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.

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."

Mortgage markets in the U.S., which remain on government life support, could be rattled by the downgrade of the U.S. credit rating, potentially raising borrowing costs for consumers. Given the "sufficiently perilous" state of the U.S. mortgage market, a downgrade "can do nothing but harm the market," says Karen Shaw Petrou, managing partner of Federal Financial Analytics, a research firm in Washington. "The question is how much?" To be sure, no one knows for certain the impact of the unprecedented downgrade on the mortgage market, even if that market is fundamentally intertwined with the federal government.

One concern is that downgrades may trigger forced selling by mutual funds or foreign investors to comply with investor-specific capital requirements restricting them to assets rated triple-A. But analysts said that most institutional investors' rules for investing in government-backed mortgage debt aren't contingent on ratings. And with investors seeking traditional safe-haven assets such as Treasury and government-backed mortgage securities, "there just doesn't seem to be much else to invest in," says Andrew Davidson, a mortgage-industry consultant in New York. "What would people put
their money in if they sold their agency mortgages? It's hard to see what the trade is."

Mortgage rates are closely tied to yields on the 10-year Treasury note. Rising demand for Treasurys pushed down yields over the past two weeks, even as the threat of a U.S. default from the debt-ceiling debate in Washington dragged on, because investors looked for less risky assets amid concerns over the European debt crisis and the sluggish U.S. economy. Mortgage rates dropped to an eight-month low last week, with 30-year fixed-rate mortgages averaging 4.39% for the week ended Thursday, according to a survey by Freddie Mac. Still, the uncertainty created by the downgrade has nvestors on edge. The interplay of a downgrade, on top of the euro-zone crisis and renewed fears over a double-dip recession in the U.S., could lead to increased volatility in mortgage markets. "There are so many moving parts to this that no one really knows how it will go," says Mr.Simon.

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.

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.

Home prices up

According to the S&P/Case Shiller 20-city index, prices rose 0.7% in April compared with March, although they fell 0.1% when adjusted for the strong spring selling season. Prices were down 4% year-over-year. "In a welcome shift from recent months, this month is better than last -- April's numbers beat March," said David Blitzer, S&P's spokesman, in a statement. "However, the seasonally adjusted numbers show that much of the improvement reflects the beginning of the spring-summer home buying season. It is much too early to tell if this is a turning point or simply due to some warmer weather," Blitzer added. Any hint of good news in the troubled housing market will likely bring cheer to the industry, and there are some signs that market conditions are not quite as dire as some of the statistics may indicate.

Much of the price drop over the past year can be blamed on severe price slashing for homes in foreclosure, as Federal Reserve chairman Ben Bernanke pointed out in a press conference last Wednesday. Prices for homes sold by regular sellers have held up much better. Metropolitan Washington continued to be the strongest of the 20 cities covered by the report. Prices rose 3% in April there and have been on the plus side year-over-year, up 4%. The worst performing market for the month was Detroit, where prices fell 2.9%. The biggest year-over-year drop was recorded by Minneapolis, where prices have plunged 11.1% since last April.

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."

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."

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.

MBA - foreclosures up delinquencies down

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 8.22% of all loans outstanding as of the end of the fourth quarter of 2010, a decrease of 91 basis points from the third quarter of 2010, and a decrease of 125 basis points from one year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 46 basis points to 8.93% this quarter from 9.39% last quarter. The percentage of loans on which foreclosure actions were started during the fourth quarter was 1.27%, down seven basis points from last quarter and up seven 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 fourth quarter was 4.63%, up 24 basis points from the third quarter of 2010 and up five basis points from 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 8.57%, a decrease of 13 basis points from last quarter, and a decrease of 110 basis points from the fourth quarter of last year. The combined percentage of loans in foreclosure or at least one payment past due was 13.56% on a non-seasonally adjusted basis, a 22 basis point decline from 13.78% last quarter.

