Has the Housing Market Reached Bubble Status Again?

With year-over-year price increases continuing on a double-digit course despite recent slowdowns, the ever-present question has once again come to the fore for market commentators and analysts: Has the housing market reached bubble status once again?

The answer—at least, according to Trulia chief economist Jed Kolko—is both yes and no.

In the company’s latest quarterly Bubble Watch report, Kolko estimates national home prices are still around 5 percent undervalued when examining long-term fundamentals like historical prices, incomes, and rents. While ongoing improvements in prices have brought the market close to a tipping point, he notes that it’s far cry from the 39 percent overvaluation in the first quarter of 2006.

“Even though recent double-digit price gains look unsustainable, current national price levels are not cause for alarm,” Kolko said in a blog post. “Sharp price gains, like we’ve had in 2012 and 2013, are not the sign of a bubble unless price levels look high relative to fundamentals.”

Furthermore, “the slowdown in price gains make[s] it less likely that we’re heading for another bubble,” he added.

While the national market is still undervalued, conditions vary widely at the local level. According to Trulia, out of the 100 largest metro markets, home prices are overvalued in 19, including eight of the 11 largest California metros. The greatest danger is along the state’s southern coast, in markets like Orange County, Los Angeles, and Riverside-San Bernardino—which make up three of the five most overvalued markets in the country. (The two remaining slots go to Honolulu and Austin.)

While the number of overvalued housing markets is on the rise, Kolko again says historical perspective is needed: “In 2014 Q1, prices were overvalued in 19 of the 100 largest metros, which is the highest number since 2009 Q4; furthermore, prices were overvalued by more than 10 percent in 4 large metros, which is the highest number since 2008 Q4.

However, at the height of the bubble, all 100 were overvalued, and 91 were overvalued by more than 10 percent.”

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Fannie Mae Extends Closing Assistance for HomePath Properties

Fannie Mae announced Thursday it is extending the 3.5 percent closing cost assistance for HomePathproperties purchased during the First Look period in 27 states. During the FirstLook period, which is in effect for the first 20 days a property is on the market, an owner-occupant or public entity buyer is able to submit offers on HomePath properties without competition from investors.

Originally, the incentive was set to expire on March 31, 2014, but was extended due to a strong interest from buyers.

"We have received a strong response from the incentive since it went into effect on February 14, and we are happy to extend the offer to even more homebuyers,” said Jay Ryan, VP of REO Sales. "With the unusually cold and extended winter season ending, we want to give people more opportunity to use the incentive to buy properties that they will call home."

Initial offers must be submitted by the deadline of April 30, 2014, to be eligible for the incentive. Sales must close on or before June 30, 2014. Buyers who qualify for the Fannie Mae incentive will receive up to 3.5 percent of the final sales price to pay closing costs.

The release noted, "In many cases, buyers could use these savings to buy down their interest rate through upfront points, resulting in additional savings over time. Buyers can work with the lender of their choice to determine if this is an option."

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5 Housing Markets Inventories Are Rising Fast!

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Job Growth Ramps Back Up in California

After losing 32,000 jobs in January, nonfarm employment rebounded in February, adding 58,800 jobs in February, according to the Wells Fargo Economics Group. February's increase reflected a 2.3 percent growth over the past year, creating a net gain of 345,600 jobs.

Three industries led the way in job creation, according to the Group's report. Construction employment increased 2.2 percent during the month, with a net gain of 14,100 jobs. Residential and commercial construction, particularly in the Bay Area and Los Angeles, helped fuel the spike in job growth.

Construction payrolls increased by 6.1 percent.

The tech sector in California remains strong, with professional, scientific, and technical services adding 10,300 jobs in February, pushing employment up 4.1 percent from last year. "Hiring also continues to ramp up in wholesale trade, reflecting growth in international trade and online retailing," the report said.

Retail, however, did not improve for the month of February, losing another 200 jobs to add to the 14,400 lost jobs in January. The Wells Fargo Economics Group attributes the loss of retail jobs to a disappointing holiday shopping season.

Overall, California's unemployment rate continues to trend lower, reported at 8.0 percent for the month. The rate has fallen for seven consecutive months, narrowing the gap relative to the nation from 1.7 point to just 1.3 points for February.

