Real Estate Sifter

RISMEDIA, March 31, 2010—(MCT)—Wynn Bloch has always dutifully paid her bills and socked away money for retirement. But in December she defaulted on the mortgage on her Palm Desert, Calif., home, even though she could afford the payments.

Bloch paid $385,000 for the two-bedroom home in 2006 when prices were still surging. Comparable homes are now selling in the low $200,000s. Bloch, a retired psychologist doubted she’d see her investment rebound in her lifetime. Plus, she said, she was duped into an expensive loan.

The way she sees it, big banks that helped fuel the mess all got bailouts while homeowners like her are left holding the bag. No more. “There was not a chance that house was ever going to be worth anywhere near what my mortgage was,” said Bloch, who is now renting a few miles away after defaulting on the $310,000 loan. “I haven’t cheated or stolen.”

Time was when Americans would do almost anything to hang on to their homes. But that commitment appears to be fraying as more people fall behind on their loans, while watching the banks and lenders that helped trigger the financial crisis return to prosperity.

Nearly one-quarter of U.S. mortgages, or about 11 million home loans, are underwater, with buyers’ houses worth less than their loans. While home values are regaining ground, they remain far below their 2007 peak. Many homeowners are just now coming to grips with the idea that prices will take years to reach the pre-crash peak: as long as 14 years in California, according to economist Chris Thornberg.

Stuck with properties whose negative equity won’t recover for years—feeling betrayed by financial institutions that bankrolled the frenzy—some homeowners are concluding it’s smarter to walk away than to stick it out.

“There is a growing sense of anger, a growing recognition that there is a double standard if it’s OK for financial institutions to look after themselves, but not OK for homeowners,” said Brent T. White, a law professor at the University of Arizona who wrote a paper on the subject.

Just how many are walking away isn’t clear. But some researchers are convinced that the numbers are growing. So-called “strategic defaults” accounted for about 35% of defaults by U.S. homeowners in December 2009, up from 23% in March of 2009, according to Luigi Zingales, a professor at the University of Chicago’s Booth School of Business. He and colleagues at Northwestern University’s Kellogg School of Management reached that conclusion by surveying homeowners about their attitudes and experience with loan defaults. They found that borrowers were more willing to walk away if someone they knew had done it, and that the greater a homeowner’s negative equity the more likely they were to default, even if they had could make the monthly payment.

Similarly, an analysis released last year by credit bureau Experian and consulting firm Oliver Wyman estimated that walkaways accounted for nearly one in five homeowners who were seriously delinquent on their mortgages in the last three months of 2008.

“The fact that people are strategically defaulting—there is no question,” Zingales said. “The risk that the number of people doing this might explode is significant.”

A flood of walkaways could damage the nation’s fledgling housing recovery by swamping the market with foreclosed properties. Still, some experts are dubious that millions of underwater homeowners will pull the plug like Bloch did. Home ownership remains the cornerstone of the American dream. Moving is a hassle and the stigma associated with a foreclosure is likely to keep many hanging on for a recovery.

The biggest surprise is that so many underwater homeowners continue to pay, according to White, the Arizona law professor. He’s convinced that personal shame, as well as moral suasion by the government and financial institutions has kept many homeowners from walking away, even when they’d be better off financially to dump their homes.

But real estate veterans said old taboos are eroding fast. Jon Maddux, a former real estate investor who founded You Walk Away, a for-profit company that guides homeowners through the process of default in 2007, said his earliest customers struggled with emotional ties to their homes as well as remorse about reneging on an obligation. That’s changed as more homeowners have concluded that the housing market isn’t going to rebound quickly and they’d be better off cutting their losses. “Now, it’s more of a business decision—it’s people who could afford their house, but it’s an inconvenience,” Maddux said. He and other experts said average Americans are fed up with hearing how they’re supposed to honor their debts while businesses operate by another set of rules.

Consumers typically begin to think about walking away once the value of the property is 25% lower than the value of the debt, according to research conducted by Sam Khater, senior economist at real estate research firm First American CoreLogic. About five million people nationwide are in that situation, he said.

Some purchased their homes at the peak of the market only to see the value drop precipitously when the bubble burst. Others bought low, but couldn’t resist borrowing against their rising equity to make home improvements and to pay off other bills. When home values fell, they too found themselves underwater.

Ken Henrich purchased his Marysville, Calif., home for $187,000 in 2004. He and his wife later refinanced the property, tapping the equity to pay off credit cards. They now owe around $300,000 on a place that’s worth about $132,000. They let the four-bedroom residence slip into foreclosure and are currently waiting for it to be sold at auction. They’re planning on renting for a few years until they can possibly buy again. “We can more than make the payment,” Henrich said. “The way we look at it, our credit would still be perfect years from now, but we’d still owe tons more than it’s worth.”

