Posts Tagged ‘housing crash’
Housing Crash Robs Senior Citizens
The worst housing market since the Great Depression is taking a huge toll on senior citizens in this country. The crash in housing values, especially in retirement haven’s such as Nevada, Florida, California and Arizona, is robbing these long, hard working Americans of their retirement and adequate health care.
While most people believe that seniors have no mortgage on their homes, the reality is that hundreds of thousands of retiree’s owe money on their homes. Even for those lucky enough to own their house outright, the unprecedented drop in home values means they have less equity to live on or exchange for a move to retirement housing or health care facilities.
- According to the AARP, 25.5 million people over the age of 50 have a mortgage on their home. More than 680,000 (which represents 30 percent of all distressed property) baby boomers are deliquent on their mortgage or are in the process of foreclosure.
- Many seniors have little saved, other than the equity in their homes. 36 percent of all retiree’s state that their savings and investment nest egg is less than $25,000, excluding home equity and benefit plans.
- Seniors banked on rising home prices and leveraged their primary asset through equity loans and reverse mortgages. Those that leveraged assets to afford retirement owe an average of $150,000 on their houses.
- Retirement communities and long term care facilities are suffering from the housing market, too. Seniors usually sell their homes to finance admission into senior housing facilities. Dire market conditions often mean no sale at all, or one at substantially discounted prices. Many people are left with no choice or options, forcing them to cancel plans to move to housing that fits their changing needs.
Although seniors and retiree’s are often overlooked in the news, the housing and stock market crash have taken a huge toll on their lives and well being. Most have worked all their lives to build secure nest eggs for their golden years, only to discover that half a lifetime of work and savings vanished in the blink of an eye.
Click Here to Read More from USA Today
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Bullish Signs for Housing Sales
Although all the news about real estate, housing and lending isn’t particularily bullish, there are some compelling new motivations for buying now. Rising interest rates, Inventory Decreases and the $8000 tax credit which expires December 1.
- Interest rates are soaring, as the dollar falls. Economists predict that the low rates we saw only a month ago, aren’t likely to return anytime soon. In April, 30 year fixed rate mortgages averaged 4.5 percent. Last week, rates hit 4.98 percent. And, this week, Bankrate.com is quoting 30 year fixed rates for prime borrowers at just over 5 percent. Note: An increase of only 1/2 percent in interest rates raises the mortgage payment for a $170,000 loan by $52/month, $624/year or $18,720/over the life of the loan.
- The deadline for qualifying for an $8000 tax credit is rapidly approaching. Although, the December 1st deadline may seem a long way off, in real estate terms it really isn’t. A lot of people are sitting on the sidelines, waiting to see if prices will drop another 1 or 2 percent over the next 6 months. Lenders are already warning us that when all those buyers rush into the market in August or September, the backlog in loan applications will mean a wait of 60-90 days to close an average loan. Note: Given that the average buyer in this market looks at over 30 homes, over a 3 month period, buyers who don’t want to miss the boat on their $8000 gift, should get serious now.
For those buyer’s hoping to time the market perfectly, we think their ship may be sailing by. Home inventories are dropping, prices are stabilizing, interest rate increases erase potential gains made by a further fall in prices and $8 grand is on the line, if the December 1 closing deadline can’t be met. Serious buyer’s should jump on board now, before they find out that the ship has sailed and they missed the boat!!
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Condo and Homeowner Associations in Trouble
Foreclosures and loan delinquency’s wreck havoc on the budgets of Homeowner’s Associations (HOA’s) across the country.
Many condominium communities are glutted with nonpaying units that swamp their operating budgets, force cutbacks on promised services and increase monthly dues for owners who are paying their mortgage and association dues.
Crisis In Florida:
In Florida, the land of the condo dweller, things are spinning out of control for HOA’s and property owners. As a result, Florida constituents are turning to legislators for an help they can provide.
Under the current system in Florida and other states, lenders can avoid paying homeowner’s fee’s until they foreclose and become the owner of the unit. Lenders face a continuing avalanche of foreclosures and loan defaults, which means that up to 2 or more years can pass before the property transfer gets through the court system.