The report found, "Because the drop in the unemployment rate nationally and in California has been accompanied by a decline in the labor force participation rate, the sharp drop in the unemployment rate has been met with a great deal of skepticism."

Regardless, the group believes there are encouraging signs for California. The civilian labor force has picked up considerably, rising by 35,700 people in February, outpacing a 23,700 gain in civilian employment. The group notes, "We suspect that the improvement in the construction sector is pulling some folks back into the labor market that were discouraged when fewer high-paying job opportunities were available."

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What is Causing the Decline in Short Sales?

Consequences stemming from the expiration of the Mortgage Forgiveness Debt Relief Act may be surfacing, according to a perspective piece written by CoreLogic’s Kathryn Dobbyn. The piece found that throughout 2012 and into 2013, short sales had been steadily declining, partly due to rising home prices.

Dobbyn is careful to note that, "While two data points do not make a trend, this negative trajectory appears to have picked up pace in 2014 with short sales dropping 0.6 percentage points from 5.2 percent of total sales in December 2013 to 4.6 percent in January 2014."

Preliminary February data would suggest that short sales will continue to decline, quite precipitously to 2.2 percent.  However, REO-sales have not declined in a similar fashion, moving instead with normal seasonal patterns, according to the CoreLogic analyst.

Dobbyn attributes the decline, not to home price appreciation or other factors, but to nascent effects of the expiration of the Mortgage Forgiveness Debt Relief Act.

"This act, which has been subsequently renewed and extended twice, allowed borrowers to exempt the amount of forgiven mortgage debt from their income, making the short sale a more attractive option for borrowers trying to avoid foreclosure," Dobbyn said.

Dobbyn writes that the expiration of the act, which would create hefty taxable income for a borrower if they proceeded with a short sale, likely made borrowers considering such a move think twice.

Expiration of the act had other consequences as well. "With the forgiven debt now taxable income, a loan modification with a principal reduction presents a more complicated decision for both the borrower and the servicer," the piece said. The increased taxable income could place more stress on an already distressed homeowner, leading servicers to look for other avenues to help trouble borrowers—actions such as a rate reduction or principal forbearance.

While Congress could still decide to extend the act further, with legislation pending in both the House and the Senate, the uncertainty of the extension is putting negative pressure on the volume of short sales and principal reductions.

In California, the passing of the states "Home Owners Bill Of Rights" has added even more pressure on lenders. In the states settlement with mortgage giants such as Bank Of America, Chase and Wells Fargo, the state won a settlement of $16 Billion to be distributed to homeowners that lost thier homes to foreclosure. But as part of the banks restitution was the agreement to offer any other distressed homeowners facing foreclosure an alternative first before foreclosure. This alternative is coming in the form of a loan modification. Now being given to distressed homeowner even if they did not qualify for one in the past.

This is a double edge sword for distressed homeowners. Once they accept this alternative any future help or consideration should they default on the loan modification is non existant. Data show that over 56% of these new loan mods given have already defaulted and the lenders are refusing to allow any more time to short sale as an alternative and going straight to foreclosure. Distressed homeowners MUST think thier decision over very carefully whether to accept ths loan modification. It very well may be thier last opportunity to save thier home.

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Small Banks Frustrated by Dodd-Frank

The results of a recent small-bank survey found small banks are facing rising compliance costs, and finding it harder to serve customers, due to the new regulations from the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The study was published through the Mercatus Center, a university-based research center at George Mason University.

The anonymous, online survey queried approximately 200 banks with $10 billion or less in assets. The survey banks revealed frustrations over the Dodd-Frank rollout.

One anonymous banker objected to "the maddening pace of illogical and unnecessary regulation (that would not) have done anything to prevent the 2008 collapse."

A concern of small banks was the pace and volume of the new regulations. The survey asked banks to compare Dodd-Frank's regulatory burden with the existing Bank Secrecy Act rules—widely perceived as compliance-intensive.

"More than 95 percent expect Dodd-Frank to be at least as burdensome," the report said.

The survey found the new Consumer Financial Protection Bureau (CFPB) was also cited as a concern, with regulators providing additional anxiety for small banks. A third of reporting banks said they hired additional compliance or legal personnel.

Some banks polled quit offering residential mortgages altogether.

"Of the surveyed banks, nearly 6 percent already discontinued residential mortgages and an additional 10 percent anticipate doing so. Although those numbers may seem small in the scope of the national mortgage market, discontinuations will ripple through the communities these small banks serve," the report said.

