As I mentioned in the previous post about the new site design, I was contemplating adding Zillow's price estimate (Zestimate) to the foreclosure listings on this site.

Based on looking at some Zestimates for some properties that were recently sold at the Bergen County Sheriff's foreclosure auction, I don't think it will be very helpful in determining your maximum bid but it might be useful to know.

More importantly and also thanks to Zillow, I've been able to provide a list of comparable sales (comps) for the foreclosure listings. This might be a little more useful.

When you click on a listing to get the details, if the listing has a Zestimate, there will also be a "Comps" tab in the property detail area. When you click on the Comps tab, the comparables will load. To get more information, you can click on the address, which will bring you to the full page on Zillow.com.

This is experimental right now. So if you like it, hate it or have any suggestions feel free to leave a comment.

Some Comps aren't coming up right now but I believe that is because I had to make a change that hasn't propogated throughout all of Zillow's servers yet.

Bloomberg just put out a story with some opinions from Steve Preston, the Secretary of Housing and Urban Development (HUD).

''I think we're right in the middle of it, and I think we have a ways to go before we start seeing a turnaround,'' Preston said today in an interview at the agency's Washington headquarters. ``We'll be well into 2009 before we see some real energy in this market.''

....

U.S. banks repossessed almost three times as many U.S. homes in July as a year earlier and the number of properties at risk of foreclosure jumped 55 percent, California-based RealtyTrac Inc. said in an Aug. 14 report.

He also goes on to discuss how Freddie Mac and Fannie Mae has a much larger share of the affordable housing market than they did a year ago. This is no doubt due to the $20 billion in bad subprime debt they took off the shoulders of troubled lenders in 2007. The affordable housing market will be key to recovery according to Preston.

Unfortunately, that's also where a big portion of the mortgage problems originated during the bubble as lenders targetted low and medium income families with predatory mortgages. It's going to be interesting to see what happens.

A lot of people are wondering what they're homes are worth. According to this article on Bloomberg one third of new homeowners owe more than their homes are worth.

Second-quarter home prices fell 9.9 percent from a year earlier, giving 29 percent of owners negative equity, said Zillow, the Seattle-based service that offers values for more than 80 million homes. For those who bought at the 2006 peak of the housing market, 45 percent are now underwater, Zillow said.

Back in June I posted some data regarding the foreclosures in Bergen County, NJ which showed 28% of properties in foreclosure in Bergen County had judgements greater than their purchase price. This was a result of lenders giving 100% financing, allowing homeowners to refinance or take out a home equity line of credit based on inflated house prices as well as the decline in home prices now that the housing bubble is bursting and prices are correcting.

Yet 40% of homeowners believe their home values have risen according to a recent survey. This beleif doesn't seem to be based in reality. Even though NAR reported that pending home sales are up, it seems the big boost to pending sales was due to foreclosure sales.

A lot of people think that they made a smart decision during the bubble by only buying a house they could afford based on traditional debt to income guidelines.The reality might be quite different.

A good rule of thumb is to buy a house priced at 2.5 times your yearly household income.  This will result in monthly mortgage payments that will allow you to put money into other areas including savings. The median house price to income ratio had skyrocketted during the bubble as lenders relaxed their standards and most buyers went along for the ride. Nationally, the house price to income ratio hit a high of 4.6 in 2006. In Bergen County, NJ the house price to income ratio hit its peak in 2005 at 5.63. This means that home buyers were paying around 2 or more times what sound financial planning indicates they should be spending on housing.

For most that were able to purchase a home using more traditional guidelines, they would have bought a home on the lower end of the price range. As we can see from the chart on the left showing the tiered data for the NY-Metro Case-Shiller Index, there is much greater volatility in lower priced homes.

The chart shows the overall, low, middle and high groupings' Case-Shiller Indices in blue and the red lines indicate the year over year change in the Case-Shiller Index for the low and middle price groups compared to the high price group. Compared to high priced homes, low priced homes did the worst. When house prices were rising, lower priced homes were increasing as much as 9.03% faster than high priced homes. When house prices started to fall, lower priced homes fell as much as 5.01% more than high priced homes.

Medium priced homes weren't much better. At times, they were increasing up to 5.14% and falling up to 4.76% more. While all home prices will undergo a correction, the lower and middle priced homes will have to correct more.

The point where low and middle priced homes break away from higher priced homes is around the same time that the origination of subprime first mortgages started to rise dramatically and conforming first mortgages dropped significantly.

So what does this mean for people that tried to be sensible while others were going nuts? They bought a home they could afford and if they bought it to live in for many years chances are it isn't a big deal to them. Even if they sell it years down the line, they will have a harder time seeing any appreciation. If they bought the home as a place to live and not an investment, it may not matter to them. But if they hit hard times, they most likely will not have much equity in their homes to draw upon.

Compare that with people that bought more house than they could afford. Since their mortgage payments are a hardship, they are more likely to be able to argue and get a loan modification or to qualify for programs to help them. For those that bought a house they could afford, there are no programs to help them make up for the lost equity.

It seems that if you're going to be part of a stampede, you're better off staying with the herd, no matter where it's headed.

SpeculativeBubble produced the following video that represents the inflation adjust US home prices as a rollercoaster ride. Pretty neat.

So for a while now people have been talking about how banks are not willing to let properties go at foreclosures without counter bidding to get the house to "market value" or to get their judgment back.

Well, Saxon Mortgage Services, Inc. didn't play that game. They were happy to get what they could for this foreclosure on Freeland St. in Paramus, NJ that went on the auction block yesterday.

Saxon was awarded a judgment of $525,361.66 for the home at 623 Freeland St, which was purchased in 2006 for $535,000. They were willing to let it go at auction for $413,000. That's over 20% below the judgement. Will other lenders start doing the same rather than going through the trouble of dealing with the hassle of an REO themselves?

Maybe, maybe not. Do a search on Saxon Mortgage and you'll find a page with 21 customers that claim to have issues with them. And even if other lenders continue to do the same, read this post that may give you a better idea where house prices are going.

I think we're going to see more homes like these that sell well below their judgment, especially if they were bought in 2006, the height of the housing bubble. Lenders are better off letting go of properties sooner rather than later. If they gain possession of the property, there are costs involved in selling the property through their REO division.

Foreclosures don't happen overnight. Saxon was awarded the judgement almost 6 months ago. Foreclosure usually doesn't happen until 3 months after the first missed payment. So for 3/4 of a year, this home was losing value while the lender was not getting paid.

The original sale date was for the end of March but it was not auctioned off until yesterday (mid June). There could be any number of reasons for this including but not limited to the borrower trying to negotiate better loan terms and/or a repayment terms with the lender.

But did the buyer get a good deal? Well, in 2003 the house sold for $210,000. The map photo may be out of date. It's possible that the house was remodeled/rebuilt to match the size of some of the other homes in the area. I haven't done a drive by to see. That's the only thing I can think of that would justify a doubling in price from 2003 to 2006. 20% off of 2006 prices isn't a bad deal. It's maybe were house prices will be this time next year. As an investment property. Eh? But if the buyer was a homeowner looking to get a good deal on their residence, not bad.

If the photos are correct and it is still the same home and there were no major renovations or rebuilding. Is $430k for a 936sq ft ranch built in 1951 that sold in 2003 for $210k a good deal? I really hope the photos are out of date. Anyone more familiar with the area know?