Showing posts with label buyers. Show all posts
Showing posts with label buyers. Show all posts
Wednesday, July 18, 2012
WSJ - tax liens triggering foreclosures
A report released this week by the National Consumer Law Center
(NCLC), says the number of foreclosures tied to delinquent tax
payments is climbing. The NCLC, an advocacy group, estimates that
$15 billion of tax-lien foreclosures happened in 2010, the latest
year for which data are available. Rising tax-lien problems stem
from two overlapping trends associated with the weak economy: To
close budget deficits, some local governments are increasing
proxy taxes to raise additional revenue. But a growing number of
homeowners, many unemployed or living on fixed incomes, are
finding those tax bills—even before rate increases—a strain.
When homeowners fail to pay, municipalities have the legal
authority to foreclose or auction off the tax lien to debt
collectors, who can charge interest rates as high as 50% on the
outstanding balances. If the homeowner doesn't pay—the
deadlines to do so vary across the nation—many states allow the
tax-lien holders to take ownership of the properties and resell
them.
While the sales are causing distress for some homeowners, they
reflect hard fiscal realities at the state and municipal level.
"Cities and towns are facing their own budget problems and of
course need homeowners to make prompt tax payments," says John
Rao, an NCLC attorney who wrote the report. Homeowners are
slipping on tax payments for the same reasons they are falling
behind on mortgage payments, Mr. Rao said: "They're unemployed,
or underemployed, expenses have gone up, and you don't have
enough money." Advocates for the elderly and the unemployed, the
groups most at risk of losing their homes, say it isn't uncommon
for consumers with homes valued at hundreds of thousands of
dollars to lose the properties after failing to pay a few
thousand dollars in taxes. "The system is really
counterintuitive," said Laura Newland, an attorney with AARP, an
advocacy group for people age 50 and older. "Some of the
properties that are most vulnerable are the ones without a
mortgage." (Local taxes on homes with a mortgage are often paid
by the mortgage lender, which collects taxes from homeowners in
their monthly payments.) Frank Alexander, a professor who
specializes in tax-law foreclosures at Emory University's law
school, said municipal governments selling tax liens are being
shortsighted. "It creates short-term cash, but generates
long-term problems," he said, pointing out that tax-lien sales
and tax foreclosures often spark legal challenges that can last
for years and prove costly for homeowners and municipal
governments.
Friday, November 11, 2011
shame on the GOP candidates
shame on the GOP candidates
"Shame on the Republican candidates for president. Shame on them for showing up at debate specifically targeting the US economy with not one credible, rational, even reputable notion of what to do about the nation's housing mess. It baffles the mind that this sector of the economy, responsible for about 18 percent of the nation's gross domestic product, is in freefall, and yet eight potential new leaders of this nation not only don't understand the problem but don't have a clue what to do about it. My favorite, and I write this with as much sarcasm as a computer keyboard will afford, is the argument that the Dodd-Frank financial reform bill is to blame for housing's current despair. Foreclosures, falling home prices, negative equity, nil consumer confidence, record low home building...yep, gotta be Dodd-Frank. 'If the Republican House next week would repeal Dodd-Frank and allow us to put pressure on the Senate to repeal Dodd-Frank, you would see the housing market start to improve overnight,' Speaker Newt Gingrich told the crowd in Michigan last night. His reasoning is that, 'It kills small banks, it kills small business.'
Increased regulation has certainly made the life of a banker today tougher, but the fact that there was zero regulation ten years ago allowed and encouraged reckless behavior on Wall Street. It created the supremely negligent subprime mortgage
trading bonanza that brought down big banks, little banks and homeowners alike...and threatened to take down the entire US economy. Were we to do nothing to change that? And Mr. Gingrich, if I may, how would repealing Dodd-Frank suddenly help the 4 million borrowers behind on their mortgages today and the 2.2 million in the foreclosure process today keep their homes? How would it put a bottom on home prices? Do you honestly believe that it would suddenly open the mortgage markets wide, allow banks to somehow fix all the troubled loans on their books and fuel a gigantic lending spree that would ignite home buying and selling again like the good old days? Is that even what we want? Let me just finish with Mr. Gingrich's last note, 'The banks are actually profiting more by foreclosing than encouraging short sales.' That's just flat out wrong.
To begin with what bank has ever profited from a foreclosure OR a short sale? Industry sources tell me that a short sale nets the bank on average 20 percent more than a foreclosure. Short sales speed up the time frame for disposal of the property as well, as foreclosures can take years to process. During that time, foreclosed borrowers can destroy the property, flushing cement down the toilet and stealing everything in the home that is and isn't nailed down. In a short sale, the homeowner lives in the home until the deal is done, and because they are not getting a huge hit to their credit and being kicked out by a sheriff's deputy, they generally don't destroy the house. In a short sale, the bank knows exactly what it's getting, unlike in a foreclosure when the bank has to take back the house in some unknown condition, market it and re-sell it at an unknown distressed price. 'Nuff said.
My second favorite argument is that it's all Fannie and Freddie's fault, and if we take them down, housing comes back in a flash. 'For these geniuses to give 10 of their top executives bonuses at $12 million and then have the guts to come to the American people and say, 'Give us another $13 billion to bail us out just for the quarter,' that's lunacy,' Rep. Michelle Bachmann argued on CNBC last night. 'We need to put them back into bankruptcy and get them out of business. They're destroying the housing market.' No question, Fannie Mae and Freddie Mac are bleeding money, costing the taxpayers billions already and potentially billions more in the near future. Something needs to be done to change that, but 'bankrupting' Fannie and Freddie would take down the US economy as we know it, and it boggles the mind that a person running for president wouldn't understand that. She in fact noted that Fannie and Freddie support the bulk of the mortgage market. That's true. Without them there would be no lending. Does she think the private market would just come running back in and give the nation's beleaguered borrowers 3.99 percent 30-year fixed across the board? Only Herman Cain seemed to get that. He argued that we need to fix unemployment first with his various proposals. 'Okay. After I did those three things that I outlined, then deal with Fannie Mae and Freddie Mac. You don't start solving a problem right in the middle of it. So we've got to do that first,' he reasoned.
Fixing unemployment was the only housing plan the candidates could offer. When CNBC's Maria Bartiromo asked Governor Mitt Romney, 'Not one of your 59 points in your economic plan mentions or addresses housing. Can you tell us why?' He responded, 'Yes, because it's not a housing plan. It's a jobs plan.' I don't love that answer, but at least I can respect it. 'Our friends in Washington today, they say, 'Oh, if we've got a problem in housing, let's let government play a bigger role.' That's the wrong way to go. Let markets work. Help people get back to work. Let them buy homes. You'll see home prices come back up if we allow this market to work,' argued Romney. There are plenty of analysts who agree that the market needs to work itself out, as painful as that may be to average Americans, many of whom are in line to lose their homes. Until the foreclosure mess runs its course, and all those homes are filled with borrowers who can afford them, home prices will not recover, plain and simple, goes the argument. I'm not saying here that the Obama Administration has done anything particular stellar to stimulate a housing recovery. A small refinance program for underwater borrowers isn't the cure-all, and forcing banks to write down mortgage principal is not politically nor technically feasible. But without some plan, this crisis could go on for a decade, like it did in Japan, as President Clinton noted recently in an interview. I'm not saying I have the answer, the great plan to fix our nation's housing crisis. But I'm not running for president."
"Shame on the Republican candidates for president. Shame on them for showing up at debate specifically targeting the US economy with not one credible, rational, even reputable notion of what to do about the nation's housing mess. It baffles the mind that this sector of the economy, responsible for about 18 percent of the nation's gross domestic product, is in freefall, and yet eight potential new leaders of this nation not only don't understand the problem but don't have a clue what to do about it. My favorite, and I write this with as much sarcasm as a computer keyboard will afford, is the argument that the Dodd-Frank financial reform bill is to blame for housing's current despair. Foreclosures, falling home prices, negative equity, nil consumer confidence, record low home building...yep, gotta be Dodd-Frank. 'If the Republican House next week would repeal Dodd-Frank and allow us to put pressure on the Senate to repeal Dodd-Frank, you would see the housing market start to improve overnight,' Speaker Newt Gingrich told the crowd in Michigan last night. His reasoning is that, 'It kills small banks, it kills small business.'
Increased regulation has certainly made the life of a banker today tougher, but the fact that there was zero regulation ten years ago allowed and encouraged reckless behavior on Wall Street. It created the supremely negligent subprime mortgage
trading bonanza that brought down big banks, little banks and homeowners alike...and threatened to take down the entire US economy. Were we to do nothing to change that? And Mr. Gingrich, if I may, how would repealing Dodd-Frank suddenly help the 4 million borrowers behind on their mortgages today and the 2.2 million in the foreclosure process today keep their homes? How would it put a bottom on home prices? Do you honestly believe that it would suddenly open the mortgage markets wide, allow banks to somehow fix all the troubled loans on their books and fuel a gigantic lending spree that would ignite home buying and selling again like the good old days? Is that even what we want? Let me just finish with Mr. Gingrich's last note, 'The banks are actually profiting more by foreclosing than encouraging short sales.' That's just flat out wrong.
