homecourt

I have regretfully posted a slew of bad news this morning.  But better to not be kept in the dark, especially in your own home.

Like Lisa Brown was.  The mother of three daughters got evicted even though she made timely rent payments.  The reason for her eviction was not because of anything she did, but because her landlord defaulted on the mortgage and the house fell into foreclosure.  It was recently sold at auction.

Worst of all, her $5,700 security deposit – gone.

According to the Center for Housing Policy, nearly 20 percent of all foreclosures are on rental properties, and tenants’ rights in such situations are minimal; eviction papers trump the lease.

In most states, neither the bank nor the landlord has a legal obligation to tell the tenant about the foreclosure. So while the owners know what’s going on, renters are usually kept in the dark.

Brown’s broker said he had no idea.

Some states, including California and New York are working on laws to protect tenants.  Who knows how long that will be.

Before you decide to rent a property, make sure you do your research and grill your landlord.

Read full story here.

After writing the previous post, I continued my read for housing news and came across this in The L.A. Times:

“Phil Orlando, chief equity market strategist at Federated Investors in New York, said investors are pleased by the moves out of the Treasury and Fed but that they will need to see more signs that the economy is improving for the market to hold onto the gains. He said renewed worries about trouble spots like unemployment could shake investors.”

The paragraph was embedded in a story about the Wall Street giving up some ground after the Dow rallied 498 points yesterday.

It’s as if investors went home and slept on what sounded like a good idea – the government’s proposal for sharing risk with investors who decided to buy toxic assets – and reassessed the market’s strength.  If these oil scions and other potential billionaire investors need reassurance of the market’s stability, you can be damn sure the rest of us do.

Now may be one of the best times to buy a house, but with all the layoffs, who would feel secure enough to buy one?  I’ve read articles and help sites that encourage homebuyers to appropriate at least 2 months worth of expenses in a separate nest egg. In case.  But in this finicky market, even two months of a joint or single salary wouldn’t be enough to cover the bums of those recently kicked out on the street.  Getting laid off right now feels more like a death sentence, because nobody is hiring!!

It certainly felt that way for the couple me and my hubby Marc had dinner with this past weekend.  Sarah* and John* had been home searching and came very close to buying one three weeks ago.  But they were outbid.  They were disappointed at the time, but when John received a pink slip (a layoff notice for teachers) three weeks later, he counted it a blessing they didn’t buy.

Interest rates may be at their lowest; housing prices may have plummeted.  But without job security, buying a home right now feels less like a safe investment and more like doubling down on a good hand.  Odds might be in your favor, but somehow the house always wins.

*Sarah and John are pseudonyms for the couple whose identity I wanted to keep private.

Dow Jones rallied some 200+ points this morning, which amplified to 315 points within 2 hours of trading.  Now the Dow is up nearly 500 points, more than 6% – all a result of the new bank plan.  It staged biggest rally in nearly five months.

The Dow catapulted to 7,775.86 points after gaining 497.48 points or 6.8%

The Standard & Poor’s 500 index increased 54.38 points or 7.1% to 822.92

The Nasdaq composite index also soared 98.50 points or 6.8% to 1,555.77.

Madness.  All of this underscores the preeminent role of the housing market in today’s economy.

Are you a current homeowner paying more than 31% of your pre-tax income?  You might be able to lower your monthly payments under Obama’s foreclosure prevention plan.  And to assist homeowners determine whether or not they might qualify for loan modification or refinancing, they’ve rolled out a new Website: makinghomeaffordable.gov.

Some features of the site:

• Homeowners can determine whether their monthly payments are more than 31% of their pre-tax income and reduce payments if so.  It gives an estimate of how low their new payment might go under the plan. For example, if you earn $4,000 a month and pay $1,400 a month, you could see your payments drop to $1,240 under the modification plan
• Borrowers can answer a set of questions to learn whether they could benefit from either the Obama modification or refinancing programs
• Provides links to finding government-approved housing counselors, while warning people of foreclosure rescue scams
• Helps borrowers determine if they have loans with Fannie Mae or Freddie Mac, a key eligibility criteria
• Checklist of financial documents, including pay stubs, tax returns and credit card statements, that they will need to present when applying for the program.

The administration estimates that its foreclosure prevention fix will help up to nine million homeowners.  Maybe it can help you.

Check out site here.

Existing home sales saw a surprising 5-percent spike in February for a total of 4.72 million units vs. 4.49 million in January.

Economists expected home sales to decline to 4.45 million in February.

CNN reports that activity was particularly strong in the West.

(Confession:  When the realtor on Saturday told me they were “extremely busy,” I thought he might be full of it.)

