Wednesday, March 24, 2010

High-end home sales making a strong comeback in 2010

There have been many reports that the high-end market is going to come crashing down with a wave of short sales and foreclosures. Most of those stories are pure conjecture so here I'd like to offer some facts. A story from dBusinessNews that has real stats showing the "over one million" market is doing very well indeed. The article is here:

There are plenty of areas besides Los Altos and Los Altos Hills with homes over $1M. However, what this tells me is that the "fever" we're seeing in the market is not just at the low end. Many of the properties that have come on the market in Los Altos since January priced under $1.5M have sold with multiple offers. That's happening because prices are low compared to recent years and demand is strong.

Now, compare this report to the news this morning that new home sale have dropped 2.2%. At first glance it looks like a conflict, however the report notes that the Western Region saw sales increase 21%. The downturn was in other parts of the country hurt by bad weather.

So, overall demand is improving and high-end is picking up. Are we going to see huge increases in prices through 2010? in my opinion, no. While demand is strong and improving I see no basis for huge price gains. I made my predictions in January so we'll see how they hold up. For now, our local market is doing well.

Wednesday, March 3, 2010

Lawyers vs. foreclosure monsters and short sale zombies

There's a growing trend these days toward getting lawyers involved to stop or slow down foreclosures. The same can be said of short sales, even after the fact, when sellers become aware that they may be liable for the loss in a short sale.

With foreclosures, a lawsuit can stop the foreclosure process to buy the seller time. Often, that's all that's needed. Just a few extra weeks to get a buyer lined up so the seller doesn't see their credit take a 120 point hit. It's the need for a little justice that's behind the massive increase in "wrongful foreclosure" and Truth In Lending Act lawsuits in California. The number of those suits has increased from 388 in 2008 to 1395 in 2009.

Is this the beginning of an ongoing trend or just a one-time spike? I'd say it's a trend that we're likely to see for many years. Why? Because borrowers will do anything they can to buy time to sell their homes and banks have not been inclined to work with borrowers on loan modifications. Only about 4% of eligible loans have been modified to new permanent loans. Banks have made it clear they're nearing the end of the loan modification era and foreclosures could come back in force.

The lawsuits targeting short sales are a different issue but potentially just as important. A question recently came up locally asking if banks had disclosed that they could recover the short sale loss when the loan paperwork was signed. If not, is that grounds to sue for lack of disclosure? I think we'll see lawyers and short sale zombies in a fight to the death for a long time. My bet is on the lawyers winning.