To begin with what bank has ever profited from a foreclosure OR a short sale? Industry sources tell me that a short sale nets the bank on average 20 percent more than a foreclosure. Short sales speed up the time frame for disposal of the property as well, as foreclosures can take years to process. During that time, foreclosed borrowers can destroy the property, flushing cement down the toilet and stealing everything in the home that is and isn't nailed down. In a short sale, the homeowner lives in the home until the deal is done, and because they are not getting a huge hit to their credit and being kicked out by a sheriff's deputy, they generally don't destroy the house. In a short sale, the bank knows exactly what it's getting, unlike in a foreclosure when the bank has to take back the house in some unknown condition, market it and re-sell it at an unknown distressed price. 'Nuff said.
My second favorite argument is that it's all Fannie and Freddie's fault, and if we take them down, housing comes back in a flash. 'For these geniuses to give 10 of their top executives bonuses at $12 million and then have the guts to come to the American people and say, 'Give us another $13 billion to bail us out just for the quarter,' that's lunacy,' Rep. Michelle Bachmann argued on CNBC last night. 'We need to put them back into bankruptcy and get them out of business. They're destroying the housing market.' No question, Fannie Mae and Freddie Mac are bleeding money, costing the taxpayers billions already and potentially billions more in the near future. Something needs to be done to change that, but 'bankrupting' Fannie and Freddie would take down the US economy as we know it, and it boggles the mind that a person running for president wouldn't understand that. She in fact noted that Fannie and Freddie support the bulk of the mortgage market. That's true. Without them there would be no lending. Does she think the private market would just come running back in and give the nation's beleaguered borrowers 3.99 percent 30-year fixed across the board? Only Herman Cain seemed to get that. He argued that we need to fix unemployment first with his various proposals. 'Okay. After I did those three things that I outlined, then deal with Fannie Mae and Freddie Mac. You don't start solving a problem right in the middle of it. So we've got to do that first,' he reasoned.
Fixing unemployment was the only housing plan the candidates could offer. When CNBC's Maria Bartiromo asked Governor Mitt Romney, 'Not one of your 59 points in your economic plan mentions or addresses housing. Can you tell us why?' He responded, 'Yes, because it's not a housing plan. It's a jobs plan.' I don't love that answer, but at least I can respect it. 'Our friends in Washington today, they say, 'Oh, if we've got a problem in housing, let's let government play a bigger role.' That's the wrong way to go. Let markets work. Help people get back to work. Let them buy homes. You'll see home prices come back up if we allow this market to work,' argued Romney. There are plenty of analysts who agree that the market needs to work itself out, as painful as that may be to average Americans, many of whom are in line to lose their homes. Until the foreclosure mess runs its course, and all those homes are filled with borrowers who can afford them, home prices will not recover, plain and simple, goes the argument. I'm not saying here that the Obama Administration has done anything particular stellar to stimulate a housing recovery. A small refinance program for underwater borrowers isn't the cure-all, and forcing banks to write down mortgage principal is not politically nor technically feasible. But without some plan, this crisis could go on for a decade, like it did in Japan, as President Clinton noted recently in an interview. I'm not saying I have the answer, the great plan to fix our nation's housing crisis. But I'm not running for president."
Wednesday, September 14, 2011
friction in Obama's refi proposal
"The response to President Obama's recent proposal to refinance more borrowers into lower interest rate mortgages was at best underwhelming and at worst scathing. The plan would expand the government's so-far disappointing, Home Affordable Refinance Program (HARP), which helps current but underwater borrowers with Fannie Mae and Freddie Mac loans to refinance. 'Mr. President, the housing market is the foundation of the US economy. It is cracked and chipping away,' writes Florida real estate consultant Jack McCabe in an editorial in the Herald-Tribune. 'The walls are beginning to cave. Your answer, anecdotally, seems to be put a new roof on it.' McCabe is calling for principal write-down for troubled mortgages, not refinances for borrowers who are current on their monthly payments. The argument so far against principal write-down is that it would cost banks and investors (including Fannie Mae and Freddie Mac) too much.
Unfortunately the plan, which could allow borrowers with more than 25% in negative equity to refinance, is being deemed too costly as well. While the Congressional Budget Office estimated it would cost investors in the original mortgages between $13
and $15 billion (while potentially saving 111,000 borrowers from defaulting), analysts at JP Morgan Chase say it would cost more: If such a policy were successful on a large scale, it would clearly devalue higher coupons, and would threaten lower coupons
with incremental gross supply. A more modest HARP overhaul, while less disruptive, still forces investors to require more conservative valuations until details emerge.
All these arguments, however, may be moot, as the overseer of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA), which would have to approve the refinance effort, is sounding wildly cautious. In a statement following the President's speech, Director Ed DeMarco states, 'If there are frictions associated with the origination of HARP loans that can be eased while still achieving the program's intent of assisting borrowers and reducing credit risk for the Enterprises, we will seek to do so.' He goes on to say, however, that there are 'several challenging issues to work through,' and then he uses the word 'uncertain' twice in characterizing any outcome. While DeMarco doesn't detail said 'frictions,' they are vast and not limited to investor cost. First of all, too many borrowers probably still wouldn't qualify if they just did away with the loan to value ratio of 125%. Of the 838,400 HARP refinancings done so far, only 62,432 had LTVs above 105%, according to Jaret Seiberg at MF Global. 'We believe lenders are reluctant to HARP a loan if they fear the borrower is so underwater that they might default anyway,' writes Seiberg. Then there are issues of loan origination dates, put-backs on loans that default and borrower qualifications. Frictions. Beyond the friction, however, is the simple fact that a refinance program, while potentially an economic stimulus, is not a housing stimulus and shouldn't be characterized as such. The HARP program is and always was for current borrowers and does nothing to address the millions of non-current borrowers, bank-owned foreclosed homes and falling home prices."
Unfortunately the plan, which could allow borrowers with more than 25% in negative equity to refinance, is being deemed too costly as well. While the Congressional Budget Office estimated it would cost investors in the original mortgages between $13
and $15 billion (while potentially saving 111,000 borrowers from defaulting), analysts at JP Morgan Chase say it would cost more: If such a policy were successful on a large scale, it would clearly devalue higher coupons, and would threaten lower coupons
with incremental gross supply. A more modest HARP overhaul, while less disruptive, still forces investors to require more conservative valuations until details emerge.
All these arguments, however, may be moot, as the overseer of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA), which would have to approve the refinance effort, is sounding wildly cautious. In a statement following the President's speech, Director Ed DeMarco states, 'If there are frictions associated with the origination of HARP loans that can be eased while still achieving the program's intent of assisting borrowers and reducing credit risk for the Enterprises, we will seek to do so.' He goes on to say, however, that there are 'several challenging issues to work through,' and then he uses the word 'uncertain' twice in characterizing any outcome. While DeMarco doesn't detail said 'frictions,' they are vast and not limited to investor cost. First of all, too many borrowers probably still wouldn't qualify if they just did away with the loan to value ratio of 125%. Of the 838,400 HARP refinancings done so far, only 62,432 had LTVs above 105%, according to Jaret Seiberg at MF Global. 'We believe lenders are reluctant to HARP a loan if they fear the borrower is so underwater that they might default anyway,' writes Seiberg. Then there are issues of loan origination dates, put-backs on loans that default and borrower qualifications. Frictions. Beyond the friction, however, is the simple fact that a refinance program, while potentially an economic stimulus, is not a housing stimulus and shouldn't be characterized as such. The HARP program is and always was for current borrowers and does nothing to address the millions of non-current borrowers, bank-owned foreclosed homes and falling home prices."
Wednesday, August 24, 2011
Delinquencies Rise, Foreclosures Fall in Latest MBA Mortgage
The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 8.44 percent of all loans outstanding as of the end of the second quarter of 2011, an increase of 12 basis points from the first
quarter of 2011, and a decrease of 141 basis points from one year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate increased 32 basis points to 8.11 percent this
quarter from 7.79 percent last quarter. The percentage of loans on which foreclosure actions were started during the second quarter was 0.96 percent, down 12 basis points from last quarter and down 15 basis points from one year ago.
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 4.43 percent, down 9 basis
points from the first quarter and 14 basis points lower than one year ago. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 7.85 percent, a decrease of 25 basis points from last quarter, and a decrease of 126 basis points from the second quarter of last year. The combined percentage of loans in foreclosure or at least one payment past due was 12.54 percent on a non-seasonally adjusted basis, a 23 basis point increase from last quarter, but was 143 basis points lower than a year ago.
Mortgage delinquencies are no longer improving and are now showing some signs of worsening," said Jay Brinkmann, MBA's Chief Economist. Foreclosure inventory rates also fell, to their lowest level since the third quarter of 2010. While some have
argued that this drop in foreclosures is a temporary drop which does not reflect the problems yet to come, this does not appear to be the case, at least at the national level.
The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 8.44 percent of all loans outstanding as of the end of the second quarter of 2011, an increase of 12 basis points from the first
quarter of 2011, and a decrease of 141 basis points from one year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate increased 32 basis points to 8.11 percent this
quarter from 7.79 percent last quarter. The percentage of loans on which foreclosure actions were started during the second quarter was 0.96 percent, down 12 basis points from last quarter and down 15 basis points from one year ago.
