Wow! One in Four Homes is Underwater

One in every four homeowners in the United States is ‘underwater’, meaning they owe more on the home than it’s actually worth. And you can expect that number to rise.

It’s actually amazing to believe that such a high number of houses fall into this category. It was recently estimated that it would cost about $745 BILLION to bring all homeowners back to the ‘break even’ mark. Furthermore, about 5.1 million homeowners own a home that is worth 75% less than what is owed. This is sparking a huge ethical debate on whether homeowners should simply walk away.

One side of the argument is this: you own a home that you’re struggling to pay the mortgage on; you know the market value will not catch up to what’s owed anytime soon; and there’s a great place down the street that you can rent for a fraction of the price. Why would you stay?

Well, there’s the other side of the argument: you have a legal obligation to the bank to pay the loan; your credit score will be damaged for up to 7 years; you continue the cycle that will lower the value of all of the homes around you.

Now, when I say walk away here, I’m referring to stuffing your keys in an envelope and mailing them to the bank. It’s estimated that 1 million homeowners did this is 2009. However, a short sale is a way to walk away that has a lot less negative impact than foreclosure.

There’s an increasing push for the government to step in and offer a more viable option for homeowners that are severely underwater. But it’s also widely known that the taxpayers who are paying their mortgage on time would oppose ‘bailing out’ other homeowners who were irresponsible (I understand ‘irresponsible’ is a broad generalization, since no one expects to lose their job or have some other hardship that prevents them from paying bills. I’m using that term because, face it, that’s how you’d feel if your tax money went to help pay someone else’s mortgage)

Expect this topic to heat up shortly and really intensify as elections approach in November.

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New Partnership With Dolphin Fitness Clubs

The Real Estate Ledger and Our Island Real Estate are proud to announce our new partnership with Dolphin Fitness Clubs. As part of this new venture we would like to extend to anyone who buys, sells, or rents with us…

One-Month Trial Membership to any one Dolphin Fitness Location

Four Locations to choose from

There is no money due and no obligation to join.
Simply contact Dolphin Fitness Sales [888-750-9994] and mention this post to redeem the offer.
(Note: Please call this number first; this offer will not be honored if you walk-in without prior notice)

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FHA Raising Fees and Tightening Standards

In what could be a sign of rough times ahead, the FHA is raising it’s fees and tightening lending standards. The government housing agency is seeing increasing losses due to foreclosures and now has reserves that are below levels required by Congress. FHA insured loans are the overwhelming choice for first-time homebuyers so changes to these rules could be detrimental to the housing market. Furthermore, the FHA did not set a date of when the changes would occur, instead stating they would occur in the first half of the year. I imagine the new standards would take effect after the April 3oth deadline for the First-Time Home Buyer Tax Credit. I think changing these rules before than would deflate the market pre-maturely. This housing market needs as much assistance as possible in clearing out some inventory.

The moves are supported by mortgage bankers. “The changes outlined today are obviously designed to improve FHA’s financial position and ensure its long-term ability to guarantee affordable mortgages for qualified home buyers, particularly first-time buyers,” said Robert E. Story Jr., chairman of the Mortgage Bankers Association.

The FHA changes will require homebuyers to:

• Pay an upfront insurance premium of 2.25 of the loan amount. This is an increase of 28% from the current rate of 1.75. On a $300,000 mortgage, this would amount to a $6,750 compared with $5,250. It’s unclear if the increase would impact annual premium in addition to this initial upfront fee.
• Budget a decrease in the maximum allowable seller’s concession from 6% to 3%. A seller’s concession allows the buyer to have some of the closing costs bundled with the purchase price in order to allow.
• Have a FICO score above 580 to qualify for a 3.5% down payment. Buyers that have a FICO lower than 580 would be required to have a 10% down payment.

The other changes would apply to lenders in an effort to crack-down on those who are abusing the current system. The most interesting will be a lender-performance ranking system to be available on the HUD website starting February 1st. This is great as it will hold lenders more accountable for their actions.

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Re: Loan Modifications Falling Short of Goal

Back in July I wrote this: http://www.therealestateledger.com/2009/07/loan-modifications-falling-short-of-goal/

UPDATE: A New York Times article is pronouncing the Making Home Affordable program… a failure. Initiated by the Obama Administration earlier this year, the program intended to modify the mortgage payments of distressed homeowners so they would be able to afford and continue to live in their homes. Unfortunately it has been a dissappointment with some experts going as far as saying it has done more harm than good.

The main problem with this bill, as I’ve stated many times, is that the bill creates a false sense of hope. The reality for most homeowners being “rescued” is they temporarily continue to pay for their mortgages but they are still in over their heads. They are living in homes they cannot afford and should be looking to reduce their home payments much lower than the loan modification program could possibly offer. They need a way to be eased out.

