Foreclosures Down, But Late Payments Up
The wave of foreclosures appears to be subsiding slightly. According to data from Mortgage Bankers Association’s National Delinquency Survey:
• The percentage of loans on which foreclosure action were started during the second quarter was 1.11 percent, down 12 basis points from last quarter and down 25 basis points from one year ago.
• The percentage of loans in the foreclosure process at the end of the second quarter was 4.57 percent, a decrease of six basis points from the first quarter of 2010, but an increase of 27 basis points from one year ago.
• Loans that were 90 days or more past due or in the process of foreclosure was 9.11 percent, a decrease of 43 basis points from first quarter, but an increase of 114 basis points compared to the second quarter of last year.
“The good news is that foreclosure starts are down, and the inventory of homes anywhere in the process of foreclosure fell for the first time since 2006 and had the largest drop since 2005,” says Jay Brinkmann, MBA’s chief economist.
The bad news is that the percent of loans one payment behind had peaked in the first quarter of 2009 at 3.77 percent and fell to 3.31 percent by the end of 2009. Now that rate has risen to 3.51 percent.
“Only when we see a consistent increase in employment will we see an increase in sales and starts, and a sustained improvement in the delinquency numbers,” Brinkmann adds.
Source: Mortgage Bankers Association (08/26/2010)
Friday, August 27, 2010
Monday, August 9, 2010
Housing Tax Credit was like a Painkiller
Housing Tax Credit was like a Painkiller…Posted on 29 Jul, 2010 by admin According to a CNN Money article, “The tax credit was like a painkiller for the housing market, but we’ll have to go into surgery to deal with the underlying problems…”
I certainly can’t speak for the rest of you, but surgery isn’t exactly a fun experience. The housing market has taken it’s bumps and bruises, broken bones, etc., but the bandages have to be addressed properly, not just put on tighter. With any injury, if you’re following the proper treatment procedures, you should follow the RICE method. Rest, Ice, Compression, Elevation…
What does this mean as translation for the housing market? How about TIRE – (T) Tax Credits for Buyers to stimulate offers, (I) Inventory Reduction, (R) Regulation of the banks to accept reasonable offers on properties, (E) Expedition of these submitted offers.
There are many problems within the system, each having a different solution. Buyers are backing out of deals because of the lengthy timeline, and because there is so much inventory on the market, they can find a new property that may not need to be approved. Offering continued tax credits to buyers will offer incentives for them to continue purchasing, it’s proven that this solution worked. Temporary regulation of the lenders to approve reasonable offers, and expediting the process will correct the tumbling housing market.
Until the time where this TIRE method comes to light, the market shifts, and property values continue to rise, we will see a very slow recovery to this housing market crisis. If property values continue to dip as they have, and homeowners owe more than their house is worth, anytime they want or need to sell within the next 10-15 years, depending on the market, it will be a Short Sale.
It would be a shame if the real estate market was still in a cycle 15 years from now, where the term “Short Sale” was as popular as it’s become today. That would simply mean, that bandage was just put on way too tight!
I certainly can’t speak for the rest of you, but surgery isn’t exactly a fun experience. The housing market has taken it’s bumps and bruises, broken bones, etc., but the bandages have to be addressed properly, not just put on tighter. With any injury, if you’re following the proper treatment procedures, you should follow the RICE method. Rest, Ice, Compression, Elevation…
What does this mean as translation for the housing market? How about TIRE – (T) Tax Credits for Buyers to stimulate offers, (I) Inventory Reduction, (R) Regulation of the banks to accept reasonable offers on properties, (E) Expedition of these submitted offers.
There are many problems within the system, each having a different solution. Buyers are backing out of deals because of the lengthy timeline, and because there is so much inventory on the market, they can find a new property that may not need to be approved. Offering continued tax credits to buyers will offer incentives for them to continue purchasing, it’s proven that this solution worked. Temporary regulation of the lenders to approve reasonable offers, and expediting the process will correct the tumbling housing market.
Until the time where this TIRE method comes to light, the market shifts, and property values continue to rise, we will see a very slow recovery to this housing market crisis. If property values continue to dip as they have, and homeowners owe more than their house is worth, anytime they want or need to sell within the next 10-15 years, depending on the market, it will be a Short Sale.
It would be a shame if the real estate market was still in a cycle 15 years from now, where the term “Short Sale” was as popular as it’s become today. That would simply mean, that bandage was just put on way too tight!
Wednesday, July 28, 2010
Home prices show stability after modest gain
Very Interesting with ALL the hype floating around with the market dropping 10%.. I dont agree! Read Below :-)
NEW YORK (CNNMoney.com) -- Home prices rose slightly in May compared with a month earlier, appearing to have stablized at the lower levels that followed the end of the residential real estate bubble, according to the S&P/Case-Shiller Home Price Index of 20 major housing markets released Tuesday.
Prices were up 1.3% from April, and 4.6% from 12 months earlier.
The price rise might have reflected one of the last gasps of the government's incentive program, which paid tax refunds of as much as $8,000 to homebuyers if they signed a sales contract before May 1.
