time to sell

8/6/2019 Time to Sell

http://slidepdf.com/reader/full/time-to-sell 1/112nd

QUARTER 2011

why now is A gREAT TimE To sEll


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TAblE of conTEnTs

5 Reasons You Should Consider Selling Now. .1

Will I Get More Money If I Wait? . 3

Almost 14,000 Houses Sold Yesterday. .4

What Exactly Is Shadow Inventory? . 5

Month’s Shadow Inventory: State by State . .7

The Impact of Distressed Properties on Neighboring Values. .8

Oswald Acted Alone and We Did Land on the Moon. .9



KEEPINGCURRENTMATTERS .COM 1 | P a g e

5 Reasons You Should Consider Selling Now

If you plan on moving anytime in 2011, you should strongly

consider selling your house now rather than waiting.

Here are five reasons why:

1. This is when your house will get the most exposure.

There is currently an increase in the number of buyers attending

open houses and searching online for a home. This surge

dramatically increases the exposure for your house. The best

chance of getting quality offers (perhaps even multiple offers) is RIGHT NOW!

2. Foreclosures and short sales will increase in about 90 days.

The good news is that the number of people paying their mortgage on time is increasing. This will lead to less

distressed property sales later this year and throughout 2012. The not-so-good news is that there is still a large

inventory of existing foreclosures and short sales that will still be coming to market.

As an example, LPS reported in their latest Mortgage Monitor that:

There are still twice as many loans going 90+ days delinquent as are starting foreclosure.

There are almost three times the number of foreclosure starts as there are foreclosure sales.

Distressed property inventory levels are almost 45 times the rate of monthly foreclosure sales.

This means that there is a backlog of properties which will start coming to the market in about 90 days as banks

clear up their paperwork challenges. These properties sell at dramatic discounts. They will be your

competition. Both Fannie Mae and Freddie Mac have recently discussed the magnitude of this challenge.

3. Interest rates have risen over the last six months.

Interest rates have stabilized recently. However, in the last six months, interest rates have climbed over 1/4%.

Every time the rates increase 1/4%, approximately 250,000 buyers are eliminated from qualifying for a mortgage.

In an environment of volatile rates, waiting could mean that there will be fewer buyers eligible to purchase your

house. It also could mean that you will pay a higher rate on the next home you buy.

4. Qualifying for a mortgage is about to get even more difficult.

Besides increasing rates, there are other factors that will hinder a buyer’s ability to qualify for a mortgage as we

move forward. Lending standards have been getting tighter over the last year. And as the government debates the

new proposed guidelines (QRM), banks are gearing up for even more stringent standards.

Morgan Stanley recently stated:

“Recent developments in issues such as GSE reform, Dodd -Frank securitization rules, and foreclosure settlement

issues suggest a tighter and more expensive environment for mortgage credit.”

This may impact any potential purchaser for your property and may also impact your next purchase.

(cont. on next page)

http://www.lpsvcs.com/LPSCorporateInformation/ResourceCenter/PressResources/Pages/MortgageMonitor.aspx



http://kcmblog.com/2011/04/04/qrm-is-the-pendulum-swinging-back-too-hard/



http://www.housingwire.com/2011/04/25/morgan-stanley-revises-house-prices-downward-again









5. It’s time to get on with your life.

Probably the most important reason to sell is so you can get on with your life. You placed your home on the market

for a reason. Do not allow a less-than-stellar housing market prevent you from reaching your goals as an individua

or as a family. Think about the reasons you decided to move in the first place. Are these reasons still important to

you? If you have to take less than you were originally hoping to get for your house, your family has a question to

ask each other: Is the dollar difference in sales price worth putting off our plans? Only you and your family know

the answer to that question.

If you plan to sell this year, the reasons above prove that selling now makes more sense than waiting to later in the

year. Sit with a real estate professional in your area today to fully understand your best option.




Will I Get More Money If I Wait?

Sellers in any real estate market are looking to get the best

possible price. If you are looking to sell in the next year, today’s

price may well be the best price. Home values stabilized

somewhat in 2010. Many hoped that was a sign that values had

bottomed out and we would see price appreciation in 2011.

Studies released recently have painted a different picture.

Mark Fleming, chief economist with CoreLogic, said, “A number

of factors continue to dampen any recovery in the housing

market. Negative equity, which limits the mobility of

homeowners, weak demand and the overhang of shadow

inventory all continue to exert downward pressure on housing

prices. We are looking out for renewed demand in the coming

months as the spring buying season gets underway to hopefully

reduce the downward pressure.”