As burdens increase on smaller banks, consolidation is expected in order to combat increases in cost that are more easily handled by larger institutions.

The report commented, "The five largest banks by assets now hold more than 40 percent of assets and deposits, which is much higher than the approximately 20 percent held in 2000. Of the surveyed banks, 94 percent expect further consolidation."

Increased regulations threaten small banks profitability, and in many ways, their very survival. The report noted that small banks serve an important purpose in the banking landscape.

"They serve small towns, rural communities, small businesses, and borrowers with unique needs and credit histories that don't fare well in unbending large-bank credit models. Small banks can make smart lending decisions based on information gleaned from their deep ties with their communities," the report said.

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Unchanged Home Prices Raises Questions

The Data & Analytics division of Black Knight Financial Services (BKFS) reported no monthly change in its Home Price Index (HPI) for January, underlining the question as to where other home price reports—including the monthly Case-Shiller Home Price Indices—will land for the year's first month.

BKFS' latest report shows the index registering $232,000 in January, unchanged from the end of 2013. Year-on-year, the index was up 8 percent from $215,000.

"Prices have flattened out due to seasonal effects and a slowing in the market," said Raj Dosaj, VP of behavioral models and HPI for Black Knight Data & Analytics.

Given January’s flatness, national prices remain 14 percent off their peak of $270,000 in June 2006.

Of the 20 largest states, California posted the biggest year-over-year increase at 14.8 percent. On a monthly basis, it ranked among the top five largest states, reporting a gain of 0.3 percent.

Among all states, New York topped in gains with a 0.6 percent monthly increase. Following the Empire State were New Jersey (0.5 percent) and Nevada, Pennsylvania, Georgia, and the District of Columbia—all at 0.4 percent.

Not making the top 10 list in January was Texas, which, after several months spent climbing to new price peaks, backed off a bit with a 0.3 percent month-over-month decline.

Among metros, half of the top 10 performers in January can be found in California—not a surprise, given the state’s representation in past HPI reports. Top movers included San Jose (0.9 percent), Santa Rosa (0.8 percent), and Oxnard (0.7 percent), California, which took up the top three spots. Also reporting gains were New York City and San Francisco, each at 0.7 percent.

As for this week's other indices, Dosaj expects to see flat to dropping prices, "as they tend to be impacted by seasonal effects more strongly than the Black Knight HPI," as they include short and REO sales that are more prone to seasonal volatility.

"Going forward we should see positive growth in 2014 but at a more moderate pace compared to 2013.  Somewhere between 2-4 percent for the year is likely," he said.

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What Season Should I Sell My Home?

Homebuyers are clueless about mortgages!

Fed Could Spur Slumping Mortgage Rates

Fixed mortgage rates moved down just "a tad" this week, keeping movements within a fairly narrow range year-to-date as the first quarter comes closer to an end.

Freddie Mac's weekly Primary Mortgage Market Survey, released Thursday, showed the 30-year fixed-rate mortgage (FRM) averaging 4.32 percent (0.6 point) for the week ending March 20, down from last week, when it averaged 4.37 percent. A year ago, the 30-year FRM average was 3.54 percent.

Since falling from 4.53 percent in 2014's first weeks, the 30-year fixed average has seen limited movements since, staying in the 4.2-4.3 percent range.

The 15-year FRM this week averaged 3.32 percent (0.6 point), down from 3.38 percent in last week's survey.

Frank Nothaft, VP and chief economist for Freddie Mac, attributed the fall back to weak housing data earlier in the week, though he added there may be a pickup soon—compliments of the Federal Reserve.

"Mortgage rates eased this week as housing starts declined 0.2 percent in February to a seasonally adjusted annual rate of 907,000, below consensus forecast," Nothaft said. "The rate on the 10-year [T]reasury note rose following the Fed’s announcement Wednesday afternoon and, if this holds, interest rates may begin to trend higher going into next week."

In adjustable-rate mortgages (ARMs), the 5-year Treasury-indexed hybrid ARM averaged 3.02 percent (0.4 point), down from 3.09 percent previously, while the 1-year ARM moved up a basis point to 2.49 percent (0.4 point).

