Tag Archives: California Assn. of Realtors

‘Housing Bubble 2’ Has Bloomed Into Full Magnificence

The current housing boom has Dallas solidly in its grip. As in many cities around the US, prices are soaring, buyers are going nuts, sellers run the show, realtors are laughing all the way to the bank, and the media are having a field day. Nationwide, the median price of existing homes, at $236,400, as the National Association of Realtors sees it, is now 2.7% higher than it was even in July 2006, the insane peak of the crazy housing bubble that blew up with such spectacular results.

Housing Bubble 2 has bloomed into full magnificence: In many cities, the median price today is far higher, not just a little higher, than it was during the prior housing bubble, and excitement is once again palpable. Buy now, or miss out forever! A buying panic has set in.

And so the July edition of D Magazine – “Making Dallas Even Better,” is its motto – had this enticing cover, sent to me by David in Texas, titled, “The Great Dallas Land Rush”:

Dallas Land Rush

“Dallas Real Estate 2015: The Hottest Market Ever,” the subtitle says.

That’s true for many cities, including San Francisco. The “Boom Town,” as it’s now called, is where the housing market has gone completely out of whack, with a median condo price at $1.13 million and the median house price at $1.35 million. This entails some consequences [read… The San Francisco “Housing Crisis” Gets Ugly].

The fact that Housing Bubble 2 is now even more magnificent than the prior housing bubble, even while real incomes have stagnated or declined for all but the top earners, is another sign that the Fed, in its infinite wisdom, has succeeded elegantly in pumping up nearly all asset prices to achieve its “wealth effect.” And it continues to do so, come heck or high water. It has in this ingenious manner “healed” the housing market.

But despite the current “buying panic,” the soaring prices, and all the hoopla round them, there is a fly in the ointment: overall home ownership is plunging.

The home ownership rate dropped to 63.4% in the second quarter, not seasonally adjusted, according to a new report by the Census Bureau, down 1.3 percentage points from a year ago. The lowest since 1967!

home ownershipWolf Street

The process has been accelerating, instead of slowing down. The 1.2 percentage point plunge in 2014 was the largest annual drop in the history of the data series going back to 1965. And this year is on track to match this record: the drop over the first two quarters so far amounts to 0.6 percentage points. This accelerated drop in home ownership rates coincides with a sharp increase in home prices. Go figure.

The plunge in home ownership rates has spread across all age groups, but to differing degrees. Younger households have been hit the hardest. In the age group under 35, the home ownership rate in Q2 saw a slight uptick to 34.8%, from the dismal record low of 34.6% in the prior quarter. Either a feeble ray of hope or just one of the brief upticks, as in the past, to be succeeded by more down ticks on the way to lower lows.

This chart by the Economics and Strategy folks at National Bank Financial shows the different rates of home ownership by age group. The 35-year and under group is where the first-time buyers are concentrated; and they’re being sidelined, whether they have no interest in buying, or simply don’t make enough money to buy (represented by the sharply descending solid black line, left scale). Note how the oldest age group (dotted blue line, right scale) has recently started to cave as well:

homeownership ratesWolf Street

The bitter irony? In the same breath, the Census Bureau also reported that the rental vacancy rate dropped to 6.8%, from 7.5% a year ago, the lowest since 1985. America is turning into a country of renters.

This chart shows the dynamics between home ownership rates (black line, left scale) and rental vacancy rates (red line, right scale) over time: they essentially rise and dive together. It makes sense on an intuitive basis: as people abandon the idea of owning a home, they turn into renters, and the rental market tightens up, and vacancy rates decline.

homeownership rate v rental vacancy rateWolf Street

This too has been by design, it seems. Since 2012, private equity firms bought several hundred thousand vacant single-family homes in key markets, drove up prices in the process, and started to rent them out. Thousands of smaller investors have jumped into the fray, buying homes, driving up prices, and trying to rent them out. This explains the record median home price across the country, and the totally crazy price increases in some key markets, even as regular Americans are trying to figure out how to pay for a basic roof over their heads.

This has worked out well. By every measure, rents have jumped. According to the Census Bureau’s report, the median asking rent in the US rose 6.2% from a year ago, and 17.6% since 2011. So inflation bites. But the Fed is still desperately looking for signs of inflation and simply cannot find any.

