Survey: Buyers Frustrated by Low Inventory, Rising Prices

By Nick Timiraos June 4, 2012, 11:30 AM for www.wsj.com

Active home buyers are increasingly concerned about rising prices, prompting a growing number to slow down their purchase plans, according to a new survey.

The findings are from real-estate brokerage Redfin, which surveyed more than 1,200 home buyers in 18 metro areas who had toured a home since March 1.

The company found that 49% of respondents believe that it’s a good time to buy a home, down from 56% last quarter. The share of buyers who think it’s a good time to sell more than doubled, to 28% of respondents.

Nearly six in 10 respondents said that low inventory remained their top concern with buying right now—by far the most predominant worry of buyers. The supply of homes listed for sale nationally is down by 20% from one year ago, and markets such as Phoenix, Orlando and Oakland, Calif., have around half as many homes for sale as one year ago.

More than seven in 10 buyers said they had faced a competing offer when making an offer for a home.

Given those experiences, perhaps it isn’t surprising that 58% of buyers said they think prices will increase, up from 34% last quarter. Meanwhile, just 9% of buyers said that concerns about falling prices were making them reluctant to buy right now, down from 29% three months ago.

The lack of supply and the uptick in multiple offer situations is surprising to many buyers and could lead some frustrated buyers to stand back. More than one-quarter of buyers said they would stand back from the market if prices went up or they were in a multiple-offer situation, while 10% of respondents said they’d do what it takes to win a competitive bid.

The survey also found that 16% of buyers were worried about fatigue from bidding wars and that 21% were concerned about prices rising beyond what they could afford.

“The overwhelming sentiment among home buyers is that there aren’t enough good homes for sale,” said Glenn Kelman, Redfin’s chief executive. “Who would sell right now if he didn’t have to?”

Inventories are also low because banks have put fewer foreclosed properties on the market. The Redfin survey found that 57% of buyers were very interested in conventional sales, up from 48% three months ago. Buyer interest for new homes, foreclosures, and short sales showed little change from last quarter.

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Original Post: http://blogs.wsj.com/developments/2012/06/04/survey-buyers-frustrated-by-low-inventory-rising-prices/

Q&A: Step-by-step guide to foreclosure

Q&A: Step-by-step guide to foreclosure

WEST PALM BEACH, Fla. – Nov. 29, 2011 – Question: I read in the paper that the banks are starting the foreclosures again. I just got served with a foreclosure lawsuit. Can you explain the process in layman’s terms?

Tony

Answer: Each state has different versions of the foreclosure process. In Florida and some other states, a lender must get permission from a judge before it can repossess your home.

When you are served with a foreclosure lawsuit, your lender files a “complaint” against you, laying out the facts as it sees it. It’s basically telling a story as to why it thinks that it should get your house as payment toward the debt that you owe.

Along with the complaint, it serves several other documents, such as the “summons,” which gives the court power over you, and the “lis pendens,” which is a document filed in the public records to let everyone know that the property is the subject of a lawsuit.

When you are served with a lawsuit, you typically have 20 days to respond or you will be in “default,” which means that you have waived all of your defenses to the lawsuit, allowing the bank to proceed with the foreclosure. This is not a good idea. At this point, your attorney will respond to the suit with a “motion to dismiss” or an “answer.” If your attorney feels that the bank has no chance to win based on everything that it alleged in the complaint, he or she will file a motion to dismiss the suit.

If, however, the suit is not defective as filed, your attorney will file an answer, in which he or she admits or denies each of the bank’s statements from the complaint. The answer also will also set forth your “affirmative defenses.”

An affirmative defense explains why the bank should not get your home even though you may not be making your mortgage payments.

At this point in the lawsuit, several months or more will have gone by and the attorneys will begin “discovery.” That’s the process of getting to the truth by asking each other questions and getting documents from the other side for review.

During the discovery phase, you and your lender will probably go to a “mediation.” In a mediation, both you and your lender will lay out your side of the story before an unbiased third party, the mediator, who will encourage you both to voluntarily settle the case. At a mediation, no one is forced to settle the case. Both sides need to agree.

The discovery process can take six months or more. Once it is complete, you or your lender may make a “motion for summary judgment,” which is basically saying to the court that your side of the case is so strong that there is no possible way for you to lose. Most foreclosure cases end at the summary judgment hearing because the judge rules for the lender. But if the judge thinks there are still some questions to be answered, there will be a trial. At trial, the judge (or jury) will determine the truth and decide who wins the case.

If you win, the lender has failed and you keep your house. If the lender wins, which is much more likely, the judge will set a date for your home to be sold, with the proceeds from the sale going toward paying your lender back for the money that you borrowed.