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 4.43 percent, down 9 basis
points from the first quarter and 14 basis points lower than one year ago. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 7.85 percent, a decrease of 25 basis points from last quarter, and a decrease of 126 basis points from the second quarter of last year. The combined percentage of loans in foreclosure or at least one payment past due was 12.54 percent on a non-seasonally adjusted basis, a 23 basis point increase from last quarter, but was 143 basis points lower than a year ago.
Mortgage delinquencies are no longer improving and are now showing some signs of worsening," said Jay Brinkmann, MBA's Chief Economist. Foreclosure inventory rates also fell, to their lowest level since the third quarter of 2010. While some have
argued that this drop in foreclosures is a temporary drop which does not reflect the problems yet to come, this does not appear to be the case, at least at the national level.
Monday, August 1, 2011
Home ownership at 1998 levels
The U.S. homeownership rate in the second quarter dropped to its lowest level in 13 years, according to the Census Bureau, with analysts expecting even more drops ahead. The homeownership rate fell to 65.9%, down one percentage point from a year ago. It's the lowest level measured since the first quarter of 1998. Analysts at Capital Economics said this means the homeownership rate built during the housing boom has been "completely wiped out" by its bust. "The poor economic climate, the double dip in house prices, the high number of foreclosures and tight credit conditions are all reasons why the homeownership rate will continue to fall," analysts said.
The rate remained highest in the Midwest at 70%, followed by 68.2% in the South, 63% in the Northeast and 60.3% in the West. Since the second quarter of 2007, the homeownership rate in the West has dropped more than four full percentage points.
Homeownership for younger consumers has become even more sparse. According to the Census Bureau, the rate among Americans younger than 35 years old dropped to 37.5% from 39% one year ago. This, analysts said, is a sign credit has tightened for younger consumers. With unemployment elevated for this cohort, as well, the rate could continue to fall in coming quarters. "With another 3 million foreclosures in the pipeline and no sign of a major improvement in credit conditions or the labor market, demand for owner-occupied housing is likely to remain weak for some years yet," Capital Economics analysts said.
The rate remained highest in the Midwest at 70%, followed by 68.2% in the South, 63% in the Northeast and 60.3% in the West. Since the second quarter of 2007, the homeownership rate in the West has dropped more than four full percentage points.
Homeownership for younger consumers has become even more sparse. According to the Census Bureau, the rate among Americans younger than 35 years old dropped to 37.5% from 39% one year ago. This, analysts said, is a sign credit has tightened for younger consumers. With unemployment elevated for this cohort, as well, the rate could continue to fall in coming quarters. "With another 3 million foreclosures in the pipeline and no sign of a major improvement in credit conditions or the labor market, demand for owner-occupied housing is likely to remain weak for some years yet," Capital Economics analysts said.
Friday, July 22, 2011
NAR - existing home sales down
Existing-home sales eased in June as contract cancellations spiked unexpectedly, although prices were up slightly, according to the National Association of Realtors (NAR). Sales gains in the Midwest and South were offset by declines in the Northeast and West. Single-family home sales were stable while the condo sector weakened. Total existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, declined 0.8% to a seasonally adjusted annual rate of 4.77 million in June from 4.81 million in May, and remain 8.8% below the 5.23 million unit level in June 2010, which was the scheduled closing deadline for the home buyer tax credit. The national median existing-home price for all housing types was $184,300 in June, up 0.8% from June 2010. Distressed homes – foreclosures and short sales generally sold at deep discounts – accounted for 30% of sales in June, compared with 31% in May and 32% in June 2010. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.51% in June, down from 4.64% in May; the rate was 4.74% in June 2010.
Total housing inventory at the end of June rose 3.3% to 3.77 million existing homes available for sale, which represents a 9.5-month supply at the current sales pace, up from a 9.1-month supply in May. All-cash transactions accounted for 29% of sales in June; they were 30% in May and 24% in June 2010; investors account for the bulk of cash purchases. First-time buyers purchased 31% of homes in June, down from 36% in May; they were 43% in June 2010 when the tax credit was in place. Investors accounted for 19% of purchase activity in June, unchanged from May; they were 13% in June 2010. The balance of sales was to repeat buyers, which were a 50% market share in June, up from 45% in May, which appears to be a normal seasonal gain.
Single-family home sales were unchanged at a seasonally adjusted annual rate of 4.24 million in June, but are 7.4% below a 4.58 million pace in June 2010. The median existing single-family home price was $184,600 in June, up 0.6% from a year ago. Existing condominium and co-op sales fell 7.0% to a seasonally adjusted annual rate of 530,000 in June from 570,000 in May, and are 18.0% below the 646,000-unit level a year ago. The median existing condo price5 was $182,300 in June, up 1.8% from June 2010.
Total housing inventory at the end of June rose 3.3% to 3.77 million existing homes available for sale, which represents a 9.5-month supply at the current sales pace, up from a 9.1-month supply in May. All-cash transactions accounted for 29% of sales in June; they were 30% in May and 24% in June 2010; investors account for the bulk of cash purchases. First-time buyers purchased 31% of homes in June, down from 36% in May; they were 43% in June 2010 when the tax credit was in place. Investors accounted for 19% of purchase activity in June, unchanged from May; they were 13% in June 2010. The balance of sales was to repeat buyers, which were a 50% market share in June, up from 45% in May, which appears to be a normal seasonal gain.
Single-family home sales were unchanged at a seasonally adjusted annual rate of 4.24 million in June, but are 7.4% below a 4.58 million pace in June 2010. The median existing single-family home price was $184,600 in June, up 0.6% from a year ago. Existing condominium and co-op sales fell 7.0% to a seasonally adjusted annual rate of 530,000 in June from 570,000 in May, and are 18.0% below the 646,000-unit level a year ago. The median existing condo price5 was $182,300 in June, up 1.8% from June 2010.
Regionally, existing-home sales in the Northeast fell 5.2% to an annual pace of 730,000 in June and are 17.0% below June 2010. The median price in the Northeast was $261,000, up 3.1% from a year ago. Existing-home sales in the Midwest rose 1.0% in June to a pace of 1.04 million but are 14.0% below a year ago. The median price in the Midwest was $147,700, down 5.3% from June 2010. In the South, existing-home sales increased 0.5% to an annual level of 1.86 million in June but are 5.6% below June 2010. The median price in the South was $159,100, down 0.1% from a year ago.
Existing-home sales in the West declined 1.7% to an annual pace of 1.14 million in June and are 2.6% below a year ago. The median price in the West was $240,400, up 9.5% from June 2010.
Tuesday, July 19, 2011
Study Reveals Original Foreclosure-Related Documents Often Do Not Exist
If a lender has not been paid in months or years and believes that they can convert a property to a performing investment, then they are going to have a very high interest in foreclosing. However, in many cases, if they had to use real, legitimate, original documents to carry out that process, it simply would never happen. Why? Because the originals simply do not exist[1]. Reuters calls this “one of the overlooked legacies of the housing boom,” and explains in a new report that “in the rush to make new home loans and sell them off as fast as possible…the original lenders…destroyed original documents or never turned them over as required.” As a result, promissory notes and mortgages frequently never made it to the end-buyer – or even just the next guy in line. This means that “many pension funds, insurance companies and hedge funds that invested in [investor] trusts never got formal title to the mortgages they had paid for.” And that means that when it comes time to foreclose, they may have no choice but to use doctored or replicated documents in order to do so. Analysts speculate that the reason that there has not been an audit or an investigation of this issue may be simply that “if the extent of the problem became known, the housing market might worsen.” For example, the country’s largest sub-prime lender (it collapsed in 2007) almost never endorsed promissory notes or assigned mortgages to the trusts that bought its mortgages, meaning that trusts may be out millions of dollars and a millions of homes could end up with clouds on their titles.
Monday, July 18, 2011
Home prices trending up
Home prices and inventory levels are trending upward in many US cities tracked by Altos Research, according to the firm's latest Housing Market Update. The median national home price for all 26 markets covered by Altos hit $450,358 in June, up from $444,273 in May. Meanwhile, in the past three months, listing prices rose 2.31% and inventory levels grew 3.52%. The only city to report a drop in home prices in June was Las Vegas and even that was a mere 0.86% decline when compared to the month before. When analyzing home price data for the past three months, both New York and Las Vegas experienced falling prices, reporting drops of 2.2% and 1.61%, respectively, Altos said.
Inventory rose in 12 of the major markets tracked by Altos last month, while falling in the remaining 14 composite cities. The biggest inventory jump occurred in Boston, with the city's inventory level rising to 5.8%. Phoenix, on the other hand, experienced the largest inventory level drop, falling 7.93%. Even though the 90-day home price trends rose somewhat, Altos said a weekly sample taken from the month of June still shows a "slight flattening" in home prices. Comparatively, the latest S&P/Case Shiller report said the average price of a single- family home rose for the first time in eight months during the month of April. Altos suspects the S&P/Case-Shiller will be reporting a few positive trends through September. At the same time when looking forward, Altos foresees a slowing or plateau of home prices in the fourth quarter.