And how much have incomes risen over these years to allow renters to meet these rising rents? OK, that was a rhetorical question. We already know what has been happening to incomes.

That’s what it always boils down to in the Fed’s salvation of the economy: people who can’t afford to pay the rising rents with their stagnant or declining incomes should borrow the money to make up the difference and then spend even more on consumer goods. After us, the deluge.

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Southern California Home Sales Soar in June

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The Southern California housing market, known for its dramatic swings, is settling into a more normal, healthy pattern.

Home sales are up. All-cash and investor purchases are down. And home prices are rising at a more sustainable pace than in the last few years.

Economists said those factors put the regional housing market on a path for growth that won’t wash away in a tsunami of foreclosures and ruined credit scores.

“The healing continues,” said Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate.

 

On Thursday, fresh evidence of that trend emerged in a report from CoreLogic. Home sales posted a sizable 18.1% pop in June from a year earlier, while the median price rose 5.7% from June 2014 to $442,000, the real estate data firm said.

The sales increase, the largest in nearly three years, put the number of sales just 9.6% below average, CoreLogic said. A year ago, sales were nearly 24% below average.

Notably, it appears more families are entering the market as the economy improves. Although still elevated in comparison to long-term averages, the share of absentee buyers — mostly investors — slid to 21.1%, the lowest percentage since April 2010, CoreLogic said.

“This is the real recovery,” Christopher Thornberg, founding partner of Beacon Economics, said of a market where increasingly buyers actually want to live in the houses they purchase. “The last was the investor recovery.”

Sustained job growth has given more people the confidence to buy houses, CoreLogic analyst Andrew LePage said. California added a robust 54,200 jobs in May, one of the strongest showings in the last year.

The housing market improvement extends nationally, with sales of previously owned homes up in May to the highest pace in nearly six years, partly because more first-time buyers entered the market, according to data from the National Assn. of Realtors.

One factor driving deals is an expected decision from the Federal Reserve to raise its short-term interest rate later this year, real estate agents say.

In response, families rushed to lock in historically low rates this spring, agents say. CoreLogic’s sales figures represent closed deals, meaning most went into escrow during May.

Leslie Appleton-Young, chief economist for the California Association of Realtors, cautioned that the market still has too few homes for sale and that prices have risen to a point where many can’t afford a house.

Unless that changes, sales are unlikely to reach levels in line with historical norms, she said.

“I am not saying the housing market isn’t robust,” she said.

“I think housing affordability is a big issue…The biggest problem is losing millennials to places like Denver and Austin and Seattle.”

For now, deals are on the rise and people are paying more.

Sales and prices climbed in all six south land counties: Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura. In Orange County, the median price rose 4.9% from a year earlier to $629,500.

In Los Angeles County, prices climbed 8.7% to $500,000. 

Source: Origination News

NAR Releases Mid-2015 U.S. Economic and Housing Forecast

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According to the National Association of Realtors (NAR), the U.S. housing market will continue its gradual pace of recovery as more home buyers enter a tight housing market for the balance of 2015, being nudged by rising mortgage rates and improving consumer confidence.

NAR’s chef economist Lawrence Yun has released the following observations for the US economy at large, and for the U.S. housing market specifically:

The U.S. Economy

  • GDP growth was slightly negative in the first quarter but will pick up in the second half.  For the year as whole, GDP will expand at 2.1 percent.  Not bad but not great.  A slow hum.
  • Consumer spending will open up because of lower gasoline prices.  Personal consumption expenditure grew at 2.1 percent rate in the first quarter.  Look for 3 percent growth rate in the second half.
  1. Auto sales dropped a bit in the first quarter because of heavy snow, but will ramp up nicely in the second half. 
  2. Spending for household furnishing and equipment has been solid, growing 6 percent in the first quarter after clocking 6 percent in the prior.  Recovering housing sector is the big reason for the nice numbers.
  3. Spending at restaurants was flat.  That is why retail vacancy rates are not notching down.
  4. Online shopping is up solidly.  That is why industrial and warehouse vacancy rates are coming down.
  5. Spending for health care grew at 5 percent in the first quarter, marking two consecutive quarters of fast growth.  The Affordable Care Act has expanded health care demand.  The important question for the future is will the supply of new doctors and nurses expand to meet this rising demand or will it lead to medical care shortage?