If the fair market value of your home is not enough to pay your loan back in full, your lender may ask for a “deficiency judgment.” That gives the lender the right to come after you for the difference between the market value of your home and the amount that you owe your lender.

If the sale brings more money than you owe your bank, you get back what’s left over. (Check with an attorney about the process for receiving any refund.)

If you hire an attorney, the entire process typically will take about two years, during which time you can be working with your lender toward a loan modification, short sale or deed in lieu of foreclosure. Of course, if all else fails, there is always bankruptcy, but that’s a different topic for another column.

About the writer: Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program. Send him questions online at http://sunsent.nl/mR20t7 or follow him on Twitter @GarySingerLaw.

The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

© 2011 the Sun Sentinel (Fort Lauderdale, Fla.), Gary M. Singer. Distributed by McClatchy-Tribune News Service.

Original Post: http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=267984

How to Figure the Fuzzy Math of Internet Home Values

Original Post: http://online.wsj.com/article/SB10001424052970204554204577026131448329006.html?mod=WSJ_RealEstate_RIGHTTopCarousel

By ALYSSA ABKOWITZ

Jason Gonsalves worked hard to turn his 6,500-square-foot stucco-and-stone home in the suburbs of Sacramento into the ultimate grown-up party pad, complete with game room, custom wine cellar and an infinity-edge pool overlooking Folsom Lake. When interest rates fell recently, Mr. Gonsalves, who runs a lobbying firm, looked into refinancing his $750,000 mortgage. That's when he got startling news—the home had dropped more than $200,000 in value while he was renovating.

Scott Pollack

Or at least, that's what one real-estate website told him. Another valued the house at only $640,500. And these online estimates left him all the more confused when a real-life appraiser, assessing the house for the refinancing loan, pinned its value at $1.5 million. "I have no idea how those numbers could be so different," Mr. Gonsalves says.

Right or wrong, they're the numbers millions of consumers are clamoring for. After years of real-estate pros holding all the informational cards in the home-sale game, Web-driven companies like Zillow, Homes.com and Realtor.com are reshuffling the deck, giving home shoppers and owners estimates of what almost any home is worth. People have flocked to the data in startling numbers: Together, four of the biggest sites that offer home-value estimates get 100 million visits a month, with web surfers using them to determine what to ask or bid for a home, or whether to refinance.

Zillow, Trulia and other websites post estimates of home values. But as Alyssa Abkowitz explains on Lunch Break, these popular sites can be -- by their own admission -- wildly inaccurate.

But for figures that can carry such weight, critics say, the estimates can be far rougher than most people realize. Valuations that are 20% or even 50% higher or lower than a property's eventual sale price are not uncommon, as the sites themselves acknowledge. The estimates frequently change, too—sometimes by hundreds of thousands of dollars—as sites plug new data into their algorithms.

More

• What the Sites Get Right and Wrong

All of the competitors make it clear their numbers are guesstimates, not gospel. "A Trulia estimate is just that—an estimate," says a disclaimer on that site's new home-value tool. Zillow goes a step further, publishing precise numbers about how imprecise its estimates can be. And every major site urges home-price hunters to consult appraisers or real-estate agents to refine their results.

But despite the disclaimers, homeowners and real-estate agents say, many Web surfers put enough faith in the estimates to sway the way they shop and sell.

After Frank and Sue Parks put their manor-style house in Louisville, Ky., on the market, they watched as Zillow put a $331,000 value on the dwelling in May; by July it had climbed to $1.5 million. (Zillow says the lower estimate reflected errors in its statistical model.) The couple got potential buyer referrals from the site, but they fended off a stream of lowball offers before they sold this fall. Mrs. Parks says the estimate roller coaster "really affected our ability to move the place."

Determining a home's value has traditionally been the job of an appraiser, who gathers data on recently sold homes and compares them with the "subject property" to arrive at an estimate.

In the late 1980s, economists started developing automated valuation models, or AVMs, computer models that could analyze data about comparable sales, square footage, number of bedrooms and the like, in a matter of seconds. For years, these tools were mostly reserved for in-house analysts at lending banks.

It wasn't until 2006 that Zillow took them to the masses, with its Zestimates, which now offer values for more than 100 million homes based on the company's own algorithms. "Humans don't make these decisions," says Stan Humphries, chief economist at Zillow.

Numbers like these have become weapons in the arsenal of consumers like Simms Jenkins, an Atlanta marketing executive, who has recently relied on online estimates to help him both buy and sell homes. "I can't imagine 25 years ago, when people would just go out and spend their entire Saturday looking at homes," he says. "You don't have to do that now."

