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As the housing market continues to struggle for stabilization, many homeowners are turning to strategic default.  Almost 11 million homes are now underwater, according to Corelogic.  Around 3.5 million homeowners are behind in their payments and another 1.5 million homes are already in the foreclosure process, according to RealtyTrac.

Aside from the moral quandary of whether strategic default is the right decision, there also are other factors we suggest be considered. Plus, obtain advice from professionals.

The borrowers’ credit scores will take a hit. According to FICO, someone with a 680 credit score would see their score decline anywhere between 85-100 points after a strategic default, and someone with a 780 credit score could lose 140-160 points.

Borrowers who are considering strategically defaulting on a house should look at it as a last resort, not a first option.  Financial troubles could be eliminated by refinancing, especially if the Obama administration’s program is implemented.

Each state has its own rules and regulations regarding foreclosures, which affect both the length of the process and what the borrower could be liable for in the end.

Other news from the “Sierra Foothills” of El Dorado, Placer, Amador and Sacramento Counties of California at: www.sierraproperties.com or email: zteam4u@gmail.com

According to the sales numbers furnished by the El Dorado County Association of Realtors, county homes sales increased 14 percent during 2011 over 2010 ending the year with 2,400 homes closing escrow.

REOs accounted for one third of all sales while short sales made up another 25 percent. The percentage of shorts and REO sales will increase during the coming year. Some lenders have finally developed more streamlined procedures for handling short sale requests. Perhaps the delayed backlog of foreclosures is working its way through the pipeline? 

The number of homes available for sale is declining. By the end of the year there were 770 active residential listings (excluding active short sales with accepted offers called “active contingent.”) Based upon our current number of sales, averaging 220 a month for the last six months, that’s a three and a half month’s supply of homes on the market. During 2010 the county had a six months supply.

Source: Ken Calhoon, Real Estate Broker, Placerville, California

The Appraisal Foundation’s Appraisal Practices Board is seeking public comment on a proposal about how to adjust comparable sales for seller concessions when making valuations.  

“A common tool used to help facilitate a property transaction is to have the seller provide financial assistance or incentives to the buyer,” the board’s proposal states. “Such assistance may be considered a seller concession or financing concession and this is important because it may have an influence on the contract price. The purpose of this guidance is how to identify, verify, analyze and adjust sale comparables for both seller and financing concessions.” 

You can view the appraisal board’s second draft at the Appraisal Foundation Web site, and submit public comment on the draft proposal through Feb. 29. 

We believe financial assistance or incentives often help families buy a home. Appraisers can reflect and adjust for concessions in their analysis. This has been our experience here in the “Sierra Foothills” region of Placerville, El Dorado County, California.   What comments or recommendations could you offer?

Source: REALTOR® Magazine Daily News

With Marcus & Millichap’s National Apartment Report showing that the U.S. average for asking rents in 2011 came in at $1,061 a month, housing analysts believe more tenants will look to own. 

Some expect the average monthly rent to rise to as much as $1,101 this year, which Paul Bishop of the National Association of REALTORS® says should prompt more potential home buyers to “think twice before renting.”

Plus, another reason some consider buying is that a limited supply of rentals exist fitting their needs. This has been the case in our Placerville, El Dorado County region of California for the past few years.

 Source: “High Apartment Rents Seen Pushing People to Buy Homes,” Investor’s Business Daily (Jan. 27, 2012

 More news at: www.sierraproperties.com or email: zeller@realtor.com

Many in the real estate industry were concerned that a change announced last year to the maximum seller contributions allowed for Federal Housing Administration-insured loans have made more sales to fall apart. The FHA announced last year that it would cut seller contributions from 6 percent to 3 percent for purchases using FHA-insured loans. Seller concessions, such as seller assistance to buyers in closing costs, can play a big part in FHA-financed home sales and in closing transactions.

We believe the previous higher seller contributions helped a lot of families buy a home. Our suggestion is to reinstate 6 percent for the “Sierra Foothills” region of Placerville, El Dorado County, California. What would you recommend for your area? 

Inman News reports that the FHA may be rethinking its seller contribution cap and will likely announce changes to its policy in April. 

“Rather than an across-the-board 3 percent ceiling on all FHA mortgages, the new policy would permit higher seller contributions, probably between 4 and 5 percent, on smaller loan balances,” Inman News reports. “Meanwhile, the 3 percent cap would be mandatory on all loan amounts above some yet-to-be-specified limit.”

Inman News also speculates that a dollar ceiling on seller concessions might be announced, like a maximum cap of $6,000 instead of a percentage.

Source: “FHA Concessions on Seller Concessions?” Inman News (Jan. 25, 2012)

When you compare the cost of owning a home to renting, you’ll find that buying may soon make more sense, Paul Diggle, a housing economist at Capital Economics, told MSNBC.com. 

Diggle’s analysis of the housing market showed a 33 percent drop in home prices, record-low mortgage rates (with 30-year fixed-rate mortgages available under 4 percent now), and a 15 percent rise in rents since the housing market turned sour are making more consumers take a closer look at buying. We find this is applicable to the “Sierra Foothills” of El Dorado, Placer, Amador and Sacramento Counties of California.