 

  • Business spending was flat in the first quarter but will surely rise because of large cash holdings and high profits.
  1. Spending for business equipment rose by 3 percent in the first quarter.  Positive and good, but nothing to shout about.
  2. Spending for business structures (building of office and retail shops, for example) fell by 18 percent.  The freezing first-quarter weather halted some construction.  This just means pent-up construction activity in the second half.
  3. In the past small business start-ups spent and invested.  It was not uncommon to experience double-digit growth rates for 3 years running for business equipment.  Not happening now.  But business spending will inevitably grow because of much improved business financial conditions of lower debt and more profits and rising GDP.
  4. What has been missing is the “animal spirit” of entrepreneurship.  The number of small business start-ups remains surprisingly low at this phase of economic expansion.  

 

  • Residential construction spending increased 6 percent in the first quarter.  Housing starts are rising and therefore this component will pick up even at a faster pace in the second half.
  • Government spending fell by 1 percent.  At the federal level, non-defense spending grew by 2 percent, while national defense spending fell by 1 percent.  At the state and local level, spending fell by 1 percent. 
  1. The federal government is still running a deficit.  Even though it is spending more than what it takes in from tax revenue, the overall deficit level has been falling to a sustainable level.  It would be ideal to run a surplus, but a falling deficit nonetheless does provide the possibility of less severe sequestration.   
  2. U.S. government finances are ugly.  Interestingly though, they are less ugly than other countries.  That is why the U.S. dollar has been strengthening against most other major currencies.  It’s like finding the least dirty shirt from a laundry basket.
  • Imports have been rising while exports have been falling.  The strong dollar makes it so.   Imports grew by 7 percent while exports fell by 6 percent.  The net exports (at minus $548 billion) were the worst in seven years.  Fortunately, with the West Coast longshoremen back at work, the foreign trade situation will not worsen, which means it will help GDP growth.
  • All in all, GDP will growth by 2.5 to 3 percent in the second half.  That translates into jobs.  A total of 2.5 million net new jobs are likely to be created this year.
  1. Unemployment insurance filings have been rising in oil-producing states of Texas and North Dakota.
  2. Unemployment insurance filings for the country as a whole have been falling, which implies lower level of fresh layoffs and factory closings.  That assures continuing solid job growth in the second half of the year.
  • We have to acknowledge that not all is fine with the labor market.  The part-time jobs remain elevated and wage growth remains sluggish with only 2 percent annual growth.  There are signs of tightening labor supply and the bidding up of wages.  Wages are to rise by 3 percent by early next year.  The total income of the country and the total number of jobs are on the rise.

 
The U.S. Housing Market Mid-2015 Trends
  

  • Existing home sales in May hit the highest mark since 2009, when there had been a homebuyer tax credit … remember, buy a home and get $8,000 from Uncle Sam.  This tax credit is no longer available but the improving economy is providing the necessary incentive and financial capacity to buy.  Meanwhile new home sales hit a seven-year high and housing permits to build new homes hit an eight-year high.  Pending contracts to buy existing homes hit a nine-year high.
  • Buyers are coming back in force.  One factor for the recent surge could have been due to the rising mortgage rates.  As nearly always happens, the initial phase of rising rates nudges people to make decision now rather than wait later when the rates could be higher still.
  1. The first-time buyers are scooping up properties with 32 percent of all buyers being as such compared to only 27 percent one year ago.  A lower fee on FHA mortgages is helping.
  2. Investors are slowly stepping out.  The high home prices are making the rate of return numbers less attractive.
  • Buyers are back.  What about sellers?  Inventory remains low by historical standards in most markets.  In places like Denver and Seattle, where a very strong job growth is the norm, the inventory condition is just unreal – less than one month supply.
  • The principal reason for the inventory shortage is the cumulative impact of homebuilders not being in the market for well over five years.  Homebuilders typically put up 1.5 million new homes annually.  Here’s what they did from 2009 to 2014:
  1. 550,000
  2. 590,000
  3. 610,000
  4. 780,000
  5. 930,000
  6. 1.0 million
  7. Where is 1.5 million?  Maybe by 2017.

