Real-estate winners and losers of 2011

Winners: Property investors

Here's one thing that almost everyone in the real-estate business seems to agree on: 2011 was the year of the investor. With a flood of bank-owned properties on the market and prices rolled back to 2003 levels, investors who had cash or access to credit were eagerly scooping up properties.

But unlike in years past, investors this year weren't after the flip but the rents, which have inched even higher this year. These buyers zeroed in on properties in cities and in resort areas such as Miami that can be rented out for a profit now and sold when prices have regained some ground.

However, some of the safest bets were made in areas where prices are not only low relative to rents, but where the economy also is on the upswing, including Bakersfield, Calif.; Tampa, Fla.; Phoenix; Boise, Idaho; and Dallas, according to forecasting firm Local Market Monitor.

This investment boom had many agents reporting intense competition and a flurry of sales on the low end, despite a drab overall market. Cash buyers walked away with many of the steals.

• Bing: What's the real-estate outlook for 2012?

• On our blog, 'Listed': Prices of nondistressed homes stabilizing

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Winners: Apartment landlords

One thing's for sure: The housing bust made it great to be a landlord again. Occupancy and rents continued to climb, as more strapped owners were thrust back into the rental market, along with those who were unable or unwilling to buy in a real-estate market still looking for bottom.

U.S. apartment occupancy reached 94.8% in the third quarter, according to MPF Research, up from 91.8% when the rental market hit bottom in 2009. Rents have swelled 7% since then and are expected to grow an additional 5.1% next year, according to MPF.

Especially thankful this holiday season are landlords in San Francisco and San Jose, Calif., where rents spiked 13.4% and 13.1%, respectively, in the past year. 

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• MSN Money: 2012 housing outlook

Winners: First-time homebuyers

Sure, this group of buyers missed the tax credit last year, but many of them purchased their homes at even bigger discounts. Existing-home prices in October were down 4.7% from October 2010, according to the National Association of Realtors, which means the median home — at $162,500 —was $8,000 cheaper than a year ago.

In much of the country, Linda Landry points out on MSN Real Estate's Facebook page, mortgage payments are now cheaper than rent.

Buyers in 2011 gained leverage at the negotiating table, as fewer people competed for the same deals. That forced sellers to do more to fix up their listings and to spring for more concessions, such as contributions to closing costs and home warranties, says Amy Tucker, also responding on MSN Real Estate's Facebook page.

Prices are forecast to decline an additional 3.9% over the next year, according to Local Market Monitor. When the market stabilizes — if it finally stabilizes at the end of 2012 as predicted — people who bought in 2011 should feel pretty good about their purchase, as it was made at pricing not seen for almost a decade.

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Winners: Owners who refinanced

For those who had enough equity, there was no better time to refinance a home. Interest rates on 30-year, fixed-rate loans started the year at an already low 5%, and marched progressively lower all year. On Dec. 15, they tied a record low at 3.94%, according to Freddie Mac.

For many homeowners, the reduction in mortgage payments was a welcome relief at a time when few other costs are declining.

For the mortgage industry, the $840 billion boom in refinancing was the sole bright spot in an otherwise depressing year. With home sales dwindling to a trickle, refinancing accounted for 79% of all mortgage application activity at year's end.

Some of this refinancing activity should spill over into next year, the Mortgage Bankers Association predicts, because interest rates are projected to rise "only gradually" in 2012. But it won't come close to this year's refi boom.

• Video: Is now the time to buy property?

• On our blog, 'Listed': Homeownership at most affordable level in 15 years

• Share your most memorable 2011 moment on MSN's 2011 Year in Review Facebook page

Winners: Short-sale negotiators

The number of short sales spiked this year as more banks and homeowners looked for a way out of their underwater assets. This surge was welcome news for many people in real estate — aside from the homeowners losing their biggest investment.

It was also a boon for short-sale negotiators, individuals who negotiate with banks on behalf of homeowners and agents, says Kim Drusch of Century 21 Award in San Diego.  

With her short sales up 65% this year, Drusch decided to hire a negotiator to handle the phone calls, paperwork submission and day-to-day dealings with the bank. "So far, I'm batting 1,000 with that addition to my business," says Drusch, who pays a percentage of her commission in exchange for this work.

And, negotiators say, short sales are getting easier for all involved, with most deals closing in a little over a month. 

• Bing: What's the real-estate outlook for 2012?

• On our blog, 'Listed': Prices of nondistressed homes stabilizing

• Video: Buy your dream home for $100,000

Losers: Las Vegas sellers

Let's face it: This was a horrible year for most sellers, whatever their location. With prices down to 2003 levels, according to data from Case-Shiller, there wasn't much money — if any — to be made on a sale.

