Thursday, October 9, 2008

Rumble In The Real Estate Jungle

Better days may be ahead but, right now? There's a real rumble in the residential real estate jungle. To fight your way through, you may have to put your state in your corner.

by Broderick Perkins
© 2008 DeadlineNews.Com
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Deadline Newsroom - Hunker down, get a cut doctor for your household budget and brace yourself for some real toe-to-toe mayhem in the residential real estate sector.

The ferocious rate of foreclosures and the hammer lock on credit have crippled consumer confidence and put the national economy on the ropes.

Home prices are down for the count and, in this heavyweight of a fight for home ownership survival, it's likely to only get uglier.

If an effort to stop the bleeding and get housing up off the mat, there's a good chance your state can champion your cause if it's one up on federal efforts to help you save your home.

The Standard & Poors/Case-Shiller 10-City Composite and the 20-City Composite Home Price Indices through July 2008 reached new record annual declines of 17.5 percent and 16.3 percent, respectively. That was the 10th consecutive monthly report of a record decline for the 10-city data.

The weakest markets were in Las Vegas, NV with an annual home price decline of 29.9, followed by Phoenix, AZ, down 29.3 percent; Miami, FL, down 28.2 percent; Los Angeles, CA, down 26.2 percent; San Diego, CA, down 25 percent and San Francisco, CA, down 24.8 percent.

And, it ain't over.

Sixty-three percent of those answering a Deadline Newsroom poll "When Will Housing Recover?" say the housing market won't come back until 2010 or later. Nearly a third, 29 percent, say housing won't recover until after 2010. The 8 percent who said it would recover this year, have likely given up on that notion. Another 29 percent said 2009 will be the recovery year -- also a slim-to-none chance of a winning bet.

Lending credence to the newsroom poll is the documented risk of future home price declines. That risk increased in 94 percent of all 381 Metropolitan Statistical Areas (MSAs) tracked by PMI Mortgage Insurance Co. in its Fall 2008 U.S. Market Risk Index.

PMI said the majority of the increases were "statistically insignificant" but the risk of future home price declines rose by more than 10 percent in 16 of the nation's top 50 MSAs, primarily in areas that experienced major increases in house prices during the boom. Among the top 50 MSAs, 17 ranked in the highest risk category and 16 of those were in California, Florida, Nevada, and Arizona.

Risk scores translate directly into an estimated percentage risk that home prices will be lower in two years.

For example, the highest risk of future price declines was in Fort Lauderdale-Pompano Beach-Deerfield Beach, FL, where the risk score was 99.5 percent. That means area prices have a nearly 100 percent chance of being lower in two years. How much lower? That's anybody's guess.

Other high-risk areas included Riverside-San Bernardino-Ontario; CA (99.5 percent); Orlando-Kissimmee, FL (99.4 percent); Miami-Miami Beach-Kendall, FL (99.3 percent); and Tampa-St. Petersberg-Clearwater, FL (99 percent). Areas with the lowest risk of price declines -- less than one percent -- were in the Texan MSAs of Fort Worth-Arlington; Dallas-Plano-Irving and Houston-Sugar Land-Baytown, as well as Pittsburgh, PA.

The downward pressure on home values, along with the choke-hold on credit makes it ever more difficult for troubled home owners to refinance their way out of trouble or even sell out without a loss. Loan applications are off nearly 30 percent from a year ago, according to the Mortgage Bankers Association.

As many as 3.3 million home owners will default in 2007 or 2008 with more than 2 million of them losing their homes, according to estimates. But it's not just about the foreclosures. Those who manage to keep their homes are estimated to lose some $365 billion in home values due to downward price pressure caused by the foreclosed properties.

The mortgage-squeeze related fallout doesn't discriminate. Borrowers with high credit scores and prime loans also have a tough time refinancing or borrowing against their equity. Buying a home ain't easy either.

Luckily, a growing number of home owners and buyers have state-level housing efforts in their corner.

The exhaustive "Defaulting on the Dream: States Respond to America’s Foreclosure Crisis," by the Pew Charitable Trusts, reveals some assertive, even experimental efforts to mitigate financial harm to homeowners, lenders, local communities and state budgets.

• To help borrowers avoid foreclosure and keep their homes, 20 states (including California, Colorado, New York and Nevada) have launched formal foreclosure intervention or prevention initiatives.

• Sixteen states (along with those above, including, Indiana, Maryland, Massachusetts, Michigan, New Jersey, Ohio and Pennsylvania) have enacted both high-cost lending and foreclosure intervention laws.

• Thirteen states (among them Arizona, Illinois, Indiana, Iowa and Minnesota) have created counseling hotlines to help the foreclosure-at-risk, and several states are encouraging (too often reluctant) lenders to work with borrowers to find alternatives to foreclosure.

• Nine states (including Delaware, Maryland, Michigan and Ohio) have established loan funds that can be used to refinance borrowers who have loans they cannot afford or to provide short-term loans to help borrowers overcome financial difficulties.

• To protect vulnerable borrowers from unscrupulous real estate investors, nine states have created laws regulating firms that claim to "rescue" borrowers from default. Since the downturn, rescue operations have preyed upon vulnerable home owners.

• And in an effort to prevent problematic loans from being made in the first place, 31 states (among them, Arkansas, Georgia, Kentucky, Oklahoma, Texas and Utah ) have implemented laws that address predatory lending.

Check with your state housing, consumer, social or community agencies to determine what home owner and mortgage programs and assistance are available to help see you through hard times.

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's news that really hits home!

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