Help Coming On Short Sale Woes?

The US Department of the Treasury announced yesterday new details about its "Foreclosure Alternatives Program", which is part of the "Making Homes Affortable" program. Short Sales make up about one-third of the homes currently listed for sale in Orange County, and have been a source of frustration for lenders, sellers and buyers because of the lack of any standardized process for handling a short sale transaction. A typical Short Sale can take up to 3 months or more to complete once an offer has been made on the home, and this can often be a problem when the foreclosure is happening at the same time.

The purpose of the Foreclosure Alternatives Program is to streamline the Short Sale process by providing a standardized process flow, establishing minimum performance time frames and standard documentation, and offering incentives to both sellers and lenders to persue a Short Sale as an alternative to foreclosure. Other issues tackled by the program will include standards for establishing the value of the home to be sold, minimum time allowed to market the home for sale before a foreclosure can be completed, standards for fees and commissions, and more. There's more in the fact sheet here.

It's too early to tell whether this program will help provide needed standardization to a long and complex process. There is always a danger with government intervention that the program will have unintended consequences and do more harm than good, but most of the stated goals of the program would be a much needed improvement over the status quo.

(Cross posted at www.leslieeskildsen.com)

Has the OC Housing Market Bottomed Out?

The Orange County Register reported that the median price of a home in OC climbed for the second consecutive month. The March median was $385,000, up from $375,000 in February and $370,000 in January. Another bullish sign is the continued climb in the number of homes sold. March was the ninth consecutive month of year-over-year sales increases, with 2,433 homes sold - a 46% jump from March of 2008.

There are still plenty of concerns in the market, with homes priced over $500,000 selling slowly, and short sales accounting for about 30% of the homes on the market. One interesting wrinkle is that bank owned homes have become a scarce commodity. Just a few months ago bank owned properties also made up about a third of the transactions, but today only represent 5% of the homes for sale. REOs, especially in the lower price ranges, are in huge demand because of the relative simplicity of the transaction compared to a short sale, and the market is hot. Most bank owned homes are selling within a few days or weeks, and often at full price or higher. The Wall Street Journal has even dared to use the term "bidding war"!

There has been talk for months about a so-called moratorium on foreclosures related to the Federal financial bailout, TARP, and consolidation of banks, with speculation that it would soon end. This, of course, could lead to a new round of foreclosures and another influx of REO inventory on the market. That might lead to more downward price pressure, but it also might signal the final phase of a long and painful process.