2012 - the year of the short sale?

2012 - the year of the short sale?

By Tom Tryon:  "Here is the real-time tale of two real estate
markets.  One market is depressed and distressed.  Property
values are down. Since mid-2006, residential values in Florida
have declined by 51%.  Hundreds of thousands of properties have
been, or are, in foreclosure and huge numbers of homes have been
repossessed.  Consider these statewide numbers, presented by
analyst Jack McCabe during last week's Herald-Tribune Hot Topics
forum:

-  150,000 residential properties in Florida have been
repossessed, and are owned, by banks.

-  371,000 foreclosure cases are open in courts.

-  530,000 residential mortgage loans are at least 90 days past
due and in default.

-  265,000 homeowners have not made a mortgage payment in more
than two years.

-  1 million residences are in some form "distressed," whether in
foreclosure, owned by banks or in default.

-  46% of mortgages "under water" - in other words, the debt
exceeds the current market value of the residential property.

Add this number - 809, the average number of days to process a
foreclosure in Florida - and it's easier to understand why
so-called short sales, in which owners and mortgage holders sell
at steep losses, are viewed as advantageous options and positive
movements in the total market.  The overriding question posed
during the forum was: Will 2012 be the Year of the Short Sale?
The answer, expressed by the overwhelming consensus of McCabe,
the guest speaker, the panel - Michael Braga and Harold Bubil of
the Herald-Tribune; attorneys Nancy Cason and Tom Avrutis - and
audience was: Yes.  There was one caveat: 2013 might be the
Second Year of the Short Sale. That's because the volume of
pending foreclosures — and the imminent threat of even more,
could make it impossible to clear this "shadow inventory" from
the real estate market.  There was widespread agreement among the
150 people — analysts, lawyers, bankers, real estate agents and
developers — who attended the forum that more lenders are
warming to short sales, despite the bottom-line effects of
writing off losses.  What's more, the homeowners in financial
peril are overcoming the psychological hurdles - and coming to
terms with the financial implications of - short sales.

The real estate market is so complex that it's impossible to
cover in a multi-day symposium, much less a 90-minute forum. But
I took away two simple points:  1)  The current market is like a
summer day in Florida: Dark and cloudy during one part of the
day, with scattered sunshine and the possibility of bright days
ahead; 2)  It's no wonder my wife and I have stayed in the same
home for 25 years; real estate makes my head spin."

Oil prices on the way up

Oil prices are poised to gain for the third straight week,
undermining global equity market sentiment and threatening the
fragile economic recovery.  A CNBC poll of analysts and traders
showed 12 out of 16 respondents, or 75%, expect oil prices to
rise this week. Three believe prices will fall and one expects no
change. Though the bulls comprise the overwhelming majority, many
are lightening long positions, or bets that prices will rise, as
they believe the recent rally is showing signs of fatigue.  "You
have to trade from the buy side but I would be reducing my long
positions ahead of the weekend," said Tom James, Chairman &
Co-Founder, Navitas Resources, in an email on Thursday. "The
fundamentals in the physical market don't support the current
short term price." James added that he was looking to add long
positions on any pullback in Brent crude to $115. "Target for the
year is now $150 on longer term basis for Brent."

Numerous respondents this week are warning higher retail gasoline
prices could threaten the fragile economic recovery in the US
David Kotok, chairman and chief investment officer, of Cumberland
Advisors said an additional penny a gallon on gasoline translates
roughly to a $1.4 billion decrease in US annual spending power.
The average US price of gasoline jumped 18 cents a gallon in the
past two weeks to $3.69 on Feb. 24, according to the nationwide
Lundberg Survey, Reuters reported.  But supplies of fuel remained
plentiful in most of the country, the survey found.  At $4.24 a
gallon, San Diego had the highest average price for regular
unleaded gasoline on Feb. 24, while the lowest price was $3.07 a
gallon in Denver.  Some believe gasoline prices may average $4.50
a gallon or as high as $5.00, damaging demand ahead of the peak
summer driving season.

