Real estate investors have been renovating properties for years in order to sell them more quickly and at a higher price point. Banks, on the other hand, have tended to let their REO properties remain largely “as-is” when they market them whenever possible. Now, however, with so much competition for buyers, many lenders are “sprucing up” their REO properties and foreclosures in an attempt to attract qualified buyers who currently have their pick of a vast inventory of homes.
However, not just any house will qualify for a lender fix-up. “There is no sense in putting in a furnace…if it’s just going to walk away the next day,” explains one real estate agent. Neighborhoods that have a high risk factor for vandalism are not likely to see many bank rehabs since the lenders tend to see this as “throwing good money after bad” and fear that a restored home will still not appeal to buyers because of the area.
It seems like this new policy certainly can’t hurt REO sales, but it also seems to leave a lot of already blighted areas of the country “out in the cold.”
We'd like to hear from you. What do you think about lenders fixing up properties before selling, and do you think this practice has had any impact on real estate overall?
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Builders broke ground on more new homes last month, giving the weak U.S. housing market a slight boost at the start of the spring buying season.
Home construction rose 7.2 percent in March from February to a seasonally adjusted 549,000 units. Building permits, an indicator of future construction, rose 11.2 percent after hitting a five-decade low in February.
Still, the building pace is far below the 1.2 million units a year that economists consider healthy. And March's improvement came after construction fell in February to its second-lowest level on records dating back more than a half-century.
Millions of foreclosures have forced home prices down. In some cities, prices are half of what they were before the housing market collapsed in 2006 and 2007. And more foreclosures are expected this year. Tight credit has made mortgage loans tough to get. Many would-be buyers who could qualify for loans are reluctant to shop, fearing that prices will fall even further.
The increase in home construction activity was felt in most regions of the country. It rose 32.3 percent in the Midwest, 27.6 percent in the West and 5.4 percent in the Northeast. Construction fell 3.3 percent in the South.
New homes can spur job growth. Each new home built creates the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
Fewer Americans are having trouble paying their mortgages now compared to a year ago, according to a new Harris Interactive poll.
About 22% of those surveyed last month said they had difficulty making their mortgage payments, down from 29% a year earlier. Additionally, 21% of respondents believed they were "under water" on their mortgage, meaning the outstanding balance is higher than the home is worth, according to the report. That's down three percentage points from last year.
The findings seem to reflect an improving job market, with more jobs and lower unemployment. March's unemployment rate fell to 8.8% from 8.9% in February while the U.S. economy added 216,000 jobs, the U.S. Labor Department said recently. In March 2010, the unemployment rate was 9.7%.
But the news isn't all good. Another reason for the decline in struggling homeowners is that some of those who had been having trouble keeping up their payments last year have since sold or lost their homes through foreclosure. Of those polled, 66% said they had a mortgage, down from 69% in Harris's year-ago survey.
After all, the U.S. housing market is still in flux. The median home price is February was $156,100, down 5.2% from a year earlier, while so-called distressed homes — houses sold at a discount — accounted for 39% of February sales, according to the National Association of Realtors.
"These findings are consistent with other Harris Poll data on the economy that show a very modest, but, still painfully slow, recovery from the recession," Harris Interactive said in a statement. "Many millions of people are still hurting badly even if the numbers are slightly better than they were last year."
An analysis of home prices through the end of February by CoreLogic shows a year-over-year decline of 6.7 percent when distressed properties – REO and pre-foreclosure short sales – are included in the numbers.
Take out the distressed factor, and the company says home prices are “showing signs of stability,” down just 0.1 percent from a year ago.
February’s 6.7 percent drop marked the seventh straight month that CoreLogic has recorded a decline in its national home price index, counting both distressed and non-distressed properties.
“When you remove distressed properties from the equation, we’re seeing a significantly reduced pace of depreciation and greater stability in many markets,” said Mark Fleming, chief economist with CoreLogic. “Price declines are increasingly isolated to the distressed segment of the market, mostly in the form of REO sales, as the stock of foreclosures is slowly cleared.”
A separate report released by Clear Capital also points to the impact of distressed property sales on home price trends.
Clear Capital’s data extends through the end of March, and the company says home prices in the western part of the country, where distressed homes account for some 40 percent of total sales, are continuing to steadily decline and have now fallen to a new, double-dip low for this cycle.