Inventory rose in 12 of the major markets tracked by Altos last month, while falling in the remaining 14 composite cities. The biggest inventory jump occurred in Boston, with the city's inventory level rising to 5.8%. Phoenix, on the other hand, experienced the largest inventory level drop, falling 7.93%. Even though the 90-day home price trends rose somewhat, Altos said a weekly sample taken from the month of June still shows a "slight flattening" in home prices. Comparatively, the latest S&P/Case Shiller report said the average price of a single- family home rose for the first time in eight months during the month of April. Altos suspects the S&P/Case-Shiller will be reporting a few positive trends through September. At the same time when looking forward, Altos foresees a slowing or plateau of home prices in the fourth quarter.
Tuesday, July 12, 2011
household shifts could affect recovery
"Every now and then you need to take a step back and put the housing market into perspective, take a break from all the monthly motions and commotions, stress and distress. Today I read a report that did just that. It takes a big-picture snapshot of how housing has fundamentally changed over the past several decades, which could have a big impact on its future as the industry rebuilds itself, literally and economically.
The report, from John Burns Real Estate Consulting's Chris Porter, is titled simply, Tremendous Demographic Shift.' And the numbers are pretty tremendous. 'The number of non-family households—people living alone or households that do not have any members related to the householder—has increased nearly five times in the last 50 years, from 7.9 million to 39.2 million. At the same time, the number of family households has increased by just 1.7 times, from 45.1 million to 77.5 million,' according to Porter. In addition, married couples have dropped to less than half of all US households from 75% in 1960. So let's think about the current housing stock, much of which is more than 50 years old. We've recently seen a downsizing trend for several reasons, namely the weak economy and builders constructing cheaper homes to meet the demand but also the environmental movement and the high cost of energy.
But this comes right after the 'McMansion' era when oversized homes were all the rage. Those homes, of course, still exist in vast quantities, despite the fact that there are, according to this report, fewer big family households and therefore less need for large square footage. We've also talked a lot about the surge in renting; we've blamed it on the housing crash, fear of buying into a depreciating market and the tight credit conditions that are pricing many potential buyers out.
Perhaps there's more to it than that as well. Perhaps with fewer large family households and less desire for a big space, smaller, full-service rental apartments are more desirable to a growing segment of the population. 'Family households are more likely to stretch for size over location. Non-family households are more likely to value location—proximity to work, entertainment, etc.—and then size. They are less willing to commute than a family household,' noted Porter. We also have to look at the growing population of Americans who intend to 'age in place,' that is, the baby boomers who are moving out of the big family homes but not into what we used to call 'retirement homes.' Now they're 'active adult communities,' with smaller one-story homes. That demographic, though, plays against a growing demographic of Hispanic Americans. The average Hispanic household is statistically larger than the national average.
So what should home builders and housing watchers take from all this?
Obviously there are and always will be large families in the suburbs who want to live in big houses. There will always be wealthy Americans who desire to live in spaces that far exceed their needs. But the shift in household size cannot simply be considered anecdotal. When you couple that shift with a much-changed mortgage market, one that prices so many more Americans out of larger, move-up homes, you have to be concerned about what happens to the stock of larger homes, old and new. Do we see huge price reductions as demand falters?
Wednesday, July 6, 2011
Wells Fargo modification outnumber Obama's 5 to 1
Wells Fargo completed or started trials on roughly 585,000 mortgage modifications through its private programs since the beginning of 2009, more than five times the 101,000 initiated through the Home Affordable Modification Program (HAMP). HAMP launched in March 2009 but almost immediately drew criticism. Treasury officials admit the more than 3 million modifications initially promised was over estimated. Through May, servicers started roughly 731,000 permanent loan modifications and have been averaging between 25,000 and 30,000 per month this year. According to a recent poll of housing counselors, only 9% of borrowers who entered the program described it as a "positive" experience. Homeowners continually blame servicers for mishandling documentation. Overwhelmed servicers point out many borrowers are simply out of reach. "Avoiding foreclosure is a top priority for us and when customers work with us, we can help seven of every 10 to stay out of foreclosure," said Teri Schrettenbrunner, senior vice president, Wells Fargo Home Mortgage.
The Treasury points out most of the private programs built since the foreclosure crisis use HAMP as a model. But since mishandled foreclosure and modification processes came to light late last year, new standards were put in place, including a single point of contact that servicers are required to provide throughout the loss-mitigation process. The Treasury began to clamp down on poorly performing servicers — at least to the extent their contracts with these firms allow. In June, the Treasury announced it was withholding HAMP payments from Bank of America, JPMorgan Chase and Wells. Schrettenbrunner said the bank continues to build on its primary contact model it established last summer, and the bank has met with 58,000 borrowers at 31 home preservation workshops. Half of those received a decision on the spot or shortly after the event. Schrettenbrunner said the department continues to "aggressively reach out" to borrowers behind on payments to bridge the communication gap as quickly as possible. "We also continue to aggressively reach out to customers 60 or more days behind on their home loans via mail and telephone in an effort to engage them," Schrettenbrunner said.
Wells Fargo completed or started trials on roughly 585,000 mortgage modifications through its private programs since the beginning of 2009, more than five times the 101,000 initiated through the Home Affordable Modification Program (HAMP). HAMP launched in March 2009 but almost immediately drew criticism. Treasury officials admit the more than 3 million modifications initially promised was over estimated. Through May, servicers started roughly 731,000 permanent loan modifications and have been averaging between 25,000 and 30,000 per month this year. According to a recent poll of housing counselors, only 9% of borrowers who entered the program described it as a "positive" experience. Homeowners continually blame servicers for mishandling documentation. Overwhelmed servicers point out many borrowers are simply out of reach. "Avoiding foreclosure is a top priority for us and when customers work with us, we can help seven of every 10 to stay out of foreclosure," said Teri Schrettenbrunner, senior vice president, Wells Fargo Home Mortgage.
The Treasury points out most of the private programs built since the foreclosure crisis use HAMP as a model. But since mishandled foreclosure and modification processes came to light late last year, new standards were put in place, including a single point of contact that servicers are required to provide throughout the loss-mitigation process. The Treasury began to clamp down on poorly performing servicers — at least to the extent their contracts with these firms allow. In June, the Treasury announced it was withholding HAMP payments from Bank of America, JPMorgan Chase and Wells. Schrettenbrunner said the bank continues to build on its primary contact model it established last summer, and the bank has met with 58,000 borrowers at 31 home preservation workshops. Half of those received a decision on the spot or shortly after the event. Schrettenbrunner said the department continues to "aggressively reach out" to borrowers behind on payments to bridge the communication gap as quickly as possible. "We also continue to aggressively reach out to customers 60 or more days behind on their home loans via mail and telephone in an effort to engage them," Schrettenbrunner said.
Saturday, June 25, 2011
WSJ - mortgage rates flat
Mortgage rates changed little for a second straight week, according to the latest survey from Freddie Mac. Mortgage rates generally track Treasury yields, which move inversely to Treasury prices. Rates have slumped for months as yields on Treasury’s slid amid economic uncertainty. Freddie Mac Chief Economist Frank Nothaft pointed to more signs of a softening US housing market, including the Federal Reserve's policy-committee statement on Wednesday, which acknowledged continued weakness in the sector. "Although new construction on single-family homes ticked up in May from April, it was still below the overall pace set in 2010," Mr. Nothaft said. "Moreover, existing home sales fell 3.8% in May to the fewest since November 2010."
The 30-year fixed-rate mortgage was at 4.5% in the week ended Thursday, the same rate as in the previous week, though the rate was below last year's 4.69% average. The 30-year rate has fallen steadily since reaching the 2011 high of 5.05% in early February. Rates on 15-year fixed-rate mortgages edged up to 3.69% from 3.67% the previous week but were down from 3.13% a year earlier. Five-year Treasury-indexed hybrid adjustable-rate mortgages decreased to 3.25%, down from 3.27% last week and 3.84% a year earlier. One-year Treasury-indexed ARM rates ticked up to 2.99% from 2.97% the prior week, but still well below the prior year's 3.77% rate. To obtain the rates, 30-year and 15-year fixed-rate borrowers required an average payment of 0.8 point and 0.7 point, respectively. Five-year hybrid adjustable rate mortgages required a 0.6-point payment, while one-year adjustable-rate mortgages required a 0.5-point payment. A point is 1% of the mortgage amount, charged as prepaid interest.
The 30-year fixed-rate mortgage was at 4.5% in the week ended Thursday, the same rate as in the previous week, though the rate was below last year's 4.69% average. The 30-year rate has fallen steadily since reaching the 2011 high of 5.05% in early February. Rates on 15-year fixed-rate mortgages edged up to 3.69% from 3.67% the previous week but were down from 3.13% a year earlier. Five-year Treasury-indexed hybrid adjustable-rate mortgages decreased to 3.25%, down from 3.27% last week and 3.84% a year earlier. One-year Treasury-indexed ARM rates ticked up to 2.99% from 2.97% the prior week, but still well below the prior year's 3.77% rate. To obtain the rates, 30-year and 15-year fixed-rate borrowers required an average payment of 0.8 point and 0.7 point, respectively. Five-year hybrid adjustable rate mortgages required a 0.6-point payment, while one-year adjustable-rate mortgages required a 0.5-point payment. A point is 1% of the mortgage amount, charged as prepaid interest.
