Is the ‘Move Up’ Buyer Starting to Feel Stuck?

More home owners who want to trade in their current home to buy a larger one are holding off, feeling trapped by a sluggish housing market and the loss of equity in their current home, The Los Angeles Times reports.

“Potential move-up buyers … are largely sitting on the sidelines these days, leaving a key part of the housing market stuck in neutral,” The Los Angeles Times article notes. “The promise of rising prices and upward mobility, once a powerful force in the American housing narrative, has been all but shattered by the downturn.”

Move-up buyers are often classified as home shoppers looking in the $300,000 to $800,000 price range, according to the research firm DataQuick. Home sales dropped the most in that category in June, dropping 25.5 percent from June 2010, according to DataQuick. On the other hand, sales of homes priced below $200,000 dropped 11.4 percent from June 2010 and home sales priced at more than $800,000 fell 17.6 percent.

The “move-up” category creates a chain of buyers and sellers that is important for a healthy real estate market, since trading up “fuels price gains and helps home owners to build equity,” The Los Angeles Times‘ article notes.

“The way to think about [it] is a chain of trades that normally occurs, and if that chain is broken at any point, or it doesn’t begin because you don’t have enough entry-level buyers, then the whole dynamic of the marketplace is affected and the level of resales is going to be very small,” says Ed Leamer, director of the UCLA Anderson Forecast.

realtormag.realtor.org “Read Full Story”

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Real estate agents to lenders: Short-sale process broken

California real estate ageshort-sale transactionsnts say closing short-sale transactions are “difficult” or “extremely difficult,” and said procedures by mortgage lenders and servicers are only serving to make matters worse over the past six months, according to a new survey.

 

The lender satisfaction survey was conducted by the California Association of Realtors.

More than three-fourths (77%) of agents said short-sale transactions were difficult or extremely difficult, up from 70% in December, according to the CAR survey. The survey gauges agents’ experiences working with lenders in their most recent transaction. The majority of those surveyed dealt with short-sale transactions — sales in which the lender agrees to accept less than the balance owed on the mortgage. Short sales are one method for homeowners in default on their mortgages to avoid foreclosure.

“Despite promises by lenders to improve their short-sale processes, clearly, they are not doing enough,” said CAR President Beth Peerce. “Instead of helping struggling homeowners who need to sell and willing homebuyers who want to buy, lenders have created manmade roadblocks that have caused real estate gridlock and hindered a desperately needed housing recovery.”

Real estate agents and brokers cited communication issues as the most frequent obstacle in working with lenders and servicers during the short-sale process, including lenders’ slow response time to a short-sale package (cited by 66% of those surveyed), poor communication with lender representatives (cited by 55%) and repeated requests for documentation (51%).

More than 15% of agents surveyed said the lender foreclosed on the home before the short sale could be completed.

The time it takes to complete a short sale is also a big beef among real estate agents with 67% saying it took more than 60 days for lenders or servicers to return a written response on the approval or disapproval of the short sale.  Additionally, 43% said it took the lender more than five days to return any form of communication.

A full 75% said they were “not satisfied” or “not at all satisfied,” with the experience of working with the lender on a short sale, up from 67% in December.

“With short sales accounting for a fifth of all transactions in California, it’s crucial that lenders improve their short-sale process so that a meaningful recovery in the housing market and overall economy can occur,” Peerce said.

CAR also asked its members to rate which lender was the easiest to work with. Of the top four lenders, 40% said Wells Fargo (WFC: 25.21 -2.06%) was the easiest, while 23% cited Bank of America (BAC: 8.17 -7.47%); 17% said JPMorgan Chase (JPM: 37.60 -0.84%); and 11% said Citigroup (C: 33.44 -3.94%).

The survey was conducted in June.  Most of the Realtors surveyed dealt with Bank of America, Wells Fargo and JP Morgan Chase in their most recent transaction.

