Declining inventories signal return of seller’s market

Though many home shoppers who assume they are still in a buyer’s market find it hard to believe, one of the sobering fundamentals shaping real estate this summer is shrinking inventory: The supply of houses for sale is down significantly in most areas compared with a year ago, sometimes dramatically so. And that is having important side impacts — raising prices and homeowners’ equity stakes, and reducing total sales.

In major metropolitan markets from the mid-Atlantic to the West Coast, the stock of homes listed for purchase is down by sometimes extraordinary amounts — 50 percent or more below year-ago levels in several areas of California, according to industry studies. In Washington, D.C., and its nearby suburbs, listings are down by 28 percent, reports Redfin, a national online realty brokerage. In Los Angeles, available inventory is 49 percent lower than it was last summer, San Diego by 53 percent. In Seattle, listings are off by 41 percent. According to the National Association of Realtors, total houses listed for sale across the country in June were 24 percent lower than a year earlier. The dearth of listings is often more intense in the lower- to mid-price ranges.

Peggy James, an agent with Erick Co. of Exit Choice Realty in Prince William County, Va., says she gets calls “all the time” from buyers asking, “Where are all the new listings? Are you agents bluffing” — holding back? But the reality is that “there just haven’t been many” listings in some high-demand price categories lately, she said. In Orange, Calif., Carlos Herrera, broker-owner of Casa Blanca Realtors, said “it’s really strange right now. We have many buyers but few sellers.”

Just south of San Francisco, Redfin agent Brad Le says inventory in Silicon Valley is down so drastically — and demand so strong — that the bidding wars are spinning off the charts. “We’re not just talking about 10 or 15” offers, he said, “but sometimes 40 and 50.” Some buyers are inserting escalation clauses into their contracts to keep pace with counter-bids, and waiving financing contingencies, inspections and even agreeing to increase their down payments to counter any differences between the accepted sale price and the appraised value. One modest, 1,700-square-foot house recently was listed at $879,000. It drew more than 50 competing offers and sold to an all-cash buyer for $1,050,000 in less than a month.

Silicon Valley is in its own special economic niche, but declining inventories are nationwide. In its latest survey of 146 large markets, found that 144 had lower supplies of listings last month than a year earlier. Online real estate and mortgage data firm Zillow reports that some of the steepest declines in inventory are in places that got hit the hardest during the bust, and where sizable percentages of owners still are underwater on their mortgages. In Phoenix and Miami, for example, 55 percent and 46 percent of owners respectively have negative equity.

Both cities have seen significant drops in inventory, and both are experiencing strong appreciation in home prices. According to data from research firm CoreLogic, Phoenix prices are up 14.7 percent for the year and Miami by 9.7 percent.

What’s behind the widespread declines in listings? Analysts say negative equity plays a major role — it discourages people who might otherwise want to sell from doing so. They don’t want to take a big loss, especially in a slowly improving price environment. So they sit tight rather than list. Banks with large stocks of pre-foreclosure and foreclosed properties are doing the same, creating a so-called “shadow inventory” of houses estimated to total 1.5 million units.

Where’s this all headed? Stan Humphries, chief economist for Zillow, says the likely trend is for more of the same: Constricted supplies will lead to price increases, especially in segments of local markets where demand is strongest. Longer term, price increases will gradually rewind the cycle, increasing owners’ equities and convincing more of them to list and sell. This, in turn, should put a brake on price increases.

Bottom line for anyone looking to list or purchase anytime soon: Though conditions vary by location and price segment, lower supplies of houses available for sale are putting sellers in stronger positions than they’ve been in years.

National Association of Realtors Report Offers Promising Signs for 2012 Housing Market

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Admirals Cove in Jupiter is a gorgeous golf and waterfront community with homes for sale.

Lawrence Yun, the National Association of Realtors chief economist, said the market is poised for a run that hasn’t been seen in four years.

Jupiter, FL (PRWEB) June 30, 2012

Another promising sign the U.S. housing market is rebounding has manifested, much to the delight of the real-estate agents.