That said, the increase of 5% is compared to January, not year-over-year sales which is the better gauge because it takes seasonality into account.  Comparing January to February is like comparing apples to oranges.  Better to compare January to year ago January.

Also, important to note: homes were still bought for cheap.  The median home price of $165,400 in February was down 15.5% from last year’s median price of $195,800.

If February’s home-buying pace continued, it would only take an estimated 9.7 months to sell down inventory of properties.

Some big shot (if you must know, Ian Shepherdson, chief U.S. economist at High Frequency Economics) says there’s a “good chance” the collapse in home sales that has been going on since September is “now over.”

Pundits.  They also thought February sales would see a decline.

But could Obama’s new toxic-assets-clean-up plan, and the home shopping spree seen in February be telltale signs that the bust will soon be over?

I have my doubts…

The Dow Jones rallied 315 points in 2 hours today after hearing Timothy Geithner formally unveil his loooong-awaited plan on how to give those toxic-securities-and-bad-home-loans-ingested banks and financial institutions a much needed colon cleansing.

And exactly how do they plan on flushing out the junk?

Use $75 to $100 billion of the federal rescue money to lure investors to buy bad sub-prime mortgages by sharing the risk – and potential gains – of acquiring the bad assets.  In Vegas terms, put $50 on black and happen to lose, Uncle Sam will front a portion of your loss so you won’t lose the entire $50.  If you win though, you only win part of that too.  Not a bad deal.

How could this potentially affect homebuyers?

Private-sector firms would weigh the potential gain of holding on to the properties for several years, which could leave less selection for current home buyers and “stabilize” market prices.

Or hear it in Geithners words:

“A principle virtue of this mechanism is to use the financial interests of investors to help set the price. Because they have money at risk, they’re going to make better judgments about how to set the price for these assets than the government could hope to make,” Geithner said. “We have seen and I expect to see a lot of interest from the private sector.”

Read the full story here.

When it comes to real estate commission fees, home shoppers have long been fraught with a dilemma.  Few home shoppers have been thrilled about paying the hefty 3-percent commission on the biggest purchase of their lives.  And yet, most experts will discourage home shoppers from dispensing with a real estate agent because an amateur’s mistakes can prove far more costly than a 3-percent commission.  With little wiggle room, home shoppers have forked over 3 percent of their nest’s value for as long as I can recall.

But what if you could now meet a realtor in the middle?

Hire a realtor from Redfin, and they will refund you half of the 3 percent commission.  It’s like a year around sale!

I learned about Redfin today while touring homes in Cerritos, CA with my friend Carl, his mom and his real estate agent from Redfin.  Carl decided to check out Redfin when he heard from a colleague in real estate that many agents charging traditional rates were losing business to these guys.

The Redfin agent also told Carl that they draw that fifty-fifty line all the way down, splitting all financial incentives they receive from banks or agents with their clients.

The catch?  They run their show a little differently.

Unlike most agents that will show you any home you want to see, Redfin realtors will only show you homes within your affordability range.  Since you must first be preapproved for the homes they will show you, upfront paperwork is required.  They will charge less, but they won’t waste their time.  Basically.

Isn’t it the perfect starter home?  It’s a 3-bedroom, 2-bath contemporary condominium with walking distance to three stellar California schools, shopping center and restaurants.  Plus it’s only 2 1/2 years old, has a walk-in closet and fireplace.  Best of all is the price tag:  $380,000.  It’s a short sale.

Too bad it’s located in Fullerton.

Sigh.

Fullerton is only a 30-minute drive from my target neighborhood (either Torrance or Redondo Beach) sans traffic, but with the narcoleptic hubby working 30-hour shifts every 4 days, I’m too afraid to live far from the hospital.

Location, location, location.

My sister-in-law, a carefree Manhattanite, flew in a couple days ago with some heavy baggage.  It seems that living out the repercussions of her former credit-card-slashing happy days in pricey Manhattan, has made her realize how cold the world can be without good credit.  In her stark words, “you’re nothing without good credit.”

Although she realizes now that spending a few hundred dollars on the season’s latest frock was “stupid,” her badly wounded credit wasn’t entirely her own fault.  She was also the victim of identity theft.  She asked me how to improve her credit, which is something I had been wondering myself.  So, I did some digging and came across an interesting article in Good Housekeeping that could improve credit scores and possibly prevent identity theft – the horror of horrors.

The tips are a worthwhile read, even for those who may have good credit, since good doesn’t cut it anymore.  A couple years ago, a 620 on the 300-to-850 scale could have grabbed you a good rate.  But to obtain the best morgage rate in today’s market, you need a score of at least 760!