August, 2008 Newsletter
+++++++++++ August 1, 2008 +++++++++++++++++++
Introduction: No Bottom Yet
Mortgage Rate Update: Rates See Saw
This Month’s Tip: Buying Foreclosures
Introduction: No Bottom Yet
Welcome to the August edition of the Home buyer’s
Newsletter. Although there are a few mixed signals on the sales
and pricing fronts, it is fairly obvious that we’ve not reached
a definitive bottom in the market. Some expect a turn towards
the end of this year, others forecast the market remaining
challenged until next year and others contend that there simply
is not enough evidence to make a call either way.
Existing-home sales – including single-family, town homes, condominiums
and co-ops – fell 2.6 percent to a seasonally adjusted annual rate of
4.86 million units in June from a pace of 4.99 million in May, and are
15.5 percent lower than the 5.75 million-unit rate in June 2007.
NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate
Specialists in Long Beach, Calif., said there is something of a
quandary in the current market. “A recent online survey of Realtors®
shows nearly a quarter of potential home buyers are waiting on the
sidelines,” he said. “However, timing the market can be very tricky,
which is why home buyers should always have a long-term view to build
Total housing inventory at the end of June rose 0.2 percent to 4.49
million existing homes available for sale, which represents an 11.1.-month
supply at the current sales pace, up from a 10.8-month supply in May.
Lawrence Yun, NAR chief economist, said first-time home buyers are
critical to the health of the housing market. “About four in 10 homes
are purchased by first-time buyers, which frees existing owners to
trade up,” Yun said. “With many potential first-time home buyers on
the sidelines, a first-time buyer tax credit would have a significant
positive impact on both housing and the economy. Combined with permanent
increases to mortgage loan limits and enhancing the FHA loan program,
the housing stimulus package working its way through Congress would go a
long way toward helping consumers and boosting the overall economy.”
The national median existing-home price3 for all housing types was $215,100
in June, down 6.1 percent from a year ago when the median was $229,000.
Sales of new one-family houses in June 2008 were at a seasonally adjusted
annual rate of 530,000, according to estimates released jointly on July 25th
by the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 0.6 percent (±11.3%) below the revised May rate of 533,000 and is
33.2 percent (±8.8%) below the June 2007 estimate of 793,000.
The median sales price of new houses sold in June 2008 was $230,900; the
average sales price was $298,600. The seasonally adjusted estimate of new
houses for sale at the end of June was 426,000. This represents a supply of 10.0
months at the current sales rate.
Mortgage Rate Update: Rates See Saw
Mortgage rates had an active month in July with lots of volatility.
According to mortgage company Freddie Mac, average 30-year fixed-rates
stood at 6.35% at the beginning of the month, dropped to an average of
6.26% mid month then, in one of the largest increases in memory, nearly
.40% in one week, rose to 6.63%. At the end of the month, rates had
eased to an average of 6.52% as of yesterday, July 31st. 15-year fixed-
rate mortgages showed a similar trend, beginning the period at an average
5.92% and ending it at an average of 6.07%.
Analysts are fairly evenly split in three camps: those who see rates
rising, those who see rates falling and those who see some stability in
the near term. With no clear picture in focus, buyers likely have some
breathing room in the upcoming weeks.
For current average mortgage rates, see the rates page.
For more information on mortgages, visit the Mortgage Section
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This Month’s Tip: Buying Foreclosures
Wherever you turn, the discussion on foreclosures is front and center. A direct
result of the housing crunch, the number of foreclosures has ballooned in the
first half of 2008. This month’s tip, courtesy of Realty Store.com, discusses the basics
of foreclosures. Should you have any interest in purchasing a foreclosure, it
will be required reading. You can find a whole tutorial on the RealtyStore.com site.
Foreclosure: Foreclosure is the legal procedure that a lender initiates to reclaim
ownership of property after the borrower fails to make payments according to the
terms of a loan. The foreclosure procedure essentially terminates the rights that
the borrower was granted through a mortgage or deed of trust. This process gives
the lender the legal right to take the property title away from the borrower so
the property can be sold and the lender can recapture its loan proceeds.
Judicial and Non-Judicial: Depending on the specific state of the defaulted loan,
the process will be either a judicial foreclosure A foreclosure which results from
a court action rather than from the power of sale given to a trustee. Judicial
foreclosures occur when a trust deed or mortgage deed does not have a power of
sale clause, thus compelling the lender to take the borrower to court. This is
in contrast to a non-judicial foreclosure, in which a foreclosure can be completed
outside the court system. or a non-judicial foreclosure The power to foreclose on
a property without court approval.. The key difference between these procedures
is the length of time it takes a lender to foreclose on a defaulted loan. In a
judicial procedure, it takes the lender approximately 12 – 18 months to foreclosure
compared to only 4 – 12 weeks in a non-judicial procedure.