May’s good news has to do with pending home sales. They’re up.

According to the National Association of Realtors, contracts on existing homes in May equaled a two-year high, rising 5.9 percent and reaching an index level of 101.1 — the largest gain since October of 2011.

Pending home sales haven’t been as high as they are now since April of 2010, according to the association, and the reason they were high that month was because buyers were trying to record transactions before that attractive home-buyer tax credit expired.

Lawrence Yun, the association’s chief economist, said the market is poised for a run that hasn’t been seen in four years. Yun predicted an improvement in overall sales of 10 percent for 2012.

The positive statistics released by the association enthralled economists, who in recent polls said they expected contracts to rise a mere 1 percent in May. Contracts, which precede actual home sales by up to two months, dropped 5.5 percent in April.

In a related report by RISMedia, an online real-estate news and information source, the association pointed to low inventories of single-families, condominiums and townhouses for sale today and said that resulted in an actual decline in existing home sale when the figure was seasonally adjusted. However, there’s an upswing to having a low inventory, and that is a rise in prices.

More good news for the real-estate industry, Yun said.

Figures released by the association indicate housing inventory at the end of May declined slightly to 2.49 million units, or a 6.6-month supply, down from April’s 6.5-month supply. The median price for a home rose to $182,600 in May, an increase of 7.9 percent.

Yun said the gain is the third consecutive monthly increase. The last time the median price of a home rose three consecutive months was in 2006.

Waterfront Properties and Club Communities is seeing a spike in existing home sales, as well. Its summer marketplace has homes for sale in BallenIsles, a lovely club community in Palm Beach Gardens, Fla. Waterfront Properties also has homes for sale on the Loxahatchee River in the Jupiter / Tequesta area of northern Palm Beach County. Admiral’s Cove real estate also is a big seller, and a video of the gorgeous community can be seen by clicking here.

Agent specialists at the licensed brokerage are interested in helping clients with all of their South Florida real-estate needs and can be reached by calling the main office at 561-746-7272.

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Quebec Federation of Real Estate Boards plans to separate from Canadian Real Estate Association

A provincial body representing Quebec’s real estate boards says it will separate from its Canadian affiliate, effective 2013 – and there doesn’t appear to be any plan for negotiations.

On Thursday, the Quebec Federation of Real Estate Boards told brokers it would be ending its membership with the Canadian Real Estate Association as of Dec. 31.

The decision to leave CREA, Canada’s largest group representing organized real estate, follows a revolt initiated last year by several member boards in Quebec that said they were fed up with paying for services they don’t need. At the time, the Greater Montreal Real Estate board, the second-largest board in Canada with 10,000 members, said it would consider leaving CREA if the association didn’t cut expenses, and embrace the very same “fee-for-service� model now available to Canadian homeowners.

In an email to brokers, the Quebec federation said Thursday it could no longer respect the national association’s bylaws after one of its members, a small real estate board from Granby, decided to opt out of CREA. To maintain its provincial membership in CREA, all members of the Quebec federation would have to be part of the national association, which was no longer the case.

“After taking into consideration all of the relevant issues in this case, the governors of the QFREB have decided to maintain a provincial association that includes all the province’s real estate boards,� the federation said in the email, obtained by The Gazette.

Each member board, including Greater Montreal, will have to choose on an individual basis whether to stay or leave CREA.

Representatives of CREA and the Quebec Federation of Real Estate Boards couldn’t be reached for comment on Thursday. Neither could a representative of the Montreal board.

CREA, which was embroiled in a highly publicized fight and settlement with the Federal Competition Bureau in 2010, angered the Montreal board last year for hiking member fees.

According to the Montreal board, CREA’s national membership dues are to rise 41 per cent from 2010 to 2013, from $220 to $310.

CREA dues are used to defray the costs of services such as government relations, publicity, meetings and technological tool, including the website.

The average Montreal-area broker will pay more than $2,000 this year to his or her industry associations, including CREA – a burden that’s becoming harder to bear as members see their commissions watered down by competition from For Sale By Owner sites and discount agencies where brokers are willing to be paid less for offering limited real estate services.

