King County house prices post year-over-year rise for first time in 2 years

Median house prices in King County rose year-over-year in March for the first time in more than two years, according to statistics released Monday by the Northwest Multiple Listing Service.

The median price of a single-family home that sold last month was $367,250, the broker-owned service said, up 0.9 percent from March 2009.

The last time prices rose year-over-year was in January 2008.

The March bar was low, however. March 2009’s median, $363,850, was the lowest in years. And last month’s number, while higher, still was the lowest since then.

Median house prices in King County have fluctuated between $370,000 and $395,000 over the past year.

The broker-owned service also reported a surge in sales, which agents said was spurred by low interest rates, greater affordability and the upcoming expiration of federal tax credits for many homebuyers.

Buyers closed on 1,596 houses in King County in March, up 65 percent from the same month last year. Condo closings were up 47 percent.

Pending single-family home sales — offers that have been accepted by sellers, but haven’t closed — were up 63 percent in King County. The last time more pending sales were recorded was in May 2007, before the market turned.

But pending sales have become a less-reliable measure of sales activity in recent months as many deals — especially “short sales” for less than the owner owes on the house — fail to close.

In Snohomish County, closed house sales were up 74 percent year-over-year in March. The median sale price, $279,950, was down 11 percent.

Source: Seattle Times, by Eric Pryne (4/05/2010)

Don’t foreclose! Do a short sale

Short sales are the hottest thing going in the distressed-property market, and the trend is expected to get even hotter in coming weeks, when the government starts handing out cash to encourage lenders to close these deals.

“Banks have ramped up short sale approvals,” said Duane Legate of House Buyer Network, which connects short sellers with buyers. “They’re hiring a lot of the people who once worked in the mortgage-lending industry and moved them over to short sales.”

These transactions, where lenders allow homeowners to sell their houses for less than they owe, accounted for 17% of all residential real estate sales in February, up from nearly 13% in November, according to a monthly real estate market survey by Campbell/Inside Mortgage Finance.

And Bank of America (BAC, Fortune 500), the country’s largest mortgage servicer, has more than doubled the number of short sales it processed in recent months.

Elizabeth Weintraub, a Sacramento, Calif.-area real estate agent who handles many short sales, was amazed at how quickly a recent deal went through. “Bank of America approved it in 24 days,” she said. “That flipped me out.”

This is a huge change from even just six months ago when the short-sale market was stalled and most people would describe the process has real estate hell. Because lenders stand to lose so much on these transactions, they have been reluctant to make short sales happen, often waiting months before getting back to potential buyers.

Beware: You lost your house but still have to pay

“In the past, many short sales would never come to fruition and the ones that did averaged over half a year to complete,” said Chris Saitta, CEO of Equator, which produces short sale software.

“Things would just fall into a black hole and not come out again,” added Weintraub.

And even when banks did agree to the sale, the process could be further complicated if the original owner had a second mortgage.

In most cases, the first lender is repaid in full before any money flows to a second-lein holder. And because most distressed borrowers are severely underwater, there’s usually nothing left to send on. As a result, second-lein holders are left holding the bag and have been killing many deals.

But that has been changing. For one thing, banks realize that they make out far better financially with a short sale than a foreclosure. “The lenders lose 50% on a foreclosure and only 30% on a short sale,” said Glenn Kelman, founder of the real estate Web site Redfin. “And short sales offer a way to get distressed properties off their books quickly.”

And on April 5, lenders and mortgage investors will have even more incentives to offer troubled borrowers short sales instead of foreclosing.

Under the new Home Affordable Foreclosure Alternatives program, borrowers will earn a $3,000 “relocation incentive” and servicers will get $1,500 for handling a short sale.

The investors who actually own the mortgage notes will get $2,000 in exchange for sharing proceeds of the short sales with any second-lien holders. And, finally, those second lien holders will receive up to $6,000 for releasing their claims.

Lenders participating in the program must also determine the market values of properties early on and inform the owners of just what price they’re willing to accept. Then, if owners come back to the lenders with bonafide offers, they have to be accepted within 10 days.

Equator’s Saiita anticipates a short sale explosion in response to the new program. “The challenge will be handling all the volume,” he said.

The company has already tweaked its software, which 58 servicers use, to handle the new HAFA rules. And that should help reduce the time it takes to execute a sale, which currently averages 88 days.

The boom in short sales may accelerate the end to the foreclosure crisis by cleaning out the overhang of borrowers in distress and replacing them with more stable homeowners.

Plus, these sales are better for distressed borrowers because their credit scores suffer less. Going through a foreclosure can knock 200 points off a FICO score, twice as much as the penalty for a short sale.

Source: CNNMoney.com, By Les Christie (03/29/2010)

Bank of America to cut some mortgage balances

Housing experts argue that borrowers are more likely to walk away if their mortgages are underwater, meaning they owe more than the home is worth. Nearly 25% of borrowers are underwater, according to First American CoreLogic.

