Waiting for the Bottom of the Real Estate Market?

RECESSION ENDS IN 2009 Many people have been telling me for years that the real estate market is turning around.  Newspapers and blogs have been enthusiastically predicted that the recession ended and everything was going to be alright.  I heard the real estate market had “turned around” in 2010, but the downward trend continued.  Now new data is coming forward.

Home Prices over the Last 10 YearsAll signs indicate that we are very likely skimming the bottom of the real estate bust, and things are just beginning to look up.  Nationally, many other locations were much harder hit than Massachusetts.  Prices and sales in the Boston area were not has hard hit as Central Massachusetts.  The towns in the Wachusett Region lost an average of 25% to 30% from 2006 to 2012.

October sales numbers jumped 21%, according to the Warren Group.  Meanwhile home prices spiked 4.4 percent, according to the Massachusetts Association of Realtors, which also released its October numbers. .  This is the most impressive jump in median prices since the end of the $8,000 home buyer credit in 2010.  Unfortunately, the Warren Group, which includes all sales in Massachusetts, not just Realtor assisted sales, has home prices staying essentially flat.

NEW CONSTRUCTION INVENTORY 112812The new construction starts are down dramatically, as you can see by this chart.  In 2000 there were 850,000 homes built, and by 2005 we reached an all-time high of almost 1,400,000.    Today, we are lucky to see 390,000 built and they cost more than the existing homes available.  The new energy and upgraded code requirements haveNew Construction Inventory added thousands of dollars to the cost of construction.  Material costs have really started to move up as well, which makes new construction more risky.  As you can see, the inventory for new homes for sale is down dramatically, at its lowest point since 1960.

Although the inventory is down in both new construction and existing homes for sale, the advice to buyers is to consider buying sooner rather than later.  It is only a matter of time before the prices do start to move up and the interest rates will unlikely be better.  Buy a home you love and settle in for the long haul as a wonderful place to live, not just an “investment”.

The elections are over, and if our politicians don’t push us over the “Fiscal Cliff“, I believe we will start the slow recovery of improved pricing and reasonable sales pace.  Sellers will need to listen careful to their Realtors when pricing their homes, but the low inventory will help move homes.  I saw the crash coming in 2005, but I never believed it would be a seven-year fall.

What Kind of Real Estate Forecast Can We Make for 2012?

The National Bureau of Economic Research, a group of independent economists, had declared that the recession ended in June of 2009.  RECESSION ENDS IN 2009The Bureau took more than a year to decide that we started the recession in December of 2007 and decided in the summer of 2010 that the recession ended in June 2009.  This recession has been the longest and deepest recession the country ever experienced. 

Many people know that we are now undergoing the longest, slowest, most painful recovery the country has ever experienced.  Now in January 2012, two and a half years after the recession “ended”, we are seeing hopeful signs of life in some areas of the economic picture.  MA UNEMPLOYMENT 1991 TO 2011The unemployment rate in Massachusetts has fallen to its lowest level in a long time to 7.3%.  Some industries are beginning to experience growth and we can only hope they continue to hire and create new jobs.

One area we continue to struggle with is housing.  The actual loss of wealth for so many people in this country is staggering.  The California Association of Realtors has released its real estate forecast for 2012. 

It is interesting to see that in 2005 they sold 625,000 homes and in 2007  that number dropped to 346,900—a 55% drop in the number of sales.  The median price of homes in 2005 was $522,700, but by 2011 the median prices have dropped to $291,000—a 56% drop in value.   All real estate is local, but some parts of California, Nevada, and Florida have experienced over 75% loss in value.

Massachusetts, and particularly Boston, has fared much better than many of the states.  Trulia has come out with its top five places slated for a quicker recovery:  Austin, Houston, San Jose, Boston, (and in particular Cambridge, Newton, Framingham, and Worcester) and Rochester, NY.  Austin and Houston have seen jobs and new construction get a jump-start.  San Jose and Boston areas are home to the technology belt with lots of smart, well-educated people, and Rochester  has had stable prices and economy throughout the downturn.  The take away is that highly educated, tech-savvy cities may push through the recovery quicker than other parts of the country.