There are consequences to walking away. A default will knock down a credit score by at least 100 points, said Craig Watts, a spokesman for FICO, the company that developed credit scores. That could make it tough to borrow money, rent an apartment or get a job since many employers now routinely check credit histories of potential hires.

To some, it’s a small price to pay to gain a measure of revenge against the financial institutions whose loose money helped to fuel the crisis. Joseph Shull, a marketing professor, said he’s planning on walking away from the town house he bought in Moorpark, Calif., in June 2006. “I’m angry, and there are a lot of people like me who are angry,” he said. He purchased the home for $410,000 and spent $30,000 renovating. Now the house is worth around $225,000. Shull admits he overpaid for his property, but he said it fell in value in part because of “regulatory mismanagement.”

(c) 2010, Los Angeles Times.

Distributed by McClatchy-Tribune Information Services.

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RISMEDIA, March 31, 2010—This week’s headlines from the NATIONAL ASSOCIATION OF REALTORS® include: fair housing resources available at no-cost through NAR’s Right Tools, Right Now initiative; travel deals from REALTOR Benefits® Program Partners; and New Fannie Mae, Freddie Mac Structures Should Ensure Availability of Mortgage Capital and Protect Taxpayer Dollars, says NAR.

Right Tools, Right Now – Fair Housing Resources at No-Cost

This April, make the most of Fair Housing Month by learning more about fair housing regulations and housing discrimination issues. FREE resources from NAR’s Right Tools, Right Now initiative include ‘Fair Housing Sales: Pocket Guide,’ ‘Fair Housing Rental: Pocket Guide,’ and ‘Fair Housing Handbook.’ Visit REALTOR.org/RightTools for all offers.

New Limited Time Offer from Hertz

Hertz, through its partnership in NAR’s REALTOR Benefits® Program is offering members savings of up to $35 on weekly or weekend rentals on economy or higher class cars at airport locations now through May 31. Taking advantage of this offer is easy–just click here and get this special deal before it expires!

New Fannie Mae, Freddie Mac Structures Should Ensure Availability of Mortgage Capital and Protect Taxpayer Dollars, says NAR

Government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac should be restructured as government-chartered, non-shareholder owned authorities, the NATIOANAL ASSOCIATION OF REALTORS® said in congressional testimony on March 23rd.

For more information, visit www.REALTOR.org.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

To see last week’s NAR Pulse, click here.

RISMEDIA, March 31, 2010—RISMedia’s 2010 Real Estate Leadership Conference—‘The Real Estate Social Media Summit’—will provide the perfect backdrop for real estate professionals who are looking to capitalize, even in today’s challenging market.

Industry experts Mike Parker, Carla Rayman, Scott Forcino and Scott MacDonald are among the top-producing agent panelists who will offer insight into how you can get the most out of social media in the least amount of time during the session titled: “Social Media: Have an Action Plan – Getting the Most Out of Social Media in the Least Amount of Time” at this year’s Leadership Conference. The session will take place on Wednesday, June 9 from 9:00 -10:15 a.m. at the Hilton Rye Town in Westchester County, New York.

Here’s a more in-depth look at some of the panelists. Look for more profiles in Friday’s edition of the news.

Mike Parker, Huff Realty
Mike Parker has been doing what he loves for over 23 years- helping families acquire their dreams of homeownership. His dedication and no-nonsense approach to selling and listing real estate have earned him numerous awards and titles, but Parker is at his highest when his clients are completely satisfied. In 2008, Parker was awarded HUFF Realty’s most prestigious award, The Life Time Achievement Award and HUFF Realty’s Hall of Fame award. He is the only agent in North America who is in the RE/MAX Hall of Fame and the HUFF Realty Hall of Fame.

Carla Rayman, Prudential Palms Realty
Carla Rayman of the “Your Global Agents” team manages the International Division of Prudential Palms Realty in Sarasota and was recently recognized as one of the company’s leading short sale specialists in addition to being named to the prestigious Leading Edge Society for 2009, an award that recognizes residential sales professionals who have achieved outstanding sales productivity in challenging market conditions. Rayman feels the need for continuing education is important, and has achieved the following designations: Transnational Referral Certified (TRC), Graduated Realtor Institute (GRI), e-PRO Internet Professional and Certified Residential Relocation Specialist. She has also achieved the Prudential Fine Homes Specialist designation, one reserved for sales professionals working with luxury properties.

It’s never been more important to stand out among the competition than in today’s challenging market. Don’t miss your exclusive opportunity to learn how to get the most out of social media in the least amount of time. This session is not to be missed!

