Busy Realtors ride rising tide of foreclosures

The residential foreclosure market set a sales record in 2008, and Realtors active in this sector anticipate an even bigger year in 2009.

“It’s the busiest year I’ve ever had in my 28 years in the business,” says Mike Weaster, a Realtor with Century 21 Excel.

Weaster sold 779 foreclosed homes — up from 680 in 2007 — for a total of $86.9 million in 2008, despite losing approximately 200 deals during Hurricane Ike.

Tracy Nicola, owner of Houston-based Nicola Real Estate, saw a similar surge in foreclosure sales. Her team recorded 532 transactions in 2008 worth $53.5 million on homes ranging in price from $15,000 to $1 million.

Nicola and Weaster both say sales would have been higher except for a decision by the Federal National Mortgage Association in November to suspend foreclosures until January.

Weaster sees even more of the same in 2009 and beyond.

“It’s steadily picking up right now and I don’t see it leveling off until at least 2011,” he says.

Nicola views prospects for the coming year with a mixture of anticipation and hope.

“I think this year is going to be even higher once the moratorium is lifted later this month,” she says. “But, I hope for the sake of economy that it’s not going to be as bad as I think it’s going to be.”

Market in limbo

Foreclosure listings for Harris County rose only slightly last year (see related box), but that could reflect the calm before the storm.

Nicola says the current state of the local foreclosure market is in a period of “limbo” due to the moratorium, but she expects a windfall of homes to be released over the next two months.

She says there’s no “rhyme or reason” to the local foreclosure market, noting that some subdivisions are being completely depleted by foreclosures while others haven’t even been touched.

Weaster says foreclosures are affecting every neighborhood and every price point in the Houston market.

He recently sold a foreclosed $4 million, 27,000-square-foot home on Lake Woodlands to Farouk Shami, owner of Houston-based Farouk Systems Group, for $2.6 million.

While some in the industry are hopeful that President Barack Obama’s new policies will have a dampening effect on foreclosures, Weaver thinks the situation goes beyond politics.

“It’s all based on the lack of movement of cash within the economy,” he says. “There are still buyers out there, but our biggest issue now is getting them financing.”

The bulk of foreclosures over the past two years involve owners who assumed mortgages they couldn’t pay to buy houses they couldn’t afford.

Weaster says the trend will continue as adjustable rate mortgages written in 2004 and 2005 begin to adjust, forcing more people out of their homes.

While lenders become more picky about financing, owners looking to sell their homes due to economic hardships will find it more difficult in a market where builders are reducing prices of new homes.

Nicola notes that a lot of homes on the foreclosure market were purchased by owners who took advantage of the 100 percent financing option during the hot housing market.

Says Nicola: “I believe that if you don’t put your own money in it, you’re not going to take care of it as well, and that’s why we’re seeing so many homes foreclosed on.”

Annual foreclosure figures tone down fanfare

While some Realtors have found a windfall in home foreclosure sales, the overall numbers suggest a far less volatile market.

The 2009 Foreclosure Forecast for Harris County issued by the Foreclosure Information & Listing Service shows the actual number was 11,837 in 2008, a miniscule increase of less than 100 over the 11,766 foreclosures in 2007.

The 0.6 percent bump is the smallest rate of increase year-over-year since 1999 when actual foreclosures declined 8.7 percent compared to 1998.

The Foreclosure Information & Listing Service owes the small increase to the moratorium imposed by the Department of Housing and Urban Development on areas affected by Hurricane Ike, along with the national moratorium on foreclosures imposed by the Federal National Mortgage Association in November.

The Woodlands-based firm makes the following forecasts:

• There will be some short-term moderation in foreclosure activity during the first few months of the year, thanks to on-going foreclosure mitigation efforts of both the financial industry and the government that started in October.

• Effects of an expected significant rise in unemployment will start impacting the Harris County foreclosure market in the second and third quarters of 2009.

Allison Wollam

Ohio Foreclosures – Good News and Bad News

CNN Money reports about the US subcommittee efforts to bring together a relief package, or legislation reform to help the ailing housing market in Ohio and other states. The article sites some numbers from Realtytrac and some are good for Ohio, and some are not so good.

Across the country foreclosures surged 48% in the month of May which is not encouraging. However Ohio saw a 7% drop in foreclosures compared to the same month in 2007. Hopefully this is the beginning of the reversal of a trend that sees Ohio’s foreclosure rate growing every year since 2000.