Kerry Curry, housingwire.com “Read Full Story”

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3rd Home lets owners exchange vacation properties

Many second-home owners make very little use of their properties. The exchange service gives members variety and flexibility.

If there is one drawback above all others about owning a vacation home, it’s that you’re stuck going to the same place year after year.

Well, “stuck” may be too strong a word. But you are limited. Unless you have the wherewithal to travel at will anywhere you like, you are pretty much restricted to that one spot.

Or at least you were until 18 months ago, when a fledgling exchange service for second-home owners called 3rd Home opened for business in Nashville.

A Web-based company, 3rdHome.com is in its infancy. At last count it had just 300 members who had listed 400 properties. But what properties they are.

They range in value from $500,000 to more than $25 million, including a villa in Villefrance-Sur-Mer on the French Riviera; a mountainside home — five bedrooms, five bathrooms and five fireplaces — in Big Sky, Mont.; a 12-bedroom oceanfront manse in the Dominican Republic; and a 43,000-square-foot monster in Costa Rica.

Although most members’ second homes are in the U.S., the listings feature homes all over the world. “We have a good base of members in close to 60 countries,” said Terry Weaver, a 3rd Home partner who is the company’s chief sales officer.

One of Weaver’s partners in the venture is Wade Shealy Jr., a longtime resort real estate specialist who had a go at this idea 15 years ago when he started Vacation Link, an exchange service that allowed people to use their second homes as collateral to travel the world.

At its zenith, Vacation Link listed more than 1,000 properties. But it was a paper-based business, and the cost of running it became prohibitive, even with annual membership fees ranging from $195 to $495, depending on the value of the property. So Shealy shut down the company about a decade ago.

Still, the idea makes sense. “A second home is one of the most underutilized assets people own,” Shealy said.

Owners of the country’s 7.9 million seasonal or year-round but occasional-use dwellings make very little use of their properties, according to the latest Census Bureau figures.

The data are a little tricky because not all of these properties are vacation homes per se. But in 2009, 1.25 million of the 4.6 million seasonal properties were occupied by their owners for no more than a week. And 3.5 million were rented for a week or less.

Similarly, of the 3.3 million year-round properties, more than half were used by their owners for a week or less, and two-thirds were rented for seven days or less.

With the growth of the Internet, swapping vacation homes has became a lot simpler. So Shealy and his partners are giving their idea another shot.

“It’s all automated now,” Weaver said. “It’s so much easier.”

But not cheaper. It costs $495 a year to belong. And a property has to be worth at least $500,000.

3rd Home has competitors. But for the most part, those are direct, yours-for-mine exchange services. An estimated 50,000 families throughout the world trade mostly primary residences every year. But finding exact matches — not just the right place but also the right time — is a labor-intensive, time-consuming task, even with the help of an exchange service.

But 3rd Home is indirect, meaning a member isn’t limited to using the second home of only those people who find the member’s place appealing. And it eliminates all the heavy lifting.

The system works very much like time sharing. Members “deposit” whatever weeks they’d like in their place. And depending on what the house is worth, they receive a key they can use to “buy” weeks elsewhere. If a house is worth $1 million or less, the owner gets one key. If it’s worth $1 million to $2 million, the owner gets two keys. If it’s worth $2 million to $3 million, the owner gets three keys, and so on up to five keys.

Once keys are received, they can be used instantly in any combination. A one-key owner, for example, can use the key to nail a week at a similarly valued one-key property. Or the owner can grab a four-key property by giving up five weeks at his or her single-key place. For each exchange, though, a member has to pay an additional $495.

Lew Sichelman, latimes.com “Read Full Story”

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Homeowners who want to trade up are stuck waiting

Before the bust, rising prices fueled the housing market, enabling buyers to start small and climb the ladder. Now that promise of upward mobility has been all but shattered, gumming up the market.

Back in the frothy days of 2007, Luciano Mor needed only a weekend and a Craigslist ad to find a buyer for his two-bedroom starter home.

