Housing-market bust is changing buyer behavior

Twenty-seven percent of first-time buyers who purchased a home between July 2009 and June 2010 received a gift from family or friends to help with the down payment, according to the National Association of Realtors’ annual Profile of Home Buyers and Sellers survey, released at NAR’s annual conference here.

That’s up from 22% a year earlier, and is the highest percentage in the more than 20 years the survey has been conducted, said NAR spokesman Walter Molony.

Also, 9% of first-time buyers received a loan from a relative or friend in the most recent data, compared with 6% who said the same in the results released last year, according to NAR. The survey included responses from 8,449 home buyers.

It’s likely many parents were motivated to help their children take advantage of a now-expired home-buyer tax credit of up to $8,000, and other favorable conditions, including lower prices and mortgage rates, researchers said. Tougher lending criteria may have also been a factor playing into the trend, Molony said.

First-time home buyers made up a record 50% of all buyers during the period, up from 47% in last year’s figures, according to the report.

While gifts have helped young buyers make down payments for years, “more people are having to do it because even if their credit is good, they need [more of] a down payment,” said Hope Harvey, a property manager and sales broker with Sugar Ski & Country Club, in Banner Elk, N.C.

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'Shadow' inventory of foreclosed homes could add to housing troubles

The Dallas-Fort Worth area has one of the lowest "shadow" inventories of unsold homes among major U.S. cities, according to a new study. But the addition of these houses to the market still significantly adds to the supply.

Shadow inventory homes are properties that have been foreclosed on or are in the process of foreclosure but are not currently listed for sale. Housing analysts say this pending supply will keep prices depressed in many cities.

Nationwide, there were more than 2 million shadow inventory homes in August – an eight-month supply – according to researchers at CoreLogic Inc. In the Dallas area, the shadow inventory was 6.7 months, the California-based mortgage and finance analysts said in a report released Monday.

Among the 50 largest U.S. cities, the average shadow inventory is almost 16 months, CoreLogic found.

The highest shadow home inventory was in the Miami area. All of the Texas markets were near the bottom of the shadow inventory list, with the lowest in Austin.

Statewide, Texas' shadow home inventory is 5.5 months, according to CoreLogic.

"Not surprising that Dallas and Texas, in general, show relatively low shadow inventory," said Dr. James Gaines, economist with the Real Estate Center at Texas A&M University. "We simply didn't get as overextended nor have we had the volume of foreclosures relative to other markets."

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Home Sales Fell 2.2% in October

Sales of previously owned homes fell in October amid weak demand and concerns about the foreclosure process, putting sales for 2010 on pace to close at their lowest level in 13 years.

Existing-home sales declined to a seasonally adjusted annual rate of 4.43 million units last month, down 2.2% from September, the National Association of Realtors said Tuesday.

The figures provide the first sign of the impact that suspensions of foreclosed property sales have had on the housing market. Several banks halted those sales in late September to address questions about the integrity of the foreclosure process.

Housing markets across the country have been fueled by sales of bank-owned properties, and delays had prompted fears of a new round of aftershocks for battered housing markets.

"To the extent people had any concern about being able to get clear title, they're going to stand back on distressed properties," said Douglas Duncan, chief economist at Fannie Mae. He said foreclosure delays were one of many factors that justified the mortgage company's "continued view of weak demand."

Still, foreclosures and other distressed sales accounted for 34% of all sales last month, compared with 35% in September, according to a NAR survey of real-estate agents.

Ivy Zelman, chief executive of research firm Zelman & Associates Inc., said the foreclosure suspensions had contributed "modestly" to October's decline and said she expected a similar impact in November.

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2010 a record year for foreclosure filings in Dallas-Fort Worth

Dallas-Fort Worth home foreclosure filings hit a record in 2010 – but not by much.

For all of this year, 63,835 homes have been posted for foreclosure in the four-county area, Foreclosure Listing Service said Thursday. That's only 4 percent higher than 2009's total.

Foreclosure postings in North Texas were up more than 20 percent in 2009 and 17 percent in 2008.

"The rate of increase has slowed, and it looks like 2010 is kind of the pivotal year as far as foreclosures here are concerned," said George Roddy, president of the Addison-based foreclosure-tracking firm. "But they are still going to be high into 2011."

Filings for December foreclosure sales have already been made, so the full-year numbers are available.

The biggest increase in home foreclosure filings this year was in Denton County, which was up 10 percent from 2009.

Dallas County residential foreclosure filings rose only 2 percent for 2010.

