CoreLogic: More Than 1 Million Homeowners Regained Equity in 2014

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5.4M properties still underwater as of 4Q14

Regaining Equity2Some 1.2 million borrowers regained equity in 2014, bringing the total number of mortgaged residential properties with equity at the end of Q4 2014 to approximately 44.5 million or 89% of all mortgaged properties, according to CoreLogic (CLGX).

Nationwide, borrower equity increased year over year by $656 billion in 4Q14. The CoreLogic analysis also indicates approximately 172,000 U.S. homes slipped into negative equity in the fourth quarter of 2014 from the third quarter 2014, increasing the total number of mortgaged residential properties with negative equity to 5.4 million, or 10.8% of all mortgaged properties.

This compares to 5.2 million homes, or 10.4%, that were reported with negative equity in Q3 2014, a quarter-over-quarter increase of 3.3%. Compared to 6.6 million homes, or 13.4%, reported for Q4 2013, the number of underwater homes has decreased year over year by 1.2 million or 18.9%.

“The share of homeowners that had negative equity increased slightly in the fourth quarter of 2014, reflecting the typical weakness in home values during the final quarter of the year,” said Frank Nothaft, chief economist for CoreLogic. “Our CoreLogic HPI dipped 0.7% from September to December, and the % of owners ‘underwater’ increased to 10.8%. However, from December-to-December, the CoreLogic index was up 4.8%, and the negative equity share fell by 2.6 percentage points.”

Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

For the homes in negative equity status, the national aggregate value of negative equity was $349 billion at the end of Q4 2014. Negative equity value increased approximately $7 billion from $341.8 billion in Q3 2014 to $348.8 billion in Q4 2014.

On a year-over-year basis, however, the value of negative equity declined overall from $403 billion in Q4 2013, representing a decrease of 13.4% in 12 months.house_mortgage_underwater_life_preserver_304

Of the 49.9 million residential properties with a mortgage, approximately 10 million, or 20%, have less than 20% equity (referred to as “under-equitied”) and 1.4 million of those have less than 5-percent equity (referred to as near-negative equity). Borrowers who are “under-equitied” may have a more difficult time refinancing their existing homes or obtaining new financing to sell and buy another home due to underwriting constraints. Borrowers with near-negative equity are considered at risk of moving into negative equity if home prices fall. In contrast, if home prices rose by as little as 5%, an additional 1 million homeowners now in negative equity would regain equity.

“Negative equity continued to be a serious issue for the housing market and the U.S. economy at the end of 2014 with 5.4 million homeowners still ‘underwater’,” said Anand Nallathambi, president and CEO of CoreLogic. “We expect the situation to improve over the course of 2015. We project that the CoreLogic Home Price Index will rise 5% in 2015, which will lift about 1 million homeowners out of negative equity.”

Here are some highlights:

  • Nevada had the highest percentage of mortgaged properties in negative equity at 24.2%; followed by Florida (23.2%); Arizona (18.7%); Illinois (16.2%) and Rhode Island (15.8%). These top five states combined account for 31.7% of negative equity in the United States.
  • Texas had the highest percentage of mortgaged residential properties in an equity position at 97.4%, followed by Alaska (97.2%), Montana (97.0%), Hawaii (96.3%) and North Dakota (96.2%).
  • Of the 25 largest Core Based Statistical Areas (CBSAs) based on mortgage count, Tampa-St. Petersburg-Clearwater, Fla., had the highest percentage of mortgaged properties in negative equity at 24.8%, followed by Phoenix-Mesa-Scottsdale, Ariz. (18.8%), Chicago-Naperville-Arlington Heights, Ill. (18.5%), Riverside-San Bernardino-Ontario, Calif. (14.8%) and Atlanta-Sandy Springs-Roswell, Ga. (14.6%).
  • Of the same largest 25 CBSAs, Houston-The Woodlands-Sugar Land, Texas had the highest percentage of mortgaged properties in an equity position at 97.7%, followed by Dallas-Plano-Irving, TX (97.1%), Anaheim-Santa Ana-Irvine, Calif. (96.4%), Portland-Vancouver-Hillsboro, Ore. (96.4%) and Denver-Aurora-Lakewood, Col. (96.2%).
  • Of the total $349 billion in negative equity, first liens without home equity loans accounted for $185 billion aggregate negative equity, while first liens with home equity loans accounted for $164 billion, or 47%.
  • Approximately 3.2 million underwater borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $228,000. The average underwater amount is $57,000.
  • Approximately 2.1 million underwater borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $295,000.The average underwater amount is $77,000.
  • The bulk of home equity for mortgaged properties is concentrated at the high end of the housing market. For example, 94% of homes valued at greater than $200,000 have equity compared with 84% of homes valued at less than $200,000.

