Weekly Market Watch

Foreclosure Prevention Plan Guidelines Revealed

Earlier this week, the Obama administration released the guidelines which enable lenders to begin modifications of eligible mortgages under the administration’s Homeowner Affordability and Stability Plan. Here is a summary of the guidelines, direct from the Department of Treasury: http://www.treas.gov/press/releases/reports/guidelines_summary.pdf.

This “foreclosure prevention plan” (dubbed by the media as such) is estimated to help some seven to nine million homeowners make their mortgages more affordable and help to prevent the continuation of the devastation that foreclosures have caused in this country.

According to the U.S. Department of Treasury, “The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.

“GSE lenders and servicers already have much of the borrower’s information on file, so documentation requirements are not likely to be burdensome. In addition, in some cases an appraisal will not be necessary. This flexibility will make the refinance quicker and less costly for both borrowers and lenders. The Home Affordable Refinance program ends in June 2010.

”The Home Affordable Modification program will help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments. Working with the banking and credit union regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, the Treasury Department today announced program guidelines that are expected to become standard industry practice in pursuing affordable and sustainable mortgage modifications. This program will work in tandem with an expanded and improved Hope for Homeowners program.
With the information now available, servicers can begin immediately to modify eligible mortgages under the Modification program so that at-risk borrowers can better afford their payments.”

Industry online magazine, RISMedia, weighed in on the plan this week and offered this insight that I thought would be helpful: http://rismedia.com/2009-03-04/how-to-help-homeowners-understand-obamas-foreclosure-plan/

I know that many clients have a lot of questions right now and we are working to gather some communication tools to help. One good option in the meantime is a consumer-friendly Q&A recently put together by the Treasury Department, the U.S. Department of Housing and Urban Development (HUD) located at http://www.financialstability.gov/makinghomeaffordable/.

Now, let’s take a look at this week in our local real estate:

East Bay—Our Berkeley office reported 75 visitors to a Crocker Highlands listing, though traffic was rather slow at our other open houses. Berkeley was recently named #1 suburb in which to sell a home by Forbes. The article reported “Prices are up 9% this year, with homes selling for a median price of $790,986…it may not be a boom, but given regional problems, it’s a good market to be in.” Castro Valley reports that buyers are snatching up well-priced listings in light of dwindling inventory. We are selling some of our aging listings and our new listings are going pending quickly. We sold two of our aged listings this week and two other listings were sold soon after hitting the market. Danville reported that one of our San Ramon listings, listed in the high six hundreds (not an REO or short sale) had six offers. The Oakland-Piedmont office reports open house activity is picking up. February was a strong month for sales in this office in all price ranges. The $600,000 to $700,000 is very hot. Short sales are now in all price ranges. Foreclosures are almost all in the lowest of the price range. Multiple offers in the foreclosures are about 30%. Orinda reported this week that we are having a lot of people come through our open houses, especially as we are working on reducing asking prices with sellers.
Monterey County—The market has remained the same for the past few weeks. Many Agents are working with potential buyers who are reluctant to get into contract on a property as they believe the prices will continue to go down—unless of course, they see a particular property that appeals to them and it appears to be a great value.
North Bay—Greenbrae reports that even despite the rain, serious buyers were out in full force. Southern Marin shares that activity seems to be picking up across the board. Sales are in the low end – and the very high end, but the $2-3 million category seems to be the softest of all price categories. The Petaluma office reports that open houses are well attended. Activity was high even during the rainy Sunday. One property that was on the market for one day priced at $599,000 received six offers that same day. Multiple offers continue in the lower priced properties. Santa Rosa reports that one Agent reported three groups at his open house and had one offer. Three other Agents reported that they were shut out at their open. Probably the rain. Still seeing the under $500,000 as the white water of the market but each week we are seeing more and more properties hitting the market above $500,000 and some are now drawing offers.
Peninsula—Burlingame shares, “It’s all about price, price, price.” Everyone wants a deal. Agents are trying hard to price things correctly with their clients and finding that the buying public wants even less. Media perception and continued negative press aren’t helping matters. Open homes were all over the map this week. Some had only two—others had 80+ people walk through. Half Moon Bay reports good open house activity even with all of the rain. One Agent had a sale over the $1 million mark with seven counteroffers. Everyone remains upbeat looking forward to the completion of the tunnel and a brighter economy. Our Menlo Park Santa Cruz Avenue office reported properties under the $2 million mark are getting buyer’s attention. One Menlo Park listing at $1,950,000 sold. Another listing in the Skyline area listed at $1,350,000 sold as well. Palo Alto reports open house activity has been dreary—consistent with the weather. The number of sales overall on MLS is extremely slow. For the clients, there is no reason to sell. They’re in the neighborhood they want to be in and because it isn’t a great market, they are not selling—we have a log jam. San Mateo shares that although we are holding our own, buyers are having difficulty making a decision. They seem to have a “you first” attitude. It is hard for buyers to make a decision to move forward.
San Francisco—Our Lombard office reported a good week as well as good February sales. We doubled ended three deals thanks to open houses. The traffic is picking up in the $1.5 to $3 million range, but this interest pick up hasn’t translated to transactions yet. Our Market Street office reported that a property listed in the Mission district received 20 offers. It was listed at $549,000 in move-in condition and had one weekend of open houses. Overall, not a bad week for the City with our offices reporting a total of 34 sales for the week.
Santa Cruz County—The office had several great new listings priced from $300,000 to $7.5 million. There is a lot of potential listing activity and appointments. Many of the sellers are in a short sale situation. Our March sales are starting out stronger than last month so we will see how consumers continue to move forward buying—it certainly is the best time in many years. For sellers, the market continues to be driven by prices. This is an important fact to consider when sellers put their home on the market.
Silicon Valley—Our Los Gatos office reports that we have a lot of buyers but we’re having a hard time getting them to step up. We’re also seeing challenges with interested buyers who are trying to qualify for a loan. The San Jose Main office shares that we’re seeing good open house traffic. We’ve seen increased interest in lower-end priced properties between $250,000 to $500,000.
South County—Our Hollister office reports that short sales are now being well attended to in a more timely manner. Agents are back to investigating short sales with a positive attitude. We saw an increase in new REO listings this week. Our Morgan Hill office reports that Agents are reporting an increased number of guests at open houses. It seems that potential buyers have graduated from the “lookie loo” mentality to that of seriously considering a future purchase. Though, as one Agent recently said, “I have to get buyers from sitting on the fence to walking into the front door.”
The news of the week should bring comfort to millions of American homeowners, and for the real estate sector, it is just what the doctor ordered. It is imperative that we continue to move with speed to make housing more affordable and to help stop the spiral in our housing markets. I believe that this plan will encourage additional loan modifications and will ultimately reduce the foreclosure rate. In the end, this is one—and possibly the most important—way to stabilize prices and once again get us moving in the right direction. Helping families keep their homes is critical, both for the health of our economy and for neighborhoods across the country.

It’s very clear that the American economy cannot be turned around without fixing the housing crisis. With the recent release of the second half of the TARP funds coupled with the Emergency Economic Stabilization Act and now the Homeowner Affordability and Stability Plan, the housing sector now has a foundation on which to build. Politicians, economist and media still debate daily as to if some of these steps are the right steps; however I do believe that we are headed in the right direction. On a local level, we’re already starting to feel the initial flow of these benefits. In a broad sense throughout our San Francisco Bay Area offices, we are seeing increased floor activity and increased open house activity. Many Buyers are now inquiring about the first time home buyer credit, the increase in conforming loan limits, and seeking counsel on how to best position themselves in order to buy.

Until next week,
Make it a great one,

Rick
Rick Turley
President, San Francisco/Peninsula/North Bay
Coldwell Banker Residential Brokerage