Olick - builders say good market trumps energy prices

"Sales of newly built homes are still stumbling along at
historically low levels, but builders claim they are beginning to
see the light at the end of a very long tunnel.  Sales may not be
surging back, but in some of the better local economies, buyer
interest is.  We saw it at open houses over the President's Day
weekend, and it's starting to show up on line even more
dramatically. Virginia-based NewHomesGuide.com, the website of
New Homes Guide magazine, saw a 46% jump in unique visitors from
December 2011 to January 2012 and a 47% jump from one year ago.
Page views were up 59%.  'We always see a seasonal jump in
January,' said Publisher, Leslie Stritmatter in a press release,
'but the increases from the same period last year show this to be
a much more significant bounce. I'm very hopeful that this is a
sign of consumer confidence returning to the markets.'  Consumer
sentiment is improving. 'Right now the improving labor market
trumped rising gasoline prices in influencing confidence, which
is good in that new jobs and wages can help cushion the blow of
an ever rising cost of living,' says analyst Peter Boockvar at
Miller Tabak.

When it comes to housing, the same may be true of high
affordability, improving employment, better confidence,
record-low mortgage rates and lower-priced homes; they all trump
rising gasoline prices.  'We don't think there's going to be a
big impact from gas prices because we have so many forces taking
us to recovery,' says Richard Kettler of Kettler/Forlines Homes.
Kettler says they have seen a substantial increase recently in
the number of visits to his homes, which largely straddle the
suburbs and exurbs of Washington, DC.  'The attitude of the home
buyer is much better, they're more excited,' he adds. He also
notes there is now suddenly more interest in larger homes, not
McMansions, but moving from the 2 thousand square foot range to
3000.  Higher gas prices may not hit buyer demand overall, but
they will affect some choices.  'We are more sensitive today
because of the economic scenario we are still recovering from,'
says Mark Fleming, chief economist at CoreLogic. 'From a housing
perspective, this impacts the exurban communities, as an
increased cost of living will reduce demand to buy homes, and
these are the same communities hit the hardest by the housing
crash anyway.'  A study by the Federal Reserve in 2010 found that
a 10% increase in gas prices reduces home construction by 10%
after four years in locations with a long average commute time,
compared with other locations.

The effect of higher gas prices on home buyers will depend on how
long the spike lasts. If consumers think it's temporary, they
won't factor it as much into their decision.  There are, however,
continuing obstacles to the new home market. Sales are still
barely above where they were last year, and last year was the
worst on record for the nation's builders. This despite all the
stimulus in the market.  And as I'm writing this, Mr. Kettler
just came out of his office, grumbling that one of his sales is
being held up by an appraisal that came in too low."

Debt ceiling fight on the way

Remember the bitter debt ceiling debate in Washington last
summer?  Well, another showdown could be in the offing sooner
than planned.  The deal cut this summer to end the debt ceiling
standoff provided for a $2.1 trillion increase in the country's
legal borrowing limit, which now stands at $16.394 trillion.  At
the time, it was estimated that such an increase could carry the
Treasury Department safely beyond the contentious presidential
election season and into early 2013.  But now that Congress has
extended the payroll tax cut, emergency unemployment benefits and
the so-called Medicare doc fix -- only some of which was paid for
- there is a greater chance that US borrowing could reach the
debt ceiling sooner.  Treasury Secretary Tim Geithner recently
told lawmakers that even with passage of the payroll tax bill -
which will add an estimated $101 billion to deficits in fiscal
year 2012 -- he doesn't expect the debt limit to be reached
"until quite late in the year."  That's a hair past the Nov. 6
election but smack dab in the middle of the fiscal firefight that
Congress is expected to have over the expiring Bush tax cuts.