Jay Brinkmann, MBA's chief economist said "These latest delinquency numbers represent significant, across the board decreases in mortgage delinquency rates in the US. Total delinquencies, which exclude loans in the process of foreclosure, are now at their lowest level since the end of 2008. Mortgages only one payment past due are now at the lowest level since the end of 2007, the very beginning of the recession. Perhaps most importantly, loans three payments (90 days) or more past due have fallen from an all-time high delinquency rate of 5.02% at the end of the first quarter of 2010 to 3.63% at the end of the fourth quarter of 2010, a drop of 139 basis points or almost 28% over the course of the year. Every state but two saw a drop in the 90-plus day delinquency rate and the two increases were negligible."

"While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner. Despite continued high levels of unemployment, the economy did add over 1.2 million private sector jobs during 2010 and, after remaining stubbornly high during the first half of 2010, first time claims for unemployment insurance fell during the second half of the year. Absent a significant economic reversal, the delinquency picture should continue to improve during 2011, Brinkmann said.

Mike Fratantoni, MBA's vice president for single family research said "While the foreclosure starts rate fell during the fourth quarter, the percentage of loans in foreclosure rose to equal the all-time high. The foreclosure inventory rate captures loans from the point of the foreclosure referral to exit from the foreclosure process, either through a cure (perhaps through a modification), a short sale or deed in lieu, or through a foreclosure sale. As we predicted last quarter, the percentage of loans in the foreclosure process increased in the fourth quarter, largely due to the foreclosure paperwork issues that were being addressed in September and October. These issues caused a temporary halt in foreclosure sales, particularly in states with judicial foreclosure regimes, such as New Jersey, Florida, and Illinois.

With fewer loans exiting the foreclosure process through sales, the foreclosure inventory rate naturally increased, even as fewer foreclosure starts meant that fewer loans entered the foreclosure process in the fourth quarter." "The share of loans in foreclosure in California and Florida combined was 36.0%, a decrease from 37.3% in the third quarter, and 39.3% a year ago. Over 24% of the loans in Florida are one payment or more past due or in the process of foreclosure, the highest rate in the nation, followed by Nevada at over 22%, compared to an average of 13.6% for the nation. Only eleven states saw an increase in their foreclosure start rate with Maryland seeing the largest increase."

Mortgage servicing crackdown expected

U.S. banking regulators are close to finalizing new national guidelines that will impact mortgage servicing shops after an interagency investigation revealed "significant weaknesses in mortgage servicing related to foreclosure oversight and operations," said John Walsh, the Acting Comptroller of the Currency, in prepared statements to be delivered before a Senate Banking panel today. "In general, the examinations found critical deficiencies and shortcomings in foreclosure governance processes, foreclosure document preparation processes, and oversight and monitoring of third-party law firms and vendors," Walsh said.

"These deficiencies have resulted in violations of state and local foreclosure laws, regulations, or rules and have had an adverse affect on the functioning of the mortgage markets and the U.S. economy as a whole." Walsh said even though the process of outlining new guidelines for servicers is at its early stage, regulators intend to address some of the pressing issues they discovered while investigating the servicing process — namely a lack of national standards for the foreclosure process and borrower confusion over whom to contact in foreclosure cases due to uncertain protocols.

Walsh's report on the investigation of loan servicing firms comes on the heels of a major announcement from the Mortgage Electronic Registration System, or MERS. MERS, which is an electronic registry of mortgage records, informed members late Wednesday that they are now prohibited from foreclosing on residential loans using the MERS name. MERS has long been the target of foreclosure defense attorneys and consumer advocates for creating a foreclosure process that fails to create transparent oversight and protocols.

Walsh said as part of their comprehensive examination of servicing shops, regulators examined Lender Processing Services Inc. (LPS), MERSCORP, the parent company of MERS, and MERS itself. After reviewing the servicing shops and examining bank self assessments, as well as 2,800 foreclosure cases, Walsh said investigators concluded that there were "significant weaknesses in mortgage servicing related to foreclosure oversight and operations." He said regulators have yet to finalize their proposed guidelines, but that will be the next step in the process.