"It does look like the market was boosted by the tax credit," said Robert Dye, senior economist for PNC Financial Services. "It seems to have pulled some of the demand forward."
Although the increase was welcome news for the beleaguered housing market, S&P spokesman David Blitzer downplayed the gain.
"While May's report on its own looks somewhat positive, a broader look at home price levels over the past year still do not indicate that the housing market is in any form of sustained recovery," he said. "Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level. The last seven months have basically been flat."
Home prices peaked back in July 2006 and fell for 33 straight months before bottoming out in April 2009. The peak-to-trough decline came to more than 32%.
The index went on a short upswing for five months, regaining 5.3% of its loss before turning tail again, declining 2.2% before a modest rebound in April.
Winners and one loser
Only one of the 20 metro areas, Las Vegas, reported a price decline for May, with a 0.5% loss. Minneapolis had the largest spike: prices jumped 2.8% and were up 11.6% over the prior 12 months.
San Francisco had the largest year-over-year gain, 18.3% higher than May 2009. San Diego, at 12.4%, and Los Angeles, at 9.7%, have also posted healthy year-over-year gains.
In a way, the index may understate its positive results. It counts all sales, including distressed properties. Those have become a major component of the market, with short sales and bank repossessions accounting for close to a third of all sales.
Repossessions sell, on average, for 27% less than conventional sales, according to a recent report from MIT economist Parag Pathak and two Harvard researchers, John Campbell and Stefano Giglio.
"It's not surprising that there is a discount due to foreclosure," said Pathak in a release. "But it is surprising that it's so large."
The repossession discount comes from a couple of factors. Borrowers who lose their homes to foreclosure may not have had the funds or the incentive to maintain their homes well. The homes often come onto the market in poor condition, lowering their values.
In addition, lenders often want to sell the homes very quickly to avoid all the expenses of home ownership - taxes, utilities, insurance and maintenance - so they're willing to sell at far below comparable homes.
Maureen Maitland, vice president for index services at S&P, said foreclosure and short sale data is included in the index because they represent such a big part of the market. "In some metro areas they're 50% to 60% of sales," she said.
They're expected to remain so for a long time. The run rate for bank repossessions so far this year indicates more than a million homes will be lost to foreclosure and put back on the market by the banks.
That will extend the overhang on inventory, which along with the end of the tax credit will probably keep prices down for at least the summer months, according to Maitland.
It may be autumn, if then, before improvement in the economy puts housing markets back on a firm footing, according to Dye.
"Housing has firmed up since the dark days of 2008 and 2009, but it's still wobbly," he said.
NEW YORK (CNNMoney.com) -- Home prices rose slightly in May compared with a month earlier, appearing to have stablized at the lower levels that followed the end of the residential real estate bubble, according to the S&P/Case-Shiller Home Price Index of 20 major housing markets released Tuesday.
Prices were up 1.3% from April, and 4.6% from 12 months earlier.
The price rise might have reflected one of the last gasps of the government's incentive program, which paid tax refunds of as much as $8,000 to homebuyers if they signed a sales contract before May 1.
"It does look like the market was boosted by the tax credit," said Robert Dye, senior economist for PNC Financial Services. "It seems to have pulled some of the demand forward."
Although the increase was welcome news for the beleaguered housing market, S&P spokesman David Blitzer downplayed the gain.
"While May's report on its own looks somewhat positive, a broader look at home price levels over the past year still do not indicate that the housing market is in any form of sustained recovery," he said. "Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level. The last seven months have basically been flat."
Home prices peaked back in July 2006 and fell for 33 straight months before bottoming out in April 2009. The peak-to-trough decline came to more than 32%.
The index went on a short upswing for five months, regaining 5.3% of its loss before turning tail again, declining 2.2% before a modest rebound in April.
Winners and one loser
Only one of the 20 metro areas, Las Vegas, reported a price decline for May, with a 0.5% loss. Minneapolis had the largest spike: prices jumped 2.8% and were up 11.6% over the prior 12 months.
San Francisco had the largest year-over-year gain, 18.3% higher than May 2009. San Diego, at 12.4%, and Los Angeles, at 9.7%, have also posted healthy year-over-year gains.
In a way, the index may understate its positive results. It counts all sales, including distressed properties. Those have become a major component of the market, with short sales and bank repossessions accounting for close to a third of all sales.
Repossessions sell, on average, for 27% less than conventional sales, according to a recent report from MIT economist Parag Pathak and two Harvard researchers, John Campbell and Stefano Giglio.
"It's not surprising that there is a discount due to foreclosure," said Pathak in a release. "But it is surprising that it's so large."
The repossession discount comes from a couple of factors. Borrowers who lose their homes to foreclosure may not have had the funds or the incentive to maintain their homes well. The homes often come onto the market in poor condition, lowering their values.
In addition, lenders often want to sell the homes very quickly to avoid all the expenses of home ownership - taxes, utilities, insurance and maintenance - so they're willing to sell at far below comparable homes.
Maureen Maitland, vice president for index services at S&P, said foreclosure and short sale data is included in the index because they represent such a big part of the market. "In some metro areas they're 50% to 60% of sales," she said.
