Short Sale Blog

Here is the latest short sale news at Seattle Short Sales. We assist hundreds of Seattle area homeowners with short selling their home and avoiding foreclosure.

Mortgage Delinquencies Drop Nationally - But Still Rising Here in WA

- Thursday, May 10, 2012

Good news on the national front regarding mortgage payment delinquencies - but, as usual, the Seattle area and Washington state seem to be lagging behind the national trends.

According to a new report by TransUnion, as published in the Silicon Valley Mercury News, the percentage of homeowners who are 60 or more days delinquent on their mortgage payments dropped in the first quarter of 2012. The nation-wide delinquency rate is now at its lowest level since 2009.

But that drop is small. The national delinquency rate was 5.78% for the first three months of this year - down from 6.19% a year ago. Before the housing crash, the delinquency rate was about 2%, and it peaked at nearly 7% in late 2009.

Throughout this housing crisis, though, Washington state seems to lag behind national trends. As the national delinquency rate declines, there are only eight states where the delinquency rate is still increasing: we in Washington are one of those eight.

The regions that were hit hardest and earliest by the financial crisis and high foreclosure rates are showing very strong signs of recovery. A report published this week by HousingWire, using figures published by Move Inc., lists the regions that show the “top turnarounds.” These are the towns showing the highest level of housing market recovery, as reflected by declining inventory and increasing house prices. Those top turnaround towns include Phoenix-Mesa in Arizona; Orlando, Florida; and Oakland and San Jose in California - all of which have already been hit hard by foreclosures.

We are confident that Washington state and the Seattle real estate market will also follow those same trends and see recovery in the housing market. We just seem to continue to be a year or two behind the national trend.

As delinquency rates are still on the rise here, homeowners who are struggling to make their mortgage payments will continue to look for solutions such as short sales, in order to avoid foreclosure and the negative affects that mortgage payment delinquency will have on their credit rating.

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Seattle Home Prices Predicted to Drop by Another 6.9% this Year - A Rate Nearly Twice the National Average

- Sunday, February 26, 2012

According to a news clip from CNN (click Play below, of view here), summarizing information provided by the National Association of Realtors and by Zillow, home prices in Seattle could drop by nearly 7% more in 2012.

Home prices in the USA are the lowest they have been in a decade. Currently, the median home price nationwide is $154,700, less than half of what it was in 2007. Housing prices are expected to drop across the country by a further 3.7% this year.

But the report goes on to break out home prices by region. Some cities, such as Washington, Los Angeles and Phoenix, have already passed through the worst of the foreclosure crisis and are even expected to show small gains in home prices this year.

However, many regions have not yet seen the worst, and are expected to show price drops that are worse than the national average for the coming year. Seattle, not having been hit as hard by the crisis so far, fits in this category.

The prediction is for home prices in Seattle to drop by another 6.9% over 2012 - a rate nearly twice that of the national predicted price drop. The only two cities with more dire forecasts than Seattle are Atlanta (8.5% drop) and Chicago (7.6% drop).

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Home Prices Now 33% Lower Than 2006: Expected Further Drop of 1% This Year Before Recovery Begins in 2013

- Monday, January 30, 2012

As reported today in The HousingWire, home prices are now a full one third lower than their peak in 2006.

Home prices continued to slide through 2011, dropping 3.9% by the end of the third quarter of 2011, relative to one year earlier.

The Case-Shiller Indexes released today predict that home prices will continue to fall another 1% this year before bottoming out. According to this index, prices are expected to then rise 3.8% in 2013.

However, Yale University Professor Robert Shiller, in an interview with Yahoo!Finance published today, treats these predictions with caution. He notes the challenges that economists face in making accurate predictions when there are not previous similar examples to study and learn from.

According to Shiller, today’s low interest rates probably don’t matter much in determining home prices. What seems to influence prices more is momentum. “So if it's been going up it will continue going up and if it's been going down it will continue going down,” Shiller says. “By that model, which is the most successful forecasting model for home prices, prices will keep going down.”