Thursday, June 23, 2011
don't let the numbers fool you
"Let me preface with an apology for the huge supply of numbers in this post, but if you can make it through them all, I think you will get the picture I'm drawing here. The so-called 'shadow inventory' of residential properties is falling, according to a new report from CoreLogic. This is the number of homes with seriously delinquent loans (90+ days), loans in the foreclosure process and bank-owned homes which are not yet listed for sale. The supply as of April 2011 declined to 1.7 million units, representing a five months' supply. This is down from 1.9 million units, also a five months' supply, from a year ago. 'The decline was due to fewer new delinquencies and the high level of distressed sales, which helped reduce the number of outstanding distressed loans,' according to the report.
Good news, no? Wait. There's more: 'In addition to the current shadow inventory, there are 2 million current negative equity loans that are more than 50% or $150,000 'upside down.' These current but underwater loans have increased risk of entering the shadow inventory if the owners' ability to pay is impaired while significantly underwater.' And then there's this other report from Lender Processing Services (LPS), which also reports a drop in newly delinquent loans, but gives the actual, mind-numbing numbers of loans in trouble:
- Number of properties that are 30+ days past due, but not in foreclosure: (A) 4,187,000
- Number of properties that are 90+ days delinquent, but not in foreclosure: 1,921,000
- Number of properties in foreclosure pre-sale inventory: (B) 2,164,000
- Number of properties that are 30+ days delinquent or in foreclosure: (A+B) 6,350,000
There are more than six million properties in distress, a third of those in foreclosure. According to yesterday's monthly home sales report from the National Association of Realtors, less than five million homes will sell this year, at the current sales pace. There are currently 3.72 million existing homes for sale, representing a 9.3 months supply; that does not include newly built homes nor does it include that six million number. This vast supply varies from state to state of course, but the overall effect is downward pressure on home prices nationally. I was interested to see a survey released today by Robert Shiller's MacroMarkets group (of the Case Shiller Home Price Indices). Every month he asks a group of 108 economists, real estate experts and investment strategists for their home price predictions. June's survey found the group's overall expectations have reached the lowest level since the survey started over a year ago, but, 'It is apparent that a significant majority of our panelists believe that the bottom for home prices arrived in the first quarter or will arrive sometime before year-end,' writes Shiller.
But wait, there's more: The group of 69 panelists who are currently forecasting a 2011 turning point predict less than two% average annual growth in nominal home prices over the five-year
period ending December 2015. Shiller added, 'If it were to materialize, such a scenario might be better described as a forecast of price stability rather than a rebound. A 2%-a-year home price increase will not inspire a lot of consumer confidence. Given prevailing inflation expectations, this
forecast implies virtually no change in real home values going forward.' So I'm faced with a national picture of over 6 million homes with distressed loans, a 9 month supply of existing homes, a smattering of new construction and no home price growth for at least the next four years. Should I buy?"
Good news, no? Wait. There's more: 'In addition to the current shadow inventory, there are 2 million current negative equity loans that are more than 50% or $150,000 'upside down.' These current but underwater loans have increased risk of entering the shadow inventory if the owners' ability to pay is impaired while significantly underwater.' And then there's this other report from Lender Processing Services (LPS), which also reports a drop in newly delinquent loans, but gives the actual, mind-numbing numbers of loans in trouble:
- Number of properties that are 30+ days past due, but not in foreclosure: (A) 4,187,000
- Number of properties that are 90+ days delinquent, but not in foreclosure: 1,921,000
- Number of properties in foreclosure pre-sale inventory: (B) 2,164,000
- Number of properties that are 30+ days delinquent or in foreclosure: (A+B) 6,350,000
There are more than six million properties in distress, a third of those in foreclosure. According to yesterday's monthly home sales report from the National Association of Realtors, less than five million homes will sell this year, at the current sales pace. There are currently 3.72 million existing homes for sale, representing a 9.3 months supply; that does not include newly built homes nor does it include that six million number. This vast supply varies from state to state of course, but the overall effect is downward pressure on home prices nationally. I was interested to see a survey released today by Robert Shiller's MacroMarkets group (of the Case Shiller Home Price Indices). Every month he asks a group of 108 economists, real estate experts and investment strategists for their home price predictions. June's survey found the group's overall expectations have reached the lowest level since the survey started over a year ago, but, 'It is apparent that a significant majority of our panelists believe that the bottom for home prices arrived in the first quarter or will arrive sometime before year-end,' writes Shiller.
But wait, there's more: The group of 69 panelists who are currently forecasting a 2011 turning point predict less than two% average annual growth in nominal home prices over the five-year
period ending December 2015. Shiller added, 'If it were to materialize, such a scenario might be better described as a forecast of price stability rather than a rebound. A 2%-a-year home price increase will not inspire a lot of consumer confidence. Given prevailing inflation expectations, this
forecast implies virtually no change in real home values going forward.' So I'm faced with a national picture of over 6 million homes with distressed loans, a 9 month supply of existing homes, a smattering of new construction and no home price growth for at least the next four years. Should I buy?"
Friday, June 17, 2011
foreigners jump into real estate market
"Falling home prices may be plaguing the US economy, but they are candy to foreign investors, who already have a weak dollar on their side. Buyers from overseas spent roughly $41 billion on US residential real estate last year, a bump up from the previous year. US real estate agents report a surge this Spring especially, as foreign buyers see continued pressure on home prices and ample bargains. 'I don’t think they’re so concerned about the prices dropping as they are about getting value for their money,' says Rick Ambrose, a Coldwell Banker agent in Lake Mohawk, NJ. Ambrose and his colleague Mary Pat Spekhardt recently hosted two groups of Japanese investors searching for homes on the scenic lake just about an hour outside of New York City. 'They can work here, be close to the city, be close to their corporations and still feel like they’re on vacation. I think that’s really what grabbed everybody.
That’s what got them,' says Spekhardt. The group of about 35 from Japan also toured properties in Las Vegas and Los Angeles, which are more popular choices among foreign investors.
A new survey by Trulia.com that tracks searches from potential foreign buyers found LA ranked number one in potential interest traffic, trailed by New York City, Cape Coral, Fl, Fort Lauderdale, FL and Las Vegas. The greatest interest is from buyers in the UK, Canada and Australia. 'Prices now in the US are generally 30-40% off from the peak. In addition, the weakness of the dollar gives the Japanese an advantage, as it does the Europeans, of another 20-25% off, so they’re seeing real bargains and opportunities,' notes Ambrose. The interest is pretty widespread, with Brazilians trolling Miami and Russians and Chinese hunting in Chicago, according to Trulia's survey.
What's so interesting to me, though, is that foreigners are so much more ready to jump into the market now than US investors. Granted, they have, as noted, the weak dollar on their side, but they also seem to have a longer term view. US buyers are so afraid to lose a little in the short term on paper, they don't realize they could gain a lot in the long term. Of course foreign buyers are largely using cash, which many US buyers are lacking. Credit, or lack thereof, is playing against the US investor. Prices in Miami are actually beginning to recover, especially in the condo market, thanks to foreign buyers, so much so that the foreigners are beating out the Americans.
I remember all the rage a long time ago when the Japanese were buying up commercial real estate in New York City. Everyone was so appalled. Not so much now, even up in Lake Mohawk, NJ...'It isn’t popular. It is unforeseen territory, and it’s unique. I think it’s a very smart choice. It’s not where everyone is looking,' says Spekhardt."
That’s what got them,' says Spekhardt. The group of about 35 from Japan also toured properties in Las Vegas and Los Angeles, which are more popular choices among foreign investors.
A new survey by Trulia.com that tracks searches from potential foreign buyers found LA ranked number one in potential interest traffic, trailed by New York City, Cape Coral, Fl, Fort Lauderdale, FL and Las Vegas. The greatest interest is from buyers in the UK, Canada and Australia. 'Prices now in the US are generally 30-40% off from the peak. In addition, the weakness of the dollar gives the Japanese an advantage, as it does the Europeans, of another 20-25% off, so they’re seeing real bargains and opportunities,' notes Ambrose. The interest is pretty widespread, with Brazilians trolling Miami and Russians and Chinese hunting in Chicago, according to Trulia's survey.
What's so interesting to me, though, is that foreigners are so much more ready to jump into the market now than US investors. Granted, they have, as noted, the weak dollar on their side, but they also seem to have a longer term view. US buyers are so afraid to lose a little in the short term on paper, they don't realize they could gain a lot in the long term. Of course foreign buyers are largely using cash, which many US buyers are lacking. Credit, or lack thereof, is playing against the US investor. Prices in Miami are actually beginning to recover, especially in the condo market, thanks to foreign buyers, so much so that the foreigners are beating out the Americans.
I remember all the rage a long time ago when the Japanese were buying up commercial real estate in New York City. Everyone was so appalled. Not so much now, even up in Lake Mohawk, NJ...'It isn’t popular. It is unforeseen territory, and it’s unique. I think it’s a very smart choice. It’s not where everyone is looking,' says Spekhardt."