Meanwhile, Bankrate.com reported in its weekly national survey that the 30-year fixed came down this week to 4.46 percent from an even 4.50 percent, while the 15-year fixed was down to 3.48 percent from 3.51 percent.

The 5/1 ARM also slipped, dropping to 3.26 percent from 3.30 percent last week.

According to analysts for the finance site, "[t]he mostly static nature of mortgage rates in recent weeks" is due to a dearth of meaningful news regarding the economy and the situation at the Fed.

"With the Fed maintaining the taper and pledging to hold short-term interest rates at record lows, there were no bombshells in [Fed Chair Janet] Yellen's initial meeting at the helm of the Fed," Bankrate said in a release. "While investors are reading into a slightly earlier timetable for Fed rate hikes, Yellen assured observers the Fed had not changed their policy."

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Buyer/Seller Market? East and West Coast Differ ....Confirming its time to SELL!

Whether buyers or sellers have the upper hand in home sales negotiations this spring will depend on which part of the country their deal takes place, according to the latest market analysis report released Thursday by Zillow.

A look at buyers' and sellers' markets around the country shows that the better job market in the West is drawing more buyers and driving up competition for homes in more economically stable cities, thus giving sellers the upper hand in home sales negotiations in western metro areas. Meanwhile, leverage for buyers is strongest in cities in the East and Midwest, where less competition for homes will likely give them more room for bargaining on prices.

According to Zillow, the best market for buyers is Cleveland, followed by Philadelphia, Tampa, Chicago, and Pittsburgh. Buyers should also have the upper hand in Cincinnati, New York City, Detroit, Baltimore, and Saint Louis.

One notable East Coast exception to the buyers' market is Washington, D.C., which came in eighth on Zillow's list of cities in which sellers have the upper hand in home sales.

The most seller-friendly markets this spring, according to the report, will be in the West—particularly along the West Coast—where robust demand, a sense of urgency among buyers, and limited supply are causing rapid home value appreciation, said Zillow's chief economist, Stan Humphries. "In the East, housing markets are appreciating a bit more slowly, and homes are staying on the market longer, which helps give buyers the upper hand," he said.

San Jose and San Francisco lead the top sellers' markets, followed by San Antonio, Los Angeles, Seattle, and Riverside, California. Denver, D.C., Sacramento, and Dallas-Fort Worth round out the top 10 sellers' markets.

The schism in leverage, according to Humphries, may actually be a good sign of overall economic recovery nationwide. "As we put the housing recession further in the rear-view mirror," he said, "the broad-based dynamics that applied during those days, when all markets were reacting similarly to nationwide economic conditions, are fading."

Zillow's data on median home sales bear out Humphries' optimism. The number of homes listed for sale on Zillow.com was up 5.5 percent in February, and the firm's Home Value Index last month was up 5.6 percent from the previous February. Meanwhile, Zillow expects home values to rise another 3 percent through next February.

"Real estate has always been local," Humphries said. "And as the spring market gains momentum, this old adage will only become more pronounced."

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$63.1 Million Awarded to Stave Off Foreclosures

NeighborWorks America announced Tuesday in a press release that $63.1 million had been awarded to 29 state housing finance agencies, 18 HUD-approved housing counseling intermediaries, and 67 community-based NeighborWorks organizations.

The money, provided through the National Foreclosure Mitigation Counseling (NFMC) program, is earmarked for counseling to families and individuals facing the threat of foreclosure.

The organization notes that although the number of households facing foreclosure is below the peak seen a few years ago during the housing crisis, "[M]any hundreds of thousands of homeowners will still face trouble with their mortgages this year."

More than 167,800 families who face foreclosure are expected to be directly assisted by the funds.

NeighborWorks America notes that more than 1,100 nonprofit counseling agencies and local NeighborWorks organizations across the country are expected to be engaged with the NFMC program as a result of the award.

The agencies provide, "[F]ree assistance to families at risk of losing their homes, determine homeowner eligibility for the various state and federal foreclosure prevention assistance programs, help homeowners understand the complex foreclosure process, and identify possible courses of action so their homeowner clients can make informed decisions and take action," according to the release.

Additionally, funds will go to the training of 2,000 counselors who can assist in foreclosure-related issues.

The NeighborWorks America program has been effective. The release cites a 33 percent decline in serious mortgage delinquencies for homeowners who received NeighborWorks pre-purchase guidance, compared to similar homeowners who received no pre-purchase help.