 

  • Building activity for apartments has largely come back to normal.  The cumulative shortage is on the ownership side.     
  • Builders will construct more homes.  By 1.1 million in 2015 and 1.4 million in 2016.  New home sales will follow this trend.  This rising trend will steadily relieve housing shortage.
  • There is no massive shadow inventory that can disrupt the market.  The number of distressed home sales has been steadily falling – now accounting for only 10 percent of all transactions. It will fall further in the upcoming months.  There is simply far fewer mortgages in  the serious delinquent stage (of not being current for 3 or more months). In fact, if one specializes in foreclosure or short sales, it is time to change the business model.
  • In the meantime, there is still a housing shortage.  The consequence is a stronger than normal home price growth.  Home price gains are beating wage-income growths by at least three or four times in most markets.  Few things in the world could be more frustrating and demoralizing than for renters to start a savings program but only to witness home prices and down payment requirements blowing past them by.        
  • Housing affordability is falling.  Home prices rising too fast is one reason.  The other reason is due to rising mortgage rates.  Cash-buys have been coming down so rates will count for more in the future.
  • The Federal Reserve will be raising short-term rates soon.  September is a maybe, but it’s more likely to be in October.  The Fed will also signal the continual raising of rates over the next two years.  This sentiment has already pushed up mortgage rates.  They are bound to rise further, particularly if inflation surprises on the upside.
  • Inflation is likely to surprise on the upside.  The influence of low gasoline prices in bringing down the overall consumer price inflation to essentially zero in recent months will be short-lasting.  By November, the influence of low gasoline prices will no longer be there because it was in November of last year when the oil prices began their plunge.  That is, by November, the year-over-year change in gasoline price will be neutral (and no longer big negative).  Other items will then make their mark on inflation.  Watch the rents.  It’s already rising at near 8-year high with a 3.5 percent growth rate.  The overall CPI inflation could cross the red line of above 3 percent by early next year.  The bond market will not like it and the yields on all long-term borrowing will rise.
  • Mortgage rates at 4.3% to 4.5% by the year end and easily surpassing 5% by the year end of 2016.
  • The rising mortgage rates initially rush buyers to decide but a sustained rise will choke off as to who can qualify for a mortgage.  Fortunately, there are few compensating factors to rising rates.
  1. Credit scores are not properly aligned with expected default rate.  New scoring methodology is being tested and will be implemented.  In short, credit scores will get boosted for many individuals after the new change.
  2. FHA mortgage premium has come down a notch thereby saving money for consumers.  By the end of the year, FHA program will show healthier finances.  That means, there could be additional reduction to premiums in 2016.  Not certain, but plausible.
  3. Fannie and Freddie are owned by the taxpayers.  And they are raking-in huge profits as mortgages have not been defaulting over the past several years.  The very high profit is partly reflecting too-tight credit with no risk taking.  There is a possibility to back a greater number of lower down payment mortgages to credit worthy borrowers without taking on much risk.  In short, mortgage approvals should modestly improve next year.     
  4. Portfolio lending and private mortgage-backed securities are slowly reviving.  Why not?  Mortgages are not defaulting and there is fat cash reserves held by financial institutions.  Less conventional mortgages will therefore be more widely available.
  • Improving credit available at a time of likely rising interest rates is highly welcome.  Many would-be first-time buyers have been more focused about getting a mortgage (even at a higher rate) than with low rates.
  • All in all, existing and new home sales will be rising.  Combined, there will be 5.8 million home sales in 2015, up 7 percent from last year.  Note the sales total will still be 25 percent below the decade ago level during the bubble year.  Home prices will be rising at 7 percent.  For the industry, the business revenue will be rising by 14 percent in 2015.  The revenue growth in 2016 will be additional 7 to 10 percent. 

California Housing Market Slows Considerably

Non-distressed sales drop for the first time since 2005

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California’s massive housing market is slowing down in almost every way imaginable, according to the latest California Real Property Report from PropertyRadar.

California single-family home and condominium sales dropped 3.5% to 36,912 in May from 38,249 in April

However, the report explained that what is unusual this month is that the decrease in sales was due to a decline in both distressed and non-distressed property sales that fell 8.6% and 2.5%, respectively.  The monthly decline in non-distressed sales is the first May decline since 2005.

