Bryan Crabtree BLOG

April 18, 2011

Seller Monday Market Update:

MLS Data as of 4/18/2011,
8834 Active Listings
2159 properties under contract
843 sold properties in March (official number)

These numbers are rather interesting. First, the number of sold properties in March was wonderful. That number is in the "ball park" of where we need to sustain a recovery. Second, the number of properties under contract is approaching the number seen last April at the expiration of the tax credit. This, too, is a bit encouraging. However, as a humbling sign of reality, even with these two positives, the number of active properties essentially is not declining (it has slightly increased for the year). I believe this equilibrium in the market is a sign that the fundamentals of demand as it meets current supply numbers will produce neither appreciation nor depreciation.

Obviously we have thousands of foreclosures to process which will increase supply; hence why many professionals think we may see 4-5% more depreciation before the absolute bottom hits. I also believe that is the sentiment of most buyers, which is why they are optimistically cautious that now is a good time to buy a home. re: The worst is behind us.

There is definitely two markets in the Charleston area. This past weekend, homes that were priced fairly well, had several showings. Those that are slightly above the market (the second of the two markets in Charleston), may have had a showing, but did not receive the level of activity of much of its competition. My rule of thumb for the last three weeks is that unless you are receiving 2-3 or more showings per week, the price is still likely too high.

As to marketing, we are on Trulia, Zillow, Homes.com, Realtor.com, Yahoo and others as a showcased listing and enhanced listing, plus we've just added Trulia Local for 45 days which displays our listings on National sites like CNBC, Trulia and more in a slide-show fashion.

March 7, 2011

Monday Market Seller Update:

8622 Active listings
2011 Pending sales
Just under 600 sales closed in the month of February.

At this time it appears that the inventory numbers are stable and the pending sales index is slightly climbing. Actual closings are still lagging behind with fewer than 600 in February; Although, this number is slightly above the sales number of 2010. As I see the current trends, pricing is still under a tremendous amount of pressure, but the actual fundamentals of the housing market are starting to recovery. As those trends continue over the next 12-18 months, we'll experience a full price stabilization (which will likely begin to be noticed by year's end).

April through June will likely bring increased demand and increased supply (as a result of the backlog of foreclosures held back) in the foreclosure freeze. This is an undesirable event for our market, and will hold back any improvement or stabilization in prices, but is necessary for the market to recover.

February 12, 2011

Charleston MLS Numbers as of 2/12/2011

8584 total active residential listings.
1839 pending transactions marketwide.
137 closings thus far in February.

The recent release of White House "White Papers" outlining reform for Freddie Mac and Fannie Mae are not helpful to the real estate recovery in the short-term but may be in part necessary to insure this sort of event doesn't happen again at such a grand scale. The current government involvement in the backing of loans is more than 85%. This means that without the US Government, there is virtually no mortgage market. The plans being unveiled in Washington, infer that they will gradually reduce the size of Fannie and Freddie (and government involvement to below 50% of the market) by raising costs and lowering Loan to Values, thus rendering some purchasers unable to qualify and/or afford a home, as a result.

While the private sector (investors) will likely pick up the slack, this will mean one thing for certain: Interest rates and the costs of a mortgages will be much higher. Without Government support right now, it is estimated that the average 30 year mortgage would be 7%, not 5% interest.

Add to that, Obama's undertone of reducing or eliminating the mortgage interest tax credit, and we definitely have two economies in the U.S: The depressed housing market economy and the other improving economy as a whole. What Washington is saying is that they believe the Housing Industry, including the mortgage industry is broken and must be completely overhauled over the next half decade or more. This will bring continued depressed conditions and will ultimately cost the average home-buyer more at the closing table and during the life of their mortgage. I do not believe it will further drive prices down; it will simply hold back any potential appreciation.

In other words, while we may see the end to depreciating home prices by late this year or certainly, early 2012, we likely won't see improving price conditions (as it relates to sellers) until well into 2013 and/or beyond.

January 24, 2011

Market MLS Data Monday Seller Update:

8485 currently active listings for sale.
1685 pending transactions.
244 closed properties month to date.

Prices are still falling, patterns are stabilized. We expect prices to fall until September/October of 2011 followed by stagnant prices through the balance of 2011 and 2012 while excessive foreclosure inventory is burned off.

Activity in the market is encouraging, but new sales data is lagging our optimistic wishes. Pricing will continue to be key for us through late this year, where a notable inventory decline should stop depreciation. "Waiting on the market" is not a viable option, as even when it stabilizes it will be a lower, low than we presently see prices.

