Strategic Default To Stop The Bleeding

Happy Friday,
   Hope it's been a great week for you.

   The thought of picking up and leaving your home behind, while still owing money on it, might seem like an extreme option, but for some, it might be their only option.

   An Arizona couple with an "underwater mortgage" was recently profiled in a story on Yahoo Finance ("What Happens When You Walk Away From Your Home?" by Chris Taylor). The couple's home was appraised at nearly $400,000, but with the market downturn, they were told they'd be "lucky to get $200,000 for it", so with their $260,000 loan, they were substantially under water. The couple was faced with a tough decision; make the payments on their new home plus the payments on this older one, or stop paying the mortgage on the older one.

   Strategic Default.

   "I constantly get the saddest e-mails from people saying, 'I've exhausted all my life savings, my retirement is gone, and now I have to default,'" said Jon Maddux, CEO of YouWalkAway.com, in a comment included in Taylors' article. As applied to these particular Arizona couple, they had to "wrestle with it", with the reasoning that they work so hard and so long to build strong credit, with an element of pride as a factor, as well. Ultimately, they looked at the numbers and realized that just cannot continue paying both loans.

   With some numbers Taylor provided from CoreLogic, almost 11 million homes are underwater, with 1.5 million of them already in the foreclosure process (as per RealtyTrac). These numbers are due to spike, with a far-reaching impact on housing prices and the market in general. What's an underwater homeowner to do?

   Taylor lists a few things to keep in mind, for example, "companies default on their obligations when it makes financial sense for them to do so, via the bankruptcy process", and that "It's not personal; it's business". As for penalties, your Credit Score will bear the brunt, and a few years will need to go by to start removing the bruises and the blemishes.

   What else should you keep in mind?

   Taylor suggests that a Strategic Default should be a "last resort", and you should consider refinancing, as well as government programs "designed to keep you in your home". Your location is key, since each State "has its own rules and regulations regarding foreclosures". You should also talk to a professional about the implications, including tax implications, before deciding.

   "Strategic default isn't a decision to be taken lightly, of course", Taylor says, and adds that it's not desirable, "but not the end of the world either".

   Has a Strategic Default been an option you have considered at some point?

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Have a Great Week, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog: http://blogging.lease2buy.com
HomeRun Homes Websites: http://www.lease2buy.com and http://www.homerunhomes.com

TAGS: #Arizona #underwatermortgage #StrategicDefault #strongcredit #foreclosureprocess #housingprices #homeowner #bankruptcy #refinancing #governmentprograms

Foreclosures Flooding The Market And Diluting Prices

Good Morning,

   Hope you are making most of this short week (short for the lucky ones).

   The woes of the housing market surface and resurface in many different ways. The S&P/Case-Shiller Home Price Indices were just released, and the numbers indicate that home prices in the Nation hit a new low in Q1 of this year. The figures showed a 4.2% drop, along with a, "new recession low" with the latest data. Additionally, home prices posted an annual decline of 5.1% when compared to Q1 of 2010. The release of these figures from Standard and Poors indicate that, "Nationally, home prices are back to their mid-2002 levels."

   "There's a three-year inventory of homes in foreclosure for sale, and that's devastating home prices.", says Les Christie, in a story titled, "Foreclosures for sale: Big supply, low prices", in a story on Yahoo Real Estate/CNN Money. The story points to data from RealtyTrac, and says that more than half of homes sold in Nevada are, "in some stage of foreclosure". California and Arizona are not far behind, with foreclosures representing 45% of sales.

   Rich Sharga of RealtyTrac was quoted very accurately as saying that this, "is very bad for the economy.".

   Homes, such as REOs (bank-owned homes), are selling dramatically lower than comparable properties, at an average of 35% less, per RealtyTrac. On the high end of this data is New York State, with a 53% discount for REOs in Q1. It is also worth mentioning short sales, which average at a 9% discount.

   Sharga says that it will take 3 years to sell the nearly 2 Million distressed properties, and about 2 years to clear out the REOs, to which he says, is, "without any new foreclosures at all coming into the system."

   This goes along with the S&P/Case-Shiller figures, where Minneapolis, for example, posted a double-digit 10.0% annual decline ("the first market to be back in this territory since March 2010 when Las Vegas was down 12.0% on an annual basis."). Always eager to end on a bright note, Washington DC was the, "only city where home prices increased on both a monthly and annual basis."