President tries to curb mortgage interest rate deduction

The president proposed in his budget to curtail high-income earners' tax deduction for mortgage interest payments and charitable contributions. Under his proposal, taxpayers in the 33% and 35% tax brackets would only be able to deduct their contributions and mortgage interest payments at the 28% rate. It would affect those with taxable income of $250,000 and up and bring in $321 billion over 10 years, according to the White House. The Obama administration, as well as several tax and deficit commissions, have called for limiting or eliminating the deductions in the past. But the proposals have gone nowhere and the same outcome is expected this year. Still, the real estate industry and non-profit sector are not taking any chances. They are making it clear to both Congress and the White House that they strongly oppose any limits to the deductions.

The industry is concerned that capping the deduction will hurt the housing market, which continues to stumble. The tax break makes homeownership more affordable, they argue. This is the second time in recent months that the Obama administration has recommended curtailing the deduction, which costs the Treasury Department an estimated $131 billion a year. In December, a presidential debt panel recommended turning the itemized deduction in to a 12% non-refundable tax credit available to everyone. It would also cut the size of eligible mortgages in half to up to $500,000. "NAR will remain vigilant in opposing any plan that modifies or excludes the deductibility of mortgage interest," National Association of Realtors President Ron Phipps said at the time.

NAR - GSE's should maintain public involvement

According to the National Association of Realtors’ recommendations for restructuring the government-sponsored enterprises (GSEs), continued government participation in the secondary mortgage market is essential to ensuring affordable and available home mortgages to qualified consumers when private lenders withdraw from the market. NAR’s recommended plan is to restructure the entities as government-chartered, non-shareholder owned authorities that protect taxpayers and ensure continued access to affordable mortgages for consumers who are willing and able to assume the responsibilities of the American Dream of home ownership. NAR believes the previous structure of Fannie Mae and Freddie Mac with private profits and taxpayer loss must never recur; however, without some level of government backing of the most basic, simple mortgages – such as the 30-year fixed rate product – interest rates and mortgage fees will be notably higher for consumers and could severely restric
t access to credit, especially during down or disruptive markets. The recent economic downturn, for example, caused private capital to flee the marketplace; government backing of residential mortgages was critical in providing capital to borrowers and without their support the financial crisis could have been far worse.

NAR encourages private market solutions and innovations such as covered bonds for less traditional mortgages. However, a full privatization across all mortgage products will inevitably put taxpayers at risk. Given the very high concentration in the banking industry, the market will be vulnerable to tacit collusion and too-big-to-fail mistakes. The restructured GSEs under NAR’s plan would guarantee or ensure a wide range of safe, reliable mortgage products such as 15- and 30-year fixed rate loans. Sound and sensible loan underwriting standards would need to be established. NAR’s plan would require the entities to be fully self-financing and subject to tight regulations on product, revenue generation and usage in a way that ensures they can accomplish their mission and protect taxpayer dollars.

New sales contracts on the increase; median price still holding steady

(December 13, 2010 – Orlando, FL) Members of the Orlando Regional REALTOR Association reported an increase in the number of home-sale contracts they filed in November, with 3,243 newly filed contracts topping last November’s tally of 3,023 by 7.28 percent.

The area’s pending sales statistic — like new contracts — is also an indicator of future sales activity. A total of 8,998 homes are currently under contract and awaiting closing. This number is also an increase (of 4.23 percent) over the 8,633 homes that were under contract in November 2009.

Members of ORRA recorded completed sales on 1,848 homes in November, which is a 20.65 percent decrease over the November 2009 tally of 2,329 sales. To date, Orlando area home sales are up 21.55 percent over this time in 2009.

“Uneven sales patterns are to be expected over the next months,” explains ORRA Chairman of the Board Mike McGraw, McGraw Real Estate Services. “We are experiencing aftershocks from slowdowns caused by the homebuyer tax credit ending and the temporary foreclosure stoppage. But at the same time, buyers who are responding to record-low interest rates and enticingly low home prices are contributing to a push-pull effect on Orlando’s housing market.”

The median sales price of all homes sold in the Orlando area held steady at $105,000 during November, the third month in a row. According to ORRA the current median price remains 5.11 percent higher than the $99,900 median price recorded in August 2010 and is 14.63 percent below the median price of $123,000 recorded in November 2009.