What seems clear is that the end to the price slide is probably not quite in sight. Shiller also notes that it is difficult to determine what, exactly, is appropriate pricing for housing today, given that we are heading from a period where homes were overpriced. “I don't know exactly where the middle is but it's not like we're overpriced anymore. Now the question is whether we'll overshoot, which is a common thing that happens after bubble burst.

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Home Price Drops in 2011 Worse Than Predicted - Seattle Prices Fall More than National Average

- Wednesday, December 28, 2011

Bloomberg reported this week that U.S. home prices fell even more than forecast for the one-year period October 2010 to October 2011.

According to the Bloomberg report, the median prediction of 27 economists surveyed last year was for home prices to fall by 3.2% over 2011. But the figures now in show that home prices actually fell by 3.4% (according to the S&P/Case-Shiller index of property values in 20 U.S. cities).

That difference may not seem much - but the damage here in Seattle is much worse. As reported by the Puget Sound Business Journal, home prices in Seattle have fallen by 6.2% from a year ago - a drop that is nearly twice the national average. Home prices in Seattle fell by 1% between September and October alone, and by 1.1% the previous month.

The one good side to the drop in home values is that it may turn renters into potential home buyers - bringing new players into the real estate market. As homes become more affordable, some renters may choose to take advantage of the twin opportunities: low home prices and low mortgage rates, and enter the housing market.

There is still a lot of inventory available at present, and it may take time before an increase in buyers is reflected by actual rising home prices - but more buyers is a necessary early step towards any eventual recovery in the real estate market.

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NAR Releases its “Corrected” Existing Home Sales Figures for 2007-2010 - Revising them Downward by Over 14%!

- Wednesday, December 21, 2011

We reported to you last week that the National Association of Realtors (NAR) had announced that there had been errors in the assumptions they had used to calculate sales of existing homes, and that they would be releasing revised sales figures for the five-year period from 2007 to 2011 this week.

Today, NAR released the revised figures.

For 2010, the figure for total sales of existing homes was originally estimated as 4,908,000 sales, but has now been revised to 4,190,000 sales - meaning that existing home sales for that year had been overestimated by 14.6%.  For the four-year period 2007-2010, sales figures have been revised downward by 14.3%.

Although NAR emphasizes that revisions to the figures over such a long period do not mean changes to the month-by month trends, this substantial downward revision means that the housing “bust” was much worse than the previous figures had suggested.

We explained in last week’s post how these calculation errors occurred, and how NAR’s Chief Economist Lawrence Yun would be revising the calculations by “rebenchmarking.”

From today’s statement by NAR:

A divergence developed over time between sales reported by MLSs and sales determined by a U.S. Census benchmark; the variance began in 2007. Reasons include growth in MLS coverage areas from which sales data is collected, and geographic population shifts.

“It appears that about half of the revisions result solely from a decline in for-sale-by-owners (FSBOs), with more sellers turning to Realtors® to market their homes when the market softened. The FSBO market was overwhelmed during the housing downturn, and since most FSBOs are not reported in MLSs, national estimates of existing-home sales began to diverge based on previous assumptions,” Yun said.

NAR’s statement also released existing-home sales figures for November 2011. Home sales for that month increased by 4.0% over the previous month, and by 12.2% over November 2010 (taking the corrected figures into account).

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NAR Revises Five Years of Existing Home Sales Figures Downward - The Bust was Even Worse than We Thought!

- Wednesday, December 14, 2011

This week, the National Association of Realtors (NAR) announced that there have been errors in the assumptions they used to calculate sales of existing homes. Going back as far as 2007, they will be recalculating and revising existing home sales figures - downward. Which means: the housing bust was even worse than we’d thought.

NAR says it will release the new figures next week

In a video released by NAR, their Chief Economist Lawrence Yun describes how these errors occurred, and how the sales figures will be revised using a process called “rebenchmarking.”

NAR’s method for calculating home sales is based upon the “decennial census.” The last decennial census for which the data have been released was in 2000. That year, 5.2 million existing homes were sold. NAR’s methodology is to use that year as a “benchmark,” since that is a year that there actually are home sales figures for.

NAR then reviews MLS data for that year. Unlike the decennial census data, MLS data are available every year. NAR uses the MLS data to calculate changes to the benchmark. For example, if home sales reported on MLS increase by 8% from 2000 to 2001, NAR can use that “benchmark” of 5.2 million sales, and assume that it also increased by 8% in 2001 - and so calculate a figure of 5.6 million homes sold for 2001.