"We're getting near the end of the woods," but this may be some of the ugliest territory yet. There will be more foreclosures this year than ever before if the current pipeline doesn't have an unexpected stop.

We have renewed our Realtor.com feature and added a rotating featured listing at a monthly cost of $1300 to enhance our listings and their presence, to accommodate continue anemic prices and traffic in the market.

JANUARY 1, 2011 - FIRST OF YEAR UPDATE.

Happy New Year!

Here is our year-end and year-beginning observations of the health of the Charleston Real Estate Market.

8155 Active Listings.
5819 Active Single Family Home Listings
446 closings on record for December, with an estimate of 500 +/- as the final number as the data is entered.
1307 Contingent and Pending listings; This phenomenon we cannot understand, except that there may have been a purging of bad data that has been artificially holding up the number near 1800.

There is some health and sickness found in this report. First, clearly, we are in a double dip on price and pending trends. We're moving downward in price and in overall market activity. On the upside, inventory is down notably and is 11% lower than this time last year. This is a good beginning to 2011 and a necessary element that can start a healing process later in 2011.

Be prepared for competition to become vigorous again this Spring as distressed homeowners, and tons of Foreclosures that have been stalled begin to hit the market in droves from February through June. In other words, let's get it sold now. If we haven't completed a price reduction in the last two weeks, we need to do one this week. 3-5% is generally suggested.

The market in Charleston, over $500,000 has about another 7-8% before it bottoms. The market has bottomed under $250,000. $250-500,000 is shaky. The prices have not fallen under $250,000 in the past 6-12 months. With many properties under $150,000, generally for investment purposes, the CAP rates can return 10 or more percent. The investors are beginning to "snap those up."

The FED is no longer concerned about housing in a meaningful way, it is less than 10% of our GDP. They are concerned about the financial/economic recovery which will take notable strength next year. Jobs won't come back; people will stay out of work and that will damper housing, but it doesn't mean that economic growth can't occur.

It's okay to sit on the fence over $500,000; there will be ample deals for 24-30 more months. But, trust me, at some point, the market will "turn on a dime" and prices will start to recover in all price ranges.

As to the comments of our administration: I put very little trust in an administration, most of which (92% to be exact) are career government bureaucrats with no private sector experience.

December 11, 2010 - Quick Video from the Radio Show on Short-Sales.
Click Here

NOVEMBER 15, 2010 - MARKET UPDATE AND CRABTREE TEAM UPDATE CHARLESTON, SC MSA:

Seller Monday Market Update:

MLS data as of today:
9067 active listings
1858 pending transactions
646 closings

The above numbers represent a stable scenario. Inventory on a slight seasonal reduction, pending index fluctuating between 18-1900 for nearly two months now and closings holding steady in the mid-600's.

With this inventory scenario and the lack of government intervention, prices are doing one clear thing: falling.

We've got another 5% down to go in real terms. And, we'll see a huge release of foreclosures in the first 60 days of 2011, which will bring our inventory numbers to slightly higher than where they are now (after a continued decline for the season).

We'll be in "market distress" until third quarter of 2011 and we'll see record foreclosures through the late-part of 2012.

In a room of Realtors? What's the common thought? PRICING IS KEY.

What's new on our marketing front? We've just added Homes.com to the mix (as a featured listing product), we're rotating our listings through the Trulia showcase and we've begun using a new service called postlets that posts listings to sites like Craigslist and more. We continue to add to our marketing suite to compensate for this anemic and slow-paced market continuum.

NOVEMBER 8, 2010 - COMMENTS ON THE OVERALL TRI-COUNTY REAL ESTATE MARKET AND BEYOND.....HOUSING IN GENERAL.

Last month there were 625 sales in the tri-county, marking the third monthly decline (very modest decline). There are 1818 pending sales (a stable number). There are 9118 active listings, which represents approximately a 15 month inventory (a number that has slightly increased). What does this all mean? For the next 14-16 months, we'll be in the "same" conditions. After such, we'll begin to recover back to normal market equilibrium. This does not mean that appreciation will bring us back to recovery of prices. Prices are where they are economically capable of being. However, we may begin to see appreciation again by late fourth quarter 2011 or early 2012 again. We will see further depreciation of price per square foot around 5% which will subside in about six months, leaving flat pricing conditions, thereafter, for a number of months.

I keep bringing this subject up, because I keep hearing the phrase, "we'll wait until the market recovers." The market is NOT GOING TO RECOVER. Recovery is going to be that prices will stabilize at a lower low and will begin to appreciate at a rate equivalent to inflation plus 1-3%. This will begin in 2012 or 2013. The market may see another robust period beginning in 2015-2018. This may sound like an attempt to be positive, while in reality, it isn't real encouraging.