But appraisers and real-estate consultants say the online models can veer off target with alarming frequency. Most data for the models come from two sources: records from tax assessors and listing data for recent sales. Collection is a challenge, however, because not every county tracks properties the same way—some calculate home size by number of bedrooms, others by overall square footage. And automated models aren't designed to account for the unique construction details that often make or break a deal, or for intangible factors like a neighborhood's gentrification. "You cannot use a computer model in certain areas and expect the value to come out right," says John May, the former assessor of Jefferson County, Ky., which includes the state's largest city, Louisville.

For all these reasons, models that banks use often add a "confidence score" to their estimates. Consumer-oriented sites, meanwhile, rely on disclaimers, some of which are eye-opening. Zillow surfers who read the "About Zestimates" page find out that the site's overall error rate—the amount its estimates vary from a homes' actual value—is 8.5%, and that about one-fourth of the estimates are at least 20% off the eventual sale price. In some places, the numbers are far more dramatic: In Hamilton County, Ohio, which includes Cincinnati, it's 82%.

The sites argue that, over time, edits and corrections will help them perfect their numbers—with many fixes coming from their customers.

On Homes.com, anyone who knows a homeowner's surname and the year the home was last purchased, can edit the details of a property listing in ways that can eventually change the estimated value.

Zillow has accepted revisions on 25 million homes—perhaps the strongest testament to how seriously consumers take its estimates. Today, the site says its figures are accurate enough to give consumers a good sense of any home's value. In the meantime, says Mr. Humphries, its economist, "We're always tweaking the algorithm or building a new one."
—Email: editors@smartmoney.com

It's Time to Buy That House

By JACK HOUGH
U.S. house prices have plunged by nearly a third since 2006, and homeownership rates are falling at the fastest pace since the Great Depression.

The good news? Two key measures now suggest it's an excellent time to buy a house, either to live in for the long term or for investment income (but not for a quick flip). First, the nation's ratio of house prices to yearly rents is nearly restored to its prebubble average. Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.

Two of the silliest mantras during the real-estate bubble were that a house is the best investment you will ever make and that a renter "throws money down the drain." Whether buying is a better deal than renting isn't a stagnant fact but a changing condition that depends on the relationship between prices and rents, the cost of financing and other factors.

But the math is turning in buyers' favor. Stock-oriented folks can think of a house's price/rent ratio as akin to a stock's price/earnings ratio, in that it compares the cost of an asset with the money the asset is capable of generating. For investors, a lower ratio suggests more income for the price. For prospective homeowners, a lower ratio makes owning more attractive than renting, all else equal.

Nationwide, the ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble, according to Moody's Analytics. The average from 1989 to 2003 was about 10, so valuations aren't quite back to normal.

But for most home buyers, mortgage rates are a key determinant of their total costs. Rates are so low now that houses in many markets look like bargains, even if price/rent ratios aren't hitting new lows. The 30-year mortgage rate rose to 4.12% this week from a record low of 3.94% last week, Freddie Mac said Thursday. (The rates assume 0.8% in prepaid interest, or "points.") The latest rate is still less than half the average since 1971.

As a result, house payments are more affordable than they have been in decades. The National Association of Realtors Housing Affordability Index hit 183.7 in August, near its record high in data going back to 1970. The index's historic average is roughly 120. A reading of 100 would mean that a median-income family with a 20% down payment can afford a mortgage on a median-price home. So today's buyers can afford handsome houses—but prudent ones might opt for moderate houses with skimpy payments.

For example, the median home in the greater Phoenix market, including houses, condos and co-ops, costs $121,700, according to Zillow.com. With a 20% down payment and a 4.12% mortgage rate, a buyer's monthly payment would be about $470. Rent for a comparable house would be more than $1,100 a month, according to data provided by Zillow.com.

Of course, all of this assumes mortgages are available—no given now that lending standards have tightened. But long-term data on down payments and credit scores suggest conditions are more normal than many buyers think, according to Stan Humphries, chief economist at Zillow. "If you have good credit, a job and a down payment, you can get a mortgage," Mr. Humphries says. "There's more paperwork and scrutiny than five years ago, but things are pretty much like they were in the '80s and '90s."

Not all housing markets are bargains. Mr. Humphries says Zillow has developed a new price/rent ratio that uses estimates for each individual property rather than city medians, to better reflect the choices facing typical buyers. A fresh look at the numbers suggests Detroit and Miami are plenty cheap for buyers, with price/rent ratios of 5.6 and 7.7, respectively. New York and San Francisco are more expensive, with ratios of 17.6 and 17.2, respectively. The median ratio for 169 markets is 10.7.

For investors seeking income, one back-of-the-envelope way of seeing how these numbers stack up against yields for other assets is to divide 1 by the price/rent ratio, resulting in a rent "yield." The median market's rent yield is 9.3% and Detroit's is 17.9%.