Wednesday, June 15, 2011
US economy "bumbling along"
The US economy is just "bumbling along" and creating an uncertainty among business that is likely to stifle hiring and growth, says investor Wilbur Ross, fund manager and head of W.L. Ross & Co. Ross blamed Washington policies for much of the
problems, from the lack of a housing recovery to the recent controversy in which the Obama administration is trying to block Boeing from building a plant in a right-to-work state. "It's not going to be a 'W' or a 'V' or an 'L' (recovery) or another
alphabet letter," said Ross. "It's going continue to be punctuation—dots, dashes, question marks, exclamation points,one strong month, one weak month—a very fragile economy."
That lack of direction could stand in the way of businesses that want to expand. "This kind of thing is bad because it's unsettling to companies," he said. "Business has a terrible time adjusting to uncertainty. Good news they can adjust to, bad news
they can adjust to. Uncertainty makes it very, very hard to make long-term commitments." Businesses also are facing weak consumer spending. Unemployment remains mired at 9.1 percent while housing prices recently have double dipped despite aggressive efforts in Washington to stem the crisis. "The consumer still hasn't been
rehabilitated," Ross said. "All the meddling in the real estate side of life has not fixed residential real estate. If anything I think it's made it worse because it's extending out the foreclosure time lines and putting more uncertainty and more
downward pressure."
Ross also wondered about the state of job creation considering the battle the National Labor Relations Board has waged against Boeing. The agency contends that Boeing broke the law when it moved a plant to South Carolina, where workers are not required
to belong to a union. Boeing contends that even though it has a unionized work force it also can build plants in right-to-work states. Some in Congress have called on cutting funding to the NLRB on ground that the agency has overstepped its authority.
For Ross, the issue comes down to the kind of message the administration is sending at a time when job creation is at a premium. "Who in American business is going to have confidence to build a new factory, add employees, if you're not even sure
you can build the factory where you want to?" he said. "You can't have social experimenting interfering with turning the economy around. And I think that's what's going on here. It's social experimenting instead of building the economy."
problems, from the lack of a housing recovery to the recent controversy in which the Obama administration is trying to block Boeing from building a plant in a right-to-work state. "It's not going to be a 'W' or a 'V' or an 'L' (recovery) or another
alphabet letter," said Ross. "It's going continue to be punctuation—dots, dashes, question marks, exclamation points,one strong month, one weak month—a very fragile economy."
That lack of direction could stand in the way of businesses that want to expand. "This kind of thing is bad because it's unsettling to companies," he said. "Business has a terrible time adjusting to uncertainty. Good news they can adjust to, bad news
they can adjust to. Uncertainty makes it very, very hard to make long-term commitments." Businesses also are facing weak consumer spending. Unemployment remains mired at 9.1 percent while housing prices recently have double dipped despite aggressive efforts in Washington to stem the crisis. "The consumer still hasn't been
rehabilitated," Ross said. "All the meddling in the real estate side of life has not fixed residential real estate. If anything I think it's made it worse because it's extending out the foreclosure time lines and putting more uncertainty and more
downward pressure."
Ross also wondered about the state of job creation considering the battle the National Labor Relations Board has waged against Boeing. The agency contends that Boeing broke the law when it moved a plant to South Carolina, where workers are not required
to belong to a union. Boeing contends that even though it has a unionized work force it also can build plants in right-to-work states. Some in Congress have called on cutting funding to the NLRB on ground that the agency has overstepped its authority.
For Ross, the issue comes down to the kind of message the administration is sending at a time when job creation is at a premium. "Who in American business is going to have confidence to build a new factory, add employees, if you're not even sure
you can build the factory where you want to?" he said. "You can't have social experimenting interfering with turning the economy around. And I think that's what's going on here. It's social experimenting instead of building the economy."
Tuesday, June 14, 2011
Fannie Freddie are better, but still cash drains
Conservatorship has been good for Fannie Mae and Freddie Mac, but
the companies continue to drain federal resources away from other
government operations, according to the regulator of the mortgage
giants. In its third annual letter to Congress, the Federal
Housing Finance Agency (FHFA ) said stronger loan underwriting
standards enabled the companies to narrow losses in 2010 to $28
billion from $93.6 billion a year earlier. The companies have
received more than $160 billion funding from the Treasury
Department the past few years. "Since being placed under
conservatorship in 2008, Fannie Mae and Freddie Mac remain
critical supervisory concerns," said Edward DeMarco, acting
director of the FHFA. This is a "result of continuing credit
losses in 2010 from loans originated during 2005 through 2007 as
well as forecasted losses from loans originated during that
time." Still, DeMarco said governmental control allowed the
companies to "accomplish their statutory mission of facilitating
stability and liquidity for single-family and multifamily housing
finance."
The FHFA said Fannie and Freddie remain plagued by "credit risk,
operational risk, modeling risks and retention of qualified
leadership and personnel." The companies hold a 60% share of
single-family loan production. As conservator, the FHFA is
tasked with minimizing credit losses at the GSEs, and DeMarco
said more stringent underwriting standards and a stronger price
structure have helped. "Although past business decisions leading
to these losses cannot be undone, each enterprise, under the
oversight and guidance of FHFA as conservator and regulator, has
improved underwriting standards for loan purchases in the past
two years.," he said. "Another way FHFA minimized losses was to
require the enterprises to enforce existing contractual
representation and warranty loan repurchase agreements with
lenders." The FHFA also oversees the dozen Federal Home Loan
Banks and said all 12 reported profits in 2010. Loans to the
banks dropped to $479 billion last year from $631 billion at the
end 2009. The regulator said the banks' financial condition and
performance stabilized in 2010, but several continue "to be
negatively affected by their exposure to private-label
mortgage-backed securities."
the companies continue to drain federal resources away from other
government operations, according to the regulator of the mortgage
giants. In its third annual letter to Congress, the Federal
Housing Finance Agency (FHFA ) said stronger loan underwriting
standards enabled the companies to narrow losses in 2010 to $28
billion from $93.6 billion a year earlier. The companies have
received more than $160 billion funding from the Treasury
Department the past few years. "Since being placed under
conservatorship in 2008, Fannie Mae and Freddie Mac remain
critical supervisory concerns," said Edward DeMarco, acting
director of the FHFA. This is a "result of continuing credit
losses in 2010 from loans originated during 2005 through 2007 as
well as forecasted losses from loans originated during that
time." Still, DeMarco said governmental control allowed the
companies to "accomplish their statutory mission of facilitating
stability and liquidity for single-family and multifamily housing
finance."
The FHFA said Fannie and Freddie remain plagued by "credit risk,
operational risk, modeling risks and retention of qualified
leadership and personnel." The companies hold a 60% share of
single-family loan production. As conservator, the FHFA is
tasked with minimizing credit losses at the GSEs, and DeMarco
said more stringent underwriting standards and a stronger price
structure have helped. "Although past business decisions leading
to these losses cannot be undone, each enterprise, under the
oversight and guidance of FHFA as conservator and regulator, has
improved underwriting standards for loan purchases in the past
two years.," he said. "Another way FHFA minimized losses was to
require the enterprises to enforce existing contractual
representation and warranty loan repurchase agreements with
lenders." The FHFA also oversees the dozen Federal Home Loan
Banks and said all 12 reported profits in 2010. Loans to the
banks dropped to $479 billion last year from $631 billion at the
end 2009. The regulator said the banks' financial condition and
performance stabilized in 2010, but several continue "to be
negatively affected by their exposure to private-label
mortgage-backed securities."
Tuesday, May 31, 2011
why should we care about foreclosures?
"Earlier this week, when we got the report of a bump up in sales
of newly constructed homes, I cautioned that the home builders
are still facing huge competition from distressed properties
(foreclosures and short sales). Today we have some new numbers
showing just how big and how widespread that competition is.
Foreclosed properties made up 28% of all home sales nationwide in
the first quarter of this year, according to RealtyTrac. That's
up slightly from Q4 of 2010, but not the record 29% we saw a year
ago. More than 107,000 bank-owned (REO) properties sold, which is
actually a drop from the previous quarter and a bigger drop (36%)
from a year ago. Foreclosed properties sold at a 35% discount to
their non-distressed counterparts.
So here we have fewer selling but making up a larger share of
total sales. That's not particularly healthy. We need to get more
of these properties sold, because as I showed you on the blog
Tuesday, there are hundreds of thousands of them and millions
more in the potential pipeline. This is not exactly news, but
every time I report it I get the argument back here on the blog
that these distressed sales are only happening in certain states
and don't affect the overall housing market. There is some truth
to that, at least the first part. I asked RealtyTrac to pull some
other numbers for me to show what I'm talking about. More than
three quarters of all distressed sales (78%) were in just ten
states. You can see the usual suspects, California, Florida,
Arizona, Nevada and much of the Mid-West. That's a problem for
the builders because so much of their most recent inventory is in
those states. But what about the rest of us? It begs two
questions: 1) If I don't live in these states, why should I care?
2) If the worst is only in a few states, then why are home prices
falling nationwide?
Here's RealtyTrac's Rick Sharga's explanation: 'The 10 states
include several of the states with the highest number of overall
home sales; driving prices down in California and Florida has
much more impact on national averages than fluctuating home
prices in Alaska and Wyoming. It's not all about geography.