By Trey Garrison Housingwire

 

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Realtor.com: Tightening Inventories Likely To Push Home Prices Up

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Inventories tightened 8.7% from January 2014 to January 2015

tightening inventoryHousing inventory continues to tighten in markets across the country – a 2015 trend identified by realtor.com Chief Economist Jonathan Smoke in its housing inventory data report for January.

Nationwide total listings declined by 6.7% month over month and about 8.7% year over year.

“January’s inventory data suggest a continuation of the tightening trend we identified last month in the December data, and with a shortage of inventory typically comes increased home prices,” Smoke said. “Half of the 200 markets realtor.com tracks experienced year-over-year price increases of at least 6% in January.”

Despite a shortage of inventory nationally, data on the 200 largest markets found a handful of housing markets categorized as healthy and growing.

These markets include: New York-Newark-Jersey City, NY-NJ-PA,;Tampa-St. Petersburg-Clearwater, Florida; Jacksonville, Florida, and Pittsburg, Pennsylvania.

“These four markets are bucking the trend, showing notable increases year over year in total listing counts and median list prices as well as clear declines in median inventory age,” Smoke said. “We will likely see the most sales growth in these markets in the coming months.”

Key monthly indicators for the national housing market include:

  • Median list price – $211,000 (Up 8.8% year over year)
  • Total listing count – 1,591,853 (Down 8.7% year over year)
  • Median age of inventory – 103 Days (Down 4.6% year over year)

By Trey Garrison Housingwire.com

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Legislation to Extend Tax Relief to Distressed Homeowners Currently in House, Senate Committees

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houses-underwaterTwo similar pieces of legislation introduced last month in the House and Senate that would extend tax relief to homeowners who are underwater on their mortgage loans have been referred to committees and are waiting to be heard.

Congressman Tom Reed (R-New York) introduced the Mortgage Forgiveness Tax Relief Act of 2015 (H.R. 1002 on February 13, and that bill is now being heard in the House Committee on Ways and Means. Two weeks later, Senators Debbie Stabenow (D-Michigan) and Dean Heller (R-Nevada) introduced a similar bill (S. 608), which is currently in the Senate Banking Committee. Both bills would extend relief to homeowners on forgiven mortgage debt – the remaining mortgage balance when a borrower sells a home in a short sale to avoid foreclosure. The bills would allow homeowners to exclude the forgiven debt from federal income tax forms and not report it as earned income.

Without such legislation, distressed and underwater homeowners would be required to report the amount of mortgage debt forgiven in a short sale as taxable income.

“It is bad enough that so many families in Michigan are faced with mortgages that now exceed the value of their home,” Stabenow said. “But to add insult to injury, without this bipartisan legislation, families willing to work with their lenders will have to pay hundreds or thousands of dollars in additional income tax when they sell or refinance their home. That’s just wrong.”