However, the $63.1 million awarded is not enough to satisfy all demand for NFMC funding. Requests for awards totaled in excess of $100 million dollars, which suggests that the many families seeking assistance 

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2013 First Time Home Buyers, Who Were They?

Were Mortgages Lost from Tight Credit Restrictions?

A new study by the Urban Institute calls for "expanding the credit box" in order to promote not only a housing recovery, but an overall economic recovery. The report estimated, "1.22 million fewer purchase mortgages were made in 2012 than would have been the case had credit availability remained at 2001 levels."

The report, “Where Have All the Loans Gone? The Impact of Credit Availability on Mortgage Volume,” reported that in 2001, 4.93 million first lien mortgages originated for home purchases.

"The number of originations rose to 6.03 million in 2005 and dropped to 2.74 million in 2012. This represents a 44.4 percent decline since 2001 and a 54.5 percent drop from the peak volume of 2005," the report said.

The loss of mortgages not only affects the housing recovery, but supplemental businesses like landscaping, furnishings, renovations, and other consumer spending related to owning a home are slowed, affecting overall economic recovery.

The report argues that lower sales activity is only partially responsible for the drop in mortgage volume.

Sales volume was 6.25 million units in 2001. In 2005, sales volume was 8.36 million units, dropping to 5.01 million units in 2012, a 20 percent decrease from 2001.

Another factor leading to a decrease of new home purchases was an increase of investor activity in the housing market, rising from 17.8 percent in 2001 to 39.5 percent in 2012. "[W]e can largely explain the drop in originations by the concurrent decline in home sales and the increase in the all-cash share," the report said.

An increase in foreclosures, nearly 7 million, creates a situation where foreclosed-upon borrowers must wait at least three to five years to qualify for a new mortgage, according to the Urban Institute report. The large volume of renters with a limited availability of credit to purchase a home only exacerbates purchases by investors paying cash.

The report found that borrowers looking to purchase a home with credit scores in the middle tier (660-750) and lower tier (sub-660) declined 46 percent and nearly 70 percent, respectively, from 2001 to 2012.

An estimated 273,000 to 1.2 million loans were not originated due to limited credit availability.

The report commented, "The truth is somewhere between these estimates, but likely closer to the upper bound because many prospective borrowers with FICO scores well above 660 are affected by the tight credit box and credit overlays."

Race also played a factor in the decline of loan originations.

"Comparing 2001 to 2012, the number of purchase loans to African American and Hispanic borrowers declined by 55 and 45 percent, respectively. In contrast, purchase loans to non-Hispanic whites and Asians dropped 41 and 15 percent, respectively," the report said.

Florida was the hardest-hit state, with a 61 percent drop in purchase loans.

The report credits the drop in purchase loans to Florida's larger overhang of foreclosed properties. "Other Sand States such as California, Arizona, and Nevada also experienced large drops in purchase activity (between 45 and 49 percent), but not nearly as large as Florida," the report said.

The Urban Institute comments that fewer individuals will be able to become homeowners at the exact moment when it is most advantageous to do so, thus losing a valuable opportunity to build wealth.

"There is an urgent need to expand the credit box to improve opportunities for households to build wealth and strengthen the economic recovery," the report said.

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Rising Prices and Mortgage Rates Stall Home Sales

Home sales declined for the fourth consecutive month with sharp drops in West Coast markets, according to the latest Real-Time Price Tracker from Redfin, a national real estate brokerage. The brokerage reported a 10.3 percent decline in sales across the country year-over-year in February.

Only three of 19 markets tracked reported increases in sales over the year—Long Island (3.3 percent), Baltimore (1.9 percent), and Austin (1.9 percent).

"The combination of steep price appreciation and rising mortgage rates is likely coming as a shock to many prospective buyers," Redfin stated in its survey.

With the spring selling season about to get underway, the company says March and April should offer insight into buyers' willingness and ability to adapt to higher prices and mortgage rates—as well as sellers' ability to price appropriately, a skill some are having to relearn to stay competitive.

"This time last year, sellers could name their price and still get 20 to 30 offers," said Los Angeles-based Redfin agent Eric Tan. "This year, even homes that are priced competitively are only seeing two or three offers come in, often at or below list price."

