are still thousands of distressed cases in limbo."

In the nine-county Bay Area, a total of 1,035 homes and condos were sold at foreclosure auctions in July, August and September, about a third of the 3,224 foreclosures at the same time last year, according to DataQuick. At the height of the housing crisis, in the second quarter of 2008, the number of Bay Area foreclosures - 12,093 - was more than tenfold higher.
Statewide, the 8,030 foreclosures in the third quarter likewise were about a third of last year's number.

Default notices, the first step in the foreclosure process, also fell dramatically.
In the Bay Area, lenders sent 2,776 notices of default in the third quarter, down 62 percent from the same time last year. Default notices for the region peaked at 19,983 in the second quarter of 2009.
Statewide, the 20,314 default notices were down 59 percent from a year earlier.

Home price surge

While a range of factors are wiping out foreclosures, the robust surge in home prices has made the biggest difference this year, LePage said. "Far fewer people are underwater," he said. "That gives them options; they can sell, refinance or get some family help. Their situations don't seem as hopeless." Even people who still owe more than their home is worth aren't as deep in the hole, so it's less likely they will walk away from their homes. "If, a few years back, you were 40 percent underwater and now you're maybe 5 to 10 percent underwater, you are more likely to hang in there, as there's light at the end of the tunnel," LePage said.

There are still lingering concerns. Many distressed homeowners have mortgage modifications, in which lenders reduced their monthly payments. Whether they can meet those obligations, whether lenders will make the changes permanent and whether other struggling homeowners can get their payments reduced, are all factors that remain up in the air.

"We don't know what the outcome will be for those thousands of properties," LePage said. "But the shadow inventory (potential future foreclosures) is nowhere near what it was three or four years ago. Could we see a large wave of foreclosure activity reminiscent of the one we just went though? Even in the worst-case scenario, that does not seem likely."

Counselors' views

Counselors who help struggling homeowners said the change is palpable.
"We see about half as many" new clients this year compared with last, said Katrina Vizinau, coordinator of the Restoring Ownership Opportunities Together program at the Community Housing Development Corp. of North Richmond, which works in Contra Costa, Alameda and Solano counties.
The most common circumstances are either people who have been rejected by their servicer for a loan modification after several months of applying, or people who have a modification but can no longer afford even the reduced payment, she said.

Earl and Lorna Phillips of San Francisco are among homeowners still struggling to hang on. The couple have an adjustable-rate mortgage on their Richmond District home with escalating payments that they find unaffordable.

After Earl Phillips, a school bus driver, had two bouts of serious illness, they fell behind on the mortgage and property taxes. Separately, their loan servicer misplaced some payments when it merged with their previous bank and charged them late fees and penalties, he said.
While they caught up on payments, their efforts to get a loan modification have been fruitless, Phillips said. But their situation also crystallizes the change in types of distress.

Equity but bad credit

Their home is worth $950,000; they owe $650,000, meaning they have substantial equity. Phillips said they cannot refinance because their credit was so tarnished by the late payments.
"Everyone tells me, because you're not underwater and you have equity, the bank feels you should just sell your house," he said. The couple make ends meet by sharing their house with their son, his wife and three children.

Negative amortization

Gale Rosboro of San Francisco also has an adjustable-rate mortgage that allowed her to make minimum payments that didn't cover the interest due and instead increased her principal owed. Such negative amortization loans, which tripped up many homeowners, are no longer offered.
Rosboro said her mortgage debt started at $409,000 seven years ago but because she made the minimum payments, it now has hit $609,000, while her house is worth about $650,000. The monthly amount owed has risen continuously.

"I haven't missed a payment, but I'm always behind," she said. "I haven't sent the September payment yet, for instance, because you have 30 days. "She's been turned down for a loan modification numerous times, despite having stable income from her job teaching literacy and ESL at the San Bruno County Jail. Rosboro said she wants to hang on to the house for the sake of her three daughters. "I hope they won't have to struggle like I did," she said.

2014 California Real Estate Forecast: Larger Inventory, Higher Prices

It's not breaking news that the California housing market is heating up, but now the California Association of Realtors is confirming it on the record, predicting that the trend will continue upward into 2014.

In its latest forecast, CAR predicts primary home buyers will make a comeback after a period of tough competition with investors for what has been a limited supply of homes on the market. "We've come up against an exceptionally low-inventory situation in California for at least the last year and half, and it has started to take a bite out of sales" says Leslie Appleton-Young, the association's chief economist. She says the market is still "robust" but predicts a 2.1 percent drop in the number of homes sold this year over last year due to limited supply.