This is not the first time Stabenow and Heller have introduced legislation to help distressed homeowners. In June 2013, the two Senators introduced a similar bipartisan bill to give distressed homeowners tax relief on forgiven mortgage debt.Mortgage-Forgiveness-Debt-Relief-Act

Just before Christmas last year, President Obama signed into law H.B. 5771, which retroactively extended 55 tax provisions – including one for distressed homeowners similar to the one that the bills recently introduced by Reed, Stabenow, and Heller. One of those 55 provisions was an extension of the Mortgage Forgiveness Debt Relief Act of 2007, originally signed into law by President George W. Bush, which relieved distressed homeowners from having to pay taxes on forgiven mortgage debt for the three calendar years of 2007 through 2009. That tax exemption was extended three more years until the end of 2012 with the Emergency Economic Stabilization Act of 2008, and it was extended until the end of 2013 with the American Taxpayer Relief Act of 2012. H.B. 5771 retroactively extended the tax break on forgiven mortgage debt until the end of 2014.

The current legislation that has been introduced would extend tax relief to underwater homeowners through the end of 2016. According to a press release on Heller’s website, nearly 17 percent of American homeowners (approximately one out of every six) are underwater on their mortgage loans, which means they owe more than their house is worth. The goal of the bill introduced by Reed is the same as that of the bill introduced by Stabenow and Heller, to “amend the Internal Revenue Code of 1986 to extend for two years the  exclusion from gross income of discharges of qualified principal residence indebtedness.”

“Unless Congress acts, those who are underwater in their homes and have received financial relief for their mortgage could be forced to pay a tax on income they never received. This makes no sense, and the legislation Senator Stabenow and I introduced ensures it won’t happen,” Heller said. “As a member of the Senate Finance Committee I look forward to finding a vehicle to pass this important legislation.”

At least one state is attempting to adopt similar legislation for distressed homeowners on state income taxes. Earlier this week, a committee in the North Carolina House of Representatives approved an amendment to bill that would permit homeowners to exclude forgiven mortgage debt when reporting income for state taxes.

Posted By Brian Honea DSNews

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Survey: Delinquency, Foreclosure Inventory Rates Fall to Lowest Levels Since 2007

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foreclosureBoth the delinquency rate and the foreclosure inventory rate in Q4 2014 for residential mortgage loans fell to their lowest levels since 2007, according to the Mortgage Bankers Association’s National Delinquency Survey released Wednesday.

The delinquency rate, which includes loans that are at least one payment past due but not loans in foreclosure, fell to a seasonally-adjusted rate of 5.68 percent in Q4 for all mortgage loans outstanding at the end of the quarter, the lowest level since the third quarter of 2007. The delinquency percentage in Q4 represented a decline of 17 basis points from the previous quarter and 71 basis points from the same quarter a year earlier.

The percentage of loans in foreclosure for Q4 also experienced a sharp decline, down to 2.27 percent – the lowest foreclosure inventory rate since the fourth quarter of 2007.  The foreclosure inventory rate for Q4 was down 12 basis points from the previous quarter and 59 basis points year-over-year.

The percentage of loans on which the foreclosure process began ticked slightly upward by two basis points quarter-over-quarter in Q4, up to 0.46 percent. This was still a decline of eight basis points year-over-year, however. The serious delinquency rate – percentage of loans either 90 days or more past due or in foreclosure – fell to 4.52 percent, a drop of 12 basis points quarter-over-quarter and 89 basis points year-over-year.delinquent-notice

“Delinquency rates and the percentage of loans in foreclosure decreased for another quarter and were at their lowest levels since 2007,” said Marina Walsh, MBA’s Vice President of Industry Analysis. “We are now back to pre-crisis levels for most measures. The foreclosure inventory rate has decreased every quarter since the second quarter of 2012, and is now at the lowest level since the fourth quarter of 2007. Foreclosure starts ticked up two basis points, after being flat last quarter, largely due to state-level fluctuations in the speed of the foreclosure process. Compared to the same quarter last year, foreclosure starts are down eight basis points.”

According to Walsh, 45 states experienced a quarter-over-quarter decline in foreclosure inventory rate in Q4. Fewer than half of the states saw an increase in 30-day delinquencies, and foreclosure starts jumped in 28 states during the quarter. The foreclosure inventory was roughly three times in judicial states compared to non-judicial states during Q4 (3.79 percent in judicial states compared to 1.23 percent in non-judicial states, according to Walsh. States that used both judicial and non-judicial foreclosure processes reported a foreclosure inventory rate of 1.43 percent.