Twitter: @RealDealMtl

Fannie Mae to investigate abandoned horse [The Press-Enterprise, Riverside …

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By Peter Surowski, The Press-Enterprise, Riverside, Calif.

McClatchy-Tribune Information Services

July 25–An investigation is under way into who may have made a mistake that resulted in a blind horse being left in unhealthy conditions on a foreclosed property.

The Federal National Mortgage Association, commonly called Fannie Mae, is investigating whether the company neglected the horse, or whether the former owners did.

Beatriz Andert, a 19-year-old who lives near the vacant home in the 18000 block of Wood Lane in the unincorporated area near Perris, rescued the horse with the help of her father, Michael, in March.

A couple bought the home in 1989, and they signed the deed over to Fannie Mae on Oct. 14, 2011, according to Riverside County assessor’s records.

The owners then abandoned the horse, according to Andrew Wilson, a spokesman for Fannie Mae.

“Let’s be clear who left the animal here,” he said. “The owners.”

Fannie Mae requires its associates to call animal services when they discover an animal living on the property, and this rule was followed, he said.

“The notes on the property we have indicate the broker called animal control,” he said. This accords with the association’s guidelines, he said.

“(The Fannie Mae managers dealing with the property) are supposed to call animal control as quickly as possible,” Wilson said.

That manager made that call on Jan. 23 or 24, according to John Welsh, a spokesman for Riverside County Animal Services.

“When our officer arrived at the property, he met up with an employee of the bank, and he saw a white boxer and a blind horse,” Welsh said. “Both animals had water. He fed the dog and the horse with a flake (of hay) and left three flakes in the barn.”

The officer then told the manager the animals were the bank’s property for 15 days after the foreclosure. The manager told the officer the foreclosure was finalized only a few days earlier, so the officer urged the manager to take care of the animals.

“He made sure the bank folks knew, ‘This is on you to make sure the animals are taken care of,'” Welsh said.

The horse’s condition did not seem dire when an officer saw her, according to Welsh. If that were the case, animal services would have taken her.

Beatriz Andert heard from a friend the horse was still living on the property in March, she said.

She contacted the manager, the manager contacted the bank, and they gave her permission to adopt the horse. The horse is recovering at the Anderts’ home in Perris.

“We are going to look into this case to determine if our guidelines were followed,” Wilson said.

It is unclear what happened to the dog.


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Fannie Mae, Freddie Mac Getting Receivership Contingency Plan

The U.S. regulator overseeing Fannie
, Freddie Mac and the Federal Home Loan Banks has hired a
consulting firm to create contingency plans for taking the
mortgage-finance firms into receivership, according to contract

The plan is part of “ordinary regulatory activities” and
does not indicate that the Federal Housing Finance Agency intends
to take the companies or the banks into receivership, agency
spokeswoman Denise Dunckel said. Receivership would involve
winding down the companies and selling off their assets.

“This planning activity is routine and does not indicate
any condition of the current status of the regulated entities,”
Dunckel said.

Fannie Mae and Freddie Mac (FMCC) have been operating under U.S.
conservatorship since September 2008, when investments in risky
loans pushed them to the brink of insolvency. Under
conservatorship, as opposed to receivership, the two taxpayer-
owned companies continue to operate while having drawn almost
$190 billion in aid from the U.S. Treasury.

The FHFA in May signed a contract with New York-based
PricewaterhouseCoopers LLP to “recommend guidelines, procedures
and other protocols the FHFA should have in place prior to
placing any regulated entity into receivership,” according to
the document.

The document said PricewaterhouseCoopers will “develop a
framework for the FHFA to use in building the capacity” to
liquidate Fannie Mae, Freddie Mac, or any of the 12 regional
U.S. Home Loan Banks.

