I am heading to the top real estate conference of the year in July, Real Estate Connect, in San Francisco in July. I will be speaking at a pre-conference Foreclosure Workshop titled, "Relationships 2.0: How to Help Homeowners While Closing Business" on July 23, 2008.
The Real Estate Connect Conference is sponsored by Inman News. The confab assembles real estate industry leaders to share thoughts and ideas in one of the most highly charged and provocative meetings in the industry.
RealtyTrac™ has released its first annual 2006 U.S. Metropolitan Foreclosure Market Report, which ranks the foreclosure rates of the top 100 metropolitan areas. This year’s report, based on data captured over the first quarter of 2006, shows Indianapolis, Atlanta and Dallas having the highest foreclosure rates among the nation’s largest 100 metropolitan areas. Cities in the Sun Belt and Rust Belt generally had the highest foreclosure rates in the first quarter of 2006, while cities in the Northeast and Gulf Coast documented some of the lowest.
"Indianapolis documented a foreclosure rate of one foreclosure for every 69 households, while Atlanta’s foreclosure rate was one foreclosure for every 70 households. Other top-10 foreclosure rates ranged from one foreclosure for every 99 households in Dallas-Fort Worth to one foreclosure for every 140 households in Canton, Ohio and Las Vegas."
The Lehigh Valley (PA) area ranks 81 on the list.
“Indianapolis narrowly edged out Atlanta as the city with the highest foreclosure rate in Q1,' said James J. Saccacio, chief executive officer of RealtyTrac. 'Most of the cities with the highest foreclosure rates have above-average unemployment rates and below-average home price appreciation. Unemployment is a major reason why homeowners stop making mortgage payments, and slow home price appreciation can make it harder for homeowners in default to refinance or sell to stop foreclosure.'
"Saccacio added that other economic factors such as decreasing affordability, rising interest rates and speculative buying can also fuel foreclosures. He cited Jacksonville, Fla. and Las Vegas Nevada, both of which documented foreclosure rates in the top 10 despite below-average unemployment and above-average home price appreciation.“Because of the high home prices in many areas, more home buyers have stretched themselves financially with creative, and often risky financing that involves adjustable interest rates, interest only and negative amortization loans' he said. 'Home buyers with these types of loans are more susceptible to default and foreclosure when interest rates move higher."
Revenues are up at large real estate offices that offer a menu of services including mortgages, home warranties, title insurance, and homeowner's insurance, according to a report by the National Assn. of REALTORS®. The report pointed to Howard Hanna Smythe Cramer of Pittsburgh, which posted a total sales sales volume in 2005 of 53,649 transactions, and income derived from ancillary services that accounted for some 43% of the firm's income.
NAR's stance against banks in real estate remains the same. The group continues to demonstrate a colossal HQ (hubris quotient) in this regard.
A recent article in Inman News, parroted yesterday by REALTOR® Magazine Online, points to a 25% national increase in foreclosure rates from the first quarter to the last quarter of the year. RealtyTrac CEO James Saccacio points out that the number of properties entering foreclosure represents fewer than one percent of American households. He offers the following comments:
"Over the past few years, we've seen historically low mortgage rates, consistently escalating home prices, and steady, strong employment. This has translated into relatively low levels of foreclosure properties, particularly bank-owned properties. With interest rates rising and an apparent slowing of property valuations in most markets, we'll be watching closely to see if there's a material effect on the number of foreclosures in 2006."
Instead of watching interest rates, I suggest that that we watch what happens in bankruptcy courts this year. Congress delivered a bankruptcy bill last year that will make it very hard to consumers to pay their credit card debt and attorneys in the trenches expect that foreclosure rates will escalate as a consequence.