The new “solution” from the Treasury is incentives to lenders to accept a lower mortgage payoff than what is actually owed, or simply – a short sale. The short sale has been increasing in popularity. It doesn’t necessarily leave the homeowner’s credit unharmed but it definetly is better than a foreclosure. (Which leads to another problem with the loan modification program – it was harming homeowner’s credit without them being fully aware.)

It remains to be seen where this latest venture will lead us. However, I’m sure if it’s worse off than today there will be a huge public outcry. Either way, prices will continue to drop as buyers are able to buy higher quality distressed homes at lower prices.

I’ll check back in on this topic in a few months or if something significant happens.

- @TheRELedger

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Home Prices Rise for 5th Straight Month

Home prices rose again but in only 11 of the 20 regions tracked by the Standard & Poor’s/Case-Shiller home price index. The index is off of it’s lows from May of this year but is still well below it’s all-time highs in April 2006. On Monday it was reported that consumer confidence has continued it’s climb. That’s important because spending, which is the main driver of the U.S. Economy, tends to increase as the consumer feels more confident.

The problem however is that most experts seem to think a double-dip price drop will occur. And they do have valid reasons: foreclosures will increase and sales will decrease after government intervention wanes. But if the economy is able to right itself shortly after the first quarter 2010 (not very likely) the tax credit could be offset by a decreased un-employment rate. If jobs are more readily available the rate of foreclosures could slow down. Nevertheless, there are still many homeowners that would still be in trouble even if they found a new job today. They might still need to go the route of a short sale or foreclosure to save themselves from an ”insurmountable” debt.

-@TheRELedger

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Habitat for Humanity Pics

Follow this link to the album on Facebook. I have some pics of myself and the other volunteers…

http://www.facebook.com/album.php?aid=2054181&id=54900228&l=ea2c517215

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Holiday Toy Drive

Donations are being accepted untill 12/18. Also, please let me know if you’d be interested in volunteering sometime to organize and wrap toys.

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Another Foreclosure – 2Family Dongan Hills

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Status: Call for Details (12/5/09) MLS#: 1057374md ER Type: Two Family Detached ListPrice: $282,150 Address: 738 SEAVIEW AVE YearBuilt: 1915/APROX   STATEN ISLAND, NY 10305 Style: Cape Area: DngnHillsB-Hylan BldgDim: 18X30 County: Richmond BuildingSqFt: 864 SqFt Condition: Poor $/Sqft: $326.56 LotSize: 4,500 SqFt Rooms/Unit: 5/ LotDim: 45X100 Bedrooms: 3 Garage: None/0 Car(s), OffStreet TotalBaths: 1 Basement: Full/Unfin Full/3/4/Hlf: 1/0/0 Taxes: $2,262 Zoning: R3-2 Abated: No CofO: N ParcelID: 03481-0012 Rented?: N/ Directions: HYLAN BLVD / FR CAPODANNO BLVD

Listing Office:	Our Island Real Estate
Courtesy Of:	Provided by Thomas Ledger, The Real Estate Ledger and Our Island Real Estate Direct: 917-731-6547 Office: 718-273-7700 Email: Tom@TheRealEstateLedger.com

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Another Foreclosure – Port Richmond 2-Family

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Status: Call for Details MLS#: 1056876m ER Type: Two Family Attached E ListPrice: $199,900 Address: 2292 RICHMOND TER YearBuilt: 2001/APROX   STATEN ISLAND, NY 10302 Style: Colonial Area: Port Richmond BldgDim: 15X40 County: Richmond BuildingSqFt: 2,100 SqFt Condition: Fair $/Sqft: $95.19 LotSize: 1,914 SqFt Rooms/Unit: 6/3 LotDim: 22X87 Bedrooms: 4 Garage: None/0 Car(s), OffStreet TotalBaths: 3 Basement: Full/Apartment Full/3/4/Hlf: 2/0/1 Taxes: $2,840 Zoning: R4 Abated: No CofO: Y ParcelID: 01086-0053 Rented?: N/ Directions: CORNER OF RICHMOND TERR & NICHOLAS AVE

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Another Foreclosure – Westerleigh 1F Detached

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Status: Call for Details MLS#: 1056669m ER Type: One Family Detached ListPrice: $325,000 Address: 267 WATERS AVE YearBuilt: 1930/APROX   STATEN ISLAND, NY 10314 Style: Colonial Area: Westerleigh BldgDim: 18X26 County: Richmond BuildingSqFt: 1,044 SqFt Condition: Good $/Sqft: $311.30 LotSize: 2,375 SqFt Rooms/Unit: 7/ LotDim: 25X95 Bedrooms: 3 Garage: None/0 Car(s), OnStreet TotalBaths: 2 Basement: Full/Unfin Full/3/4/Hlf: 1/0/1 Taxes: $2,715 Zoning: R-2 Abated: No CofO: N ParcelID: 01463-0006 Rented?: / Directions: WATCHOGUE RD TO GASCOE TO WATERS AVE.

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