They are not talking about the spring market increasing or even

stabilizing prices. They hope it will “reduce” the pressure to drive

prices lower.

Radar Logic’s RPX Composite Price comes to virtually the same conclusion:

Radar Logic believes the RPX Composite price will continue to exhibit year-on-year declines throughout 2011 due

to a growing supply of homes for sale and in the inventories of financial institutions, and weakening demand due to

the reduction of government incentives for home buyers. Moreover, banks are facing uncertainty over whether they

will be forced by regulators to expand mortgage modifications, and may reduce lending and tighten standards as a

result.

“No matter what you call it, a ‘double dip’ or the continuation of a long process of deterioration, the current trend

in home prices is evidence that housing markets are continuing to languish,” said Quinn Eddins, Director of Research

at Radar Logic. “ We expect the negative trend to continue under a severe supply overhang that includes a large

and growing ‘shadow inventory’ of homes in default or foreclosure.”

It seems that prices have again begun to fall nationally. With the overhang of existing and shadow inventory, prices

will probably continue to decline throughout most of 2011. If you’re thinking of selling, now might be the best

time. Check with a local real estate professional to see how this might impact your area.

http://campaign.r20.constantcontact.com/render?llr=qbyn7kcab&v=001bX0lc4lcuhN2K7o0LOd3vCqwW3OS11avYuqLq9AHSgHY2ZAPxzJ3940cPEjtu77qKmIebbmfhVC7YDPGelMBIusSW_Ce3-VAHciFOpdtY3DKH77gMuGaFcsWiJhPbmAPfFICXxb8AxJOum9l7kKyGWfLCpSVJs3SJIB4CSH5ikeS_YrZx9NCUC7Uraen7rehP0uLPW4-h2k3SbMYbzs0bttFfGTvwXsS







Almost 14,000 Houses Sold Yesterday

One of the biggest misconceptions in today’s housing market is that

homes are not selling. That is simply not true. The National

Association of Realtors (NAR) is showing that homes were selling at

an “annual rate of 5.10 million”. That’s an average of 13,973 every

day – 365 days a year !

We realize that 40% of the sales are distressed properties and that

22% of buyers are investors. Yet, that still doesn’t negate the fact

that homes are in fact selling… and 60% of them are NOT

foreclosures or short sales.

And Lawrence Yun, chief economist of NAR, believes this uptick will

continue:

“Based on the current uptrend with very favorable affordability

conditions, rising apartment rents and ongoing job creation,

existing-home sales should rise around 5 to 10 percent this year.”

Homes are selling. You probably will need to offer a compelling

price if you put your house on the market. But if you do, it will sell.




What Exactly Is Shadow Inventory?

It is difficult to read an article about real estate today without the term

‘shadow inventory’ being mentioned. But, what exactly is shadow

inventory? It refers to the inventory of homes not yet for sale that will

eventually come to market in the near future. Most definitions include

properties already foreclosed on and owned by the banks (REOs), thosehouses in the foreclosure process and those homes where the

homeowner is seriously delinquent on their mortgage payment (at

least 90 days behind).

There are many questions about shadow inventory. Today, we want to

address the most common misunderstandings.

I’ve heard about shadow inventory for years.

Does it really exist?

Not only does it exist, it is being slowly released onto the market. TheNational Association of Realtors has reported that over 30% of all home

sales over the last few months have been distressed properties.

Why include seriously delinquent homes in this number?

Seriously delinquent are counted because studies show that 98% of all

those who fall 90 days behind never catch up and these properties

eventually come to the market as distressed sales (short sales or

foreclosures).

Do banks have a backlog of properties that they currently own?

Yes. In an article in Housing Wire, RealtyTrac Senior Vice President Rick Sharga said:

“…major banks currently hold roughly 1 million REO, or homes repossessed through foreclosure, but only 30% have

actually made it onto the market.”

Why are banks holding this inventory?

The article mentioned above answers this question this way:

Striking a proper balance on how to manage this shadow inventory of foreclosures is vital for the banks to show a

healthy balance sheet while not dumping too many distressed properties onto the market, further dragging down

home prices and values.

(cont. on next page)

http://www.housingwire.com/2011/01/31/realtytracs-sharga-banks-still-holding-70-of-reo-from-market







Isn’t most of this inventory sub-prime and exotic mortgages?

Not any longer. A study recently done by Morgan Stanley shows that:

26.3% of the loans are sub-prime

17.4% are Alt-A

56.2% are prime mortgages

Right now, prime mortgages make up the majority of loans in this shadow industry.