The split-level house, on a quiet Silver Lake street, sold for $749,000, commanding nearly twice what he paid in 2002 and about $50,000 more than a real estate agent had suggested as a listing price. Mor, who works for Vans’ apparel division, had planned on taking the gains and snapping up a place closer to his job in Cypress with enough room to accommodate an expanding family.

It was the kind of life progression that traditionally fuels a healthy housing market. Then prices started to drop. Nearly four years later, Mor is still looking for the right deal.

“I just feel like the longer I hold off, the better I will be,” Mor said, sitting in the living room of the Long Beach home he and his wife rent. “It’s almost like getting a new car — you just know it’s best to hold on to your old car as long as possible.”

Potential move-up buyers like the Mors are largely sitting on the sidelines these days, leaving a key part of the housing market stuck in neutral. The promise of rising prices and upward mobility, once a powerful force in the American housing narrative, has been all but shattered by the downturn.

“The move-up market is a conveyor belt, and everyone moves up a rung, but that has kind of gotten gummed up during the housing recession,” said Stan Humphries, chief economist of the real estate website Zillow.

Although there is no way to precisely to track move-up buyers, such shoppers often are looking in the $300,000-to-$800,000 price range, according to San Diego real estate research firm DataQuick.

Home sales fell the most in that category in June, dropping 25.5% from June 2010, mainly because buyer tax credits last year sparked so many first-time purchases, DataQuick said. All those first-time purchases fueled move-up transactions.

By comparison, sales of homes priced below $200,000 fell 11.4% from June 2010, and sales of homes priced at more than $800,000 dropped 17.6%.

Before the bust, moving up was so common that chains of buyers and sellers would develop, with each deal dependent on the previous one in the chain. Move-up buyers are a key part of a more robust market, as all that trading up fuels price gains and helps homeowners to build equity.

“It is critical,” said Ed Leamer, director of the UCLA Anderson Forecast. “The way to think about is a chain of trades that normally occurs, and if that chain is broken at any point, or it doesn’t begin because you don’t have enough entry-level buyers, then the whole dynamic of the marketplace is affected and the level of resales is going to be very small.”

Dean Baker, co-director of the Center for Economic and Policy Research, said the move-up market got out of hand during the boom, with too many people taking on more debt than they could afford. Even in a more normal market, moving up is not necessarily the best option for homeowners who could put their money to use in other places.

“For the longest time, people took it for granted that prices would go up, and, particularly over the last decade, they assumed prices would go up fairly rapidly,” he said. “The idea that you move up, and that it is automatically a good investment — that is crazy, and if people think more clearly about what they want to do, that is going to lead to making better decisions.”

People appear to be thinking carefully about their next housing moves, said Beryl Henry, a Lakewood real estate agent who remembers that chains as long as seven weren’t unusual before the bust. These days, her sellers are more likely to be scaling down rather than trading up.

“I personally am not seeing the move-up buyer,” Henry said. “I don’t remember the last time I have even seen a chain of three.”

Some homeowners are afraid to look for something bigger or better because of high unemployment, a shaky economic recovery and the fear that prices have yet to stabilize. Many can’t get a mortgage that would cover the cost of a move-up home. And others are “underwater” on their mortgages, having watched housing prices fall so far that their homes wouldn’t sell for enough money to pay off their debt.

The declining real estate market and poor economy in Northern California’s Shasta County have kept Michael Cox, 40, and his wife, Carrie, 35, from moving out of their first home, a three-bedroom, two-bath house they bought in 2003. Shasta County was hit hard by the recession and continues to suffer in the recovery, with the unemployment rate standing at 15% in June.

“We had more kids,” Cox said. “We just wanted to upgrade and move up to that next level like everybody else does.”

The couple put their home on the market in 2008 but got no takers. They aren’t underwater and can afford their mortgage payments. For now, they are simply stuck.

Alejandro Lazo, atimes.com “Read Full Story”

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