Best 10 Real Estate Markets in the U.S.

Orange County, California is not one of the best real estate markets in the U.S., but Utah has three cities in the top ten. The best city, Wentatchee, Washington is experiencing significant price increases through the first three quarters of 2007; 15.7 %. Wow! In comparison, O.C. closed sales in November 2006 compared to November 2007 went up 11.3%, while prices only went up an average of 1% over the same period. Of course, some O.C. cities are doing poorly while others are doing well. If you want a list of the top ten U.S. cities, or details on your city in O.C., contact me by email, tom@tomlevitt.com or call me at 714-264-5964.

California Foreclosure Process

The current real estate market poses some hearty challenges for everyone; especially, property owners having difficulty meeting their loan obligations. The process usually begins with what is called a “Notice of Default.” There are numerous possible outcomes leading all the way to a Trustee Sale. If you find yourself in the unfortunate circumstance of falling behind in your mortgage payments, or real estate property taxes, it is wise to talk to your bank or taxing authority to see what special arrangements they may be willing to work out with you. If you are interested in either listing or buying foreclosures, or other similar properties, I can help! Simply call me at 714-264-5964, or email tom@tomlevitt.com . This link provides a simple to understand process chart depicting how foreclosures work in California. Chart

Who will the Fed's Suprime Mortgage Plan help?

The Fed's plan is designed to help as many as 1.2 million homeowners who are heading for trouble paying their subprime mortgages, but aren’t yet in foreclosure, haven’t already refinanced, or those who are more than 60 days delinquent on more than one payment over the past year. All the others won’t benefit from the Fed’s plan. The initiative is supposed to help stabilize falling home prices and stem foreclosures. Many charge that the plan amounts to a bailout for financially reckless homeowners. Others think the plan does not go far enough. The contention is sure to continue. Actually, the housing crisis has spread beyond the relatively small subprime universe. Prime adjustable loans which are not covered in the plan, hit their highest rate since 1972, and accounted for nearly 20% of the mortgages starting foreclosure in the third quarter! Whatever your personal opinion on the plan, one thing is for sure, the housing market isn’t likely to improve for quite some time. Let me know what you think. Post your thoughts to this Blog.

It's not over yet!

You’ve seen and heard the bad news about home mortgage delinquencies and foreclosures which are on the rise nationwide. In some areas they are at record levels. While I wish I could assure you that the bad news is over, I can’t; because, I think it is likely to continue well into 2008. I think it is almost guaranteed, given anticipated interest rate resets on adjustable loans. Also, something that has been almost completely overlooked in the news is the effect energy costs are having on buyers’ decisions. Home energy prices have been rising for quite some time. Also, vehicle gas prices have had an effect on where people buy, and how far they are willing to drive in order to get their “dream home.”

Okay, so much for the gloom. Here’s the good news. Jobs and exports are way up. Fortunately the U.S. economy continues to expand and provide jobs despite the setbacks related to the housing market. There were nearly two million job gains over the past 12 months, and an average wage increase of 4% which is generating $700 billion in additional income for households this year! That easily offsets the negative impact of rising mortgage payments due to resets. Exports grew by nearly 7% in the latest quarter which shaved off a big chunk of our trade deficit. That translates to almost 1 % more in GDP! Here’s the bonus: the weak dollar will almost assure the U.S. of much stronger expansion due to exports over the coming years. These are all important to the real estate market. Don’t overlook what corporate profits are doing. They are solid, and double what they were in 2000; now at $1.5 trillion. The impact can be seen in the stock market which has been bouncing all over, but is still holding on strong compared to the great year of 2000. There are no predictions of recession, and that is what everyone should find joyful to their ears.

Okay. Where does this all lead us? Soft home sales for now; but, healthy job growth, and higher incomes will lead to more people wanting housing. Home prices will be going back up again. It is just a matter of how soon, and how much. I think mid to late 2008 will reveal my prediction. If you have a different opinion, let me know.

Holding Mortgage is Risky for the Seller

In today's market, most sellers have plenty of equity, which allows them to consider holding a portion of the buyer's mortgage. This is frequently referred to as a "seller carry back." The belief is, that these loans can yield an attractive rate of return for the seller. I don't consider them to be very good investments unless a seller can obtain a higher price on the sale. Although the rate may be high, second mortgages are riskier than first mortgages. Borrowers who get into trouble sometimes stop paying on the second while gambling that the holder of the second won't do anything about it. Forcing a foreclosure is costly and won't guarantee recovery of the second loan. Another problem is that mortgages must be serviced and few sellers are equipped to do it effectively. A higher price might overcome these negative factors. For example, if the seller can raise the price from $700,000 to $720,000 by providing a 9% second for $35,000, the ratio is 57% which is a great investment if the buyer repays. If not, the seller stands to lose up to $15,000. As a rule of thumb, I would not even consider a carry back unless the borrower's FICO was 750 or more. If the buyer puts more money down, I might consider a little lower score.

What's going to happen the second half of 2007?

For the past two years now, real estate has been slowing down in terms of sales, and price increases have pretty well come to a halt. In some areas of Orange County, prices have fallen back to where they were this time last year. I think this summer we will find more and more sellers putting their homes up for sale, and being more reasonable about prices. The ones who are just "testing" the market, will take their homes off the market by the end of the year. Interest rates will hold steady, or perhaps decline a little; which will encourage buyers to come back into the market when they see how interest rates improve their personal affordability. I believe prices will probably keep up with inflation.