That works fine assuming nothing else changes. However, over the years, if other factors do change, then this method of calculating may no longer be accurate. The calculated number of home sales “drifts” from what the true number of home sales is. Then NAR researchers must find a new benchmark - a new “real” home sales number to use in order to make their calculations. This process is called “rebenchmarking.”

The main reason that NAR’s calculations have drifted is that the MLS service was never designed to be a research tool. It was intended to be a sales tool. Some problems with trying to use MLS data for research are:

  • Some homes move as “For Sale by Owner” - outside of the MLS system. As long as the percentage of by-owner sales remains the same, it won’t affect the calculation. But in a challenging real estate market, more homeowners use realtors, rather than trying to sell their homes themselves. So more home sales will appear on MLS - but this does not mean that the total number of home sales went up.
  • Also, in a depressed housing market, home-builders are more likely to attempt to sell new homes via MLS. As Yun notes, the sales figures that NAR receives from MLS do not always distinguish between new and existing homes. So these new home sales also may make it appear that MLS existing homes sales have risen.
  • A third problem with using MLS figures for research is that sometimes homes will be listed more than once - perhaps in two different geographical markets, or perhaps listing a home in two different ways (e.g. as a 3 bedroom; as well as 2 bedroom plus study) in order to attract more interest. This is permitted on MLS, as the service is a sales tool. But, when that home sells, it means that the sale may be reported twice.

These are three of the reasons that NAR’s calculated home sales figures have drifted upwards over the past years. The last time they had a “benchmark” figure, of real home sales, was eleven years ago, in 2000. The challenging real estate market over recent years means that some of their assumptions on how they could use MLS data to calculate home sales do not work: the figures that they calculated were too high.

Unfortunately, the 2010 census did not include a long-form census. This means that NAR cannot use the 2010 census data for their rebenchmarking. However, they will be using information gathered in the American Community Survey, a survey sent to 1.3 American households every year, for their rebenchmarking process.

The revised NAR calculations of existing home sales will be released on December 21st.

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Bad News Nationally, Worse News for Seattle: Home Prices Down 4.1% Nationwide and 6.4% in Seattle, Compared to a Year Ago.

- Thursday, September 29, 2011

The Standard&Poor’s/Case-Shiller Home Price index published this month shows that home prices have declined nationwide by 4.1% over the previous year - but that Seattle home prices have fared over 50% worse than the national average.

The S&P/Case-Shiller Home Price is the leading measure of US home prices. It is published monthly by Standard&Poor’s, using a three-month moving average, with a two-month time lag, so the figures published this week reflect home prices up to July 2011.

S&P’s 20-city composite index shows that, although home prices rose by 0.9% in the month from June to July 2011, they are down by 4.1% compared to July 2010. The June-July increase, as well as small home price increases in the previous three months, reflect a normal seasonal upswing. However, S&P’s Chairman of the Index Committee, David Blitzer, told DSNews that the rate of the July increase was a better-than-usual price increase.

The bad news in the numbers comes for the Seattle area, though. Seattle home prices were down by 6.4% over the previous year - a performance more than 50% worse than the 4.1% drop seen nationally. And the month-over-month increase from June to July for Seattle was a negligible 0.1%.

Only two of the 20 cities used in the index showed price increases for the year. These recent drops bring home prices back down to where they were in 2003 - what some are referring to as “the lost decade in the housing market.” Prices are now down 32% from their peak in 2005, and nearly $7 trillion have been lost in homeowners’ equity through the period.

Stan Humphries, chief economist for the online mortgage marketplace Zillow, told DSNews that he expects only a weak performance from the housing market through the remainder of the year.

Many analysts tie the recent home price increases to the recent drop in foreclosure filings. As we reported to you earlier this month, foreclosure processing times have reached record highs. Since foreclosures tend to sell at lower-than-market prices, the effect of less foreclosure sales is to raise average sales prices for an area. As discussed in an analysis by Bloomberg, investigations into banks’ foreclosure practices which have slowed foreclosure filings may have also helped to slow the drop in home prices (the 4.1% drop was not as high as analysts had predicted a year ago).