On a yearly basis, sales were up slightly, gaining 2.3% from 36,096 in May 2014. 

“With the exception of a few counties, price increases have slowed considerably,” said Madeline Schnapp, director of economic research for PropertyRadar. “You cannot defy gravity.”

“The environment of rising prices on lower sales volumes was destined not to last.  Higher borrowing costs since the beginning of the year and decreased affordability was bound to impact sales sooner or later. We may also be seeing the fourth year in a row where prices jumped early in the year, only to roll-over and head lower later the rest of the year,” Schnapp continued.

Back in March, PropertyRadar’s report showed California was finally ramping up for the spring homebuying season, posting that March single-family home and condominium sales surged to 31,989, a 33.1% jump from 24,031 in February. It was the biggest March increase in three years. 

Meanwhile, May’s median price of a California home was nearly unchanged at $396,750 in May, down 1.8% from $404,000 in April. 

Within California’s 26 largest counties, most experienced slight increases in median home prices, edging higher in 21 of California’s largest 26 counties.

Year-over-year, the median price of a California home was nearly unchanged, up 0.4% from $395,000 dollars in April 2014.

While at the county level most of California’s 26 largest counties exhibited slower price increases, four counties continued to post double digit gains.

Airbnb And Other Short-Term Rentals Worsen Housing Shortage, Critics Say

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Landlords in Venice and other tourist-friendly areas are converting units into short-term rentals, worsening the area’s housing shortage, a study says.

The last time he advertised one of his apartments, longtime Los Feliz landlord Andre LaFlamme got a request he’d never seen before.

A man wanted to rent LaFlamme’s 245-square-foot bachelor unit with hardwood floors for $875 a month, then list it himself on Airbnb.

“Thanks but no thanks,” LaFlamme told the prospective tenant. “You’ve got to be kidding me.”

But he understood why: More money might be made renting to tourists a few days at a time than to a local for 12 months or more.

Where are the short-term rentals?

About 12,700 rental units were listed on Airbnb in Los Angeles County on Dec. 22, 2014, but they were not spread out equally. In parts of Venice and Hollywood, Airbnb listings accounted for 4% or more of all housing units.

As short-term rental websites such as Airbnb explode in popularity in Southern California, a growing number of homeowners and landlords are caving to the economics. A study released Wednesday from Los Angeles Alliance for a New Economy, a labor-backed advocacy group, estimates that more than 7,000 houses and apartments have been taken off the rental market in metro Los Angeles for use as short-term rentals. In parts of tourist-friendly neighborhoods such as Venice and Hollywood, Airbnb listings account for 4% or more of all housing units, according to a Times analysis of data from Airbnb’s website.

That’s worsening a housing shortage that already makes Los Angeles one of the least affordable places to rent in the country.

“In places where vacancy is already limited and rents are already squeezing people out, this is exacerbating the problem,” said Roy Samaan, a policy analyst who wrote the alliance’s report. “There aren’t 1,000 units to give in Venice or Hollywood.”

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Fast-growing Airbnb and others like it say they help cash-strapped Angelenos earn a little extra money. Airbnb estimates that 82% of its 4,500 L.A. hosts are “primary residents” of the homes they list, and that nearly half use the proceeds to help pay their rent or mortgage. And the effect on the broader housing market is so small that it’s all but irrelevant, said Tom Davidoff, a housing economist at the University of British Columbia whom Airbnb hired to study its impact.

“Over the lifetime of a lease, rents maybe go up 1.5%,” he said. “That’s peanuts relative to the increases we’ve seen in housing costs in a lot of places.”

But there are growing signs of professionalization of the short-term rental world, from property-manager middlemen like the one who e-mailed LaFlamme to Airbnb “hosts” who list dozens of properties on the site. The Los Angeles Alliance study estimates that 35% of Airbnb revenue in Southern California comes from people who list more than one unit.

“I don’t think anyone would begrudge someone renting out a spare bedroom,” Samaan said. “But there’s a whole cottage industry that’s springing up around this.”

City Council member Mike Bonin, whose coastal district includes Venice, and Council President Herb Wesson want to study how these rentals have affected the city. No regulations have been drafted, and Bonin said the council would seek extensive community input. Current rules bar short-term rentals in many residential areas of the city, but critics say they’re rarely enforced.