Uncertain Future

The fate of Fannie Mae and Freddie Mac is in limbo. Private
financing for mortgages evaporated in the aftermath of the 2008
financial crisis, and the two companies now own or guarantee
about 60 percent of residential mortgages. President Barack
’s administration and members of Congress called for
shrinking the government role in the housing market, but have
not taken action.

Edward J. DeMarco, acting director of the FHFA, has said
the agency will do what it can to prepare for the future of the
government-sponsored enterprises in the absence of a plan from
Congress and the White House to wind them down or otherwise
reorganize them. The FHFA is working on plans to build a single
platform for securitizing home loans and to set standards for
how those loans are managed.

The FHFA released the PricewaterhouseCoopers contract to
Vern McKinley, a financial consultant working with the
Washington-based legal organization Judicial Watch, in response
to a Freedom of Information Act request.

“Conservatorship is kind of this limbo they’ve been in
since 2008 and receivership would be more aggressive toward
liquidating Fannie and Freddie and putting them out of
business,” said McKinley, who has filed other FOIA requests
with the FHFA seeking to find out why Fannie Mae (FNMA) and Freddie Mac
weren’t dissolved in 2008. “They’ve never taken any steps in
that direction.”

Staff from the FHFA and PricewaterhouseCoopers have met
since May with staff from Fannie Mae and Freddie Mac to discuss
the receivership plans, the documents show.

PricewaterhouseCoopers will deliver the receivership plans
by Oct. 1 and will be paid $757,000, the contract says.

To contact the reporters on this story:
Meera Louis in Washington at
Clea Benson in Washington at;

To contact the editor responsible for this story:
Maura Reynolds at

Campbell mayor sues Freddie Mac, Fannie Mae

Lawsuit filed in U.S. District Court by Campbell County Mayor William Baird

Campbell County’s mayor is accusing Fannie Mae and Freddie Mac of robbing his county’s coffers, and he’s filed a proposed class action lawsuit over the dispute.

Mayor William Baird, acting on behalf of Campbell County, filed suit in U.S. District Court against the two government-sponsored entities as well as the Federal Housing Finance Agency, which was granted conservatorship over the companies after the housing market went bust in 2008.

Fannie Mae and Freddie Mac buy mortgages from lenders and issue guaranteed mortgage-related securities.

Critics of the agencies have said they contributed to the recent financial crisis, in part by investing in so-called toxic mortgages — loans made to homeowners who did not have the financial wherewithal to foot the bill.

Baird contends in his lawsuit that Fannie Mae and Freddie Mac now control a huge chunk of foreclosed homes and properties in the wake of the housing market crash in not only his county but potentially in all of Tennessee’s 95 counties.

“As these mortgages become delinquent and properties enter into foreclosure, defendants Fannie Mae and Freddie Mac take ownership of the properties and attempt to locate buyers,” the lawsuit stated. “Once defendants Fannie Mae and Freddie Mac locate a buyer for a foreclosed property, they convey the property and record the deed.”

But what the agencies won’t do is pay a “transfer fee” required by state law, Baird alleges. The organizations, he says, insist they are exempt from the fee. Since those fees are supposed to go into county coffers, Baird argues local governments are being robbed of money.

It’s not clear how much money is at issue. According to state law, a transfer fee of 37 cents per $100 of either purchase price or property value is to be assessed on each deed recorded in a particular county. There are exceptions under the law, and those exemptions include government entities.

“(Freddie Mac and Fannie Mae) sometimes claim the transactions are exempt because they are government entities and, under Tennessee statute, government entities are exempt,” the lawsuit states. “At other times they claim they are exempt pursuant to federal statute. Neither exemption claimed to the transfer tax applies.”

Baird is asking a federal judge to designate the lawsuit a class action case, with Campbell County serving as the representative plaintiff for all other counties. No hearing date has yet been set. Freddie Mac and Fannie Mae have not yet been served with the lawsuit, which was filed Tuesday.

Freddie Mac: Mortgages Rose 2.8% in June

Mortgage-finance company Freddie Mac (FMCC) said its mortgage-related securities and other guarantee commitments increased at an annualized rate of 2.8% in June.