Realtors have not been able to see the bottoming of prices yet,  but I expect this year will be it.   Once we have hit the bottom, it will be a slow climb back up, but there truly is light at the end of the tunnel.  I first saw the warning signs of trouble in 2005, and after 6 years of serious turmoil,  I believe we are past the worst.

The new economic reality may be something we have to get used to, because this complete recovery may be many years in the making.  Some people, like seniors, who have done everything right, have had their planned retirement future smashed by the dramatic loss of wealth.  We are already seeing not only seniors, but young college graduates moving back to the family home.  This may be the new reality for now as we all adjust to the slow recovery.  But I am looking forward to 2012 as our turn around year.  What do you think?

Real Estate Indicators and the Real Estate Market Review

The leading market indicators are showing some positive signs toward recovery. The most recent Case-Shiller Report indicates that the prices in the leading cities are flat, not descending, as may be reported by some of the media. Of course, all real estate is local and some areas may still be struggling.




A recent article in the Worcester Telegram and Gazette noted that the home prices across Massachusetts had fallen about 14% since 2006, but the Warren Group, which tracks all sales in the state, report that the home prices in Central MA have fallen 27% in that same time frame.



It will certainly take Worcester County longer to recover from this downturn than the Boston area. Employment figures confirm that Boston  unemployment is 6.8% and the Worcester unemployment stands at 8.4%.  Even though there is quite a wide discrepancy between Boston and Worcester, but both numbers are better than the national unemployment of 9.2%

Nationally, the Builder Confidence Level is in the positive realm, because there are more new housing starts most notably in the West.  The positive signs in many areas of the market belie the Consumer Confidence Index at 39.8%, which says the consumers believe we are still in a very serious recession.


This video from the National Association of Realtors give some glimpses of light at the end of a long dark tunnel.  We can all use some good news.  Young people are starting to look at homes because they have faith that things will improve, and it could not be a better time to buy. Interest rates have never been lower and prices are excellent.

Seven Tips for Navigating the Short Sale Process

Short SaleThere are many reasons why people decide to sell their homes during these troubled times, and it is even more difficult when that home has lost significant equity.    If you find yourself in this position. there are some important points to know about the short sale process.

Here are seven tips for navigating the short-sale process.

1. Know who you owe

A short sale has to be approved by any company that has a mortgage or lien against your home. That includes your first, second, or even third mortgage lender, your home equity line lender; your homeowners or condominium association; and any contractors who’ve placed a lien on your home. Make a list and start talking to everyone early in the process. Ask what documents they’ll need from you.

2. Pick your short sale team

You’ll need to work with a team of short sale experts, including a real estate agent, real estate attorney, and your accountant. Look for agents and attorneys who advertise themselves as short sale experts.  There are special training classes and certifications for Realtors, such as Loss Mitigation Certified, and you should look for experienced and well-trained Realtors.  Interview at least three, and listen carefully for signs that they understand the complexities of the short sale process.

Agents should explain how they’ll arrive at a suggested price for your home. Ask them to show you a sample short-sale package or for an example of a prior short-sale success.

The attorney is a very important member of the short sale team, and you must choose an attorney who has successfully closed a number of properties.  You might ask for referrals to check with his clients about their experiences.

3. Get your documents ready

Gather the paperwork your creditors and mortgage lenders asked to see, like your listing agreement and a hardship letter explaining why you need to do a short sale. You’ll also need proof of what you earn and what you owe as well as copies of your federal income tax returns for the past two years.

4. Expect delays

Despite a federal rule saying banks participating in the federal government’s Making Home Affordable loan modification program must respond to short-sale offers within 10 days, it may take weeks or months for your lender to decide whether to allow you to sell your home in a short sale—and even longer if you must negotiate with more than one lender or lienholder.

Your lender and lienholders don’t have to agree to your proposed short sale. They can reject your terms or make a counter offer, which can create further delays.