   Where do you think we'll go from here in terms of home prices and inventory?

Have a Great Week, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com

TAGS: #foreclosure #realestate #REO #shortsales

Big Discounts Equal A Pending Buyer Frenzy?

Hi Folks,

   Welcome back!

   With the housing bust, it makes logical sense that there are bargains to be found out there, of course, however, I read an article that I'd like to share with you that shows just how large the discounts are !

   There was an article on Yahoo Real Estate titled, "Cities With the Biggest Home Discounts", which was compiled using a Home Offer Report that is generated by Trulia (for nonforeclosure properties). The analysis was broken down based on price cuts and organized into 4 metrics: "average number of days on the market before first price reduction, average discount during the price-cut period, probability of a second price cut, and the total percentage of for-sale properties of which prices have been reduced at least once.". Using the breakdown, Forbes ranked 50 cities to determine largest activity in terms of overall price reduction.

   The "biggie" was Phoenix, Arizona, with, "residential prices down nearly 45% since 2006.". When you add in the high foreclosure rates and the large vacancy rates, sellers are certainly in a pickle, which gives homebuyers the upper hand. Overall, Arizona fared the worst, with Phoenix, Mesa, and Tucson all included in the top 10 for largest discounts.The other cities after Phoenix that round out the top 5 with the biggest discounts are Mesa, Minneapolis, Long Beach, and Baltimore.

   One of the factors, how long a home sits on the market at the original sale price before the first price cut, was just 48 days for Phoenix, but 80 days for New York City, which was coined as a "robust" market.

   What does this all mean for us? Well, if you are selling a nonforeclosed home, you need to cut your prices to compete with the distressed properties that are selling for a "15% to 50% discount". Las Vegas, which is referred to as, "the nation's foreclosure capital", made the list at #7.

   If you are selling a home in one of these areas, you have decisions to make. Do you slash and burn your price, do you site on your price and wait, or do you look into a Rent to own agreement? This decision will be based on your position in life; are you sitting on a ton of equity, or do you need to cut and run fast? Can you rent out the home with an option to buy, while covering your mortgage payments monthly as you wait for the market to turn around?

   What are your thoughts and comments on this extremely interesting story?

Have a Great Day, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com

TAGS: #realestate #renttoown #Phoenix

Running Out of Homebuyers? Are We Really?

Hi Everyone,

   Welcome back and hope you had a great weekend. This is a pretty big week, with four major housing indicators that are due to be released, which are as follows:

* 1/25 (Tuesday) 9:00 AM: S&P/Case-Shiller Home Prices
* 1/25 (Tuesday) 10:00 AM: FHFA Monthly House Price Index
* 1/26 (Wednesday) 10:00 AM: New Residential Sales
* 1/27 (Thursday) 10:00 AM: Pending Home Sales Index

   We'd like to thank everyone for their fantastic feedback regarding our Blog Post from Friday January 21st, titled, "A Funny Thing Happened on The Way to a Real Estate Deal". As we have mentioned to several of you, we will be planning a new edition of that story line with all new "Funny Real Estate Stories" (we are accepting submissions via E-mail)

   I came across a very interesting story to share with you, and the title really grabbed my attention; "The Eight States Running Out of Homebuyers". In this 24/7 Wall St article (written by Douglas A. McIntyre, Michael B. Sauter and Charles B. Stockdale), the authors state that, "The devastation in some regions will never be repaired.", and they point to population desertion, jobless rates, and the eventual possibility that, "Some homes will be torn down in these pockets of high foreclosures in the hopes that reducing supplies will boost prices."

   The states listed in this article were Michigan, Nevada, Arizona, California, Illinois, Georgia, Oregon, and Florida, and in the article, the full breakdown of each state along with the sources for the data are provided.

   This is indeed a very frightening and an eye-opening story. It is also a sad story to hear of towns literally "dying".

   Do you live in any of the states mentioned? If so, what is your take on this story? We'd love to hear an inside scoop from Realtors, investors, homeowners, and home buyers.

Have a Great Week, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com


TAGS: #homeprices #realestate #realtor