At some point all of the adjustable rate mortgages will have reset and the home owner will either refinance a fixed rate they can afford, negotiate with the bank, sell their home, or foreclose. The question we in the real estate and mortgage profession is when will we hit bottom, when will we have moved past a point when all of the crisis mortgages have been flushed from the system and we can slowly begin to rebuild the housing industry based on sound lending principals and appropriate risk / reward tolerances. The end goal is to attract investors to buy up relatively bland, and previously dependable residential mortgage backed securities. Only then will we know the depth of the damage to the reputation of the housing industry as an investment vehicle.

Ohio Sues 2 Cincinnati-Based Foreclosure Rescue Services

Ohio Attorney General Richard Cordray filed a lawsuit Friday against two Cincinnati-based foreclosure rescue companies accused of failing to deliver on their promises to save consumers from foreclosure. 

The suit, filed in the Hamilton County Court of Common Pleas, charges Foreclosure Assistance USA Inc. and American Foreclosure Professionals Inc. with several violations of Ohio consumer protection law. 

“These companies have been sending direct-mail solicitations that specifically refer to the foreclosure lawsuit an individual consumer is facing by its unique case number,” said Cordray in a news release. “The companies said they could offer immediate assistance in saving the consumer’s home from foreclosure, but they failed to do so. They promised work-out agreements, but did not deliver.”

Cordray said an investigation of FA USA and AFP, which began in March 2008, found that the same person serves as president of both companies and that the two companies offer similar foreclosure assistance services to consumers facing foreclosure. 

In addition to direct-mail, AFP also advertises its services at www.helpstopforeclosurenow.net. 

The lawsuit charges the companies with violating Ohio’s Consumer Sales Practices Act, Credit Services Organization Act and Debt Adjusters Act. Cordray said his office currently has four unresolved complaints against AFP, with damages ranging from $700 to $900 each. 

The office also has four unresolved complaints against FA USA, with alleged damages between $900 and $1200 each. 

In the lawsuit, Cordray asked the court to prohibit FA USA and AFP from committing further violations of the law and to require the companies to reimburse consumers and pay civil penalties.

Foreclosures drag down prices

Existing-home sales drop 16% in 2008!

Home sales and prices continued to tumble in 2008 as a third year of housing market corrections ran their course in Greater Cincinnati and Northern Kentucky.

Existing-home sales dropped 15.8 percent in Greater Cincinnati last year compared to activity in 2007, while in Northern Kentucky, sales were off 14 percent, according to reports released Monday by local boards of Realtors.

Nationally, sales declined 13.1 percent over 2007 – the slowest sales activity since 1997, the National Association of Realtors said

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“The numbers are a bit sobering, but expected,” Johnny Hodge, president of the Northern Kentucky Board of Realtors, said. “We’ve absolutely noticed a tightening in credit and lending standards, which ultimately is a good thing, but we think the pendulum has swung a bit too far, and some parameters are so strict there is some overcorrecting going on.”

Experts also say the housing market continues to be thrown out of balance by an excess supply of lender-owned and foreclosed properties.

The impact is felt most heavily in sales prices, which have been dragged down as lenders move aggressively to shed troubled real estate from their portfolios.

“Take out distressed sales, and we had a pretty good market last year,” Paul Jacob, president of the Cincinnati Board of Realtors, said.

In Greater Cincinnati, the average sale price fell last year by 6.7 percent to $162,340, the Cincinnati Realtors reported. The median price – which is the point at which half the homes sell for more or less – fell 20 percent to $102,513 in December compared to the same month in 2007. A median price was not available for the full year.

Pricing was less affected in Northern Kentucky.

The average sale price remained relatively unchanged at $160,611, and the median price for the year dropped 3.3 percent to $132,324, according to Northern Kentucky Multiple Listing Services data.

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Nationwide, the median price last year was $198,600, down 9.3 percent from $219,000 in 2007. The decline was the biggest since the national Realtors began keeping records in 1968, and experts said it’s probably the biggest drop in seven decades.

The sales report did contain good news. Sales in Greater Cincinnati rose 8.4 percent in December compared to November as more buyers entered the market to take advantage of low interest rates and favorable prices.

“Mortgage rates are on sale right now,” Jacob said, adding that the recent rates, which have hovered around 5 percent to 5.5 percent, are the lowest seen since 1963.

While the December sales spike was encouraging, experts said they don’t think that it indicates we’re at the bottom of the correcting market.

