Summertime and Showings Are Increasing

On Friday I gave you the new Monday market report early so that you could catch up on your web browsing over the weekend.  At that time our company, RE/MAX Properties, Inc (the company with the greatest market share by far in Colorado Springs) showing activity for active listings was down 48% from the best week of the year so far, April 5-11, 2010.  The number of listings was up 7% between April and the week of May 31-June 6, 2010.  The good news is now that graduations, early summer weddings, and the hub-bub that surrounds kids getting out of school here in the West has passed, people are interested in looking at houses once again.  Listings are still increasing (10% increase from the first full week of April), but showing activity has increased 41% in the past week from the week before.  Our company showing activity is down 26% from early April, but we are still hoping for steady sales through the next few months before the high real estate season in Colorado Springs winds down.

Bill to Extend Closing Schedule for Tax Credit Qualifiers

One bright spot is that a bipartisan bill is in Congress to extend the closing deadline for home buyers who have been under contract as of April 30, 2010 to September 30, 2010 rather than June 30, 2010.  This bill is intended to keep the tens of thousands of short sale purchases that were contracted for in play as banks attempt to approve short sales and give buyers enough time to close on those homes.  Without the extension many of the purchasers of these homes could change their minds without the benefit of one of the two tax credits offered this year.  Getting these homes closed could make the difference in how many more homes go into foreclosure between now and the end of the year.  It’s better for those homes to sell at a short sale price rather than an almost assuredly lower price if they go on the market as a bank foreclosure at a later date.

More next Monday!  Get the latest real estate market news here each week.

Recent Statistics of Interest in Foreclosed Properties

According to a recent Harris poll, less buyers are interested in purchasing foreclosure or short sale properties.  And when they are interested, a whopping 36% have unrealistic expectations that bank owned properties will sell for a discount of 50% or more off the price of a non-foreclosure property.  For more details, here is the link to the article.

Walking Away

In the article, new statistics are also provided concerning what percent of the population would consider walking away from an underwater mortgage.  This topic seems to keep showing up in the press.  The good news is 59% of respondents would not walk away from their homes.  One percent would make walking away their first option.  In other posts on this blog, we’ve learned that those whose loan to value ratio exceeds 125% are the most likely to walk away.  This one percent may already be there and see no other option out of their situation.

Distressed Property Sales Statistics

Depending on the season, anywhere from 15-35% of residential real estate sales in the Pikes Peak Region are distressed properties (short sales and foreclosures) in the past few years.  We have a relatively stable market compared to Nevada, Arizona, Florida, and California.  The number of mortgages that are underwater in California varies with the city, but many California communities are finding they have an unusually high number of homeowners who owe more than they can sell their home for.

The Top Three

The cities and states with extremely high rates of underwater mortgages are also the markets where huge unsustainable appreciation rates were the norm during the height of the market.  These appreciation rates were exceeding 30% a year in many cities.  Three statistics I thought were the scariest for homeowners were Las Vegas (70% underwater), Phoenix (58%), and Florida (48%).  It will take many years for these locations to dig out from under their real estate problems.  As long as rates stay low, buyers will come, but the condo markets will continue to be in distress due to tightening financing requirements for these properties.  Las Vegas and Florida have a lot of condos that were built with speculation in mind.

Strategic Defaults

A consequence of all this misery is that some homeowners are making strategic defaults - a fluff term that means walking away from your home and sending the keys to the bank.  Many homeowners in these greatly distressed markets don’t see any way out.  They would rather trash their credit than pour more money into these properties or wait for the turn around.  Statistics show that homeowners most likely to default on their loan are those that have a loan to value ratio of 125% or greater.  Other sellers with an underwater loan are seeing an opportunity to rent out these properties to people who would rather rent than buy or who aren’t in a position to buy, let them pay the mortgage, and wait for things to improve.  And the third group doesn’t need to move, like their homes, and are content to just wait it out and live their lives.

Just food for thought.  What do you think will happen in the next 5 years in your community?

There is a new trend in some areas that have been especially hard hit during the past 4 years - people who are current on their mortgages walking away and letting the bank take back their house.  In the early 1980s this phenomenon was happening in Houston, TX, where we lived at the time, because home prices dropped all over the city and surrounding communities and people who were unable to sell their homes for what they owed simply walked away.  Some neighborhoods looked like Phoenix and Florida do today with foreclosure after foreclosure lining the streets.  Here is a link to a recent article from Realtor.com about the risks in doing this.