I track the foreclosures in the Lehigh Valley through the multiple listing service. (There is a link in the right column titled Bank Properties that is a link to bank properties available through the Lehigh Valley Multiple Listing Service.) Today there are 88 bank properties available for sale. The number has almost doubled since September:
Sept. 30, 2005 there were 46 bank properties on the market
Oct. 21, 2005 there were 52 properties for sale
Nov. 25, 2005 there were 73 bank properties for sale
Dec. 30, 2005 there were 81 bank properties on the market
One of the most frustrating parts of the real estate game is the struggle with languages with immigrants. Leading Lehigh Valley mortgage expert Tom Flad of First Horizon Home Loans in Allentown, PA, rolled out his Language Line service for one of my clients whose first language is Vietnamese. Tom engaged his translators and took a fully documented application to underwriting in less than two days, in a process that typically takes two to four weeks. His service can handle 150 languages. Tom handles all the govvies...FHA, VA, PHFA first-time homebuyer loans, and lots of good conventional products. He knows his stuff...give him a call if you need financing help 1-800-258-8518 x 222
BusinessWeek Online Hot Property blog reports that foreclosures are up in California:
"Lending institutions sent default notices to 12,568 California homeowners during the July-to-September period, up 3.5% from last year's third quarter."
I'm predicting that the foreclosure market will enjoy a new renaissance, even when the rest of the market is cool, thanks to the bankruptcy bill that put new rules into effect last month. Bankruptcy attorneys tell me that many consumers who are not able to get relief from credit card debt will not be able to stay current on their mortgage payments and they forecast a huge increase in foreclosures.
David Lereah, chief economist of The National Assn. of REALTORS®, told reporters that he is uncertain about the impact of the bill on the foreclosure rate, but that it is an open question and he will study the issue. We look forward to his findings. We just wish that NAR had the wisdom to ask their economic talent about such things before supporting that terrible bill in such a wholehearted fashion. (Note: This post appears also on the Real Estate Blog Squad. Typically I do not double post articles, but the nature of the material is so compelling and disturbing that I made an exception in this case.)
Spiraling FHA default rates prompted a U.S. Senate Appropriations Committee to authorize only $50 million for the American Dream Down Payment Assistance program. The White House had requested $200 million. Prospects appeared to dim the chances for a zero-down-payment FHA loan product offering in the near future. National Mortgage News reports:
"Senate appropriators are concerned that the Federal Housing Administration single-family program is becoming a 'lender of last resort' and needs to do a better job of educating homebuyers. 'FHA is clearly becoming a lender of last resort, taking on the most risky mortgages, especially those likely to default,' according to a report that accompanies the Department of Housing and Urban Development fiscal year 2006 appropriations bill. The FHA default rate has increased from 2.99% in fiscal 2000 to 6.9% in fiscal 2004, while claims have increased from $5.5 billion to $8.5 billion over the same period. In approving the Treasury, Transportation, and HUD appropriations bill, the Senate Appropriations Committee directed HUD to educate FHA homebuyers about the value of a home inspection. Without a home inspection, these purchasers may find themselves responsible for high-cost repairs that that they cannot afford, thus "putting the home at risk of foreclosure," the committee report said."
The National Assn. of REALTORS® has taken some pages from Tom Delay's recent best-seller on governance, "A True Ethicist's Guide to Redistricting." In stealth maneuvers during a national election cycle when the populace was concerned with weighty issues such as Mary Cheney's sexual orientation, NAR beefed up its director rolls by some 8.8% with 75 new large firm representatives (LFR) and established a much needed 2005 Large Broker Advisory Group. (There are no small firm or medium firm advisory groups to this blogger's knowledge.) It appears that at least 12 of those advisory group members belong to The Realty Alliance, a group of large brokers that strongly supports the entry of federally chartered banks into the real estate industry.