Bank of America is launching the program to entice more borrowers to participate in its foreclosure prevention efforts and to reduce the chance of redefault, said Barbara Desoer, president of Bank of America Home Loans.

When modifying mortgages, Bank of America will initially consider reducing the balances of borrowers with qualifying subprime, Pay-Option ARMs and prime 2-year hybrid ARM loans to bring down the monthly payments to 31% of pre-tax income. Currently, banks first look to reduce interest rates or lengthen the term.

TARP watchdog slams Obama foreclosure program

Homeowners who are at least 60 days late and whose mortgages total more than 120% of their home’s value can have their balances reduced over five years by a maximum of 30%. Borrowers must also meet the criteria for the president’s loan modification program.

“Bank of America has found that many homeowners who owe considerably more on their mortgages than their homes are worth are reluctant to accept a solution that addresses only the amount of the payment without an accompanying reduction in the balance due on the loan,” said Desoer.

Borrowers also must qualify for the servicer’s National Homeownership Retention Program to be considered. The initiative was developed as part of Bank of America’s 2008 settlement with state attorneys general to assist Countrywide Financial Corp. borrowers with subprime and Pay-Option ARMs.

The settlement called for Bank of America, which acquired Countrywide in July 2008, to modify troubled mortgages with up to $8.4 billion in interest rate and principal reductions for nearly 400,000 Countrywide customers.

The bank expects that 45,000 borrowers will qualify to have their loan balances reduced by a total of $3 billion under the program announced Wednesday. It is set to begin in May.

Pay-Option ARMs allow borrowers to make tiny monthly payments, but the unpaid interest is tacked onto the mortgage balance, a practice called negative amortization. Two-year hybrid ARMs have a fixed interest rate for the first two years, but adjust after that.

How it will work

Under the “earned principal forgiveness program,” borrowers will receive an interest-free forbearance of principal that can be turned into forgiveness if the homeowner makes timely payments over five years.

The ultimate amount forgiven depends on an updated appraisal of the property. Bank of America will not reduce balances below 100% of the home’s value.

These conditions will also make the program more attractive to investors because it should reduce the probability of redefault and adjust the amount forgiven if home values rise, Desoer said.

The servicer is also making changes to its National Home Retention Program. It will reduce the negative amortization on Pay-Option ARMs through principal forgiveness and will convert the loans to ones that don’t build up the balance.

It will also expand the program to cover Countrywide loans originated on or before Jan. 1, 2009, and will extend the program by six months to the end of 2012.

Many housing experts, lawmakers and even some mortgage investors have been pushing servicers to reduce loan principal. But Treasury officials and bank executives have said they are concerned about the “moral hazard” of helping those who don’t truly deserve or need it.

Still, experts say that principal reduction is a must, especially in areas hit hard by falling home values.

Bank of America announced Wednesday that it will first look at reducing the loan balances of certain distressed homeowners with subprime or adjustable rate mortgages to make their payments more affordable.

The move makes Bank of America (BAC, Fortune 500) one of the first major loan servicers to systematically incorporate the controversial loan modification technique into its home retention program. Financial institutions, as well as the Obama administration, have come under increasing pressure in recent months to add principal reduction to their foreclosure prevention efforts.

“Principal reduction is an important tool in making loans sustainable for many borrowers,” said John Taylor, head of the National Community Reinvestment Coalition, who praised BofA’s effort. “The rest of the industry should follow suit. And federal policy should reflect the growing consensus that principal reductions are required to stem the foreclosure crisis…”

Source: CNNMoney.com By Tami Luhby, senior writer (03/24/2010)

New Foreclosure Prevention Plan Announced

President Obama is announcing an expansion of foreclosure-prevent tactics, including a plan to reduce principal balances and special aid for unemployed borrowers.

The bulk of the responsibility for carrying out the new program will be assigned to the Federal Housing Administration, which will insure lenders against part of the losses.

The plan asks banks to write down loan balances to less than the value of the home. If there is both a first and second mortgage, the combined total would have to be no more than 115 percent of the home’s value.

The Treasury would pay part of unemployed homeowners’ loans for three months while they job hunt.

Source: The Wall Street Journal, Nick Timiraos and James R. Hagerty (03/25/2010)

Foreclosed Borrowers May Get Loans Again

Will people who currently face foreclosure or short sales or who walk away from their underwater properties ever be able to get financing to buy another home down the road?

Banks haven’t been very forthcoming on this issue. However, knowledgeable observers of the situation say that while it may take some time, the situation will right itself for most people.

Because bankrupt borrowers have eliminated their debts, they should “constitute attractive fodder for mortgage lenders,” says University of Michigan law professor John Pottow, whose specialty is bankruptcy.