Local officials said the inventory of unsold homes in Greater Cincinnati remains high, with a 10-month supply of houses. The figure – which is down considerably from 2007 levels – represents the amount of time needed to sell all of the homes currently on the market.

The excess inventory is an advantage for prospective buyers – but it’s still indicative of an unbalanced and correcting market, Jacob said. A balanced market – one that is competitive for buyers and sellers – has a six-month supply, experts say.

“We’re still going through the equation of supply and demand,” Jacob said. “When the supply numbers come closer to demand numbers, you will see a more stable real estate market.”

Meanwhile, local home builders continued to be hit hard last year by the declining market.

In Southwest Ohio, permit activity for new single-family home and condominium construction fell 39 percent last year over 2007, according to Home Builders Association of Greater Cincinnati.

Northern Kentucky saw a 31 percent drop for the year, the Northern Kentucky Home Builders Association reported.

“Builders are trying to diversify as much as possible,” said Dan Dressman, executive vice president of the Northern Kentucky HBA. “I’m not sure anyone knows what’s around the bend. We’re just taking it one day at a time and maximizing opportunities that do come our way.”

The New York Times contributed.

US Foreclosure Filings Up 81 Percent In 2008

Nationwide, more than 860,000 properties were actually repossessed by lenders, more than double the 2007 level, according to RealtyTrac, a foreclosure listing firm based in Irvine, Calif., which compiled the figures.

Foreclosure activity rose 26 percent last year in Ohio, a state that had one of the nation’s highest foreclosure rates, the report said.

The four states with the highest foreclosure rates last year were Nevada, Florida, Arizona and California. Ohio ranked 7th.

More than 1.1 million properties in those four states received a foreclosure notice, almost half the national total. And more than one in five of those households were in California, which is coping with massive job losses in the housing and mortgage industries as well as a rapid decline in home prices.

In December, more than 303,000 properties nationwide received at least one foreclosure notice, up more than 40 percent from a year earlier and up 17 percent from November, according to RealtyTrac.

Nearly 79,000 properties were repossessed by lenders in December, a 61 percent increase over a year ago.

In a speech at the University of Delaware, Charles Plosser said that the unemployment rate probably won’t drop anytime soon, but that he doesn’t expect it to rise to double digits, as it did during the recession of the early 1980s.

“I expect the housing sector will finally hit bottom in 2009 and the financial markets will gradually return to some semblance of normalcy,” said Plosser, adding that the current recession could be one of the longest in the post-World War II era.

Problems With Foreclosed Properties in Cincinnati

Most homeowners in Cincinnati are under stress related to foreclosures, where there are 7,800 active listings of Bank-owned properties as of Sept. 30 in the Tri-State which adds up to the stress level of those people who still live in the said area.

Lorie Batdorf, the executive director of Hamilton based foreclosure consulting firm Neighborhood Housing Services, commented that when house owners vacates their properties because of foreclosures, those homes wouldn’t be maintained and so, there would be cases of people breaking in just to steal copper. This situation on foreclosure homes are totally discouraging for those people who are still living in the area.

Although, Cincinnati has 15 regions and has 27 zip codes but they have 100 bank-owned properties. Neighborhoods in Middletown, Mount Healthy and Price Hills have the highest rank in foreclosed properties and more than 7 percent of them in owned by lenders.

When foreclosed properties are closed, they can’t get loans for these properties and would just sit on the market that makes the price value of the repo homes down. A good example of this is what is happening in Southwest Ohio with the average sale price of homes sold declined to about 5.5 percent.

This also cause tension to both lenders and neighborhoods with foreclosed homes such as the evidenced of lawsuit filed by a neighborhood group, Price Hill Will, last July. They allege Deutsch Bank for failing to comply with city rules covering non-occupied buildings and ask them to pay $112,000 in fines and fees.

This situation on neighborhood activists and lenders with the mounting complexity of the mortgage markets are just but some problems the nation is facing. Deciding ownership is also difficult in foreclosure propertiesespecially those involving mortgage-backed securities. Although there are a lot of complexity in foreclosures.

Ken Smith, the executive director of Price Hill Will said that this is only an excuse given by property managers and that they have to deal with the problem. Such as what David garner is doing. He made a property management company, Turkey Asset Management Solutions LLC, to helpbank-owned homes for maintenance and prepared them for resale.

In a weak Cincinnati housing market, some neighborhoods hot, some cold

lbaverman@bizjournals.com | (513) 337-9431