But two trends are changing that, says Appleton-Young. One is a rapid rise in home values. It's lifting many underwater homeowners — those who owed more in mortgage payments than their homes were worth — providing them with the opportunity to sell. Appleton-Young says that's beginning to boost the number of real estate listings.

The second is a shift in investor behavior. For the past three or four years, investors have bought homes and rented them out. Now, Appleton-Young says they're starting to "flip" the houses — buying, fixing and putting them back on the market — more frequently. The forecast projects home sales to reach 430,300 units in California this year and rise 3.2 percent next year to reach 444,000 units.

The median price of a California home will also increase, according to the forecast: 28 percent this year over last year to $408,600, and then another 6 percent in 2014 to $432,800. So is all of this heated activity sending California into a housing bubble of the kind that preceded the 2008 financial crisis? Appleton-Young's first answer is "never say never," but she believes the dynamics of today's housing market are very different from the bubbly times. For one, it's a lot harder to get a home loan. "The underwriting that goes into loan origination today does not look anything like the underwriting that we had in 2003-6, where you essentially had a pulse and got a loan," Appleton-Young said.

Tips on Selling Your Home in Today's Market

Understanding today's real estate market can make all the difference between making a solid profit or experiencing some of today's real estate doldrums. Getting the most from today's tight marketplace means sellers and buyers need to apply the most current techniques to get an edge on the competition. Here are some tips to gaining an edge in today's real estate sellers' market: Make a Good First Impression The first thing potential buyers will notice in a home for sale is the exterior. First impressions can make a huge difference in the chances of selling your property. Be sure to boost your curb appeal and help draw buyers to your property by presenting a clean, neatly landscaped lawn. Taking pride in your property inside and out can make a big difference. Attract Potential Buyers Having a joint open house with sellers is one way to attract potential buyers. This process is done by joining with two to three other real estate sellers in your area to combine your open house with theirs in an effort to bring more buyers into the neighborhood. One of the great plusses of joint open house days is that it gives buyers a chance to see how neighborhood residents interact. Write a Seller's Letter Another great tip for selling your property is promoting your home and neighborhood to potential buyers by writing a seller's letter that anticipates likely buyer questions and answers them. The seller's letter could include relevant information about the neighborhood, information on the home's history, improvements, or any other distinguishing features. Be Prepared and Flexible Be prepared to show your real estate property quickly since some buyers get interested in your house during their neighborhood visit to another property for sale. They may ask their agent to show them your property listing too. Flexibility with visitation hours may increase your chances of a sale and offer more opportunities to attract buyers. Keep Interior Colors Simple Once potential buyers begin to visit, remember to stick to a neutral color scheme such as beige or cream throughout the walls and accents. When walking through a home, potential buyers want to imagine living there and put their own vision into play. by avoiding extreme color schemes and keeping it simple, potential buyers can see the home as they would want it. Be Open to Feedback When working to sell your property, remember to ask for feedback after your open house. This will allow you to understand where improvements might be made before your next visit day and help you attract more potential buyers. You can gauge visitor feedback by talking directly with visitors during the open house or by using visitor comment cards on other viewings. Make the Price Right In today's market, buyers seem to be in the driver's seat when it comes to negotiating a purchase. They're also more savvy when it comes to knowing comparable sales in the area. It's important for sellers to price their home in the range of similar homes. Even discounting it perhaps up to 15% below the fair price could make the home look like a better deal to potential buyers. Market in the Right Season Real estate purchasing can be a seasonal issue. If you can wait until the high season to offer your property, you might want to consider doing so. This is because during the off season, buyers may be looking to make a deal and might put in a lower offer during the negotiation phase because of less demand. Take time to consider whether you are going to offer your property during the spring, summer, or winter months. Use Your Social Network Social media sites like Facebook, Twitter, or YouTube help information reach larger audiences. Sharing information about your property with your social media network helps spread the word about your listing to not just your friends, but your friends' friends. Use tools like photo galleries and video to share your home's best features. Make it personal. Talk about what you love about the house. Selling a home is never easy in a down market where inventory exceeds demand. By taking some of these steps and being proactive in creating the best experience for potential buyers you can improve your chances of selling your property and possibly make a potentially long and trying experience easier.