As home prices and the mortgage market stabilize, lenders will be motivated to lend to people who previously had financial troubles if they look like they can pay the next time around, says Alan Riegler, a consultant with CCG Catalyst, which advises banks.

“The lender who figures out how to do more of this case-by-case stuff cost-effectively is going to end up ahead of the pack,” Riegler says.

Source: Inman News, Matt Carter (03/05/2010)

Head of FDIC Supports Loan Write-Downs

The possibility of solving the underwater mortgage problem by writing down principal has been deemed politically impossible by the Obama administration, but some government officials see write-downs as the best long-term solution.

One of the most outspoken supporters of write-downs is Federal Deposit Insurance Chair Sheila Bair. This week, she called underwater mortgages a continuing problem and said the FDIC is “actively looking” at ways to encourage principal write-downs in the deals it does to facilitate acquisitions of failed banks.

Overall, Bair was positive about housing finance. “After three long and difficult years for housing and mortgage finance, I think we’re seeing some progress in stabilizing our housing markets,” she said.

Source: Reuters News, Karey Wutkowski (03/04/2010)

Home prices inch up on Eastside, in Seattle year-over-year

After a two-year slide, home prices may be starting to inch up in big chunks of King County, February home-sale statistics suggest.

The median price of a house that sold on the Eastside last month was $490,000, up 1 percent from February 2009, the Northwest Multiple Listing Service reported Thursday. While minuscule, it was that area’s first year-over-year increase since December 2007.

Seattle’s median price also rose slightly for the second month in a row after nearly two years of declines.

Countywide, however, the median single-family home price, $373,010, was down 0.5 percent from a year ago. The chief reasons: Southwest and Southeast King County, the county’s most affordable areas, where median prices fell by double digits.

Sales volumes were up strongly throughout the county, 51 percent overall from February 2009. It was the ninth straight month of year-over-year gains, fueled by low interest rates, federal tax credits and mild winter weather.

But brokers say prices in South King County are continuing to fall because houses repossessed by banks and short sales — those for less than the seller owes on the home — make up a bigger share of that market.

Those sellers are more likely to settle for less. “It’s putting a lot of downward [price] pressure on sellers who are not in trouble,” said Tony Hettler, broker-owner of the John L. Scott office in Des Moines.

In Seattle and on the Eastside, in contrast, brokers say move-up buyers are returning to the market.

In Seattle’s Capitol Hill and Madison Park areas, 39 houses sold in February with a median price of $596,000, according to the listing service. That’s up from just 17 houses that sold in February 2009, with a median price of $409,000.

“We are starting to see high-end sales in bigger numbers,” said Dave Hale, broker at Windermere Real Estate’s Madison Park office.

Prices have dropped, he said. Jumbo loans — more than $567,500 — are easier to get. And the stock market has come back from the depths of a year ago.

“For a lot of these folks, their portfolios have probably come up 30 or 40 percent,” Hale said. “They’re feeling more confident.”

He said he sees few short sales or sales of bank-owned homes in the central-city neighborhoods he serves.

In Southwest King County, in comparison, foreclosed homes and short sales make up 26 percent of active listings, Hettler said.

He said he recently completed an analysis for an owner who wondered why condos in his building weren’t selling. The answer: Prospective buyers were gravitating toward single-family homes in the same relatively low price range.

“Two or three years ago [condos and houses] wouldn’t have been competing for the same buyer,” Hettler said.

Overall, King County condo sales rose 26 percent last month from February 2009, the listing service said. The median condo price was down 3 percent but, again, it varied significantly by area.

The median price rose 6 percent in Seattle and 19 percent in Southeast King County, but fell 13 percent in Southwest King County and 12 percent on the Eastside.

The median price of single-family homes sold in Snohomish County in February was $280,000, down 10 percent from the same month last year. Sales were up 53 percent.

Source: Seattle Times, Eric Pryne, (03/06/2010)

Pending Home Sales Drag In January, But Should Rebound For Spring

Fewer homes went under contract in January as the housing market continues to limp through the winter months.

According to the National Association of Realtors®, the Pending Home Sales Index fell to its lowest level in 3 quarters this January. By contrast, in October 2009, the index had touched a 3-year high.

The Pending Home Sales Index measures the number of homes that have gone under contract to sell, but have yet to close nationwide. It’s compiled using data from more than 100 regional listing services and 60-plus brokerages  — the sample set encompasses 20 percent of all home resales in a given month.

Economists have come to rely on the Pending Home Sales Index because of its high correlation to actual home sales. 80% of all home marked “pending” close within 60 days. Many of the rest close within 120.

Therefore, when we see Pending Home Sales show weakness like it did in January, we can infer that home resales will remain weak through the spring.

But will they really?