This year’s Conference will also focus on Social Media and Mobile Strategies for both brokers and sales associates to help these professionals best meet the demands of today’s home buyers and sellers. There will also be a track dedicated specifically for brokers, and additional business development and marketing sessions.

For a complete list of sessions, visit http://rismedia.com/events/leadership-conference/sessions/.

Who Will Attend? Leaders of the real estate community, including Top 5 Members, other leading real estate sales associates, team leaders, leading brokerage owners, economists and a host of related industry visionaries from around the United States.

Register Now at http://events.rismedia.com!

Interested in Sponsoring and/or Exhibiting? Contact your Account Representative or e-mail advertising@rismedia.com.

Questions on the Conference? Visit http://rismedia.com/events/leadership-conference or contact Stephanie Andre at stephanie@rismedia.com or 203-855-1234 x141.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

RISMEDIA, March 31, 2010—A new analysis by the Center for Neighborhood Technology (CNT) shows that only two in five American communities—or 39%—are affordable for typical households when their transportation costs are considered along with housing costs.

The Housing + Transportation (H+T) Affordability Index examines 337 metro areas across the country—encompassing 161,000 neighborhoods and 80% of the U.S. population—and provides the only comprehensive snapshot of neighborhood affordability by accounting for combined housing and transportation costs associated with a community. The H+T Index and its accompanying report, Penny Wise, Pound Fuelish, illustrate the direct link between household transportation costs and the location and design of neighborhoods and transit options.

Under the traditional definition of housing affordability (30% or less of household income spent on housing), seven out of ten U.S. communities are considered “affordable” to the typical household. But in almost all metro regions of the country, when the definition of affordability includes both housing and transportation costs—at 45% of income—the number of communities affordable to households earning the area median income decreases significantly. Nationally, the number of affordable communities declines to 39%, resulting in a net loss of 48,000 neighborhoods with combined housing and transportation costs that stress the average family’s budget.

“Across the nation, families are dealing with the economic crisis and looking at their bottom lines to determine how they can save money and plan for the future,” said Congressman Earl Blumenauer (D-OR). “The H+T Index provides valuable information about the two biggest household expenses, housing and transportation. This index will help policymakers level the playing field to improve location efficiency, and it will help lenders educate consumers about the trade-offs and costs associated with their housing choices.”

For most families, transportation is the second largest household expense. The new analysis shows that for many families in “drive ‘til you qualify” zones, savings realized from lower cost housing are eliminated by unexpectedly high transportation costs. Yet it is difficult for consumers and policymakers to estimate the full costs of a location, including the cost of both housing and of transportation. This lack of information can lead families to unknowingly make housing decisions that cause them to live beyond their means as gas prices rise and commutes grow longer. A community’s average transportation costs can range from 12% of household income in efficient neighborhoods with walkable streets, access to transit, and a wide variety of stores and services to 32% in locations where driving long distances is the only way to reach essential services.

“The Rockefeller Foundation is proud to have funded the H+T Index as part of our initiative to promote equitable and sustainable transportation,” said Nick Turner, Managing Director at The Rockefeller Foundation. “This unique tool will give consumers the opportunity to make more informed decisions about where they can afford to live, and help provide policy makers with data to develop new policies and targeted investments that can reduce transportation costs. Transportation costs are often the second highest expense for working Americans–and the Rockefeller Foundation’s initiative is committed to helping Americans re-think our transportation future as a critical way to expand economic opportunity.”

The failure to provide Americans with affordable transportation and compact neighborhoods that support pedestrians and cyclists as well as drivers, increases the financial pressure on families, resulting in unstable household budgets, lack of savings, and even foreclosure, and places communities across the country, particularly those with inadequate transportation options, at greater risk.

“In recent years we have seen foreclosures increasing faster in outer suburbs than in central cities. When gas prices peaked in 2008, families in many regions saw their transportation costs soar by $3,000 per year or more. When communities have few transportation options and require driving long distances for basic necessities, already stressed household budgets are very vulnerable to spikes in gas prices and rising transportation costs,” said Scott Bernstein, president and founder of CNT. “The H+T Index gives a reliable estimate of each neighborhood’s average household transportation costs, a strong move toward a ‘no surprises, no sticker shock’ home buying or renting experience.”

For more information, visit www.cnt.org.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

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RISMEDIA, March 31, 2010—Without a job for almost a year, Lori could not keep up with her orthodontist bills for her son. She had always paid on time, but circumstances outside her control had taken over. Lori met with the dental office manager and explained her situation.