Investors would then subtract for taxes, insurance, upkeep and other expenses—costs that vary widely. But suppose total costs were 4% of the purchase price. That would still leave a 5.3% rent yield in the typical market. With the 10-year Treasury yield at 2.2% and the Standard & Poor's 500-stock index carrying a dividend yield of 2.1%, rents for residential housing in many markets look attractive.

A few caveats are in order. First, not all transactions are average ones. Even in low-priced markets, buyers should shop carefully. Second, prices could fall further. Celia Chen, a senior director at Moody's Analytics, expects prices to drop 3% before bottoming early next year and rising slowly thereafter. "If the economy slips back into recession, however, we could easily see a 10% drop," Ms. Chen says.

And property "flipping" can be dangerous even when prices are rising. That is because, absent a real-estate boom, house price gains simply aren't that exciting. Research by Yale economist Robert Shiller suggests houses more or less track the rate of inflation over long time periods.

Houses aren't the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.
—Jack Hough is a columnist at SmartMoney.com. Email: jack.hough@dowjones.com

5 Mistakes Home Sellers Should Never Make

By Ann Brenoff | Posted May 31st 2011 9:00AM ∨

Trying to sell a home in today's market requires courage, smarts and a fair amount of humble pie-eating. It's a buyers' market, which means sellers are expected to roll over and grovel appreciatively over each showing their agent landed.

Sometimes, whether through ignorance or a last gasp of pride, sellers make one of these critical mistakes that actually worsens their situation. So if you are trying to sell a home, make sure you:

1. Don't move out with your furniture.

Let's say you're no longer dancing to the unemployment blues and finally landed a job that happens to be in another city. You need to sell your house fast and relocate because there's a paycheck with your name on it, but it's 3,000 miles away. By all means, you can move post haste. Just don't take your furniture with you. Nothing sells worse (and by worse, we mean for less money and takes much longer) than an empty house.

Think about all those new developments you have toured. Which of the identical units looked the best? The ones with the furniture in them. Empty houses are cold and depressing. The rooms may look bigger without furniture but they also look soulless. Plus a house recently stripped of wall hangings often screams "paint me" at the top of its lungs.

2. Don't assume home-staging is just for the wealthy.

Getting back to point No. 1, you want the house to look good and maybe your old La-Z-Boy lounger has passed its prime. Professional home-stagers are the magicians of the modern-day decorating world. They move things around, bring in a few pieces, stash away some of your junk and -- voila! -- your house looks like it's worth $100,000 more than you're asking and suddenly you have a buyer drooling. In fact, you might like the new look so much you don't want to sell anymore.

A study by Stagedhomes.com found that 94.6 percent of homes that were professionally staged sold within 33 days, compared to an average of 196 days for homes that are not staged. Staged homes stay on the market 83 percent less time than a home that has not been staged.

Staging is something you should consider if you do need to move out your furniture.

3. Don't think your dog doesn't smell.

We here at AOL are pet-lovers. We even are allowed to bring our dogs to work with us. But we also know that not everyone shares our affection for our four-legged friends. In fact, it's been estimated that 15 percent of the population is allergic to dogs and even more are allergic to cats.

Pets need to be removed for showings. Crate them and leave the crate in the garage.

But to focus on the odor issue. We often grow immune to smells that we live with. Many an ex-cigarette smoker has commented how he never smelled the cigarettes while he smoked them but now that he's stopped, he can smell someone smoking in the next car on the highway. Same principle applies to dogs. Admit it: Can your pooch really roll around in the dog park and come home not a little odoriferous?

Steam clean the carpets and upholstered furniture; launder the bedspreads if Fido has been known to sneak up on the bed; and ask a pet-less friend to give your house the sniff test.

4. Don't think that buyers will understand that you have kids and tolerate a little mess and clutter.

It's just not so, my friends. The perfect house showing, says just about every agent bearing a Realtor's membership card, is one where the personal affects are missing. You want prospective buyers to be able to envision themselves living in this house. Your son's Little League trophy belongs in the garage, packed in a box ready to be moved. Having clean bathrooms and kitchens are most critical. Nothing turns a buyer's nose up more than dishes in the sink or a bathroom in need of a good cleaning.

The declutter and cleanup advice applies to the outside of the house as well as the inside, said Jim Hamilton, regional vice president of National Association of Realtors. He says that 70 percent of the decision about whether to buy a home is made as the buyers drive up to it.

5. Don't price the house based on what you need to get out of it or what you think it is worth.

Price it based on what it will sell for. Otherwise, what's the point of chasing the dog around with a can of Lysol and making your kids pick up their clothes: You won't be moving anyway