As city officials craft new ones, they’ll certainly be hearing from Airbnb and its allies. Last year, the company spent more than $100,000 lobbying City Hall and released a study touting its economic impact in L.A. — more than $200 million in spending by guests, supporting an estimated 2,600 jobs. A group representing short-term rental hosts has made the rounds of City Council offices as well.

This industry “needs to be regulated and regulated the right way,” said Sebastian de Kleer, co-founder of the Los Angeles Short Term Rental Alliance and owner of a Venice-based vacation rental company. “For a lot of people, this is a very new issue.”

Neighborhood groups are sure to weigh in too, especially in Venice.

https://i2.wp.com/fc09.deviantart.net/fs4/i/2004/194/c/7/canals_of_venice_california_11.jpgThe beach neighborhood has the highest concentration of Airbnb listings in all of metro Los Angeles. Data collected by Beyond Pricing, a San Francisco-based start-up that helps short-term rental hosts optimize pricing, show that in census tracts along Venice Beach and Abbott-Kinney Boulevard, Airbnb listings accounted for 6% to 7% of all housing units — about 10 times the countywide average.

A letter last fall from the Venice Neighborhood Council to city officials estimated that the number of short-term rental listings in the area had tripled in a year, citing a “Gold Rush mentality” among investors looking for a piece of the action. That’s hurting local renters, said Steve Clare, executive director of Venice Community Housing.

“Short-term rentals are really taking over a significant portion of the rental housing market in our community,” Clare said. “It’s going to further escalate rents, and take affordable housing out of Venice.”

Along the Venice boardwalk, a number of apartment buildings now advertise short-term rentals, and houses on the city’s famed “walk streets” routinely show up in searches on Airbnb. Even several blocks inland, at Lincoln Place Apartments — a 696-unit, newly renovated complex that includes a pool, gym and other tourist-friendly amenities — Roman Barrett recently counted more than 40 listings on Airbnb and other sites. Barrett, who moved out over the issue, said Airbnb effectively drives up the rent. He paid $2,700 a month for a one-bedroom; now he’s looking farther east for something he can afford.

“It’s making places like Santa Monica and Venice totally priced out. Silver Lake is impossible. I’m looking in Koreatown right now,” Barrett said. “They need to make a law about this.”

 

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A new law of some sort is the goal at City Hall. New York, San Francisco and Portland, Ore., have crafted regulations to govern taxes, zoning and length of stay in short-term rentals, and Airbnb says it’s glad to help in that process here.

“It’s time for all of us to work together on some sensible solutions that let people share the home in which they live and contribute to their community,” spokesman Christopher Nulty said in a statement Tuesday.

Will Youngblood, the man who e-mailed LaFlamme about managing his apartment in Los Feliz, says he’d also appreciate clearer rules and an easier way to pay occupancy taxes.

Youngblood runs five Airbnb apartments, mostly in Hollywood. A former celebrity assistant, he’s been doing this for two years; it’s a full-time job. Most of Youngblood’s clients own their homes but travel a lot or live elsewhere. One, he rents and lists full time. He’s been looking around for another.

“I’m honest about what I do,” he said. “Some [landlords] are like, ‘That’s insane. No way.’ Other people say, ‘We’d love that.'”

If the city decides it doesn’t like what he’s doing, Youngblood said, he’ll go do something else. But for now, he said, it’s a good way to make some cash and meet interesting people.

But he won’t meet LaFlamme. The longtime landlord concedes he “might be old-fashioned,” but he just doesn’t like the idea of strangers traipsing through his apartments. He prefers good, long-term tenants, and in L.A.’s red-hot rental market he has no problem finding them.

“I almost find it painful to rent things these days,” he said. “There’s so much demand and so many people who are qualified and nice people who I have to turn away.”

For that apartment in Los Feliz, LaFlamme said, he found a tenant in less than 24 hours.

25 Percent of all U.S. Foreclosures Are Zombie Homes

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RealtyTrac’s Q1 2015 Zombie Foreclosure Report, found that as of the end of January 2015, 142,462 homes actively in the foreclosure process had been vacated by the homeowners prior to the bank repossessing the property, representing 25 percent of all active foreclosures.