The manager checked her records, and after complimenting Lori on her excellent payment history and customer loyalty, offered to waive the over $1,800 that was remaining on Lori’s bill, remove her son’s braces and provide a retainer at no further cost. Wow! Lori was grateful and decided she would use this orthodontist for her other children at the appropriate time.

With decreasing disposable income and increasing bills (debt), many American families are faced with tough choices: Pay the cell bill or cable bill? Purchase fuel or food? Pay the mortgage or schedule surgery? These are tough choices faced by many families every month.

Credit card companies, lenders and service providers often offer emergency hardship programs designed to help customers who have lost jobs, become ill or endured some other setback in managing family credit.

Although it was much more challenging to get creditors or service providers to extend reduced payments or improved terms during better economic times, these opportunities have significantly increased over the last two years. With the ever-growing threat of credit defaults, bankruptcies and foreclosures, many creditors are creating more effective and flexible payment options for their customers.

Service providers like Lori’s orthodontist are competing more than ever to grow and maintain their client base as they continue to lose customers due to economic reasons. This ongoing client attrition places an extra strain on servicers to offer more appealing deals and options.

In many cases, a strategically placed phone call or personal visit to the right person (decision maker) can often result in reductions of outstanding balances, interest rates or terms and, at times, a complete write-off/waiver of remaining balances.

Jeff Mandel is president and Marlin Brandt is COO of ApprovalGUARD.

For more information, visit www.ApprovalGUARD.com.

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RISMEDIA, March 31, 2010—Sotheby’s International Realty Affiliates LLC announced that Baltic Sotheby’s International Realty in Riga, Latvia, has joined its luxury real estate network.

The firm is owned by Vestards Rozenbergs, Leonid Kil and Ilze Mazurenko and will serve the Baltic States, which consist of Latvia, Estonia and Lithuania.

“The addition of Baltic Sotheby’s International Realty reinforces the strength of our presence in key markets across Europe,” said Michael R. Good, president and chief executive officer, Sotheby’s International Realty Affiliates LLC. “We look forward to growth in this region with Baltic Sotheby’s International Realty and the team of professionals they are building.”

The firm is located in Riga, the capital of Republic of Latvia within a renovated historical building in an area well known for its Art heritage. Rozenbergs, who also serves as the firm’s chairman of the board, has plans for further expansion into Lithuania and Estonia in the next two years. “We have strong local partnerships, good client relationships and a professional infrastructure where we focus on high-level training for each of our sales agents,” said Rozenbergs. “The market throughout the Baltic region remains stable for high-end properties and demand is still high from Russian buyers especially.”

For more information, visit www.sothebysrealty.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

RISMEDIA, March 31, 2010—Prudential Real Estate and Relocation Services, Inc., a Prudential Financial, Inc. company announced the affiliation of Trend Realty, previously affiliated with ERA Real Estate. The company will operate as Prudential Trend Realty, serving Gainesville and greater Alachua County.

Thomas McIntosh, Prudential Trend Realty president said he chose Prudential Real Estate and Relocation Services for its international brand recognition, sizeable referral network and technology advantages, among other qualities. The affiliation will help Prudential Trend Realty, which operates three offices, pursue growth in the transitioning north-central Florida real estate market.

“We are placing the Trend name next to one of the best-known brand names in the financial services sector, and we feel really good about that,” McIntosh said. “We also are gaining access to a network of the finest real estate brokers in the country, and our associates will have access to the best real estate marketing tools in the industry.”

Earl Lee, president of Prudential Real Estate and Relocation Services welcomed McIntosh and his company to the Network. “Prudential Trend Realty makes a wonderful addition to our Network,” Lee said. “The company is a dominant force in greater Gainesville, with a sales team known for exemplary service, consultation and innovation.”

The companies share similar cultures based on excellence, integrity and sound corporate citizenship, Lee added. “The new affiliation represents two fine organizations coming together, and customers will surely benefit.”

McIntosh said his customers and company alike will benefit from Prudential Real Estate and Relocation Services’ Online Advantage lead-generation and customer-contact systems, and from its significant presence on Internet search sites. “Prudential Real Estate and Relocation Services offers us industry-best real estate technology that will help our teams become even more efficient and effective in the service of our customers.”

Prudential Trend Realty, founded in 1973, embraces training as a competitive advantage. In fact, continuous improvement is a core value, McIntosh said. “Highly trained sales professionals will consistently deliver excellent customer experiences.”

McIntosh added that his sales teams will enhance their skills using Prudential Real Estate and Relocation Services’ LearnCenter education portal, which provides professionals 24/7 access to a significant array of professional development opportunities and options. “Change is constant in our industry,” he explained. “To be the very best for your clients you must stay ahead of change, continuously improve and pursue new angles on our business.”

For more information, visit www.prudential.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.