Mortgage delinquency rates will likely decline in 2012 as lenders foreclose and remove the loan from the delinquency pool. Unfortunately for lenders, the delinquency rate is expected to rise for the first quarter of 2012 as declining prices and a weak economy prompts more borrowers to strategically default.

Home Address ... 9 PENNY Pnes Irvine, CA 92604
Asking Price .......  $569,000

2012 mortgage delinquencies seen dropping sharply

By Eileen Aj Connelly

NEW YORK – If the U.S. economy does not suffer more setbacks, the rate of mortgage holders behind on their payments should decline significantly by the end of next year, according to credit reporting agency TransUnion. Mortgage delinquency rates — the ratio of borrowers 60 or more days behind on their payments — will likely tick up to about 6% through the first three months of 2012, TransUnion said in its annual delinquency forecast issued Wednesday.

Did you notice I used a different headline than the reporter? Which is the bigger news story, the rise in delinquencies caused by the weak economy, or the projected decline later in the year? In my opinion, the fact that delinquencies are increasing is the bigger story. This reverses the trend of the last couple of years, and the forecast for a late year decline may or may not come to pass. What if the economy remains weak? Or what if the ongoing decline in prices induces more borrowers to strategically default? End late year drop which is the subject of the reporter's headline is by no means certain.

But by the end of next year, it could drop to 5%, TransUnion said. That's well off the peak of 6.89% seen in the fourth quarter of 2009. Chicago-based TransUnion's forecast takes into consideration several factors, including expectations that consumer confidence and the economy will improve next year.

This is a very important assumption, and it could easily be wrong. If consumer confidence does not increase, strategic default will become an even greater problem. Borrowers who are watching prices fall and who don't believe either house prices or the economy will be improving soon are far more likely to walk away, particularly for borrowers who are already underwater and paying more than a comparable rental.

Also, banks are expected to get a good portion of pending foreclosures off their books next year, said Charlie Wise, TransUnion director of research and consulting. ... Economic uncertainty has also contributed. In the third quarter of 2011, mortgage delinquencies saw their first uptick in six quarters, largely fueled by concerns over the economy as lawmakers were debating the U.S. debt ceiling and Europe's debt crisis was unfolding.

This reporter does not know what he is talking about. Does he really think some borrower somewhere decided to quit paying their mortgage because of the European debt crisis? Macro issues do not prompt micro decisions.

Helping to cut the mortgage delinquency rate are a slowly improving job market and a stabilizing housing market.

The declining delinquency rate is actually a result of foreclosures wiping out non-performing mortgages, and the better loans being underwritten as lenders return to sane lending practices.

While the drop will be significant, the rate will remain well above the pre-recession average of 1.5% to 2%. "We have a long way to go to get back," said Steven Chaouki, a TransUnion vice president. ... Chaouki said the conventional wisdom before the Great Recession was that homeowners would put their mortgages first because of concern about their reputation and the emotional attachment involved in owning a home. But what has become clear as housing prices have continued to fall, he said, is that bill payment is far more practical.

"People were protecting their home equity," he said. Credit cards were relatively easy to come by in years past, he said, so when money got tight, it was an easy decision to default on cards and maintain house payments. Now it's common to owe more on a mortgage than a house is actually worth, but credit cards are harder to get. So consumers are being practical and protecting what is more valuable to them. He said he expects the equation will shift again if housing prices rebound and people go back to building home equity.

Don't expect the situation to change any time soon as most loan owners are years away from having any equity. Delinquencies will likely decline in 2012, but not because borrowers will become current on delinquent mortgages. Increasing foreclosures will largely be responsible for any decline in delinquency rates. Expect foreclosure rates to increase in 2012.

This single-story three bedroom two bath home costs less than $2,100 per month to own. Situated across the street from the middle school and large central part in Deerfield, this property will probably sell quickly.

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This property is available for sale via the MLS.    
Please contact Shevy Akason, #01836707     
949.769.1599    
sales@idealhomebrokers.com   

Home Address ...    9 PENNY Pnes Irvine, CA 92604
Asking Price .......     $569,000
    
Beds:  3    
Baths:  2    
Sq. Ft.:  1900    
$299/SF    
Property Type: Residential, Single Family    
Style: One Level, Traditional    
Year Built:  1974    
Community:  El Camino Real    
County:  Orange    
MLS#:  S681611    
Source:  CRMLS    
Status:  Active    
On Redfin:  7 days    
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Straight Sale-THIS IS AN EXPANDED ELKWOOD MODEL-A VERY LARGE COMBINATION FAMILY ROOM/OFFICE HAS BEEN ADDED-THE ADDITION GIVES THIS MODEL A FAMILY ROOM AND FULL DINING ROOM. Great location, on a quiet cul de sac with a private Park/Pools and Tot Lot at the end of the street. New careting in Living Room and Master suite. Real Wood Floors - Dramatic vaulted ceilings in many rooms - Two firplaces, Living Room and Dining Room - Smooth Ceilings - Newer Roof - Built-in Bookcases/Cabinets/Entertainment Center in Fam. Rm. Large Walk-in Closet in Master Suite - Garden Wuindow in Kitchen - Central Air Conditioning - Very private back yard - Ceramic tiled Atrium - This home is very ligjt and open. 5 Pools, Tennis, NEW state-of-the-art Deerfield Elementary School and Venado Middle School are both located in the Village of Deerfield.     
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Proprietary commentary and analysis    
    