5. Anticipate demands

Discuss with your short-sale team how you should respond to common short-sale demands from lenders. For example, are you willing to sign a promissory note agreeing to pay outstanding amounts after the sale is complete?

6. Know the tax implications

Any unpaid amount of your mortgage “forgiven” by your lender through a short sale may be considered income to you under federalForeclosures tax rules. Ask your attorney or accountant whether you qualify to exclude that amount as income on your tax returns under the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act. Also ask if you’ll be required to report amounts “forgiven” by other lienholders, if applicable.

7. Consider how the short sale will affect your credit and what you must pay

Ask whether your lender will report the short sale to credit-reporting agencies. Having a portion of your debt forgiven may negatively affect your credit score, but a short sale typically damages your score far less than a foreclosure or bankruptcy.  A short sale also puts you in control of the process.  A foreclosure make take years to complete and the bank is in control of this time frame.  Two home I knew about Repair your creditpersonally took over four years to finish the foreclosure process because the bank continued to make mistakes.  When you finish a short sale, you will be able to start to repair your credit immediately, and then you will be able to buy another home in a reasonable amount of time.

Ask you lawyer whether you’ll be responsible for paying back the lenders’ loss. If the lender says it will forgive any losses on the sale of your home, get that promise in writing.

When you are ready to evaluate whether a short sale is the right decision for you, contact several Realtors and begin to ask which one can give you the best guidelines.  Put the agony of this financial situation behind you.

Short Sale Information

Good news for people who are doing a short sale.  The government has implemented a program to expedite the short sale process.   This will be a great benefit to the homeowners who have made a decision not to keep their homes.

Certain banks and mortgage companies planning a foreclosure of a property must contact their homeowners to offer a mortgage modification.   If homeowners do not quality or do not wish to continue to own the home,  the bank or mortgage company must work with them to either offer a short sale solution or a (DIL) deed-in-lieu of foreclosure.   This video provides a comprehensive  explanation of the new short sale process.

Here a list of the mortgage companies that are a part of the HAMP (Loan Modification) program. Those companies that are signed up for the HAMP program must offer the HAFA (Short Sale) program to homeowners and if the Short Sale does not work, they have the option of the DIL (Deed in Lieu) of Foreclosure.

Homeowners should check this list only if they do not have a FHA financing loan. Fannie Mae is the actual overseer of the HAFA program guidelines.

Servicers Participation

1.American Home Mortgage Servicing, Inc
2.Assurant, Inc.
3.Aurora Loan Services
4.Bank of America
5.Bayview Financial
6.Carrington Mortgage Services, LLC
7.Citigroup, Inc. (Citi Mortgage / Citi Residential)
8.First Horizon Home Loans and First Tennessee Home Loans
9.GMAC Mortgage
10.Home Loan Services, Inc. (d/b/a First Franklin Loan Services & NationPoint Loan Services)
11.HomEq Servicing
12.HSBC Finance-Beneficial
13.HSBC Finance-HFC
14.HSBC Mortgage Corporation
15.HSBC Mortgage Services
16.JP Morgan Chase
17.Litton Loan Servicing
18.LoanCare Servicing Center
19.MetLife Home Loans
20.Nationstar Mortgage, LLC
21.Ocwen Loan Servicing, LLC
22.OneWest Bank
23.PMI Mortgage Insurance Co.
24.PNC Mortgage
25.Quicken Loans
26.Residential Credit Solutions
27.RoundPoint Mortgage Servicing Corporation
28.Saxon Mortgage Services / Morgan Stanley
29.Select Portfolio Servicing, Inc.
30.State Farm
31.Strategic Recovery Group
32.SunTrust Mortgage, Inc.
33.Vericrest Financial Inc.
34.Wells Fargo and Company (Wells Fargo Home Mortgage / Wells Fargo Financial)
35.Wilshire Credit Corporation

If you have any questions about this process, please contact us.  The Evergreen Realty Team members have been Loss Mitigation Certified (LMC).  We will be reviewing bankruptcy options shortly for those folks who have those type of financial questions.