March, 2012:

The Calm Before the Storm?

Due to the cessation of foreclosures following the robo-signing scandals of 2010, the backlog or “shadow inventory” of bank owned properties has grown significantly. Locally, actual foreclosure sales are down over last year by 50%. However, lis pendens (foreclosure) filings are now up 100%.

This would tend to indicate that we are in a lull, the period in which the lion’s share of the foreclosures have been absorbed by the market and when the banks are resuming foreclosure action. With the banks more aggressively pursuing delinquent homeowners, many expect a surge this year in bank owned inventory. Another consequence will likely be more short sales as more delinquent sellers begin looking for ways to avoid foreclosure.

The impact that this may have on Emerald Coast real estate values will depend much upon demand. Demand has been steadily increasing  over the past two years. Should this trend continue, the negative impact of additional distressed inventory on the market may be negligible.

Home Prices Fall 3.8%

According to the S&P/Case-Shiller Home Price Indices, January 2012 home prices fell 3.8 percent compared to January 2011. The report also indicates that prices fell from December to January in 16 of 19 markets tracked. Charlotte, N.C., was not included due to reporting delays. Phoenix, Detroit and Denver were the only 3 markets that experienced price gains. 8 of the 20 markets actually saw new lows in January. Those 8 markets are Atlanta, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa. As illustrated by the graph below, the index shows that prices are back to early 2003 levels. January’s prices represent a 34% decrease from 2006 levels.


Conversely, the National Association of Realtors predicts that not only will home prices rebound this year, but that existing home sales will jump 7 to 10 % in 2012. If correct, that would represent the highest sales level seen in 5 years.

Metro area Change December-January Change from year ago
Atlanta -2.1% -14.8%
Boston -0.4% -2.8%
Chicago -1.9% -6.6%
Cleveland -2.0% -3.3%
Dallas -0.4% -1.2%
Denver -0.6% 0.2%
Detroit -1.1% 1.7%
Las Vegas -0.5% -9.0%
Los Angeles -0.8% -5.4%
Miami 0.6% -1.9%
Minneapolis -0.8% -1.8%
New York -0.8% -2.9%
Phoenix 0.9% 1.3%
Portland -2.1% -4.3%
San Diego -1.1% -5.3%
San Francisco -2.5% -5.9%
Seattle -0.7% -4.0%
Tampa -0.8% -3.8%
Washington 0.7% -0.6%
Composite-20 -0.8% -3.8%

Sources: S&P Indices and Fiserv.

A reader asks: What can I do if a seller changes her mind about selling after I contracted to buy her house?

If the seller refuses to participate in the transaction after signing a legally binding sales contract, you may have a claim for damages. It has everything to do with the language in your sales contract, and we have never seen one that gives either party the right to arbitrarily change their minds and back out of the deal.

We will forward the names and contact information for some good local real estate attorneys that can give you further guidance.

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Destin Harbor Dredging Complete

Emergency dredging of Destin Harbor has been completed, just in time for spring break.  The Destin Harbor channel at Norriego Point has been filling in for many months. During Destin’s October Fishing Rodeo, boats were often required to enter and exit the harbor in single file.

The City of Destin declared a coastal emergency on February 13th and committed $150,000 of the $250,000 needed to complete the dredging project. Okaloosa County Commissioners and the Okaloosa County Tourist Development Council came to the rescue with a one-time grant in the amount of $100,000 to complete funding of the project. These funds come from Okaloosa County bed taxes and not the County’s general fund.

To help protect Norriego Point and the channel from future erosion, the city is planning to use “increased vegetation, a scour mat, a rubble mound groin and a sheet pile wall” along the harbor side of the point. Additionally, a planned stepped seawall along the tip of Norriego Point should help to further stabilize the peninsula.

Foreclosure and Delinquincy Rates Still High

According to Lender Processing Services (NYSE: LPS),  there are now more than 6 million delinquent mortgages in the U.S.  A delinquent loan is any loan that is at least 30 days past due, which of course includes those currently in foreclosure.  LPS is a loan servicing conglomerate that maintains a database of roughly 40 million mortgage loans at a given time, which gives them considerable perspective in terms of national trends and statistics.  According to their calculation, the mortgage delinquency rate (MDR) is nearly 8 percent, which does not include mortgages that are in the foreclosure process. Therefore, the national  foreclosure inventory is now estimated to be nearly 2.1 million. The actual mortgage delinquencies then total 4 million.  Of those delinquencies, a staggering 44.3% are more than 90 days delinquent.

Can a lender deny my short sale just because I am not behind on payments?

A lender can decline a short sale for just about any reason, so long as it doesn’t violate federal discrimination laws.  A lender is under no obligation to approve any short sale or modify the terms of any existing loan contract. If a lender does approve a short sale it is because that lender believes it to be in their best financial interest to do so.

We have consummated quite a number of short sales involving borrowers who were not behind on payments. In those cases, we were able to demonstrate to the lenders that the borrowers would soon become delinquent should the short sales not be approved.

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Mortgage Interest Deduction Takes a Hit

Celebrity psychiatrist Charles Sophy and his S.O. lost in U.S. Tax Court last week. The judge ruled that deductible interest on the two homes that the couple own together be limited to $1.1 million. At issue was whether or not the limits applied per person or per residence. This limit applies even if the co-owners are unmarried and file separate tax returns.  This is the first court ruling on the matter since the IRS issued a memo on the subject in 2009. The court ruling affirms the IRS memo.

Senate Districts to be Re-apportioned

The Florida Supreme Court has declared the Legislature’s Florida House apportionment plan valid, but has declared the plan for Senate districts unconstitutional.  “The Legislature is now tasked by the Florida Constitution with adopting a new joint resolution of apportionment ‘conforming to the judgment of the supreme court,'” the Court said.

Regional MLS Adopts New REO Rules

Regional Multiple Listing Service Inc. in southeast Florida is now requiring that their MLS participants identify listed properties as bank-owned or REO if they are in fact owned by a lender. This action was taken two days after the Palm Beach Post reported that some banks were telling agents not to disclose their ownership. A “large” asset management company was specifically referenced that sells homes for Wells Fargo and other banks. According to the article, they were instructing listing agents to show the owner of these bank-owned properties as “Owner of Record,” rather than naming the bank. 

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