Asking Price .......     $569,000
Purchase Price …    $589,000
Purchase Date ....    12/2/2004
    
Net Gain (Loss) ..........    ($54,140)
Percent Change ..........    -9.2%
Annual Appreciation …    -0.5%
    
Cost of Home Ownership    
-------------------------------------------------    
$569,000 .......... Asking Price    
$113,800 .......... 20% Down Conventional    
4.02% ............... Mortgage Interest Rate    
$455,200 .......... 30-Year Mortgage    
$110,327 .......... Income Requirement     
    
$2,178 .......... Monthly Mortgage Payment     
$493 .......... Property Tax (@1.04%)    
$0 .......... Special Taxes and Levies (Mello Roos)    
$119 .......... Homeowners Insurance (@ 0.25%)    
$0 .......... Private Mortgage Insurance    
$60 .......... Homeowners Association Fees    
============================================    
$2,850 .......... Monthly Cash Outlays    
    
-$353 .......... Tax Savings (% of Interest and Property Tax)    
-$654 .......... Equity Hidden in Payment (Amortization)    
$159 .......... Lost Income to Down Payment (net of taxes)    
$91 .......... Maintenance and Replacement Reserves    
============================================    
$2,094 .......... Monthly Cost of Ownership     
    
Cash Acquisition Demands    
------------------------------------------------------------------------------    
$5,690 .......... Furnishing and Move In @1%    
$5,690 .......... Closing Costs @1%    
$4,552 .......... Interest Points    
$113,800 .......... Down Payment    
============================================    
$129,732 .......... Total Cash Costs    
$32,000 ............ Emergency Cash Reserves    
============================================    
$161,732 .......... Total Savings Needed    
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Us Too Gymnastics

My son goes to a gymnastics center for special needs children. I think they do great work. There is a contest where they can get a free spot on Monday Night football if enough people "like" them on Facebook.

If you would be so kind as to click on this link, scroll to the bottom and vote for Us Too Gymnastics, it could help provide funding for a sports program for special needs children. It won't cost you anything, and you can do something very good for a deserving child. Thank you for your support.

In a recent report Chapman University's Anderson Center for Economic Research said, “More problematic is the inventory of unsold homes. Not only are there still too many unsold housing units in the market, there are a large number of homes in the foreclosure process that will keep the supply of resale housing units at an elevated level.”

Home Address ... 42 IDYLLWILD #55 Irvine, CA 92602
Asking Price .......  $399,900

They are projecting the median sales prices will remain flat. In this same report last year, Chapman blew it and projected an increase in the median sales price. The supply problems that caused their forecast to fail in 2011 became the reasoning for a more bearish forecast in 2012. Better late than never.

In my post on January 1, 2011, Predictions for 2011, I made the following predictions:

Basically, my outlook for 2011 is unchanged from 2010. (1) Inventory will go up. (2) Properties selling at or below rental parity will be the norm. (3) Sales volumes will increase. (4) Prices in Irvine will fall 2% to 5% in 2011.

I was right on all four points, and my first point, "Inventory will go up" is precisely what Chapman failed to recognize last year.

Chapman: No home price gain for 2012

December 7th, 2011 -- posted by Jeff Collins

Forecasters at Chapman University predict that Orange County home prices will stop falling in 2012. That’s the good news, considering that home prices here have done nothing but that in 2011. But prices won’t go up much either. In fact, they’ll be virtually flat, with no more than a 0.2% gain.

So does this mean they are calling a bottom? Or is this a chickenshit forecast which could be interpreted either way? I think it's overly optimistic to believe prices won't decline further, particularly since we know lenders are increasing their foreclosure. Next year's spring rally will be greeted with an abundance of REOs. The only real question is whether or not the number of REOs pushes prices a lot lower or a little lower.

“Our forecast calls for the median selling price of a single-family unit … (to) remain flat in Orange County in 2012,” the forecast from the school’s A. Gary Anderson Center for Economic Research stated. “More problematic is the inventory of unsold homes,” the report said further. “Not only are there still too many unsold housing units in the market, there are a large number of homes in the foreclosure process that will keep the supply of resale housing units at an elevated level.” Of course, forecasting is a tough business. Last year, Chapman forecasters said prices would go up. They went down.