The total number of zombie foreclosures was down 6 percent from a year ago, but the 25 percent share of total foreclosures represented by zombies was up from 21 percent a year ago.

“While the number of vacated zombie foreclosures is down from a year ago, they represent an increasing share of all foreclosures because they tend to be the problem cases still stuck in the pipeline,” said Daren Blomquist vice president at RealtyTrac. “Additionally, the states where overall foreclosure activity has been increasing over the past year — counter to the national trend — tend to be states with a longer foreclosure process more susceptible to the zombie problem.”

“In states with a bloated foreclosure process, the increase in zombie foreclosures is actually a good sign that banks and courts are finally moving forward with a resolution on these properties that may have been sitting in foreclosure limbo for years,” Blomquist continued. “In many markets there is plenty of demand from buyers and investors to snatch up these distressed properties as soon as they become available to purchase.”

Florida, New Jersey, New York have most zombie foreclosures

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Despite a 35 percent decrease in zombie foreclosures compared to a year ago, Florida had the highest number of any state with 35,903 — down from 54,908 in the first quarter of 2014. Zombie foreclosures accounted for 26 percent of all foreclosures in Florida.

Zombie foreclosures increased 109 percent from a year ago in New Jersey, and the state posted the second highest total of any state with 17,983 — 23 percent of all properties in foreclosure.

New York zombie foreclosures increased 54 percent from a year ago to 16,777, the third highest state total and representing 19 percent of all residential properties in foreclosure.

Illinois had 9,358 zombie foreclosures at the end of January, down 40 percent from a year ago but still the fourth highest state total, while California had 7,370 zombie foreclosures at the end of January, up 24 percent from a year ago and the fifth highest state total. 

“We are now in the final cycle of the foreclosure crisis cleanup, in which we are witnessing a large final wave of walkaways,” said Mark Hughes, Chief Operating Officer at First Team Real Estate, covering the Southern California market. “This has created an uptick in vacated or ‘zombie’ foreclosures and the intrinsic neighborhood issues most of them create.

“A much longer recovery, a largely veiled underemployment issue, and growing examples of faster bad debt forgiveness have most likely fueled this last wave of owners who have finally just walked away from their American dream,” Hughes added.

Other states among the top 10 for most zombie foreclosures were Ohio (7,360), Indiana (5,217), Pennsylvania (4,937), Maryland (3,363) and North Carolina (3,177).

“Rising home prices in Ohio are motivating lending servicers to commence foreclosure actions more quickly and with fewer workout options offered to delinquent homeowners, creating immediate vacancies earlier in the foreclosure process,” said Michael Mahon, executive vice president at HER Realtors, covering the Ohio housing markets of Cincinnati, Dayton and Columbus. “Delinquent homeowners need to understand how prices have increased in recent months, and how this increase in equity may provide positive options for them to avoid foreclosure.”

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Metros with most zombie foreclosures: New York, Miami, Chicago, Tampa and Philadelphia. The greater New York metro area had by far the highest number of zombie foreclosures of any metropolitan statistical area nationwide, with 19,177 — 17 percent of all properties in foreclosure and up 73 percent from a year ago.

Zombie foreclosures decreased from a year ago in Miami, Chicago and Tampa, but the three metros still posted the second, third and fourth highest number of zombie foreclosures among metro areas nationwide: Miami had 9,580 zombie foreclosures,19 percent of all foreclosures but down 34 percent from a year ago; Chicago had 8,384 zombie foreclosures, 21 percent of all foreclosures but down 35 percent from a year ago; and Tampa had 7,838 zombie foreclosures, 34 percent of all foreclosures but down 25 percent from a year ago.

Zombie foreclosures increased 53 percent from a year ago in the Philadelphia metro area, giving it the fifth highest number of any metro nationwide in the first quarter of 2015. There were 7,554 zombie foreclosures in the Philadelphia metro area as of the end of January, 27 percent of all foreclosures.

Other metro areas among the top 10 for most zombie foreclosures were Orlando (3,718), Jacksonville, Florida (2,368), Los Angeles (2,074), Las Vegas (1,832), and Baltimore, Maryland (1,722).

Metros with highest share of zombie foreclosures: St. Louis, Portland, Las Vegas

Among metro areas with a population of 200,000 or more and at least 500 zombie foreclosures as of the end of January, those with the highest share of zombie foreclosures as a percentage of all foreclosures were St. Louis (51 percent), Portland (40 percent) and Las Vegas (36 percent).

