Five Things You Can Do To Avoid Foreclosure

We keep hearing that millions of American homeowners are in financial trouble and can not pay their mortgages. There are a lot of reasons for this situation, but mostly it has to do with living beyond our means on borrowed money and now we can't make the payments. If you find yourself among those who face the loss of your home because you can no longer afford the mortgage, here are five things you should do ...

1. Call Your Lender. Lenders want your money. They do not want your house. The last thing your lender wants to do is foreclose on your property. As soon as you start having problems covering the payment, call your lender and talk to them about what you can do to keep your house and avoid a foreclosure procedure.

2. Stay informed. I'm one of those people with the bad habit of not opening my mail for days at a time. If you're missing payments on your mortgage, you better open the mail from your lender in a timely manner. Early on, your lender will be mailing you friendly offers which can help you avoid foreclosure. If you don't respond, the tone of those letters will likely change and eventually will become legal notices. Your best bet is to respond to every letter you get from your mortgage lender, take advantage of any offers of help and answer any questions the lender may have in a timely manner.

3. Learn Your Rights. Foreclosure is not automatic. There are procedures your lender must follow. Many of the legalities of foreclosure are designed to protect you, the debtor. Foreclosure laws differ in different states. You need to know how your state operates and what the laws are where you live.

4. Live Within A Budget. You'd be amazed at how many people don't budget their income. Often, people have plenty of money to pay for their mortgage but they pay for everything else first -- like the new BMW, the club dues, clothes, nights on the town and finally pay for their mortgage with what's left if there is anything remaining. Wrong. Get a budget that puts a high priority on making your house payments. I'm thinking the order of budget priority should be like this: 1. food 2. house payment 3. everything else. Get the picture?

5. Get Answers From The Right People. There's a lot of bad mortgage adivce out there now. If you have questions, I suggest you call HUD, the Department of Housing and Urban Development. They offer counselors who can give you good, accurate advice. Most of the info from HUD is free or very low priced. You can reach HUD at 1-800-569-4287 or at their web site, http://www.fha.gov/.

For more information about real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.

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July Real Estate Sales Still Stagnant

The St. Petersburg Times reported on Friday, August 10, 2007 that the real estate glut is easing up -- that the total number of properties for sale was lessening. The paper reported that listings, which had been over 50,000 properties in April in Pinellas, Pasco and Hillsborough counties, had now retreated to a mere 42,000 or so in July.

The paper then rightly reported that this drop in inventory has nothing much to do with an increase in sales. Rather it is the result of sellers who have gotten "sick of trying" to sell property and "turned to renting" thus removing the house from the listing pool, and that real estate agents have similarly grown sick of trying to sell overpriced property and are simply refusing to list properties that can't be sold because the seller is unrealistic about the market value. Frankly, I think the drop in listings is more the result of the former than the latter, but that's another storyline for a future blog.

I think we are seeing all of these issues in this month's sales figures for Pinellas County. As usual, we'll start with a quick look at the Absorption Rate (AR) which is determined by dividing the number of units sold in a month by the total number of listings in the Multiple Listing Service.

For single family homes, the July AR stood at 5.9%. That figure shows a decline in sales from June's 7.5%. So, a lower percentage of homes were sold from the listing inventory in July.

For condominiums, the July AR was at 3.7%. The July figure is even lower than June's 4.0% AR. Consequently, it can be said that the market for condos is still suffering.

Single family listings in July increased in Pinellas County. In July the number of homes in the MLS increased to 9,198 from June's listing figure of 9,111. This statistic, by the way, runs counter to the numbers reported in the Times article mentioned above, but they were reporting on the three-county region.

The number of condominiums in the MLS was down to 8,614 from June's 8,954.

If the real estate glut is easing up as the St. Petersburg Times' headline indicated, the reason is not because property is being sold. July's sales figures still show a very stagnant market as buyers still seem reluctant to re-enter the real estate marketplace.

In July, only 541 single family homes were sold. That's fewer sales than the 682 sales made in June. A bit of good news for sellers is that the median price increased to $225,000 which is the highest for the year so far.

Condo sales remain absolutely dismal. In July only 319 condos were sold in Pinellas County. That is even fewer than the 356 condo sales in June. As with single family homes, however, the median price increased from $159,000 to $175,000, indicating some slight upturn in overall selling price for condos -- which is a good thing!

As you look at these numbers, keep one important thing in mind. These are just the numbers reported through the MLS system. They are "hard numbers" and represent reportable listings and sales. What they do not report is what I call "market frustration".

Market frustration can be defined as the sum total of angry, disappointed, frightened, confused, desparate and helpless buyers and sellers who have just given up on buying and selling property. We can't measure market frustration. We can't put a number on it. How do you measure confusion? How do you score anger? I know one thing: there are a lot of people suffering market frustration right now that these MLS figures don't reflect.

If you're suffering market frustration as a buyer or a seller, I can only offer one bit of advice. Remember that real estate markets run in cycles. Right now, we are fighting through a period of market adjustment following rampant real estate speculation, tax uncertainty, insurance mayhem and a growing mortgage problem brought about by sub-prime lending. Eventually these problems will work themselves out and things will get back to normal. They always do.

How long will this peirod last? I don't know and neither does anybody else. Eventually things will return to normal.

If you would like more information about real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.

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Why Fool Around With Foreclosures?

Recently I was invited to lunch with a group of real estate agents in St. Petersburg, Florida. I'm not going to name names, but there were some pretty smart cookies sitting around that table.

One of them was an up-and-coming young man with Tourtelot Brothers named Jeff Joyner. His family goes back many years in the Tampa Bay area and they did some very successful residential developing in decades past. Jeff seems to have been passed the family's real estate genes and he is one of the smartest young real estate agents you are likely to meet.