Meanwhile, the total mortgage portfolio decreased at an annualized rate of 2.5% in June. The total morgage portfolio consists of Freddie Mac mortgage-related securities and other …

Auditor, federal agency appears to be breaking rules, columnist says

Never underestimate the government’s capacity for incompetence when it comes to overseeing large financial institutions. The latest example: an ill-advised consulting contract between Freddie Mac’s outside auditor and the federal agency in charge of running the company.

Freddie Mac, the housing financier with a $2.1 trillion balance sheet that was seized by regulators in 2008, remains under the control of its conservator, the Federal Housing Finance Agency. Yet its shares and bonds are still publicly traded. And it continues to file reports with the Securities and Exchange Commission, which means it must follow the SEC’s rules.

Some of those regulations seem to have been ignored when the FHFA hired Freddie Mac’s auditor, PricewaterhouseCoopers LLP, in May to provide advice on managing the company. The firm’s work includes consulting services that are barred under the SEC’s auditor-independence rules, as far as I can tell. The agency and the accounting firm say they are following the rules.

Their explanations aren’t convincing.

The contract came to light last week after the housing-finance agency released a copy to Vern McKinley, a consultant working with the Washington-based advocacy group Judicial Watch, in response to a Freedom of Information Act request. The agency hired Pricewaterhouse to create contingency plans that would be used if the government someday decides that Freddie Mac, Fannie Mae or any of the Federal Home Loan Banks should be taken into receivership and liquidated.

(Pricewaterhouse audits the 12 Federal Home Loan Banks, none of which is in conservatorship. Fannie Mae’s auditor is Deloitte Touche LLP.)

The reason for having auditor-independence rules is to promote confidence in the integrity of companies’ financial statements. Auditors are supposed to be watchdogs for the public, not beholden to their clients. To be sure, the system is a bit of a charade. The client pays the firm for its audit, so there always are conflicts of interest.

The independence problem in this instance arises from the FHFA’s connection to Freddie Mac. In substance, the agency is Freddie Mac. Here’s how the company explained the relationship in its latest annual report:

“As our conservator, FHFA succeeded to all rights, titles, powers and privileges of Freddie Mac, and of any stockholder, officer or director thereof, with respect to the company and its assets,” the company said. “FHFA has delegated certain authority to our board of directors to oversee, and to management to conduct, day-to-day operations. The directors serve on behalf of, and exercise authority as directed by, the conservator.”

With that in mind, the auditor-independence problems become obvious. There are three main principles underlying the SEC’s rules: An auditor can’t function in the role of management. It can’t audit its own work. And it can’t serve in any advocacy role for an audit client.

The contract, under which Pricewaterhouse will receive about $757,000, calls for “providing general advice on receivership preparation, assisting the FHFA in developing pre- and post-receivership procedures, implementing those procedures,” and “assisting the FHFA in the operation and administration of a receivership.”

That means Pricewaterhouse is giving advice on how to run Freddie Mac, and even could be called upon to help operate the company at some point. The contract says the firm’s work includes making recommendations regarding “valuation services” and “human resources.” The SEC’s rules list those as services that auditors are prohibited from providing to audit clients.

Additionally, the contract calls for Pricewaterhouse to offer advice on “public relations,” which is an advocacy role.

Other services include making recommendations on risk management, claims management, asset management, and securities management.

The housing-finance agency released a statement from its general counsel, Alfred Pollard. “This is not a contract for PwC to perform work for Freddie Mac or any other entity regulated by FHFA,” he said. Additionally, Pollard said “measures are in place to ensure against conflicts of interest and to maintain independence, including a process that prevents PwC employees working on this FHFA contract from working on contracts for a regulated entity.”

Nothing in his statement addressed the point that the agency, as Freddie Mac’s conservator, is standing in the company’s shoes, or that Pricewaterhouse is providing advice on how to manage the company’s affairs. A Freddie Mac spokeswoman, Sharon McHale, declined to comment.

In a world where rules were consistently enforced, the SEC would be cracking down. Of course, we know better than to expect the government to enforce rules against itself.