During the lengthy legal process, homeowners often continue living in the units, using the ammenities and facilities for free. Some even rent the units for income, after they have stopped making payments on the property. Many associations are forced to cover the costs of water, cable, laundry, lawn and pool maintenance and garbage collection for paying and non-paying owner’s alike. To make up for the added expenses, paying unit owner’s have to foot the bill or the entire association goes down.
And, things get even more complicated. Some banks stall on taking title to units because they have a cap that limits the amount of past-due fee’s they have to repay to 6 months or 1 percent of the original loan amount. Some luxury condo associations report that some units have as much as $50,000 in unpaid fee’s by the time the bank takes ownership.
Downward Spiral:
Lenders are also denying financing for financially unstable buildings, which essentially means the property can not be sold, even if a buyer is found. In January, mortgage giant Fannie Mae said it would no longer fund loans in buildings if more than 15 percent of the units were 30 or more days past due with their association fee’s.
The problem has reached a crisis point for many HOA’s that are struggling to cover basic utilites such as water and electricity. If they raise fee’s on paying owners for the shortfalls, they risk pushing even more residents into delinquency. Most owners are already upside down on the property and they simply can not afford a higher payment.
Renting out units could offset loses, but rentals are usually prohibited or they are limited to a very small percentage of the number of units in the complex. Furthermore, lenders such as Fannie Mae also deny funding for buildings that are less than 51 percent owner occupied. So, raising money with rent income does not appear to be a viable solution, nor does it maintain the quality of life for the paying residents.
The housing crisis has uncovered many problems that we have never encountered before, but the number of failing HOA’s is an imminent crisis. Unfortunately, it isn’t simple 
and if solving it isn’t done correctly, more permanent damage may occur.
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Coldwell Banker Asks Sellers to Drop Price 10 Percent
From Reuters:
Coldwell Banker Asks Sellers for 10-day price cuts to spur home sales
One of the largest U.S. real estate companies said it is asking its sellers to cut their listing prices by as much as 10 percent to kick-start U.S. home sales in a market plagued by falling prices and near-record unsold inventory supply.
Coldwell Banker Real Estate said some 25,000 sellers, who have homes listed with its brokers, will cut prices during its first national, 10-day sales event starting on Friday, October 10th. The goal, to lure potential buyers off the sidelines in the worst housing market since the Great Depression.
Most owners still are unrealistic when pricing their homes, and a reduction of 10 percent or less would push the properties “over the tipping point to a sale,” according to Coldwell Banker, which is based in Parsipanny, New Jersey, and is part of Realogy Corp.
“The main driver is to bring buyers and sellers together and to increase the activity in the marketplace,” Jim Gillespie, president and chief executive officer of Coldwell Banker, said in an interview.
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Many sellers have been reluctant to slash asking prices, but they face competition from the large number of foreclosed homes on the market at discounted prices.A recent Coldwell Banker survey found that more than half of the real estate agents said listing prices in their market are too high to attract qualified buyers. Brokers, however, believe that, depending on the market, a price cut of up to 10 percent will be enough to stoke sales.
Kathryn Taylor is one seller who hopes that’s the case.
“The economy. No movement for our home, or even any interest, just because people are scared,” she said, explaining her decision to cut the asking price on her parents’ home in Silver Spring, Maryland, by 10 percent for 10 days.
The two master-bedroom, two-bathroom home in an over-55 community was listed in May at $458,000, undercutting several nearby sellers of the same model.
“This is the first time we’re lowering it, and we really didn’t want to do that because we listed it to sell,” she said. “We knew things were tough, but the home is a really desirable unit in a neighborhood that rarely has anything come open so we didn’t think it would have any problems selling.”
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Taylor, a retired government employee, is getting “more antsy” about selling. Her father passed away last year and her mother is moving to a nursing home that costs $9,000 each month.With stock wealth being roiled, “it’s getting more and more important to keep her afloat by selling this house,” she said of her mother.
Sellers can opt to keep their asking prices lower after the 10-day sale, according to Coldwell Banker.
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