The jobs and economic fundamentals are still fragile and this will continue for another 12 months. Economically, we will see notable improvement in 2011, which will not begin to affect real estate until 2012-2013 in any meaningful manner.

Comments on the overall housing market - By Bryan Crabtree, November 1, 2010:

Keep in mind that the adjustment we had from 2006 to 2010 was not a bust, it was a really a recovery. Prices had to return to levels that the market's income data could sustain. And, based on that economic data, prices are still 5-10% too high. As we look forward into the future, we believe that today's prices will remain the same or lower through 2013, and will begin to appreciate again in 2013. There won't be a market recovery; it will simply be a return to sustainable supply and demand and price increases that are a couple points higher than inflation. (4-7%/year). Townhomes and condos may lag the overall housing market by 12-18 months due to the severe oversupply we have.

Many people say to me, "I'm going to wait on the market to recover," and I always try to challenge that statement with factual economic indicators that support the fact that the market has recovered (only in a negative direction). Had prices fallen below the affordability index of the median market income, then we could expect a recovery in prices. However, since we are still slightly overpriced, we are more likely to see further declines that appreciation.

This trend will obviously stop at some point and we'll return to a normal market where economically driven appreciation can occur.

Update on The "Foreclosure Freeze." By Bryan Crabtree, October 24, 2010:

The foreclosure industry is in a state of turmoil, according to Rob Galbraith, speaking as Moderator in the Foreclosure Update Session at REOMAC, Hollywood, on October 22, 2010. He added that there are basically four types of legislative and political events currently contributing to this reassessment of the foreclosure process. These include new legislative interpretations of new and old statutes (on the assignment of mortgages), scamming in the foreclosure arena, the general legislation of public opinion and business determinations between title insurance and underwriting.

By the numbers, Rick Sharga from Realty Trac reports that (in the Third Quarter of 2010) 930,000 homeowners received a foreclosure notice representing an increase of 4% from the previous quarter, and a decrease of 1% from one year ago. 347,000 homeowners, in September received a foreclosure proceeding, representing a year over year increase worth watching. There have been 2.3 million year to date foreclosure notices (2.8 million total in 2009). By contrast there were only 550,000 homeowners who received a notice in the entire year of 2005.

A statistical record was set in month of September for the number of actual REO properties: 102,000 in September alone. There were 820,000 REO Properties year-to-date. According to Sharga, ?we?re on pace to exceed last year until the foreclosure freeze. He adds, From the twenty-four states that Bank of America released, those states account for 40 percent of all foreclosures and 36 percent of all REO inventory. The potential drop-off is enormous.?

There is one thing for certain. The Foreclosure Freeze by many of the major servicers is having an impact on the overall REO market and the ability of the Housing industry to cleanse itself of the distressed inventory, an event necessary to fully heal the housing market. By the numbers, The Foreclosure Freeze has had only a modest impact on the Default Industry numbers as of October 18, 2010:

Through 10/18 off 3 percent in terms of foreclosure actions compared to September.
Through 10/18 off 2.8 percent in REOs expected to see a larger drop.
Notices of sale were off 7.5 percent in October.
The industry experienced an increase in notices of default for October.
The Trend may or may not hold for the balance of the month.

A lot of Brokers are having sales delayed and some even canceled. The general concensus is that the Foreclosure Freeze will simply ?bring Christmas early. Foreclosures and related activity tends to experience a seasonal slow-down during the Holidays each year. This year, its assumed that the bulk of the Foreclosure Freeze will be sorted out by the Holidays, even though in some cases we may experience remnants of this for as much as 12-18 months to come. By first quarter, volume should start to accelerate again and be normalized into second quarter of 2011.

The case that essentially blew open this latest foreclosure crisis was a small house in Maine, which represented a microcosm of the broad spectrum of procedural problems in the Industry. During this case, the term robo-signing became Nationally known, because it was found that the employee for GMAC, who signed the foreclosure affidavit signed hundreds of them a day without reading the documents. In this microcosm, the house was financed with 103% financing, purchased from a ?brother-in-law. The borrower took out a second loan for repairs. But, according to Sharga, What was the money used for [the house didn't appear repaired at all]. This borrower went from full-time to part-time employment, later falling behind on her payments. She then applied to GMAC for a loan modification where her loan payments went from $1500 to $1700 per month, which she couldn't afford. After failing to remain current, GMAC filed a foreclosure action. The borrower hired a ?pro-bono? attorney who got the case dismissed because of improper paperwork. GMAC refiled the case, and had it thrown out again for failing to provide accurate property address information. GMAC (Ally Bank) plans to file the case again. According to Sharga, ?The judge has not rescinded their right to foreclose ? or ruled against them. The Judge said "go get your paperwork right." Sharga adds, ?The fallout from the robo-signing could be a lot less severe than what you?ve read in the press.