Meanwhile, the Bipartisan Policy Center, which analyzed projected
monthly deficits and other factors that could play a role in
Treasury's borrowing, now projects that the debt ceiling could be
hit between late November 2012 and early January 2013.  Of
course, if need be, the Center notes that Treasury could still
avert a US default by employing "extraordinary measures" -- such
as suspending investments in federal retirement funds.  So even
if Treasury is at risk of hitting the ceiling at the end of
November, it's possible that its moves could take the risk of
default off the table until early 2013.  Keep in mind, though,
that these estimates assume nothing material changes between now
and the end of the year to increase federal borrowing.  But if
there are any surprises along the way -- such as a slowdown in
the economic recovery that puts a crimp in federal revenue, or
more unpaid-for legislation -- the debt ceiling could be hit
before Election Day, said longtime political observer Norm
Ornstein, a resident fellow at the American Enterprise Institute.
 Either way, the presidential election, the pending expiration of
the Bush tax cuts and the debt ceiling are a combustible mix. And
it's impossible to predict the endgame for any of them yet. Much
will depend on when the ceiling is breached and who wins the
election, Ornstein said.

Florida's "category 5" foreclosure problem

Already facing overloaded dockets of criminal and civil cases,
Florida's court system is getting hit by a deluge of foreclosures
that could tie up the state's legal system for years to come,
according to nationally prominent lawyer.  "It's Florida's
Category 5 foreclosure hurricane," said Kendall Coffey, a legal
expert and author of "Foreclosures in Florida," a book he
discussed during a Space Coast Tiger Bay Club dinner in Cocoa
Beach.  "Collateral damage can be seen in every sector of life,"
he said. "The collapsing real estate market inflicted waves of
unemployment, massive losses in the financial and real estate
industries, and an untold human cost for the families forced out
of homes auctioned at public sales. The mortgage meltdown has
also battered local governments with a deteriorating tax base."
There are 368,000 pending home foreclosures in the state, and
that number could double by 2016, Coffey said.  "In contrast to
most states that employ abbreviated processes for deeding the
mortgaged property back to the lender, every foreclosure action
in Florida is a lawsuit governed by the same rules for pleadings
and court hearings that apply to other civil litigation," said
Coffey, who added the average foreclosure in Florida takes 806
days. "We're not just going to hand it over to the lender."

"Foreclosures in Florida" details aspects of Florida law along
with legal and practical strategies for lenders and borrowers
embroiled in default issues, work-outs and litigation over
troubled mortgage loans.  Coffey is partner in the Coffey
Burlington law firm in Miami and has a home in Brevard County.
He's a former US attorney, legal analyst for the CNN, MSNBC and
Fox networks and author. He was among the lawyers representing Al
Gore during the 2000 presidential election recount dispute. His
latest book, "Spinning the Law," looks at the art of trying cases
in the court of public opinion.  The foreclosure crisis that
began with skyrocketing default notices in 2006 has engulfed the
nation, but hit Florida especially hard. Half of state's homes
are "underwater," meaning owners owe more on their mortgages than
their home is worth.  The state's real estate driven economy is
generating floodtides of litigation and has spawned an industry
of foreclosure defense lawyers who rely on overwhelmed court
dockets to stave off foreclosure and keep clients in their homes,
Coffey said.  "Florida still has and will have one of the slowest
rates of foreclosure in the country," he said.  How will the
consumer fare?  "Ultimately," Coffey said, "homeowners will lose
a contested foreclosure in the overwhelming majority of cases."

More buyers paying with cash

Even more American homebuyers are paying cash to acquire homes,
according to a new survey from Campbell/Inside Mortgage Finance.
The group's HousingPulse Tracking Survey said between October and
January, the number of homeowners purchasing residences with cash
grew from 30.8% to 34.1%.  This trend is occurring at a time when
mortgage rates are holding low. The survey noted that all-cash
buyers are getting discounts of approximately 10%.  Homebuyers
who turned to cash purchases are doing so because of the slow
underwriting process late appraisals and long-wait times when
dealing with certain loans, the report said.  "It is taking about
60 days to close a non-troubled FHA loan. About 30 days longer
than usually a year ago," an agent in Florida told the survey
team.  To release its report, the Campbell/Inside Mortgage
Finance HousingPulse Tracking survey interviewed 2,500 real
estate agents across the country.