However, as banks catch up on their paperwork and bring up the pace of foreclosure filings, home prices may experience increased downward pressure. The Bloomberg article notes that foreclosure filings surged by 33% in August compared to the previous month - a sign that the foreclosure process may be speeding up again.

And that home prices may continue their slide downward.

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Good News… Well, Sort of: Shadow Inventory Now Down to Under 4 years

- Monday, August 22, 2011

The good news is that the shadow inventory has finally dropped.

The bad news is that it will still take nearly 4 years to clear.

A news report by CNN Money today indicated that the shadow inventory - the number of homes that are delinquent on their loan payments, or already in some stage of foreclosure - has dropped from the 52 month inventory of earlier this year down to 47 months.

But 47 months still means nearly 4 years for that shadow inventory to clear. As long as there are homes being released on to the market at distressed-sale prices - and there an estimated 4 to 5 million homes currently in the shadow inventory - home prices are unlikely to recover.

Although, as reported in the HousingWire today, foreclosure starts have decreased for the second quarter of 2011 (both compared to the first quarter of the year, and to the same period last year), the number of mortgage delinquencies actually rose this past quarter.

This drop in forecast shadow inventory is a good sign - but only that the bottom of the market may be approaching, not that we are there yet. Forecasts from earlier this month suggest that home prices may still drop by 4 to 5% before the middle of next year.

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Seattle Real Estate Market Continues to Buck National Trends - But That is Probably Not Good News

- Thursday, August 18, 2011

The Seattle real estate market continues to operate, in large part, contrary to national real estate market trends.

We reported to you last month that, despite foreclosure rates dropping nationwide, foreclosure rates in Seattle had jumped by 10% over the first half of this year.

Now, a new study by the National Housing Conference, a non-profit housing advocacy organization, reported this week in The News Tribune, indicates that Seattle is one of only 12 of the largest US metropolitan areas where the rate of “serious delinquency” grew over the 12 months ending March 2011. A year ago, 7.7% of mortgages in the Puget Sound region were seriously delinquent (i.e., 90 days delinquent or in foreclosure). That rate has increased to 8.4%.

While Washington state has not been hit as hard by the economic crisis and the nationwide wave of foreclosures as some other states, there are worries that this may reflect that it is simply lagging behind national trends. A year ago, home prices in Seattle were still considered to be overpriced relative to their real market value - a statistic which could mean that they have more potential to drop further.

An article published yesterday in the Wall Street Journal, and summarized on the Seattle PI blog, indicates that Seattle area homes are still considered to be 14% overvalued, relative to historical (pre-year 2000) trends. However, this is one figure where Seattle is in line with the national average, which is also 14%.

And another report released by CNNMoney on Tuesday indicates that, while home prices have come down nationwide enough so that buying is cheaper than renting in most US cities, in Seattle the opposite is true. This study examined the country’s 50 largest cities. Seattle was one of only 12% of those cities where renting was cheaper than buying - another indication that home prices here are overvalued.

Data from earlier this year indicate that one third of Seattle area homes are worth less than the balance owed on their mortgages. Recent predictions see home prices dropping nationwide by another 5% over the coming year. Both Seattle's currently overvalued home prices, and Seattle’s tendency to buck the national trends, together suggest that the slide here could be even steeper.

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Housing Prices Could Drop Another 4 to 5% by Early 2012

- Friday, August 12, 2011

As reported today by the HousingWire, JPMorgan Chase continues to forecast further drops in US home prices. Their current prediction sees home prices decreasing by a further 4 to 5% by early 2012.

Home prices had shown small signs of improvement in the spring. However, these gains were attributed to seasonal factors - the usual pre-summer increase in homebuying, and the tendency of market share of previously foreclosed or delinquent properties to drop in the summer - rather than as any signal that the housing market was improving overall.

Chase analysts indicated that "Without a fundamental improvement in the demand-supply imbalance, both seasonality and distressed sales may turn against us in the coming winter and push home prices lower.” They also noted that the recent US debt downgrade and the European debt crisis both signaled the possibility of a double-dip recession.

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