Home prices rose 13 percent over the year in February, with steep gains in the West Coast markets such as Las Vegas (25 percent); Sacramento (22.2 percent); and Riverside, California (21.7 percent).

East Coast markets demonstrated much tamer price gains, according to Redfin. For example, prices were up 2 percent in Long Island, 4.7 percent in Washington D.C., and 6.6 percent in Boston.

Housing inventory across Redfin's 19 markets declined 5.6 percent over the year in February. However, in West Coast markets, where prices rose most, inventory also rose, according to Redfin.

Several markets posted double-digit inventory gains over the year in February, including Phoenix (38.5 percent); Sacramento (23.9 percent); Riverside, California (22.8 percent); Ventura, California (22.1 percent); San Diego (18.6 percent); and Los Angeles (17.8 percent).

Las Vegas, on the other hand, experienced a 35.3 percent decline in inventory.

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Should I Sell My Home With A Realtor?

First-Time Buyers Show Interest; Face Tough Market

More than 4 million first-time buyers want to enter the market, but they face some tough issues as market conditions aren’t exactly favorable to new buyers.

This conclusion came from the Zillow Housing Confidence Index (ZHCI), a new calculation released by Zillow and Pulsenomics.

The ZHCI is a measure of consumer sentiment; anything over 50 indicates a positive sentiment. The current national index is 63.7. Of the 20 metros surveyed, 11 had individual confidence levels above the national average.

In 19 of the 20 large metros surveyed, more than 5.0 percent indicated they wanted to buy a home in the next year. The report notes, "Among current renters, homeownership aspirations were particularly strong, with about 10 percent of all renters nationwide saying they would like to buy within the next 12 months."

A vast majority of respondents said they were "confident or somewhat confident" they could afford a home in 2014.

If every respondent who indicated they wanted to buy a home actually purchased one, first-time home sales would total more than 4.2 million for 2014, more than double the roughly 2.1 million first-time buyers in 2013.

While this optimistic total from Zillow suggests interest is high, actually purchasing a home should prove to be a challenge in the upcoming year.

Market conditions are mixed: inventory, up 11 percent from a year ago, is still well below optimal levels, and has fallen year-over-year in 8 of 20 metros measured by the ZHCI. Mortgage rates, once a record low 3.3 percent in 2013, have risen to 4.2 percent, according to the Zillow Mortgage Marketplace.

A dearth of inventory coupled with rising mortgage rates could push homes out of a homebuyer's price range, particularly for first-time buyers.

"For the housing market to continue its recovery, it is critical that homes are both available and remain affordable to meet the strong demand these survey results are predicting, particularly from first-time homebuyers," said Zillow Chief Economist, Dr. Stan Humphries. "Even after a wrenching housing recession, this data shows that the dream of homeownership remains very much alive and well, even in those areas that were hardest hit."

He added, "But these aspirations must also contend with the current reality, and in many areas, conditions remain difficult for buyers. The market is moving toward more balance between buyers and sellers, but it is a slow and uneven process."

Areas indicated by the ZHCI with the highest interest in purchasing a new home come from metros that were hit hardest by the housing recession: Miami (67.5), Atlanta (62.9), and Las Vegas (64.1).

Each were near or above the national index of 63.7 for "Overall Housing Confidence."

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Total Foreclosures Fall; ‘Zombie Foreclosures’ Pose Challenges

Foreclosure filings are down to record lows, but a more sinister-sounding problem may be on the rise—"zombie foreclosures."

RealtyTrac released its U.S. Foreclosure Market Report for February, reporting that foreclosure filings (default notices, schedule auctions, and bank repossessions) were 112,498, down 10 percent from January and down 27 percent from the previous year.

Foreclosure filings in the month of February represent the lowest monthly total since December, 2006—a more than seven-year low.

"Cold weather and a short month certainly contributed to a seasonal drop in foreclosure activity in February, but the reality is that new activity is no longer the biggest threat to the housing market when it comes to foreclosures," said Daren Blomquist, VP at RealtyTrac.

"The biggest threat from foreclosures going forward is properties that have been lingering in the foreclosure process for years, many of them vacant with neither the distressed homeowner or the foreclosing lender taking responsibility for maintenance and upkeep of the home—or at the very least facilitating a sale to a new homeowner more likely to perform needed upkeep and maintenance," Blomquist said.