1. Fewer sales should drag down home prices, bringing more buyers into the market
2. Mortgage rates are still very low, but are poised to rise in just a few weeks
3. The home buyer tax credit requires buyers to be in contract by April 30, 2010

In other words, there’s a confluence of factors that could lead to a rush of sales around the country over the next two months, reversing the housing market’s recent momentum.

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Foreclosure Bargains Getting Harder to Find

Home buyers hoping to snag a really good deal on a foreclosed home are finding it increasingly difficult because supply is shrinking.

The number of foreclosures that are available for sale nationwide fell to 617,000 in December, down from 845,000 in November 2008, reports Barclays Capital.

Not only have attractive homes in popular neighborhoods already been snapped up, but also government help for distressed buyers is delaying more foreclosures.

Demand is driving up prices. Investors say typical prices have climbed from 75 percent of appraised value to 85 percent or higher when there are bidding wars.

Source: The Wall Street Journal, James R. Hagerty (02/23/2010)

45-story condo tower proposed for low-profile Federal Way

A 45-story condo tower — in Federal Way?

That’s the plan longtime Seattle developer Steve Smith and two Korean-American partners unveiled Wednesday.

The Sky Hotel & Residences would be the tallest building between downtown Seattle and downtown Portland, said Patrick Doherty, economic-development director for the low-rise suburb of 87,000 residents.

“It would definitely be the exclamation point on our skyline,” he said.

The $225 million project would be built with money from foreign investors who, under an obscure federal program, can parlay investment in certain neighborhoods into permanent U.S. residency, or “green cards.”

An application by the city and the Sky project’s developer, Twin Development, to include downtown Federal Way in the program was approved by U.S. Citizenship and Immigration Services last fall.

Without that designation and the inducement of green cards, the proposed condo tower wouldn’t have penciled out, said Smith, Twin’s co-manager.

He said he and his partners, Luke Hwang and Pom Kwak, have been pitching the project to potential investors for some time. “It’s gone very well,” he said, but would not provide details.

Federal Way has a large Korean-American population, and the developers expect most of the investors would be Koreans, Smith said.

Investors later would have the option of converting their investment into ownership of a unit in the building, he added.

The Sky Hotel & Residences would be built on 2 acres on 23rd Avenue South where a Mexican restaurant once stood. The site is close to Interstate 5’s South 320th Street interchange and the Federal Way Transit Center.

The project would include a 120-room hotel, about 24,000 square feet of restaurants, shops and office space, and 400 condos of about 1,000 square feet each. They would sell for $500,000 to $600,000.

The developers hope to break ground next spring and complete construction in 2014, Smith said.

Twin doesn’t own the land yet and hasn’t filed permit applications. But Smith said the property is under contract, and the developers have submitted pre-application materials to the city.

There have been few new condo starts since the economy sank and the real-estate and credit markets collapsed two years ago. Recently completed high-rise, high-end condo towers in downtown Seattle and downtown Bellevue have had trouble attracting buyers.

But “the market may look very different in four or five years,” said Dean Jones, of the condo-marketing firm Realogics, who is consulting on the Sky project.

Twin first approached Federal Way about the project a year ago, said Doherty. It’s in keeping with the city’s long-stymied efforts to reshape its sprawling center into a higher-density, less auto-centered downtown, he said.

“We’re a designated urban center,” Doherty said, “but we haven’t really gotten there yet.”

Federal Way’s tallest building now stands just nine stories.

The federal program under which the Sky project is being marketed to foreign investors is known as EB-5. It grants would-be immigrants residency if they invest at least $500,000 in a project that creates at least 10 jobs in a designated “regional center” targeted for economic growth.

In Seattle, developer Henry Liebman has used the EB-5 program to attract more than $150 million in foreign investment to the Sodo District, where he has acquired more than 40 acres.

Liebman also has won “regional center” designations for Everett, Tacoma and Lakewood.

Federal Way’s regional-center application was supported by Gov. Chris Gregoire, among others. “It is imperative that additional, creative sources of redevelopment financing be found,” she wrote last year.

Smith, Twin’s co-manager, has built more than 1,300 apartments and condos in the Seattle area over a 20-year career, according to his company’s Web site.

He also has obtained permits for 2,000 more units, then sold the projects to other developers to build.

The Sky project is his biggest undertaking yet, he said.

There is little, if any, market for high-end condos in Federal Way now.

The median price of condos sold in Southwest King County last year was $150,500, according to the Northwest Multiple Listing Service.

Of 349 units sold in 2009, just three fetched more than $500,000, where the Sky project’s prices would start.

“I don’t know of anyone who would pay that kind of money to live in that area,” said James Stroupe, a condo specialist at Windermere Real Estate in Seattle.

“But if you’re sitting in Singapore with lots of money, this gets you a door into the country. It’s very intriguing.”

Source: Seattle Times, Eric Pryne (02/17/2010)