States with judicial procedures issue legal instruments called mortgages A loan to
finance the purchase of real estate, usually with specified payment periods and
interest rates. The borrower (mortgagor) gives the lender (mortgagee) a lien on
the property as collateral for the loan. while states with non-judicial procedures
issue deeds of trust The document used in some states instead of a mortgage. Title
is conveyed to a trustee rather than to the borrower.. The mortgage foreclosure
process takes longer since a lender must initiate a judicial procedure through the
courts to obtain a judgment allowing the foreclosure and sale.
By contrast, a default on a trust deed does not require lengthy court action since
the title remains with the lender until the loan is paid in full. Additionally,
the lender has the power of sale A power granted in a mortgage to sell the property
upon the default of the mortgage. which allows the trustee to sell the property
more quickly and thus recover the lender’s collateral in a timely manner.
The procedural difference in mortgage and trust deed foreclosures is provided below.
Trust Deed Foreclosure: There are three principal parties involved in a trust deed
foreclosure. The three parties are (1) The lender A private, public or institutional
entity which makes funds available to others to borrow. (2) The borrower
(3) The trustee A legally empowered person who holds or controls a piece of
property for another person. who is an independent third party holding title
to the property until the loan is repaid in full. When the borrower fails to
make the required payments on the loan, the trustee simply records a Notice of
Default A formal notice to a borrower declaring that a default has occurred and
that legal action may be taken. Also known as a NOD., sends a copy to the borrower,
and after a specified holding period, a Notice of Trustee Sale The notice which a
lender is usually required to give before foreclosure sale of collateral. Also
known as a NOTS. is posted on the property.
When searching for properties through Realtystore.com, properties with a Notice of
Default are categorized as “Preforeclosures” and properties with a Notice of Trustee
Sale are categorized as “Auction” properties.
The Notice of Trustee Sale is advertised to the public for a required period and
if the borrower does not bring the loan current, the property is auctioned to the public.
Mortgage Foreclosure: A mortgage is a legal contract in which the borrower secures
a loan by using the property as collateral. When the borrower fails to make payments,
the lender is forced to take legal action to collect the amount due. The lender will
typically send multiple notices to the borrower requesting information about the
missed payments in an attempt to work with the borrower to bring the loan current.
When these efforts fail, the lender will hire an attorney to initiate foreclosure.
At this stage, the attorney will file several legal documents including a lis pendens
A notice indicating that legal action is pending on a property., which is a public
notice indicating legal action is pending on the property. If the borrower fails to
respond to the complaint, the attorney submits a report to the court with the facts
of the case. The judge will then issue a Judgment of Foreclosure and Sale in favor
of the lender. At this stage, an auction sale is advertised according to the local statutes.
Opportunities to Purchase Foreclosures: You should now understand how a property
ends up at auction through the foreclosure process. We will now turn our attention
to purchasing foreclosures during the three different stages of the process.
The three stages are as follows:
(1) Before the Auction (Preforeclosures or Notice of Default properties)
At this stage the owner has defaulted on his loan and in many cases would like to
find alternatives to avoid foreclosure and the resulting damage to his credit history.
(2) At the Auction (Auction or Notice of Trustee Sale properties)
The property owner has defaulted on his loan and has been unable to bring the loan
current. Unfortunately, at this stage the owner is out of time and the property
will be sold at a public auction to the highest bidder.
(3) After the Auction (REO, Bank Owned or Government Owned properties)
If the minimum bid at an auction is not met, the ownership rights of the property
are transferred to the lending institution that provided the loan. In general,
banks are eager to sell these properties so they can get the money back on the
defaulted loan and issue a new loan.
For more information, visit RealtyStore.com
Next Month’s Tip: Build Your Home Equity Quicker
The Home Buying Checklist
Many of our visitors have said that one of the most valuable
aspects of the Home Buyer’s Information Center is the
Buying Checklist, where they can make sure that all
the bases have been touched. You can find the checklist here.
As always, if you have suggestions for improving the
site, or topics you would like to see addressed in
this newsletter (or, if you have used the Home Buyer’s
Information Center to successfully purchase a home),
drop us a quick line here.
A special thanks to all those who have written to let us know
that they have found the Home Buyer’s Information Center a
helpful resource in their buying process.
Have a great month and good luck in all your endeavors!
The Team at the Home Buyer’s Information Center