“The median monthly mortgage payment of about $700 has fallen to about the level of a median monthly rent check,” an article at MSNBC.com notes about Diggle’s analysis. “If mortgage rates keep falling and rents keep rising, the equation will tip even further toward owning.”

Case in point: Diggle says that a buyer who purchases a median-priced home and stays there for at least seven years would likely come out ahead by about $9,000 than if they chose to rent for those seven years. Diggle’s calculations factor in rents continuing to rise 3 percent a year. Plus housing prices staying flat for the next two years before rising in 2014. 

But while more Americans may be motivated to buy, many still can’t, Diggle notes. Home owners who lost their home to foreclosure may be forced to wait on the sidelines before owning again, other Americans may not have a 20 percent down payment that more lenders are wanting, lack a high credit score to qualify for the best financing, or have steady employment. 

Source: “Home Buying Could Soon Beat Renting,” MSNBC.com (Jan. 23, 2012)

 More assistance at: www.sierraproperties.com or email: zeller@realtor.com

Nearly three out of every four home owners say they are satisfied with their purchase – and the No. 1 reason for their satisfaction is pride they feel about owning a home, according to HomeGain’s 2012 National Home Ownership Survey.

In addition to pride, home owners also said they enjoy the freedom and control they have to make improvement and upgrades to their home. Positive thoughts like these reflect what we are hearing here in the “Sierra Foothills” region of Placerville, El Dorado County, California.

Of the 1,400 home owners surveyed nationwide, satisfaction was found to be highest in the Northeast at 77 percent, followed by the Southeast at 73 percent, the West at 71 percent, and the Midwest at 68 percent.

“The HomeGain 2012 National Home Ownership satisfaction survey shows in spite of declines in the values of homes nationwide, satisfaction among home owners remains high at 72 percent,” said Louis Cammarosano, general manager of HomeGain.

Source of data is Erica Christoffer, REALTOR® Magazine.

More information at: www.sierraproperties.com or email: zeller@realtor.com

Fallen home prices and record-low mortgage rates have pushed housing affordability to a 40-year high. Meanwhile, rental prices are continuing to rise at a fast pace, according to a new report released by Hotpads.com, a rental listing service. 

Rental prices in many areas like ours in the Placerville, CA. increased about 3.5 percent in 2011, and prices are expected to continue to rise in 2012. Meanwhile, home prices fell by about 1.5 percent in 2011 but are expected to level out in 2012. 

“In a lot of cases it’s getting to a point where it makes more sense for people to buy because rent has been going up significantly faster, while home prices have been falling,” Paul Gleger, author of the report, told AOL Real Estate. 

Source: “U.S. Rental Market Stays Hot in 2011,” Hotpads.com (January 2012) and “Rental Prices Climb, Buying Remains More Affordable,” AOL Real Estate News (Jan. 18, 2012)

More news from the “Sierra Foothills” of El Dorado, Placer, Amador and Sacramento Counties of California at: www.sierraproperties.com or email: zeller@realtor.com

Great to report that loan rates hit another all-time low this week, marking the seventh straight week it has averaged below 4 percent, Freddie Mac reports in its weekly mortgage market survey.

Here’s a closer look at rates for the week ending Jan. 19: 

• 30-year fixed-rate mortgages: averaged 3.88 percent, with an average 0.8 point, a new all-time low and dropping from last week’s previous record of 3.89 percent. A year ago at this time, 30-year rates averaged 4.74 percent. 
• 15-year fixed-rate mortgages: averaged 3.17 percent, with an average 0.8 point, up slightly from last week’s record low of 3.16 percent. Last year at this time, 15-year rates averaged 4.05 percent. 
• 5-year adjustable-rate mortgages: averaged 2.82 percent, with an average 0.7 point, the same as last week’s average. Last year at this time, 5-year ARMs averaged 3.69 percent. 
• 1-year ARMs: averaged 2.74 percent, with an average 0.6 point, dropping from last week’s 2.76 percent average. Last year at this point, the 1-year ARM averaged 3.25 percent. 

Source: Freddie Mac

More news from the “Sierra Foothills” of El Dorado, Placer, Amador and Sacramento Counties of California at: www.sierraproperties.com or email: zeller123@gmail.com

In markets where foreclosures and distressed properties are common, experienced appraisers should be used to conduct the complex appraisals, says Appraisal Institute President Sara Stephens.

However, the Appraisal Institute has acknowledged that new rules blocking lenders from hiring their own appraisers mean that appraisers are often hired by appraisal management companies, which generally absorb some of the fee that appraisers earn. 

The National Association of REALTORS® has long asserted that appraisals conducted by less experienced appraisers can derail transactions and impede the market’s recovery. A recent REALTOR® Magazine webinar addresses these issues and offers advice on how to work with appraisers. Download the presentation slides or playback the event recording.

 Source: “Unskilled Appraisers Seen as Problem,” NASDAQ (01/17/12)

This is likely occurring in your region as we contend with it in the “Sierra Foothills” of El Dorado, Placer, Amador and Sacramento Counties of California. More information at: www.sierraproperties.com or www.dougandbudzeller.com