Here’s what the SEC should be demanding that the housing-finance agency tell Pricewaterhouse: As Freddie Mac’s auditor, you’re fired.

Freddie Mac Announces The Issuance Of A New Seven-year Reference Notes® Security

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China’s Gift to US Homeowners

They are increasingly rich, hungry for the good things this country has to offer, buying high-end homes, and don’t mind paying huge amounts of cash upfront to get them without going into debt. If you don’t think this reads like a typical American story today, you’re right—these new homeowners are Chinese living in the U.S.

For a housing market just starting its recovery, foreign investment in U.S. residential real estate has been a bright spot, and there’s no sign of the trend letting up. According to data released last month by the National Association of Realtors, non-U.S. buyers accounted for $82.5 billion in residential property sales in the 12 months ended March 2012. Chinese purchasers made up 11 percent of this total, while Canadians continued to represent the largest swath at 24 percent. Perhaps even more striking is the fact that 27 percent of Realtors surveyed by the NAR reported working with international clients in the last year. Along with China and Canada, buyers from countries including Mexico, India, and the U.K. combined to make up 55 percent of purchases from abroad—mainly concentrated in Florida, Texas, Arizona, California, and New York. The fastest growth in recent years is among Chinese buyers.

The global interest is driven by several different factors, yet for the Chinese in particular, the chance to get their children into top universities is probably the largest motivation. To Chinese parents, the opportunity provides proof that their years of effort have paid off. “The Chinese work very hard—it’s part of their culture,” says Cathy Zhao, a real estate broker in Maryland who has served many wealthy Chinese clients. “For them, the most important thing is education, and with prices being very low as they are, they see a chance to get near a good school.” And once here, most international buyers want to stay, Zhao adds, because their chance of a better-paying job is still better in the U.S. than back home.

The chance to earn a prestigious degree is not the only reason Chinese buyers find the U.S. market increasingly appealing. “There is an increasing number of wealthy Chinese who are buying in the U.S. to diversify their portfolio,” says NAR economist Jed Smith, who helped compile the annual survey. “Even with the rally in recent months, homes here still look very good from an investment point of view.”

Unlike Japanese corporations in the 1980s, which bought at the top of the market in their quest for big-name commercial properties, the Chinese are more interested in good deals. With residential real estate prices still almost a third less than they were at their peak in 2007, it’s a strategy that may well pay off if job growth returns and triggers a rally in the housing market, according to Smith.

Last year the average price of a foreign-purchased U.S. home was more than $400,000, which is double the national average—so the search for good value might only extend so far. That high figure becomes even more impressive when one considers that buyers from abroad often lack credit scores and access to mortgages, and frequently opt to pay the whole price upfront. “[S]ales transactions can often be completed quickly as many Chinese purchasers prefer all-cash deals,” Pamela Liebman, president and chief executive officer of the Corcoran Group, a New York real estate firm, writes in an e-mail. Liebman also says that her company has serviced more Chinese clients this year than at any time in the past, and that their interest is not just in residential real estate but in commercial property as well. Sixty-two percent of purchases by foreign buyers last year were in cash, according to the NAR. Zhao says many of the deals are for very large homes, capable of supporting several generations under one roof, which is a preference for affluent families.

Foreign buyers still make up a small part of all U.S. sales, accounting for just 4.8 percent of the total dollar amount in the last year. While in relative terms this represents an increase, the numbers will probably not spur a nationwide real estate recovery.

“In a market the size of New York, it would take a substantial influx of any one buyer group to significantly affect market prices,” writes Liebman of Corcoran. “The number of Chinese purchasers of New York real estate has not reached the critical mass it would require to impact prices.” It’s a point echoed by Smith of the NAR. “The only thing that will really get the market back to where it was is jobs. Really it’s all about jobs in the end,” he says.

That may be true, but the pattern of recent years might allow Americans to take some solace in the fact that their country is still top of the list when it comes to places where individuals from around the world want to live and learn.