However, the market with the most precipitous plunge in prices was Sin City. Here, rampant overbuilding at the peak of the housing bubble left the city with more homes than there are jobs.  

Builders gambled and homeowners lost.  In the past year alone, Las Vegas prices slid 15%, according to the Federal Housing Finance Agency. Distressed homes made up nearly 60% of the market for much of the year.

The city's lackluster employment outlook doesn't promise any speedy resolution to its housing woes. Homeowners here will need more than luck; they will need time — years of it — to recoup their investment. "It will take many years for population to soak up the excess inventory," says Ingo Winzer, president of Local Market Monitor.

• On our blog, 'Listed': New-home sales headed for record low in 2011

• Video: Has the real-estate market hit rock bottom?

• MSN Money: 2012 housing outlook

Losers: Underwater homeowners

This is the biggest group of unhappy people on our list and the group that had the fewest options in 2011. 

For many — except those who qualify for the new version of the Home Affordable Refinance Program now being adopted by lenders — negative equity meant no refinancing, no sale other than a short sale, and a long road to recovery. Many people simply walked away.

At the end of the third quarter, 22.1% of all residential properties with a mortgage were in negative equity, according to data firm CoreLogic. An additional 2.4 million had less than 5% equity or "near-negative equity" in the quarter, which could be wiped out by the projected slide in home values in 2012.

"This overhang is holding back the recovery of the housing market and the broader economy," said Mark Fleming, CoreLogic's chief economist.

Let's hope that HARP 2.0, which applies to borrowers more deeply underwater, can help more of these owners than its predecessor.

• Video: Is now the time to buy property?

• On our blog, 'Listed': Homeownership at most affordable level in 15 years

• Share your most memorable 2011 moment on MSN's 2011 Year in Review Facebook page

Losers: Foreclosed borrowers

Many troubled borrowers got a reprieve from a foreclosure sale for much of 2011 as the robo-signing scandal slowed down the processing of delinquencies. But the pipeline opened up again later in the year, with foreclosure auctions swelling in November, according to foreclosure data firm RealtyTrac.

The sad part was that many borrowers who were told that they qualified for a modification never stood a chance and missed an opportunity to do a short sale while servicers collected whatever payments they could get on the property.

San Diego short-sale negotiator Shannon Noble says she had an unemployed client who was trying to arrange a short sale of her home. She canceled the sale because one of the major banks told her that she qualified for a modification despite not having a job.

"You are lying to my client," was Noble's first thought when she heard this.  Last month, she says, that home was foreclosed on.

Worse off still were those borrowers whose homes were foreclosed on and who were later sued by the bank for the debt still owed after a foreclosure sale. Banks are allowed to pursue these "deficiency judgments" in 41 states and the District of Columbia. 

• Bing: What's the real-estate outlook for 2012?

• On our blog, 'Listed': Prices of nondistressed homes stabilizing

• Video: Buy your dream home for $100,000

Losers: 'Double losers' and their lenders

One measure of just how broken the loan-modification process was: the huge number of re-defaults, or mortgages that had been modified only to be defaulted on again. These so-called "double losers" made up 45% of the 232,865 foreclosure starts in October, according to a report by Lender Processing Services. They come at an especially bad time, when foreclosure inventory is at an all-time high and foreclosure starts outpace sales 3 to 1.

The modifications most likely to falter were those made by private lenders, not the government's Home Affordable Modification Program. Indeed, private re-defaults outnumbered government failures by a rate of 2 to 1, according to a recent report by the Office of the Comptroller of the Currency. That's troubling, because more than 4 million private modifications have been completed by private lenders since 2007, compared with a mere 791,000 through HAMP.

• On our blog, 'Listed': New-home sales headed for record low in 2011

• Video: Has the real-estate market hit rock bottom?

• MSN Money: 2012 housing outlook

Losers: Mortgage investors, Fannie and Freddie, taxpayers

It may be hard for many of us to summon sympathy for the big investors who were sold a bad bill of goods by the banks. After all, at the outset of the foreclosure crisis, many investors were reluctant to agree to loan modifications or short sales, leading many troubled borrowers to lose their homes and investors to lose even more money as the value of their collateral slid.

But these investors — including many pension funds — have taken a huge loss during the housing crisis. And the perpetually insolvent government-sponsored enterprises, Fannie Mae and Freddie Mac, which bundled and sold these securities, are now paying out guarantees for these securities at taxpayer expense.

One bright spot for these investors — if not for the larger economy and faltering stock market — is that some are beginning to recoup losses from the banks that are accused of using lies, omissions and bogus appraisals to sell them the loans. In recent weeks, Merrill Lynch & Co., which is owned by Bank of America, settled one of the largest of these securities class-action suits — with no admission of wrongdoing — agreeing to pay investors $315 million.

Where is the check for taxpayers?

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