While foreclosure sales obviously depress the price of homes
nearby, they also affect prices by limiting new home sales, which
typically help drive home prices up. But foreclosure sales are
only one of the factors behind falling home prices. Weak demand
is probably the biggest driver.'
And I contend that weak demand is driven by several factors, not
the least of which are credit and confidence. The banks are
looking at their overall book of business and the losses they're
still taking; the losses are concentrated in those states that
are continuing to suffer the most. Regardless, they spread that
pain nationwide in their lending standards, tightening up to the
point that many borrowers far far away from California can't get
a loan. Confidence, or lack thereof, is a bigger factor than we
often give it credit. Yes, the big bad media report all these
numbers, and yes, some of the worst of it is nowhere near where
you live, but you see and process it. It affects your confidence
and consequently how you act.
Housing demand is nowhere near where it should be, and the mix of
what is selling is all on the low end. Investors with cash and
first time home buyers are bargain hunting, and that pushes the
price average/median down in every market. As prices fall on real
sales, thousands of borrowers fall underwater on paper...on their
mortgages, and that puts them at higher risk of foreclosure.
'Residential home sales fell by 18% in Q1 2011 compared to Q4
2010 and by almost 32% from Q1 2010,' notes Sharga. Foreclosures
and distressed sales, even if they're not in your back yard or in
your state, affect your home's value because they affect the
overall demand for your home."
of newly constructed homes, I cautioned that the home builders
are still facing huge competition from distressed properties
(foreclosures and short sales). Today we have some new numbers
showing just how big and how widespread that competition is.
Foreclosed properties made up 28% of all home sales nationwide in
the first quarter of this year, according to RealtyTrac. That's
up slightly from Q4 of 2010, but not the record 29% we saw a year
ago. More than 107,000 bank-owned (REO) properties sold, which is
actually a drop from the previous quarter and a bigger drop (36%)
from a year ago. Foreclosed properties sold at a 35% discount to
their non-distressed counterparts.
So here we have fewer selling but making up a larger share of
total sales. That's not particularly healthy. We need to get more
of these properties sold, because as I showed you on the blog
Tuesday, there are hundreds of thousands of them and millions
more in the potential pipeline. This is not exactly news, but
every time I report it I get the argument back here on the blog
that these distressed sales are only happening in certain states
and don't affect the overall housing market. There is some truth
to that, at least the first part. I asked RealtyTrac to pull some
other numbers for me to show what I'm talking about. More than
three quarters of all distressed sales (78%) were in just ten
states. You can see the usual suspects, California, Florida,
Arizona, Nevada and much of the Mid-West. That's a problem for
the builders because so much of their most recent inventory is in
those states. But what about the rest of us? It begs two
questions: 1) If I don't live in these states, why should I care?
2) If the worst is only in a few states, then why are home prices
falling nationwide?
Here's RealtyTrac's Rick Sharga's explanation: 'The 10 states
include several of the states with the highest number of overall
home sales; driving prices down in California and Florida has
much more impact on national averages than fluctuating home
prices in Alaska and Wyoming. It's not all about geography.
While foreclosure sales obviously depress the price of homes
nearby, they also affect prices by limiting new home sales, which
typically help drive home prices up. But foreclosure sales are
only one of the factors behind falling home prices. Weak demand
is probably the biggest driver.'
And I contend that weak demand is driven by several factors, not
the least of which are credit and confidence. The banks are
looking at their overall book of business and the losses they're
still taking; the losses are concentrated in those states that
are continuing to suffer the most. Regardless, they spread that
pain nationwide in their lending standards, tightening up to the
point that many borrowers far far away from California can't get
a loan. Confidence, or lack thereof, is a bigger factor than we
often give it credit. Yes, the big bad media report all these
numbers, and yes, some of the worst of it is nowhere near where
you live, but you see and process it. It affects your confidence
and consequently how you act.
Housing demand is nowhere near where it should be, and the mix of
what is selling is all on the low end. Investors with cash and
first time home buyers are bargain hunting, and that pushes the
price average/median down in every market. As prices fall on real
sales, thousands of borrowers fall underwater on paper...on their
mortgages, and that puts them at higher risk of foreclosure.
'Residential home sales fell by 18% in Q1 2011 compared to Q4
2010 and by almost 32% from Q1 2010,' notes Sharga. Foreclosures
and distressed sales, even if they're not in your back yard or in
your state, affect your home's value because they affect the
overall demand for your home."
Tuesday, March 15, 2011
Hacker claims BOA hid mortgage errors
A hacker organization known as Anonymous released on Monday a series of e-mails by a former Bank of America (BOA) employee who claims they show how a division of the bank hid foreclosure information. The bank unit, Balboa Insurance, which deals in force-placed coverage, was acquired by BOA when it bought the mortgage lender Countrywide in 2008, and the e-mail messages involve removing information linking loans to certain documentation. The e-mails dating from November last year reveal a correspondence among Balboa employees in which they move to hide the record of certain documents "that went out in error." The documents were tied to loans by GMAC, a BOA client, according to the e-mails. "The following GMAC DTN's need to have the images removed from Tracksource/Rembrandt," an operations team manager at Balboa wrote. DTN refers to document-tracking number, and Tracksource/Rembrandt is an insurance-tracking system.
The response he receives: "I have spoken to my developer and she stated that we cannot remove the DTN's from Rembrandt, but she can remove the loan numbers, so the documents will not show as matched to those loans." Removing the loan numbers from the documents, according to the e-mails, was approved. A member of Anonymous said in an interview Monday that the purpose of his Web site was to bring attention to the wrongdoing of the banks. "The way the system is, it's made to cheat the average person," he said. A BOA spokesman told Reuters on Sunday that the documents had been stolen by a former Balboa employee, and were not tied to foreclosures. "We are confident that his extravagant assertions are untrue," he told the news service.
The response he receives: "I have spoken to my developer and she stated that we cannot remove the DTN's from Rembrandt, but she can remove the loan numbers, so the documents will not show as matched to those loans." Removing the loan numbers from the documents, according to the e-mails, was approved. A member of Anonymous said in an interview Monday that the purpose of his Web site was to bring attention to the wrongdoing of the banks. "The way the system is, it's made to cheat the average person," he said. A BOA spokesman told Reuters on Sunday that the documents had been stolen by a former Balboa employee, and were not tied to foreclosures. "We are confident that his extravagant assertions are untrue," he told the news service.
Friday, February 25, 2011
Existing homes sales up
Existing homes increased 2.7 percent to a seasonally adjusted annual rate of 5.36 million in January from a downwardly revised 5.22 million in December, and are 5.3 percent above the 5.09 million level in January 2010. This is the first time in seven months that sales activity was higher than a year earlier. A parallel NAR practitioner survey2 shows first-time buyers purchased 29 percent of homes in January, down from 33 percent in December and 40 percent in January 2010 when an extended tax credit was in place. Investors accounted for 23 percent of purchases in January, up from 20 percent in December and 17 percent in January 2010; the balance of sales were to repeat buyers. All-cash sales rose to 32 percent in January from 29 percent in December and 26 percent in January 2010. All-cash purchases are at the highest level since NAR started measuring these purchases monthly in October 2008, when they accounted for 15 percent of the market. The average of all-cash deals was
20 percent in 2009, rising to 28 percent last year.
The national median existing-home price3 for all housing types was $158,800 in January, down 3.7 percent from January 2010. Distressed homes edged up to a 37 percent market share in January from 36 percent in December; it was 38 percent in January 2010. Total housing inventory at the end of January fell 5.1 percent to 3.38 million existing homes available for sale, which represents a 7.6-month supply4 at the current sales pace, down from an 8.2-month supply in December. The inventory supply is at the lowest level since December 2009 when there was a 7.3-month supply. Single-family home sales rose 2.4 percent to a seasonally adjusted annual rate of 4.69 million in January from 4.58 million in December, and are 4.9 percent higher than the 4.47 million level in January 2010. The median existing single-family home price was $159,400 in January, down 2.7 percent from a year ago.
Existing condominium and co-op sales increased 4.7 percent to a seasonally adjusted annual rate of 670,000 in January from 640,000 in December, and are 7.9 percent above the 621,000-unit pace one year ago. The median existing condo price5 was $154,900 in January, which is 10.2 percent below January 2010. Regionally, existing-home sales in the Northeast fell 4.6 percent to an annual pace of 830,000 in January from a spike in December and are 1.2 percent below January 2010.
The median price in the Northeast was $236,500, which is 4.0 percent below a year ago. Existing-home sales in the Midwest rose 1.8 percent in January to a level of 1.14 million and are 3.6 percent above a year ago. The median price in the Midwest was $126,300, which is 3.2 percent below January 2010. In the South, existing-home sales increased 3.6 percent to an annual pace of 2.02 million in January and are 8.0 percent higher than January 2010. The median price in the South was $136,600, down 2.1 percent from a year ago. Existing-home sales in the West rose 7.9 percent to an annual level of 1.37 million in January and are 7.0 percent above January 2010. The median price in the West was $193,200, down 5.7 percent from a year ago.
20 percent in 2009, rising to 28 percent last year.