Isn’t most of this inventory confined to CA, AZ, NV and FL?

Not anymore. The Morgan Stanley study showed:

…the shadow inventory is growing across all of the United States…”While hard -hit cities represent a more than fair

share of shadow inventory, its distribution broadly encompasses all corners of the country,” said the analysts.

Shadow inventory is real and will impact almost every part of the country. Make sure you ask a local real estate

expert to find out how it may impact your market.

http://www.housingwire.com/2011/01/28/banks-grip-on-prime-shadow-inventory-growing-morgan-Stanley







Month’s Shadow Inventory: State by State

The National Association of Realtors’ (NAR) Economists’ Outlook shows the number of months shadow inventory

by state:

NAR Explained their Methodology:

The map shows the number of months it would take to clear the shadow inventory by state. The months’ supply is

estimated by dividing the shadow inventory and the monthly number of distressed sales. The numbers range

broadly from 51 months in New Jersey to 7 months in Nevada. When looking at months’ supply it is important to

keep in mind that this estimate highly depends on saturation of distressed sales. Given that New Jersey over the

past year on average reported about 20 percent of existing home sales to be distressed sales, it will take a longer

period for the shadow inventory to clear. In contrast, Nevada’s distressed sales averaged a considerabl e 70 percen

share of the existing sales and at that rate the current shadow inventory would clear in 7 months.

Appreciation of residential real estate will not take place until a region works their way through the shadowinventory that exists. This map gives you an indication of when that will occur in your state.

http://economistsoutlook.blogs.realtor.org/2011/03/21/state-by-state-estimate-of-shadow-inventory/







The Impact of Distressed Properties on Neighboring Values

The banks are finally getting their foreclosure paperwork in

order. They will start bringing larger numbers of distressed

properties to market over the next six months. We must

realize that this influx of discounted inventory will have an

impact on the values of neighboring homes. How large an

impact?

According to RealtyTrac a foreclosure sells for 65% of the

value of a similar non-distressed property. Therefore, this

foreclosure inventory will affect values in two ways:

1. As Discounted Competition

Obviously, a segment of purchasers will prefer the discounted property based on price alone. Even if the distressed

property is in need of substantial repair, the buyer is getting the property at a 35% discount. Price is determined bysupply and demand. Distressed properties will eat up a portion of the demand for housing and that will put

downward pressure on all values.

2. As Comparable Sales on Your Appraisal

Even after you put your house into contract, this distressed inventory can still impact your transaction. Unless your

purchaser is paying all cash, there will be an appraisal of your property by the bank who is giving the mortgage to

your buyer to complete the purchase. Because of the volume of distressed properties selling in almost every

market, banks are instructing appraisers to use these discounted sales in determining values of non-distressed

sales. We can argue the logic of this some other time. At this point, we must simply be aware that this is

taking place.

As banks move substantial numbers of foreclosures onto the market, values of other homes in the region wil

be impacted.




Oswald Acted Alone and We Did Land on the Moon

We believe that things are usually as they seem. We are not the type

of organization that believes in conspiracies. However, there is

something interesting in some of the housing price studies we are

seeing in our research. It seems that some of the groups making the

predictions are the same ones that have the greatest power toaffect the prices they are projecting.

Most housing analysts warn that the heaviest downward pressure

on prices will be created by distressed properties and the speed at

which they will be released to the market. Research shows that

‘short sales’ sell at a 10% discount and foreclosures sell at a

whopping 35% discount. Obviously, when and how much discounted

real estate enters the market will have a major impact on prices of

surrounding properties.

Back to Our Research

We are now seeing that a certain segment of those projecting future

pricing have two things in common:

They believe prices will fall rather dramatically in 2011

They have control of the flow of discounted properties to the market

Predictions for 2011 by firms that fall in the above category:

Bank of America projects that prices will fall 3.7%

Fannie Mae predicts that median prices will drop $12,500

Wells Fargo reported that they feel home prices will drop 8%

Not a Coincidence

We are beginning to realize this is not a coincidence. The organizations which should best know when the surge of

foreclosures will be released are saying house prices will be hit hard this year. We are not asserting that there is

anything devious in what we have found. We are just reporting that those who have control over the flow of

distressed properties must think/know that inventory is about to be released. Why else would so many of them be

predicting a sharp decline in home values?

If you currently have your house on the market and are hoping that you will see a better price later in the year, BE

CAREFUL! Those in the know are warning you the best price might be attained TODAY!

time to sell

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