Posted By Brian Honea DSNews

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“Why there are No Deals on the MLS” – ASK the P.I.G. [VIDEO]

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QUESTION: Can you find deals to flip on the Multiple Listing Service (MLS)?

The simple answer to this question, one that I receive all the time, is NO, you can’t find deals to flip on the MLS.  Whenever I post something on my website or Facebook about the lack of deals on the MLS, I always get some goober who wants to tell about his massive success story from an MLS property, but the fact is that deals RARELY are found on MLS.  Yes, I have also purchased a very profitable deal on the MLS….1 house in 12 years.  And so, if I relied on that deal source for my real estate investing, I would have been out of business a LONG time ago.

If your definition of a “deal” is a rental property that has a 10-11% cap rate, then of course, you can pick those up by the handfuls on the MLS.  However, you will have a very difficult time finding deals you can rehab or wholesale, like most “active” investors are looking for, on a public website with inordinate amounts of web traffic.  New investors always follow the path of least resistance, and so when they want to find houses, they go to the MLS…because that’s where they’ve been told to go find houses for sale.  But the deals that fit the standard 65-70% rule that most investors use, must be found OFF the radar, the hidden gems that no one else knows about.  And the reasons are simple:

1.) Competition – It only stands to reason that if you have a lot of people (the millions of people with access to the MLS) looking at a few properties (how many houses are priced even close to what an investor would need to buy it at), that the price of those homes will be driven up to the point that MOST investors will be priced out of the market.  It’s a basic rule of supply and demand.  I just experienced this same phenomenon when I listed an old refrigerator on Craigslist.  I listed it LOW ($50) because I just wanted it out of my garage, but I receive SO MANY phone calls, that I ended up selling for $75…and could have gotten more!   There was just ONE cheap refrigerator, with a LOT of people interested, and so I had the luxury of raising my price.  Had I gone 10 days without a call, and someone called and offered me $25, I would have taken it without a hesitation.

2.) Realtor Pricing Strategies – Realtors are trained to get top dollar for their client’s houses in the shortest amount of time.  So, when they do their research to determine the listing price for a home, they are not researching what price will create a stampede of bargain-hunting, bottom-feeding, low-ball-offering investors.  It’s their fiduciary responsibility to that seller to price the property at highest price that is realistically attainable in the open market.

3.) Bank Loss Mitigation Strategies – As most of you know from your experience with banks, they are not an investors friend, unless it’s an investor in their company who is looking for a good return on their stock purchase.  Real estate investors will always find themselves beating their head against a wall in trying to get a “deal” from a bank-owned REO listing.  After eating as much as $25,000-$50,000 in the foreclosure process, the bank is now out to get as much as humanly possible for their new acquisition, and to mitigate their loss as much as possible.  They will typically have an AS-IS BPO or appraisal done, list it at the full current market price with a high-octane Realtor, and then WAIT…as long as they have to in order to receive top dollar.  They are NOT emotional and they are NOT in a hurry.  They are much more likely to make small, systematic price reductions than to consider a low-ball offer by you.

4.) MLS sellers are TYPICALLY not motivated – Of course, that’s not always the case, because on a rare occasion I will make lowball offers on the MLS, and have found some sellers who are extremely motivated and will consider lower offers.  However, in general, most motivated (or desperate) sellers will try other ways to sell their home before they have to go through the process of listing with a Realtor.  Those who have met with an agent, and signed a contract to list, are usually a little more patient and looking at trying to maximize their profits on what is typically their most valuable asset.

You might be asking yourself, then how in the world do we find these “deals” that you are always talking about flipping?  Well, that my friend might be for another blog post.  If you are a member of the Professional Investors Guild, go back and watch the “Guerilla Marketing” videos in the archives, as well as the “Treasure Trove of Motivated Seller Leads” bonus video for tips and tricks to generating a deluge of motivated seller leads.

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