The national median existing-home price3 for all housing types was $158,800 in January, down 3.7 percent from January 2010. Distressed homes edged up to a 37 percent market share in January from 36 percent in December; it was 38 percent in January 2010. Total housing inventory at the end of January fell 5.1 percent to 3.38 million existing homes available for sale, which represents a 7.6-month supply4 at the current sales pace, down from an 8.2-month supply in December. The inventory supply is at the lowest level since December 2009 when there was a 7.3-month supply. Single-family home sales rose 2.4 percent to a seasonally adjusted annual rate of 4.69 million in January from 4.58 million in December, and are 4.9 percent higher than the 4.47 million level in January 2010. The median existing single-family home price was $159,400 in January, down 2.7 percent from a year ago.
Existing condominium and co-op sales increased 4.7 percent to a seasonally adjusted annual rate of 670,000 in January from 640,000 in December, and are 7.9 percent above the 621,000-unit pace one year ago. The median existing condo price5 was $154,900 in January, which is 10.2 percent below January 2010. Regionally, existing-home sales in the Northeast fell 4.6 percent to an annual pace of 830,000 in January from a spike in December and are 1.2 percent below January 2010.
The median price in the Northeast was $236,500, which is 4.0 percent below a year ago. Existing-home sales in the Midwest rose 1.8 percent in January to a level of 1.14 million and are 3.6 percent above a year ago. The median price in the Midwest was $126,300, which is 3.2 percent below January 2010. In the South, existing-home sales increased 3.6 percent to an annual pace of 2.02 million in January and are 8.0 percent higher than January 2010. The median price in the South was $136,600, down 2.1 percent from a year ago. Existing-home sales in the West rose 7.9 percent to an annual level of 1.37 million in January and are 7.0 percent above January 2010. The median price in the West was $193,200, down 5.7 percent from a year ago.
Wednesday, September 22, 2010
Orlando homes sales increase as affordability hits all-time high
September 10, 2010 – Orlando, FL) Members of the Orlando Regional REALTOR® Association reported completed sales on 2,429 homes in August, which is a 10.91 percent increase over the August 2009 mark of 2,109. To date, Orlando area home sales are up 36.12 percent over this time in 2009.
“As expected, sales have been softer following the expiration of the homebuyer tax credit,” explains ORRA Chairman of the Board Kathleen Gallagher McIver, RE/MAX Town & Country Realty. “However, since May, the number of new contracts has continued to climb as consumers take advantage of record-low mortgage rates and historically high housing affordability.”
The number of new contracts filed in August 2010 (3,892) represents an increase of 17.09 percent more than were filed in August 2009 (3,324). The area’s pending sales statistic — also an indicator of future sales activity – is likewise remaining at a record high with 8.60 percent more homes (8,945) under contract and awaiting closing in August of this year than in August of last year (8,237).
The median price of all existing homes combined sold in August 2010 decreased 21.95 percent to $99,900 from the $128,000 recorded in August 2009. August 2010’s median price is a decrease of 8.10 percent compared to July 2010’s median of $108,700.
“With foreclosures and short sales dominating the market, the median price continues to be lowered,” says Gallagher McIver. “Plus, the rise in popularity of lower-priced condominiums has put additional downward pressure on prices.” Gallagher McIver adds that one in four home sales during the month of August was a condo sale, and the median price for all August condo sales was $44,000.
The median price for “normal” sales is $165,900 (down 5.20 percent from last month’s $175,000). The median price for bank-owned sales is $70,000 (down 2.78 percent from last month’s $72,000), and the median price for short sales is $100,000 (down from last month’s $116,000).
Of the 2,429 sales in August, 691 “normal” sales accounted for 28.45 percent of all sales, while 1,187 bank-owned and 551 short sales made up 71.55 percent.
The Orlando affordability index increased to 270.30 percent in August. (An affordability index of 99 percent means that buyers earning the state-reported median income are 1 percent short of the income necessary to purchase a median-priced home. Conversely, an affordability index that is over 100 means that median-income earners make more than is necessary to qualify for a median-priced home.) Buyers who earn the reported median income of $53,219 can qualify to purchase one of 9,932 homes in Orange and Seminole counties currently listed in the local multiple listing service for $270,031 or less.
First-time homebuyer affordability in August increased to 192.21 percent. First-time buyers who earn the reported median income of $36,189 can qualify to purchase one of 6,885 homes in Orange and Seminole counties currently listed in the local multiple listing service for $163,219 or less.
Homes of all types spent an average of 84 days on the market before coming under contract in August 2010, and the average home sold for 95.04 percent of its listing price. In August 2009 those numbers were 94 and 94.44 percent, respectively. The area’s average interest rate decreased in August to 4.61 percent.
Inventory
There are currently 16,535 homes available for purchase through the MLS. Inventory decreased by 28 homes from July 2010, which means that 28 more homes exited the market than entered the market. The August 2010 inventory level is 1.06 percent higher than it was in August 2009 (16,361). The current pace of sales translates into 6.81 months of supply; August 2009 recorded 7.47 months of supply.
There are 12,769 single-family homes currently listed in the MLS, a number that is 859 (7.21 percent) more than in August of last year. Condos currently make up 2,342 offerings in the MLS, while duplexes/town homes/villas make up the remaining 1,424.
Condos and Town Homes/Duplexes/Villas
August when compared to August of 2009 and increased by 5.89 percent compared to July of this year. To date, condo sales are up 74.09 percent (4,596 condos sold to date in 2010, compared to 2,640 by this time in 2009).
The most (361) condos in a single price category that changed hands in August were yet again in the $1 - $50,000 price range, which accounted for 57.39 percent of all condo sales.
Orlando homebuyers purchased 208 duplexes, town homes, and villas in August 2010, which is a 1.96 percent increase from August 2009 when 204 of these alternative housing types were purchased.
“As expected, sales have been softer following the expiration of the homebuyer tax credit,” explains ORRA Chairman of the Board Kathleen Gallagher McIver, RE/MAX Town & Country Realty. “However, since May, the number of new contracts has continued to climb as consumers take advantage of record-low mortgage rates and historically high housing affordability.”
The number of new contracts filed in August 2010 (3,892) represents an increase of 17.09 percent more than were filed in August 2009 (3,324). The area’s pending sales statistic — also an indicator of future sales activity – is likewise remaining at a record high with 8.60 percent more homes (8,945) under contract and awaiting closing in August of this year than in August of last year (8,237).
The median price of all existing homes combined sold in August 2010 decreased 21.95 percent to $99,900 from the $128,000 recorded in August 2009. August 2010’s median price is a decrease of 8.10 percent compared to July 2010’s median of $108,700.
“With foreclosures and short sales dominating the market, the median price continues to be lowered,” says Gallagher McIver. “Plus, the rise in popularity of lower-priced condominiums has put additional downward pressure on prices.” Gallagher McIver adds that one in four home sales during the month of August was a condo sale, and the median price for all August condo sales was $44,000.
The median price for “normal” sales is $165,900 (down 5.20 percent from last month’s $175,000). The median price for bank-owned sales is $70,000 (down 2.78 percent from last month’s $72,000), and the median price for short sales is $100,000 (down from last month’s $116,000).
Of the 2,429 sales in August, 691 “normal” sales accounted for 28.45 percent of all sales, while 1,187 bank-owned and 551 short sales made up 71.55 percent.
The Orlando affordability index increased to 270.30 percent in August. (An affordability index of 99 percent means that buyers earning the state-reported median income are 1 percent short of the income necessary to purchase a median-priced home. Conversely, an affordability index that is over 100 means that median-income earners make more than is necessary to qualify for a median-priced home.) Buyers who earn the reported median income of $53,219 can qualify to purchase one of 9,932 homes in Orange and Seminole counties currently listed in the local multiple listing service for $270,031 or less.
First-time homebuyer affordability in August increased to 192.21 percent. First-time buyers who earn the reported median income of $36,189 can qualify to purchase one of 6,885 homes in Orange and Seminole counties currently listed in the local multiple listing service for $163,219 or less.
Homes of all types spent an average of 84 days on the market before coming under contract in August 2010, and the average home sold for 95.04 percent of its listing price. In August 2009 those numbers were 94 and 94.44 percent, respectively. The area’s average interest rate decreased in August to 4.61 percent.
Inventory
There are currently 16,535 homes available for purchase through the MLS. Inventory decreased by 28 homes from July 2010, which means that 28 more homes exited the market than entered the market. The August 2010 inventory level is 1.06 percent higher than it was in August 2009 (16,361). The current pace of sales translates into 6.81 months of supply; August 2009 recorded 7.47 months of supply.
There are 12,769 single-family homes currently listed in the MLS, a number that is 859 (7.21 percent) more than in August of last year. Condos currently make up 2,342 offerings in the MLS, while duplexes/town homes/villas make up the remaining 1,424.
Condos and Town Homes/Duplexes/Villas
August when compared to August of 2009 and increased by 5.89 percent compared to July of this year. To date, condo sales are up 74.09 percent (4,596 condos sold to date in 2010, compared to 2,640 by this time in 2009).
The most (361) condos in a single price category that changed hands in August were yet again in the $1 - $50,000 price range, which accounted for 57.39 percent of all condo sales.
Orlando homebuyers purchased 208 duplexes, town homes, and villas in August 2010, which is a 1.96 percent increase from August 2009 when 204 of these alternative housing types were purchased.
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