Friday, June 17, 2011

The Rise of the "Strategic Default"

With the housing market in worse shape than during even the Great Depression, more and more homeowners are turning to a "strategic default" as a way to "move on" from their financial and housing woes. 

A strategic default is fairly straightforward - you owe more than the house would sell for, and instead of seeking another course of action to avoid foreclosure (short sale, loan modification, deed in lieu of foreclosure, etc..) the homeowner stops paying "strategically" and eventually loses the home to foreclosure. 

It is understandable why some people believe this is their best option.  Many underwater and distressed homeowners feel trapped and fail to seek advice from someone who understands the implications of foreclosure, as well as the foreclosure process itself.  Others genuinely believe that strategic default is their best choice. 

I'm here to tell you that, in almost any circumstance, doing SOMETHING is better than simply doing NOTHING.  There are a litany of professionals who can help guide you in the right direction.  For example, most lenders are accepting a short sale as a viable alternative to foreclosure.  For a bank to start the foreclosure process is very expensive.  For a homeowner early in the process, there is plenty of time to attempt a short sale.  A short sale will limit the damage done to the homeowner's credit score, and will typically allow them to purchase again in just 2-3 years.  Conversely, a homeowner with a foreclosure on their credit will likely have to wait 7+ years to purchase again.

For some people, perhaps just walking away really is the right choice.  If you are a private investor with 25 houses and hefty sums in your bank account, a foreclosure or two probably isn't going to devastate you.  But in reality, most people don't have 25 houses.  They have one, and it is the largest investment they have.

Tuesday, June 14, 2011

Moving Sale

I was on the Star Tribune website and stumbled across this: 

http://www.startribune.com/lifestyle/homegarden/123657869.html


Martha O'Hara Interiors will be holding several sales over the next few weekends to clean their inventory from the Parade of Homes, home stagings, etc...  I have not personally been to one of these events, but it could be a great opportunity to pick up furniture, end tables, lamps, and the like at discounted prices.  The link to Martha O'Hara's website is below as well.

http://www.oharainteriors.com/

Wednesday, June 8, 2011

Prepping Your House for Summer

With the recent spike in temperatures (102 degrees yesterday!!!), it is probably a good time to think about preparing your home for the summer months.  Here are a few very simple tips to get you started:

  1. Air Conditioner Tune-up - Your air conditioner, much like your furnace, goes unused for large periods of time.  Much like you change the air filter and tune-up your furnace before winter hits, the same should be done with your air conditioner.   A simple Google search reveals that a standard maintenance tune-up will run you between $130 and $150 (unless, of course, you sign up for Groupon).
  2. Buy a Programmable Thermostat - Programmable thermostats are relatively inexpensive and come in a variety of models and styles.  Here is a Google Shopping search for "Programmable Thermostat" - as you can see, they typically run between $40 and $100, depending on the brand and the extent to which it has "all the bells and whistles". 
  3. Change Fan Directions - This one actually seems a little silly, but simply changing the direction your fans spin can improve air flow and simultaneously improve your comfort level.  As a rule-of-thumb, fans should spin counter-clockwise in the summer, clockwise in the winter.
  4. Install/Replace Weatherstripping - Weatherstripping is inexpensive and goes a long way towards keeping the bad air out and the good air in.  Replace your weatherstripping every year or two to ensure that it continues to do its job effectively!
There are a lot of other tips, but this is a decent start.  If you have other unique tips that you use, please feel free to mention them in the comments section - I will add any good ones to this list for future reference.

Friday, June 3, 2011

Foreclosure Notices Drop Sharply

Via Peter King at MorgageLoans.com:

Foreclosures tumbled in April, with the number of homeowners receiving initial notices of default down by 25 percent from their March level.  New figures from the HOPE NOW Alliance indicate there were 163,000 foreclosure starts in April, down from 217,000 the month before.
This is good news for the overall health of the housing market, but I wouldn't read too far into these seemingly positive figures.  There is skepticism that banks have been processing foreclosures at a slower rate in light of the "robo-signing" scandal, and that they will pick up the pace once they settle with the Department of Housing and Urban Development (HUD).  Also, although the number of foreclosure notices is down, the data indicates that the number of mortgage delinquencies has remained steady, with 2.66 home loans at least 60 days past due. 

Thursday, June 2, 2011

Back on Market - Great Woodbury Townhome

This listing of mine in Woodbury is back on the market due to the buyers backing out at the last minute.  It is in move-in condition in a great area, right near Marksgraf Lake.  The association allows rentals, and this could be a great opportunity for either a first-time buyer or an investor.  Call with any questions!

Wednesday, June 1, 2011

Jobs and the Housing Market

Another monthly jobs report was released today by ADP and the news is less impressive than most economists and analysts were predicting/hoping for.  The report essentially says that the economy added only 38,000 jobs last month, including small losses in manufacturing.  While it is encouraging that the economy continues to add jobs, most economists agree that at least 150,000 jobs must be created monthly...just to keep pace with population growth!

But what does this mean for housing?  A report released yesterday by Case-Schiller, a firm that tracks housing prices across the United States, was also unimpressive:  most major metropolitan areas continue to see falling home prices.  In the Twin Cities metropolitan area, home prices are down roughly 10% compared to a year ago.  Now a (pretty strong) case can be made that the housing tax credits last year artificially inflated prices, and they are now "re-setting".  The report also indicates that housing prices are now similar to 2002 levels.  In other words, nearly 10 years worth of equity has been lost by homeowners.

This string of lackluster economic data has had effects on mortgage rates as well.  Rates have gone down over the past week and it's unclear how soon they will rise, if at all.

At the risk of sounding like a broken record, the bottom line is that there has never been a more opportune time to buy.  With prices continuing to fall (albeit slowly), rates as low as they have ever been, and an above-average amount of inventory on the market, buyers are in a great position to snatch up deals that, just five years ago, would have seemed laughable.  If you are thinking that a transition from renting to owning makes sense (in this market, it does!), please call or e-mail me - I would be happy to assist you in any way possible.