According to Tom Federman of Federman and Associates, ?In real terms, a judge will often do whatever they want when it comes to helping someone keep their home. I don't think you?re ever really going to be free from this issue. A lot of people [will be] be going for the assignment [defense]. The right to sue will come under a lot of scrutiny. This doesn?t really impact the borrower or their obligation under the mortgage. It?s still a legitimate technical defense that can be raised. The end result is that foreclosures in some states like New York that used to typically take 9-12 months have now slowed to as much as 20 months. States like Texas typically took 30 days for a foreclosure now it?s 90 days or longer. Florida is about double what it was just two-three years ago. The average foreclosure in Florida is a 330 day process, on average.

What do Real Estate brokers need to know about this latest crisis?

Maintain the status quo until you've gotten direction otherwise.
It?s on a servicer by servicer basis.
A lot of what we?re seeing depends on the size of the servicer. Larger servicers are taking a conservative approach. Some of the smaller ones are quite comfortable with their processes.
This robo-signing situation is likely to take 30-60 more days to work through.
It's going to trend toward work-outs and short-sales, as these things continue to happen. It's going to continue to drive a trend towards more short-sales.

From a Macro-level Rick Sharga added, "If you have 330 days to complete a foreclosure, why can?t you take 10 minutes to review the document? It doesn't seem we should be worried about being staffed up five years into a foreclosure crisis?"

How safe is it to buy an REO?
Rick Sharga added that "I assumed that by the time it was put on the market, they had secured clear title." Now as a buyer, are these things toxic sludge? That's what the latest media reports might have you believe, anyway.

The Answer? Title companies are asking for indemnification from the servicers. And, it it may be that safe and that simple.

Attorneys General in non-judicial states are thrust into the position of the judges in judicial states. There has been some significant movement by the major title insurers as to what they are going to accept from the foreclosure process. Some want to get an order from the judge to affirm that the foreclosure was properly done. And, according to Galbraith "going back to court in NY, I could get my head handed to me, literally." This Title Insurance issue has a similar ring to The Asbestos-issues that could have stopped the sale of any property more than 30-40 years old for a long time. After that ?scare? was sorted, now you just abate it and move forward.

Galbraith adds, "Some agency is going to have to lead and step-up [here]. Now you have 50 states, towns, attorney's generals, etc. Everybody that can get their finger into the pie is putting their finger in the pie" [it is so big and there?s so many of them].

One audience member asked, "When can I sell more REO Properties again?? And, the answer may just be," you should keep brushing up on your short-sale skills,? in the words of Federman.

Is there a liability from to Real Estate Brokers due to all of this?
You can't stop someone from suing, according to Federman. But according to the Seller?s Bank addendum, all of this is clear in the language that if title is defective, that the seller has no liability. There is no perfectly correct way to do it.

Some brokers have a one page letter and have the buyer sign the bottom to have the buyer made aware of the process and potential pitfalls. Doing that sort of thing is advantageous.

I asked Rick Sharga if he sees a mass-release of REO Properties as a result of this latest crisis or a continual and controlled release as we?ve been seeing. Sharga said, until this, we were forecasting next year as the foreclosure peak. Now we will guarantee an increase. Based on the REO pipeline, 2012 will start to get better. In 2013, REO could actually get back to normal levels. We don't think that we?re going to see a flood at any point, according to Sharga. We'll see a very gradual process of properties through the system to the market. Interestingly, the Lenders are processing the same number of new defaults now as they are processing actual REO properties. This represents a controlled delivery of REO to the market. A lot of the smaller lenders don?t have capital reserves to handle the losses. Some of the bigger ones can't afford to miss wall-street expectations. These two facts keep the tidal-wave of foreclosures and REO properties in check.

With all of the recent procedural discoveries, the pressure in the Court of Public Opinion and the mid-term election cycle, the chaos may well continue through the end of the year. But, it appears the default industry cycles will get back to normal procedural operation by the end of the First Quarter of 2011. While there is a lot of fear being injected into the market about the quality of titles, the rights to foreclose properties (due to paperwork flaws), and the potential impact of this on the already battered housing market, the most likely scenario is that this is nothing more than a ?righting? of the processes still existing, today, that similarly led to the overall Housing Crisis. But, there is little evidence that this will otherwise broaden the effects of the overall housing crisis. Likely, it will just extend the time it takes to foreclose on many of the properties and give homeowners more "free" time.