So far, foreclosure moratoriums caused by problems with lender paperwork and procedures haven't affected the rate of D-FW foreclosure filings.

For December's auctions, almost 6,100 North Texas homes are threatened with foreclosure – 16 percent more than a year earlier. It was only the third month in 2010 that postings topped 6,000.

Roddy said it's too early to forecast the results of lenders' foreclosure problems and calls for government intervention in the process.

"It's becoming more muddled as to what the outcome is," he said. "Will it be massive lawsuits?

"And what will the impact be on the consumer and home values?"

Not all the foreclosure postings each month result in home sales by lenders. In more than half the cases, the foreclosure is delayed or the borrower makes a new agreement with the mortgage company.

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Short sales often turn into long stories

It's a good thing first-time homebuyer Harley Summers wasn't in a hurry to get a house.

He bought his Allen home using a short sale that turned out to be anything but short. It dragged out for almost four months.

"It was a very long and frustrating process," said Summers, who wrapped up the deal last week. "The biggest advice I can give to anybody is don't pursue it unless you are an incredibly patient person."

Short sales are the big buzz in today's housing market. They are called short because the buyer gets the property for less than the previous owner still owed.

And that's what makes the transaction so complicated – it requires both the seller and the mortgage company to take a loss.

So why even do such a deal?

"The lenders are trying to reduce their costs if a home goes into foreclosure," said Dallas agent Logan Waller, who specializes in distressed properties. "The lender can see the property value decline by roughly 20 percent when the house is vacated.

"And they have other big expenses associated with a foreclosure."

Sellers are trying to get out of the property without a foreclosure, Waller said. "Their credit is not tarnished as bad with a short sale," he said.

A typical short sale negotiation can drag on for six months.

"We've had some of them in our inventory for a year," he said. "Sometimes we get to the closing table and the seller has disappeared.

"We see it with buyers, too – they give up."

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The housing crisis in 1933, and today

Question: I know that the New Deal created the Home Owners’ Loan Corp. I have been eager to read an article by someone who has looked at the way that mortgage crisis was handled ... and compared it to government efforts in our present crisis. If you are familiar with anything written on this subject I would appreciate your informing me where to find it. If you are not aware of anything, I might suggest that you would be an excellent person to explore it. —M.N.

Answer: Actually, you’re in luck. I do know of one such study; it was done a few years ago by Alex Pollock, a resident fellow at the American Enterprise Institute in Washington and the former president of the Federal Home Loan Bank of Chicago.

Pollock looked back to 1933, when Congress created the Home Owners’ Loan Corp. as a temporary fix “to relieve the mortgage strain and then liquidate.”

While the current mortgage meltdown and resulting — or corresponding, depending on your point of view — housing bust has been described as the worst since the Great Depression, it is nothing when compared to what happened in ‘33, when a financial and economic collapse occurred that is all but impossible to imagine today.

Back then, about half of all mortgage debt was in default. Unemployment reached 25%, thousands of banks and savings and loans had failed and annual mortgage lending had fallen by some 80%. New residential construction had dropped by 80% as well.

The prelude to the crisis might sound familiar. It was a period of grand economic growth and overconfident lending and borrowing. The 1920s featured interest-only loans, balloon payments, an assumption of ever-rising prices and the firm belief in the easy availability of a string of refinancings.

And then came the crash, the defaults, and the markets froze.

By comparison, only 2.95% of mortgages as of Oct.1, 2007, when Pollock wrote his paper, were labeled seriously delinquent, meaning roughly 1.5 million loans 90 days past due or in foreclosure. That’s risen to 9.11%, as of the second quarter this year, according to the latest figures from the Mortgage Bankers Association. Read more on foreclosures drop, but delinquencies rise, in MBA's second-quarter report.

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U.S. home sales drop 1.8% in September

The housing market took another step back in the latest measure. Pending U.S. home sales dropped 1.8 percent in September from August, the National Association of Realtors said Friday.

“This is after two consecutive months of rise – a step backward,” said Lawrence Yun, chief economist of the National Association of Realtors. “We don’t view this as a fundamental shift in the market.

“I’m not sure how much of this latest drop is due to the foreclosure moratorium some banks initiated,” he said at the Realtor’s annual meeting in New Orleans. “The data is consistent with soft activity right after the tax credit.”

Home sales across the country have been in a slide since federal tax credits that boosted purchases expired at the end of April.

Yun said it will be later this year before it’s clear how the home sales market will behave going forward in 2011.

Pending sales in September were down almost a quarter from the same month in 2009, when buyers were scrambling to qualify for the first round of federal tax credits.

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