Metros with biggest increase in zombie foreclosures: Atlantic City, Trenton, New York

Among metro areas with a population of 200,000 or more and at least 500 zombie foreclosures as of the end of January, those with the biggest year-over-year increase in zombie foreclosures were Atlantic City, New Jersey (up 133 percent), Trenton-Ewing, New Jersey (up 110 percent), and New York (up 73 percent).

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Tenants Benefit When Rent Payment Data Are Factored Into Credit Scores

by Kenneth R. Harney | LA Times

It’s the great credit divide in American housing: If you buy a home and pay your mortgage on time regularly, your credit score typically benefits. If you rent an apartment and pay the landlord on time every month, you get no boost to your score. Since most landlords aren’t set up or approved to report rent payments to the national credit bureaus, their tenants’ credit scores often suffer as a direct result.

All this has huge implications for renters who hope one day to buy a house. To qualify for a mortgage, they’ll need good credit scores. Young, first-time buyers are especially vulnerable — they often have “thin” credit files with few accounts and would greatly benefit by having their rent histories included in credit reports and factored into their scores. Without a major positive such as rent payments in their files, a missed payment on a credit card or auto loan could have significant negative effects on their credit scores.

You probably know folks like these — sons, daughters, neighbors, friends. Or you may be one of the casualties of the system yourself, a renter with a perfect payment history that creditors will never see when they pull your credit. Think of it this way and the great divide gets intensely personal.

But here’s some good news: Growing numbers of landlords are now reporting rent payments to the bureaus with the help of high-tech intermediaries who set up electronic rent-collection systems for tenants.

One of these, RentTrack, says it already has coverage in thousands of rental buildings nationwide, with a total of 100,000-plus apartment units, and expects to be reporting rent payments for more than 1 million tenants within the year. Two others, ClearNow Inc. and PayYourRent, also report to one of the national bureaus, Experian, which includes the data in consumer credit files. RentTrack reports to Experian and TransUnion.

Why does this matter? Two new studies illustrate what can happen when on-time rent payments are factored into consumers’ credit reports and scores. RentTrack examined a sample of the tenants in its database and found that 100% of renters who previously were rated as “unscoreable” — there wasn’t enough information in their credit files to evaluate — became scoreable once they had two months to six months of rental payments reported to the credit bureaus.

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Tenants who had scores below 650 at the start of the sampling gained an average of 29 points with the inclusion of positive monthly payment data. Overall, residents in all score brackets saw an average gain of 9 points. The scores were computed using the VantageScore model, which competes with FICO scores and uses a similar 300 to 850 scoring scale, with high scores indicating low risk of nonpayment.

Experian, the first major credit bureau to begin integrating rental payment records into credit files, also completed a major study recently. Using a sample of 20,000 tenants who live in government-subsidized apartment buildings, Experian found that 100% of unscoreable tenants became scoreable, and that 97% of them had scores in the “prime” (average 688) and “non-prime” (average 649) categories. Among tenants who had scores before the start of the research, fully 75% saw increases after the addition of positive rental information, typically 11 points or higher.

Think about what these two studies are really saying: Tenants often would score higher — sometimes significantly higher — if rent payments were reported to the national credit bureaus. Many deserve higher credit scores but don’t get them.

Matt Briggs, chief executive and founder of RentTrack, says for many tenants, their steady rent payments “may be the only major positive thing in their credit report,” so including them can be crucial when lenders pull their scores.

Justin Yung, vice president of ClearNow, told me that “for most [tenants] the rent is the largest payment they make per month and yet it doesn’t appear on their credit report” unless their landlord has signed up with one of the electronic payment firms.

Is this something difficult or complicated? Not really. You, your landlord or property manager can go to one of the three companies’ websites (RentTrack.com, ClearNow.com and PayYourRent.com), check out the procedures and request coverage. Costs to tenants are either minimal or zero, and the benefits to the landlord of having tenants pay rents electronically appear to be attractive.

Everybody benefits. So why not?

kenharney@earthlink.net Distributed by Washington Post Writers Group. Copyright © 2015, Los Angeles Times