Quick Update on Foreclosures

Good news per DataQuick Research:


The number of California homes entering the foreclosure process declined again during fourth quarter 2009 amid signs that the worst may be over in hard-hit entry-level markets, while slowly spreading to more expensive neighborhoods. There are mixed signals for 2010: It's unclear how much of the drop in mortgage defaults is due to shifting market conditions, and how much is the result of changing foreclosure policies among lenders and loan servicers, a real estate information service reported.


NODs reached an all-time high in first-quarter 2009 of 135,431, a number that was inflated by activity put off from the prior four months. In the second quarter of last year, NODs totaled 124,562. The low of recent years was in the third quarter of 2004 at 12,417, when housing market annual appreciation rates were around 20 percent.

"Clearly, many lenders and servicers have concluded that the traditional foreclosure process isn't necessarily the best way to process market distress, and that losses may be mitigated with so-called short sales or when loan terms are renegotiated with homeowners," said John Walsh, DataQuick president.

While many of the loans that went into default during fourth quarter 2009 were originated in early 2007, the median origination month for last quarter's defaulted loans was July 2006, the same month as during the prior three quarters. The median origination month during the last quarter of 2008 was June 2006. This means the foreclosure process has moved forward through one month of bad loans during the past 12 months.
"Mid 2006 was clearly the worst of the 'loans gone wild' period and it's taking a long time to work through them. We're also watching foreclosure activity start to move into more established mid-level and high-end neighborhoods. Homeowners there were able to make their payments longer than homeowners in entry-level neighborhoods, but because of the recession and job losses, that's changing. Foreclosure activity is a lagging indicator of distress," Walsh said.

The state's most affordable sub-markets, which represent 25 percent of the state's housing stock, accounted for 52.0 percent of all default activity a year ago. In fourth-quarter 2009 that fell to 34.9 percent.

On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the NOD. The borrowers owed a median $13,510 on a median $325,818 mortgage.

On home equity loans and lines of credit in default, borrowers owed a median $3,939 on a median $62,965 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.

Estate Tax and You

It is unfortunate that the U.S. Senate has been unable to forge a resolution to the repeal of the estate and generation skipping tax which took effect on January 1st. These changes last one year and then in 2011 and then we go back to a death tax with only a $1.0 million exemption per taxpayer. The big question is whether Congress will pass legislation during 2010 which will be retroactive to January 1, 1010. Who knows?

The back story:
In the 2001 Tax Act, many changes were made to the transfer tax system, including increasing the estate and generation skipping (GST) transfer tax system gradually to $3.5 million as of 2009, lowering the top rate for all three transfer tax systems to 45%, eliminating the state death tax credit and ultimately repealing the state and GST taxes (but not the gift tax), and thereafter lowering the top gift tax rate to 35% and eliminating of the "step up" in basis under section 1014e of the IRS code, so a decedent's basis will 'carryover' to those who inherit his or her property.

Stay tuned for the what's coming!


Foreclosure Update
Distressed properties continue to dominate the market. Fierce competition is at hand for properties in Santa Cruz county between $400,000 and $650,000. Have your financials, verification of funds, loan approval and pay stubs up to date and be prepared to battle. We are returning home values to more realistic levels.. It is bloody and brutal and lives are being upended. Yes, the banks led us to the slaughter but the good news is hopefully you will not have to be a slave to your mortgage payment. A home will once again become a home, and no longer an ATM machine. Takes a lot of pressure off. But for now, the stories are painful, the stress is enormous and many people will be starting over. It's okay. You are not alone. And the future may be a much better ratio of mortgage to take home pay. Keep fighting for your dreams.

Luxury Market Update
In the last three months 11 properties sold at over $1 million dollars. The winner was a lovely newer home in Rio Del Mar that closed at $3,500,000. But the bulk of the sales were under $2 million with a couple of exceptions. 8 of the 11 homes had market times over 100 days, while the remaining 3 sold in less than a month. Let's see what spring does to this market,
and will over heating in the valley drive those sales come summer?

Selling Hints
Nothing is more important than clearing clutter, you must be able to see the floor, with only the legs of furniture on it. Cleanliness is next to Godliness, or whatever higher power you admire,
and pet or smoking odors are the kiss of death. (Ask a truthful friend if your house is stinky)
Keep the curtains open, light is the most requested quality home buyers ask for. If you can afford it, put in a skylight. You'll get your money back, or you'll get your money from the house because it may mean the difference between selling or not.

Ok, keep the faith, get a great agent that cares about you, understands technology and has seen the inventory.

Peace and competence,

Terry