The median price for “normal” existing homes – i.e., those that are neither a short sale nor a foreclosure – sold in November is $159,900. The median price for bank-owned sales is $78,101 and the median price for short sales is $99,950. The lower median prices of bank-owned and short sales, which accounted for 66.67 percent of all sales in November, exert a downward influence on the overall median price.

The Orlando affordability index decreased to 261.95 percent in November. (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 $53,390 can qualify to purchase one of 9,027 homes in Orange and Seminole counties currently listed in the local multiple listing service for $275,049 or less.

First-time homebuyer affordability in November decreased to 186.28 percent. First-time buyers who earn the reported median income of $36,305 can qualify to purchase one of 6,493 homes in Orange and Seminole counties currently listed in the local multiple listing service for $166,252 or less.

Homes of all types spent an average of 97 days on the market before coming under contract in November 2010, and the average home sold for 94.08 percent of its listing price. In November 2009 those numbers were 85 and 94.90 percent, respectively. The area’s average interest rate increased in November to 4.48 percent.

Inventory

There are currently 15,192 homes available for purchase through the MLS. Inventory decreased by 249 homes (1.61 percent) from October 2010, which means that 249 more homes exited the market than entered the market. The November 2010 inventory level is 5.06 percent lower than it was in November 2009 (16,002). The current pace of sales translates into 8.22 months of supply; November 2009 recorded 6.87 months of supply.

There are 12,083 single-family homes currently listed in the MLS, a number that is 2.85 percent more than the 11,748 single-family homes listed in November of last year. Condos currently make up 1,871 offerings in the MLS, while duplexes/town homes/villas make up the remaining 1,238.

Condos and Town Homes/Duplexes/Villas

The sales of condos in the Orlando area decreased by 6.45 percent in November when compared to November of 2009 and decreased by 16.59 percent compared to October of this year. To date, condo sales are up 53.77 percent (6,031 condos sold to date in 2010, compared to 3,922 by this time in 2009).

The most (193) condos in a single price category that changed hands in October were yet again in the $1 - $50,000 price range, a year-long trend that accounts for 54.50 percent of all condo sales. The next greatest range, with 12.09 percent of this year’s condo sales, is the $50,000 - $60,000 category.

Orlando homebuyers purchased 178 duplexes, town homes, and villas in November 2010, which is a 24.89 percent decline from November 2009 when 237 of these alternative housing types were purchased.

MSA Numbers

Sales of existing homes within the entire Orlando MSA (Lake, Orange, Osceola, and Seminole counties) in November were down by 19.13 percent when compared to November of 2009. Throughout the MSA, 2,295 homes were sold in November 2010 compared with 2,838 in November 2009.

To date, sales throughout the MSA are 16.72 percent above this time in 2009 with 31,988 homes exchanging hands compared to 27,406. Each individual county’s year-to-date sales comparisons are as follows:

Lake: 2.06 percent above 2009 (3,827 homes sold to date in 2010 compared to 3,728 in 2009);
Orange: 18.17 percent above 2009 (17,223 homes sold to date in 2010 compared to 14,575 in 2009);
Osceola: 12.12 percent above 2009 (5,774 homes sold to date in 2010 compared to 5150 in 2009); and
Seminole: 30.63 percent above 2009 (5,164 sold to date in 2010 compared to 3,953 in 2009).

For detailed statistical reports, please visit www.orlrealtor.com and click on “Housing Statistics” on the top menu bar. This representation is based in whole or in part on data supplied by the Orlando Regional REALTOR® Association or its Multiple Listing Service (MLS). Neither the association nor its MLS guarantees or is in any way responsible for its accuracy. Data maintained by the association or its MLS may not reflect all real estate activity in the market. Due to late closings, an adjustment is necessary to record those closings posted after our reporting date.

ORRA REALTOR® sales, referred to as the core market, represent all sales by members of the Orlando Regional REALTOR® Association, not necessarily those sales strictly in Orange and Seminole counties. Note that statistics released each month may be revised in the future as new data is received.

Orlando MSA numbers reflect sales of homes located in Orange, Seminole, Osceola, and Lake counties by members of any Realtor® association, not just members of ORRA.