Home Owners Torn on mortgage obligations: Right or Wrong?

Home Owners Torn on mortgage obligations: Right or Wrong?

Forty-five percent of Nevada home owners recently surveyed say “there is nothing wrong” with walking away on your mortgage obligations, according to a new report, “Face of Foreclosure,” released by the Nevada Association of REALTORS®. On the other hand, an equal number of home owners say home owners have a “legal and ethical obligation to pay their mortgage if they can.”

The number of home owners who find “strategic default” socially acceptable is growing in the state, which has consistently had one of the highest foreclosure rates in the country the last few years. In 2011, 23 percent of Nevada home owners who lost their home to foreclosure said they walked away from their mortgage. In 2012, 27 percent of foreclosed home owners say they strategically defaulted on their mortgage.

Strategic default is when a home owner is financially able to make their mortgage payments but decides to stop, usually because the property is underwater.

“This year’s report shows it’s more socially acceptable to strategically default on your mortgage obligations,” says Blane Johnson, NVAR’s president. “I hope banks and government leaders will look at this to help them get ahead of these issues.”

For those who decided to walk away from their mortgage, 40 percent said they had been advised by their lender or financial adviser to stop paying their mortgage so that they could qualify for more assistance with their home loan.

NVAR is calling on lenders to do more to help distressed home owners, such as through refinance and loan modification programs or streamlining the short sale process so that fewer home owners will opt to walk away from their mortgage obligations.

The survey also found that despite the plague of foreclosures in the state the last few years, most Nevadans still overall favor home ownership. Nearly 80 percent of home owners surveyed who have faced foreclosure say they want to buy a home again one day, according to the report.

Supplementing the report, NVAR developed a video featuring interviews with local home owners, real estate and mortgage professionals about foreclosures in the state. You can view the report and video at www.FaceOfForeclosure.com.

Source: “Face of Foreclosure Report,” Nevada Association of REALTORS® (2012)

Smart Homes Not in Sight for 2020.

Smart Homes Not in Sight for 2020

Technology may seem to be rushing forward, but it isn’t ready to make all our homes, smart homes.

That’s the view of the Pew Internet & American Life Project, which collaborated with Elon University in North Carolina recently to assess the state of Smart Homes in America.

Lee Rainie, who headed the project for Pew, told Chicago Tribune columnist Mary Umberger that she asked more than 1,000 technology observers and researchers whether they foresaw Smart Homes commonly available by 2020 or whether there were too many obstacles, leaving the home of 2020 about the same as current homes.

About half of the respondents felt that even if the technology was there for Smart Homes, barriers such as companies’ lack of interest in working together would prevent smart homes from being readily available. Costs were another frequently cited barrier, Rainie said.

But optimists said that the value of the homes would appeal to buyers, with “a financial benefit as well as a personal comfort benefit,” Rainie said, and they suggested that tax and zoning codes could be adjusted to ease burdens. “A driver of this,” said Rainie, “would be incentives in public policy as well as what’s happening in the marketplace.”

Source: “A slow start for smart homes,” Chicago Tribune (7/19/2012)

4 Home Showing Tips in the Hot Weather.

4 Home Showing Tips in the Hot Weather

Sizzling 100 degree temperatures have been blanketing the country in recent weeks, but some potential buyers may be more reluctant to go house shopping in the heat. How can you still draw the buyers out?

“Even though buyers have air conditioning in their cars, you have to convince them to get into their cars — then out of their cars — to check places out,” Brad Knapp, a National Association of REALTORS® regional vice president, told The Street.

Here are four showing tips for the hot weather, according to Knapp in a recent article at The Street.

1. Keep it cool. It’s not the time to penny-pinch on the air conditioning. Knapp says home owners without central air conditioning will be at a big disadvantage, and he says they might even consider keeping their home off the market until the cooler days of fall. As for home owners who do have central air, he recommends keeping the thermostat around 72 degrees.

2. Watch the smell. The warm weather can cause odors in the home to become even stronger, such as pet smells and musty basements, Knapp says. Have your sellers remove the kitty litter box, relocate the pets for showings, and clean any musty basements with bleach. He also recommends using a dehumidifer to make sure the home stays dry.

3. Tend to the lawn. Curb appeal is important but Knapp acknowledges it can be a challenge in sizzling hot weather and when a city has water restrictions in place. “Try to keep the front yard as green as possible — but you can forget about the backyard if you have to,” he says. “Most buyers are astute enough to know that if all of the backyards up and down the street are brown, there really isn’t a problem if yours is too.”

4. Pay attention to doors and windows. Front doors can be filled with summer pollen so make sure your sellers give it a nice clean at least once a week, Knapp suggests. He also suggests regularly cleaning the windows — both the inside and out — to make sure they sparkle.

Read more tips from Knapp at The Street. 

Source: “8 Tips for Selling a Home in Summer,” The Street (July 20, 2012)

Older Adults at Higher Risk for Foreclosure.

Older Adults at Higher Risk for Foreclosure

More than 1.5 million older adults have lost their homes to foreclosure and millions more are at risk, according to a new AARP report. The risk appears to be greatest among Americans 75 years and older, as well as minority home owners.

About one in 30 adults 75 and older face foreclosure today. That’s significant when compared to 2007, when one in 300 home owners aged 75 and older were at risk of foreclosure.

Furthermore, older minorities — particularly African Americans and Hispanics — have foreclosure rates that are nearly double than those of white home owners at the same age, the report notes.

What’s more, the number of older adults who are underwater on their mortgage is alarmingly high. About 3.5 million — or 16 percent of older home owners — have underwater mortgages, which could put them at risk of foreclosure.

“The Great Recession has been brutal for many older Americans,” says Debra Whitman, AARP’s policy chief.

Just in the past five years, the number of loans held by older Americans who are seriously delinquent on their mortgage soared more than 450 percent.

Many older adults live on fixed incomes and are in retirement, which makes catching up with their mortgage payments once they fall behind particularly difficult.

Rep. Elijah Cummings, D-Md., is pushing the federal government to do more to help older Americans keep their homes, such as by promoting more mortgage principal reductions and loan-modification programs.

“These are people who in many instances have never missed a payment in 20 years,” Cummings told the Associated Press. “You see grown men crying because of the potential foreclosure.”

Source: “Foreclosure Crisis Hits Older Americans Hard,” Associated Press (July 19, 2012)

Commercial real estate continues to Lead Rebound.

Commercial real estate continues to Lead Rebound

Two recent reports highlight the strength of the commercial market.

Morningstar reports that commercial real estate is much stronger than housing as evidenced by real estate funds, which have recorded an average annualized return of 33 percent over the past three years.  Through June, real estate funds have attracted $2.9 billion in new cash while investors have pulled out of nearly every other stock fund group.  The decline in commercial real estate was not nearly as severe as the residential market crash due to the fact that office buildings, industrial facilities, hotels, and apartments were not overbuilt to the same extent as homes.

Meanwhile, Fitch Ratings reports that delinquencies on commercial real estate collateralized debt obligations (CDO) declined in June for the second month in a row.  The rate fell to 12.3 percent last month from 13 percent in May.  Just five new delinquencies were added to the Fitch index in June, while 15 assets were removed.  Eight of those 15 interests were disposed of at full to partial losses, which contributed to the $115 million in realized losses reported by asset managers in June—the highest monthly total so far in 2012.

Sources: “Real Estate Funds Lead the Pack, Can It Last?” USA Today (June 21 2012) and “Fitch: Commercial Real Estate CDO Delinquencies Fall for Second Month in a Row,” Wall Street Journal (June 20 2012)