As of the first quarter of 2014, a total of 152,033 properties in the foreclosure process had been vacated by the homeowner. These “zombie foreclosures” represent 21 percent of all properties in the foreclosure process.

Owner-vacated properties have been in the foreclosure process an average of 1,031 days, nearly three years.

"One in every five homes in the foreclosure process nationwide have been vacated by the distressed homeowner, but it is closer to one in three foreclosures in some cities," Blomquist added. "These properties drag down home values in the surrounding neighborhood and contribute to a climate of uncertainty and low inventory in local housing markets."

The state with the most owner-vacated foreclosures was Florida with 54,908, representing 36 percent of the national total. Illinois (15,512), New York (10,880), New Jersey (8,595), and Ohio (7,780) rounded out the top five states for owner-vacated foreclosures.

Foreclosure starts fell back to 51,842, their lowest level since December, 2005. A total of 47,715 U.S. properties were scheduled for a future foreclosure auction in February, down 15 percent from the previous month and down 21 percent from a year ago.

Bank repossessions (REO) were 30,307 in February, up less than 1 percent from January. Year-over-year, REO properties were down 33 percent.

States with the highest foreclosure rates in February were Florida, Maryland, Nevada, New Jersey, and Illinois.

Among metros with populations of 200,000 or more, Florida held nine of the top ten metros for foreclosure rates in February. The dubious honor of leader went to the Palm Bay-Melbourne-Titusville metro, where one in every 296 housing units were in foreclosure—nearly four times the national average.

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2018 IS PREDICTED WHERE MEDIAN HOME PRICE WILL MATCH PEAK OF 2006

Should States Fast-Track Foreclosures?

A new study released by the Federal Reserve Bank of Cleveland suggests that fast-tracking foreclosures on vacant properties could provide states with substantial savings. Researchers Kyle Fee and Thomas J. Fitzpatrick used two judicial states, Ohio and Pennsylvania, to show that savings from fast-tracking could save at least $24 million annually.

The report notes, "In Ohio, the annual savings from a foreclosure fast-track is estimated to be between $24,000,000 and $129,000,000," and that savings are "an elimination of deadweight losses, rather than a shifting of costs. That is, these costs already exist and benefit no one."

Pennsylvania could have saved an estimated $24 million to $54 million.

States that require foreclosures to be conducted through the courts "have decided that protecting the rights of property owners is worth the higher cost of judicial foreclosure relative to nonjudicial foreclosure," Fee and Fitzpatrick said.

Costs are incurred when properties are left vacant, leaving them more susceptible to be vandalized and stripped of valuable items, like metal. Repairing these homes to sell is a costly endeavor, and by speeding up the foreclosure process, properties would be left vacant for smaller periods of time, resulting in less damage.

Additional concerns arise as unoccupied homes create health and safety hazards, and cause homes in neighboring areas to decrease in home value.

The report notes that the costs of vacant properties provide no value, and "these costs are born primarily by the lender through rehabilitation costs or lower sales prices."

By fast-tracking homes through the judicial process, researchers Lee and Fitzpatrick found that Ohio could have lowered its foreclosed inventory by .5 percentage points, to less than 2 percent instead of the current figure of just under 2.5 percent. Pennsylvania would have seen similar results, according to the report.

In the study, Lee and Fitzpatrick found that fast-tracking foreclosures could shave off between 8 and 43 days in Ohio, and 9 to 20 days in Pennsylvania.

However, creating legislation to hasten the judicial process is likely to be difficult.

"Crafting legislation that adequately balances the interests of creditors and homeowners while meaningfully fast-tracking foreclosures is no simple task, and would likely require the input of creditors, communities, foreclosure attorneys, and the judiciary," the report said.

For more information contact

Jerry GUsman, The Gusman Group

(888) 213-4208

jerryggroup@aol.com

Thinking About Selling Your Home?

The major selling season is quickly approaching and inventory of homes for sale is at an all time low. This is actually good for hom,eowners who want to sell or that have been waiting for the home values to rise so they can sell. It's simple economics, when demand is high and supply is low IT'S A SELLER'S MARKET!

Get top dollar for your home now! Many sellers are enjoying buyers paying well over listed prices right now. Don't miss your window of opportunity to get the most for your property. Sell Now!

For more information contact

Jerry Gusman
The Gusman Group
(888) 213-4208
Jerryggroup@aol.com