We were all talking about the real estate correction that is going when somebody mentioned foreclusures. Seems like whenever things get bad in real estate, foreclosures are a subject of discussion because so many buyers and investors think it's the road to a bargain.

Jeff Joyner sat quietly listening to this discussion, not saying a word. Finally he managed a wry smile and then volunteered that he didn't think much of chasing foreclosures and often advises his clients not to spend much time doing it.

The reason?

Jeff Joyner feels there are much better deals in the regular real estate market from among sellers who have owned their property for long periods of time.

Jeff explained to all of us that long-term owners have had time to benefit from years of property appreciation. As a consequence, they are in a good position to accept something of a bargain price and still make a handsome return. The person facing foreclosure must get a higher price in order to pay off his outstanding mortgage no matter how desparate the situation. If the property being foreclosed upon was purchased within the past two or three years, the seller most likely will need to get a price near the current market value -- and that's not really much of a bargain given prices from two or three years ago.

Jeff pointed out that the person who has owned a property for 10, 15, 20-years or more has loads of built up equity and may be more agreeable to negotiating a somewhat more affordable price. It all depends on the long-term seller's motivation -- which can be just as desparate as the person facing foreclosure. If the seller is mortgage-free, they may be even more likely to negotiate a good deal with the buyer.

The more I thought about this approach, the better I liked it. Essentially, instead of looking for foreclosures, look for sellers with long-term ownership and lots of equity. If possible, find sellers who have already paid-off their mortgage. Depending on the seller's motivation, you may end up negotiating a better deal and have much fewer headaches trying to close.

Good thinking, Jeff!

For more information about real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.

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Is The Fourth Star Moving Away From Us?

Readers of this blogsite know that I feel there are four key issues -- I call them "stars" -- that must be in alignment for the real estate market to reverse its downward trend.

These four stars are the price of real estate itself, property taxes, property insurance and the availability of mortgage funds. My feeling is that whenever any of these four stars are out of alignment, the whole real-estate-thing comes to a halt.

Just look at how the stars were aligned for the real estate boom of the first half of this decade. Prices were much, much lower than they are today. Taxes were affordable. Insurance was not an issue. And mortgage companies featured something called "creative financing" which basically meant anybody who could sign their name to loan docs could qualify for a mortgage.

Today, prices are high. Florida's property tax policy is broken, and the repair is questionable. Insurance companies ignore the new laws enacted by the legislature just a few months ago. And now, it appears that the mortgage star is moving farther and farther from the centerline.

The situation with sub-prime mortgages has apparently gone from bad to worse as projections of doom fill the financial pages. The financial industry is now discovering that making loans to people who really can't repary them is wrong. Adjustable rate mortgages (ARM) appear to be the main culprit. ARMs offered an ultra-attractive initial interest rate at the start, then kicked in with higher interest rates after two years.

Let's see, two years would be ... ummmmm ... now! And the biggest month for re-setting those new rates is going to be in October. So, bad as things appear to be today, they are likely going to get a lot worse come autumn.

How much worse? Here are the financial facts ...

About $50-billon in mortgages will switch to a new rate in October for the first time. From that point on, about $30-billion in mortgages will click upward every month through September, 2008. All in all, $1-trillion in mortgages will reset for the first time -- that's 12% of America's total mortgage amount.

Here's what that means ...

A total of 3.2-million houses were pruchased in the ten years ending 2005 using sub-prime mortgages. Now, two years later, the estimate is that 1.7-million buyers will lose their homes as these mortgages click over to new, higher rates. In other words, over half the homeownership gains of the last 10 years brought about by sub-prime lending stand to be lost.

If you're a seller, this has dire consequences. Those foreclosed houses will flood the market and further depress real estate prices.

It's going to become tough on buyers too! The reason? Mortgage companies are going to become ultra conservative in their lending policies and make it much harder for people to get mortgage loans, even people with strong credit ratings. So, its going to become harder to buy a house. Buyers are going to have to prove creditworthiness -- something many just can't do.

You see? The fourth star is moving farther out of alignment!

Home sales depend on availability of mortgage money. A credit crunch will make the housing market even worse, forcing lower prices, reducing the number of qualified buyers and prolonging time on market for those who want or need to sell property. You will likely see higher interest rates as mortgage-bond investors pull the plug on risky mortgages and "creative financing" falls under more and more business and government bureaucratic rule-making and red tape.

Even loans for people dubbed "Alt-A" -- a loan category between prime and sub-prime for borrowers who can not fully document their incomes or assets or those who wish to purchase income properties -- will start to dry up in the coming months. Alt-A loans accounted for about 13 percent of mortgages last year, and subprime loans accounted for another 20 percent. Industry experts are now saying that they expect Alt-A and subprime loans to be reduced by 50 percent during the next year.

In the short term, this will mean more problems for the real estate industry, and the fall-out will surely affect us in the Tampa Bay area which had rampant real estate speculation and more than its share of sub-prime mortgage loans. In the long term, however, it will help usher in a return to normal lending policies that will anchor better times in the real estate market. When will those better times return? Sorry, my crystal ball is a bit cloudy on the date.

If you think I'm mistaken about this, take a look at what has been happening on Wall Street during the past week when all this frightening news came out about mortgages. The Dow has lost a fortune, mostly over investor uneasiness about the mortgage and real estate business. Wall Street experts expect that the economy as a whole can absorb these mortgage problems, but you never know and even the big boys are uneasy. So, they're hedging by selling. Those big boys wouldn't be worried if this wasn't a real problem headed our way, and soon.

The fourth star is moving farther off center. My opinion? Folks, this so-called market correction ain't over yet.

For more information on real estate in the Tampa Bay area, please visit my website at http://www.thestpeterealestatesite.com/.

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