"Large Brokers Advisory Council - The Large Brokers' Advisory Council consists of 22 of the 100 largest real estate firms. The Council provides meaningful discussion with the heads of the larger real estate companies in the United States and the chief elected and staff officers of the NATIONAL ASSOCIATION OF REALTORS®. The Council acts directly with the President and Executive Vice President of NAR to help NAR become more relevant and meaningful to the largest companies in the NAR membership."--NAR
Delay's home state saw its director rolls increased 11% with new LFRs, upping the LFR vote from 16% of the total to a 26% share of the Longhorn vote...Ohio increased LFR strength from 1 to 7, giving LFRs a 21% share vs. the 3.7% it had previously...Colorado tripled its large firm vote from 1 to a total of 3 or 13, or a 23% share of the state's vote... Pennsylvania, always a battleground state, saw its large firm vote increase from 21% to 31% with 3 new LFRs...West Virginia, it seems, was LFR deficient with a 31% LFR vote; an additional 3 votes brings the LFR vote to some 43.7% of the total.
CORRECTION AUGUST 2, 2005: It was brought to my attention today that the introduction of Large Firm Representatives to the NAR Board of Directors was achieved in 2000, not 2004. The total number of non-LFRs would probably be less in 2004 since the total REALTOR roll has increased appreciably since that time. The numbers cited in the paragraph above remain true in terms of states' balance of LFR vs. non LFR representation in 2005. Percentage increases in 2000 may be higher, in fact, in light of an overall lower REALTOR census at that time. Delay's book about ethics and redistricting was still a work in progress.
Notice to Employee Benefits Providers: Line forms at the left at the fancy new offices of The National Assn. of REALTORS® . What's that, you say? The benefits providers are all banks on this line? First Penn Bank, S&T Bank, M&T Bank, PNC Bank, HSBC, TCF Bank, United Bank of California, Chase/BankOne, Sovereign Bank.
“It's good to shut up sometimes." - Marcel Marceau
REALTOR®/proponents of federally chartered banks being granted permission to operate real estate brokerages have been keeping a low public profile since the 2002 knockdown round, but they've been busy behind the scenes gathering strength. Consider the following facts:
1. The largest real estate companies in the country strongly SUPPORT federally chartered banks in real estate through their own network at The Realty Alliance. Member companies must have closed a minimum of $500 million is residential sales volume in t he previous calendar year and completed a minimum of 5,000 transactions sides in that same period. They are members of NAR.
2. Each of the 75 largest firms in the real estate business now has its own director on the NAR Board of Directors.
3. There is substantial representation by Realty Alliance members serving in leadership throughout NAR.
4. Some 29 states and the District of Columbia already allow state-chartered banks to engage in real estate activity.
2002 Revisited: Correspondence from Realty Alliance to NAR (excerpt taken from an Inman News Article 02/25/2002):
"The letter calls NAR's position 'hypocritical,' 'fundamentally wrong' and 'objectionable' because it would bar banks from real estate brokerage activity even though brokerages operate mortgage banking, insurance and title insurance businesses and certain state-chartered banks and subsidiaries of the Federal Savings & Loan Association are permitted to engage in real estate brokerage.
"The letter also warns that NAR's legislation, if it proves successful, could trigger 'retaliatory' legislation from the banking industry. 'If federal banks were indeed prohibited from engaging in real estate brokerage, how long would it be before the powerful banking lobby took steps to prevent real estate brokerages from participating in the mortgage banking, insurance and title insurance business?' the letter asks.
"The letter also argues that allowing nationally chartered banks into real estate brokerage would increase competition, attract more capital to the industry and benefit consumers. 'Increased competition from companies of size would benefit consumers by making all of us sharpen our skills and improve the services we provide,' the letter said.
"The letter closes with a not-so-subtle warning that NAR's failure to reconsider its position could result in "a breakdown of the relationship between The Realty Alliance and NAR."
Banks in real estate linkage:
NAR on banks in real estate
Realty Alliance letter to NAR 2002
Why banks should be allowed in real estate
Bring on the banks
Howard Hanna U.S. Senate testimony
Industry "visionary" sees banks in real estate 2002 Testimony before Congress
2002 Hearing in U.S. Senate
Trends in real estate 2003 (MN)
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