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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

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

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

The multifamily market continues to post gains. 

“Rents are rising, vacancies are falling, household formations are growing and rental supply is limited,” according to a recent report, “2012: The Year of the Landlord,” issued by Morgan Stanley. “We believe the demand for rental properties will continue to grow.”

Vacancies of rental properties dropped to 9.8 percent in the third quarter of this year compared to 10.3 percent earlier this year. 

Led by strong gains in multifamily housing, groundbreaking for new-housing market soared 9.3 percent in November. Construction of multifamily homes of at least two units increased 25.3 percent in November, the Commerce Department reported last week. Starts for structures with five or more units has increased more than 30 percent from October and is nearly double year-over-year levels, Reuters reports.

Rental costs are also on their way up, increasing 2.4 percent over last year compared with an increase of 0.6 percent in 2010, Reuters reports.

Source: “America Becoming a Nation of Renters,” Reuters (Dec. 27, 2011)

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

The latest monthly data shows total existing-home sales, which are completed transactions that include single-family, townhomes, condominiums, and co-ops, increased 4.0 percent to a seasonally adjusted annual rate of 4.42 million in November from 4.25 million in October, and are 12.2 percent above the 3.94 million-unit pace in November 2010.

Full article at: http://bit.ly/trTuv9 via @AddThis

More news from Placerville and the El Dorado, Placer, Amador or Sacramento Counties regions of California at: www.sierraproperties.com or www.dougandbudzeller.com

A survey of 109 economists released this week by Zillow Inc. forecasts that U.S. home prices may fall further under the weight of foreclosures, bouncing back no sooner than 2013 even with mortgage rates at historic lows.

Zillow researchers say U.S. home values probably registered their smallest drop in four years in 2011, with prices expected to hit bottom in late 2012 or the first quarter of 2013 and begin rising by 3 percent a year through 2016.

“Negative equity, unemployment, and low consumer confidence remain the key factors delaying a true recovery,” Zillow Chief Economist Stan Humphries says.

 Source: “Foreclosures Weighing on Prices May Push Housing Rebound to 2013,” Bloomberg (Dec. 22, 2011)

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

The government isn’t doing enough to help home owners at risk of default, foreclosure, and underwater on their homes, a majority of Americans say in the Home Horizons 2012 study, a survey conducted by Yahoo! Real Estate of 1,500 current and aspiring home owners. 

Fifty-one percent of home owners say the government needs to pass more legislation to help home owners who are at risk of losing their house. About two-thirds of Americans surveyed say the government needs to offer more assistance like low-cost loans to help home owners more.

Four out of five adults polled say the 2012 presidential election will have a small or large influence on the housing market, with 43 percent predicting it will have a large impact. However, one-third of those surveyed doubt either party — Republican or Democrat — will have either a positive or negative impact on the real estate market.

“A large-scale government policy that’s going to fix all of this — no one has seen such a thing,” Stan Humphries, chief Yahoo! Study, told Yahoo! Real Estate.

Source: “Yahoo! Study: Home Owners Want Political Action,” Yahoo! Real Estate (Dec. 12, 2011)

Other information from El Dorado, Placer, Amador or Sacramento Counties of California at: www.sierraproperties.com or www.dougandbudzeller.com

At its Tuesday meeting, the Federal Reserve reaffirmed its pledge to keep interest rates low and opted to not take any new measures to bolster the economy, saying the economy has already been showing signs of “expanding moderately.” The economy has shown some improvement in employment and consumer spending in recent weeks. However, the Fed cautioned at Tuesday’s meeting that the “housing sector remains depressed.”

In reaffirming a pledge it first issued in August, the Fed said the federal funds rate — which serves as a benchmark rate for many types of loans, including mortgages — will remain near zero until mid-2013. The Fed said it will continue with plans to move $400 billion of its bond portfolio into longer-term securities, which ultimately could send long-term interest rates even lower.

Overall, the Fed said the economy has steadily been showing signs of improvement and is on track to post its strongest gains of the year in the final months of 2011. But the Fed said that the European debt crisis will continue to pose a major threat to recovery with “strains in global financial markets continue to pose significant downside risks.”

Let’s hope this helps your market and ours in Placerville, El Dorado County, CA.

 Source: “U.S. Fed Leaves Rate Unchanged, Says Economy Expanding Moderately,” Bloomberg News (Dec. 13, 2011)

Buyers may be swayed by the big bargain prices that foreclosures often offer. But before they jump in, some housing experts say they need to be warned that it may not be as big of bargain as they believe. 

For example, often times, foreclosed homes are sold “as-is,” but if the homes have been left vacant for awhile it may have lots of maintenance and damage issues that might not make it such a great bargain after all. Housing experts recommend getting a home inspector to look at the property before submitting an offer—regardless of it being sold in “as-is” condition—so that buyers can know what they’re getting into and the potential price tag for any needed repairs. In our Sierra Foothills region of Placerville California, we also recommend buyers obtain a home warranty if possible.  

Buyers should also be aware that closing costs may be more expensive when buying a foreclosed property since banks will not absorb some of the costs.

Source: “Focusing on Foreclosures; Buyers Are Warned to do their Homework Before Closing a Deal,” Buffalo News (Nov. 27, 2011)