Oops. The problem with running complex econometric models and calling it forecasting is that these models all fail to account for the unusual or uncommon. We have never had a huge nationwide housing bubble before. The forecasters have never modeled what happens when banks foreclose on millions of homes. Of course, the weaknesses of econometric modelling does not excuse forecasters for missing the obvious. The model should be a point of departure from which a good forecaster can adjust the findings based on a subjective interpretation of the unique circumstances of the day. Given the obvious problems with foreclosures and delinquencies, forecasting a drop in prices in 2011 wasn't rocket science.

Among the highlights of this year’s housing forecast:

• The index value of an existing single-family home is expected to rise to 219.5, with 100 equal to 1990’s base value. That’s up 0.2% from 219.1 this year.

• This time last year, Chapman predicted that house prices would be up 3.3% in 2011. The university now project’s that the 2011 price will end the year down 5.1% from 2010 levels.

I predicted prices would be down between 2% and 5% in 2011. I was off by 0.1% as prices overshot my downside range.

• By comparison, California house prices are projected to drop 2.5% next year, following a 5.9% decrease estimated for 2011.
• The decrease in home sales has occurred despite historic high levels of housing affordability. A homebuyer earning the median family income in O.C. would need to spend 28.2% of his or her paycheck on housing at today’s prices. That compares to the need to spend 46.6% of the monthly earnings on housing back in 2006.

A 28.2% DTI is affordable, particularly by OC standards. If anything were to make the market strengthen next year, it is the tremendous affordability brought about by 4% interest rates.

The continued downturn in housing is putting a damper on the overall economic recovery, the forecast said. “The sharp drop in home prices is the main culprit (for slow job growth), leading to a very weak recovery,” it said. “With high inventory of unsold homes and high commercial real estate vacancy rates, construction spending nosedived.” The forecast also predicted that Orange County employers will hire more than 21,000 new workers next year, an improvement over 2011, but it won’t immediately turn the economy around, Register staff writer Mary Ann Milbourn reported. To read the full report on Chapman’s overall economic outlook, CLICK HERE!

Next year will be more of the same. House prices will continue to drop, particularly at the high end, and the economy will be weak, albeit improved over 2011.

This pending sale at $233/SF in Irvine represents a 35% drop from the peak. If 2006 construction starts selling for the low $200/SF, what hope does the rest of Irvine have? How is the Irvine Company supposed to get $400/SF for its new construction? What does that do to the value of older houses?

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This property is available for sale via the MLS.    
Please contact Shevy Akason, #01836707     
949.769.1599    
sales@idealhomebrokers.com    

     
Home Address ...    42 IDYLLWILD #55 Irvine, CA 92602
Asking Price .......     $399,900
    
Beds:  2    
Baths:  2    
Sq. Ft.:  1500    
$267/SF    
Property Type: Residential, Condominium    
Style: One Level, Contemporary    
Year Built:  2003    
Community:  Northpark    
County:  Orange    
MLS#:  S680830    
Source:  CRMLS    
Status:  Active    
On Redfin:  15 days    
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Nice lower level single story home facing greenbelt. Corner lot location in gated Northpark Square. Open layout with laminate flooring, 2 car attached garage, greenbelt views and good size patio off master. Newer construction and appeal. Great opportunity to own in desirable community near Beckman High School.     
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Proprietary commentary and analysis    
    
Asking Price .......     $399,900
Purchase Price …    $562,000
Purchase Date ....    5/26/2006
    
Net Gain (Loss) ..........    ($186,094)
Percent Change ..........    -33.1%
Annual Appreciation …    -5.9%
    
Cost of Home Ownership    
-------------------------------------------------    
$399,900 .......... Asking Price    
$13,997 .......... 3.5% Down FHA Financing    
4.02% ............... Mortgage Interest Rate    
$385,904 .......... 30-Year Mortgage    
$120,832 .......... Income Requirement     
    
$1,847 .......... Monthly Mortgage Payment     
$347 .......... Property Tax (@1.04%)    
$100 .......... Special Taxes and Levies (Mello Roos)    
$83 .......... Homeowners Insurance (@ 0.25%)    
$444 .......... Private Mortgage Insurance    
$301 .......... Homeowners Association Fees    
============================================    
$3,121 .......... Monthly Cash Outlays    
    
-$287 .......... Tax Savings (% of Interest and Property Tax)    
-$554 .......... Equity Hidden in Payment (Amortization)    
$20 .......... Lost Income to Down Payment (net of taxes)    
$70 .......... Maintenance and Replacement Reserves    
============================================    
$2,370 .......... Monthly Cost of Ownership     
    
Cash Acquisition Demands    
------------------------------------------------------------------------------    
$3,999 .......... Furnishing and Move In @1%    
$3,999 .......... Closing Costs @1%    
$3,859 .......... Interest Points    
$13,997 .......... Down Payment    
============================================    
$25,854 .......... Total Cash Costs    
$36,300 ............ Emergency Cash Reserves    
============================================    
$62,154 .......... Total Savings Needed    
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