They're expected to remain so for a long time. The run rate for bank repossessions so far this year indicates more than a million homes will be lost to foreclosure and put back on the market by the banks.
That will extend the overhang on inventory, which along with the end of the tax credit will probably keep prices down for at least the summer months, according to Maitland.
It may be autumn, if then, before improvement in the economy puts housing markets back on a firm footing, according to Dye.
"Housing has firmed up since the dark days of 2008 and 2009, but it's still wobbly," he said.
Friday, July 23, 2010
Exhaust all options prior to foreclosure, or should I just let it go?
We speak to people every day that have it embedded in their mind to just let their property go to foreclosure. One of the main reasons for this, is they don’t know the options in order to avoid foreclosure in the first place.
The biggest item of consideration with this decision is the impact on credit. A foreclosure has a very aggressive impact on credit, both immediately, and in the future. Most importantly, every time a loan application is filled out, you will always need to inform the potential lender that you have a foreclosure in your past. This is a huge red flag for lenders when attempting to get a loan in the future.
Each of the alternatives to foreclosure can help you avoid both the short term and the long term stress. Whether it be an attempt to modify the mortgage, sell the property prior to the foreclosure date through a Short Sale, each will have a less damaging impact on your credit. Depending on the terms of the negotiation, it can show on credit as a settlement or as paid in full. The ramifications of this are less damaging.
Lenders are speeding up their processes for successful short sales of properties, so it is possible that your lender will move swiftly to get your property sold. Whether it is through the Foreclosure process or the short sale process, there is one guarantee. You will have to move.
Ultimately, the question that needs to be asked is are you willing to deal with the long term stress of future inability to obtain a loan, or will you exhaust all options prior to moving? There is plenty of help available to restore credit, and according to most of the information given, you can obtain a loan after a short sale as soon 2 years, whereas through the foreclosure process, not for 7-10 years.
Exhaust all options, you deserve it.
The biggest item of consideration with this decision is the impact on credit. A foreclosure has a very aggressive impact on credit, both immediately, and in the future. Most importantly, every time a loan application is filled out, you will always need to inform the potential lender that you have a foreclosure in your past. This is a huge red flag for lenders when attempting to get a loan in the future.
Each of the alternatives to foreclosure can help you avoid both the short term and the long term stress. Whether it be an attempt to modify the mortgage, sell the property prior to the foreclosure date through a Short Sale, each will have a less damaging impact on your credit. Depending on the terms of the negotiation, it can show on credit as a settlement or as paid in full. The ramifications of this are less damaging.
Lenders are speeding up their processes for successful short sales of properties, so it is possible that your lender will move swiftly to get your property sold. Whether it is through the Foreclosure process or the short sale process, there is one guarantee. You will have to move.
Ultimately, the question that needs to be asked is are you willing to deal with the long term stress of future inability to obtain a loan, or will you exhaust all options prior to moving? There is plenty of help available to restore credit, and according to most of the information given, you can obtain a loan after a short sale as soon 2 years, whereas through the foreclosure process, not for 7-10 years.
Exhaust all options, you deserve it.
Wednesday, July 21, 2010
Mortgage Rates Fall to 4.59%, Enough To Move Demand
By Nick Timiraos
Finally.
Record low mortgage rates spurred an uptick in new-purchase mortgage applications last week for just the second time in the past two months, while more Americans also applied to refinance, according to the Mortgage Bankers Association.
Rates fell last week to 4.59% on an average 30-year fixed-rate mortgage, which is down from 4.69% one week ago and the lowest ever recorded by the trade group since its survey began in 1972. Other measures show that rates continued to fall this week: Zillow’s Mortgage Marketplace quoted an average of 4.37% on Tuesday.
Those low rates haven’t done much to drive up demand for new home loans in recent weeks. Purchase activity is still more than 40% down from its highs of April, though it ticked up by 3.4% last week. That’s largely because home-buyer tax credits pulled demand forward. But the recent drop in applications to 14-year lows “smacks of more than a temporary, one-off fall in activity,” says Paul Dales, chief economist at Capital Economics.
Refinance activity has held up better because it’s driven much more by low rates than other economic factors that go into buying a house. Refinance applications were up by 9% last week and are up by almost 30% over the past four weeks, though activity is still below the near-term May 2009 peak. Around 80% of mortgage activity last week was for refinances, the highest refinance share since April 2009.
Still, refinancing activity isn’t as high as would be expected at current rates, in part because it’s harder to get a loan today. Also, many borrowers have lost equity or taken a hit to their incomes or credit and either can’t qualify or aren’t willing to pay extra fees that come with being a bigger credit risk.
Of course, it doesn’t make sense for everyone to refinance. Borrowers who plan to sell in the next few years will want to think twice about paying closing costs to get a low rate. Also, borrowers who’ve had their loans for a long time—and are therefore paying a greater share of their payment towards their loan principal, as opposed to interest—may not want to refinance.
Finally.
Record low mortgage rates spurred an uptick in new-purchase mortgage applications last week for just the second time in the past two months, while more Americans also applied to refinance, according to the Mortgage Bankers Association.
Rates fell last week to 4.59% on an average 30-year fixed-rate mortgage, which is down from 4.69% one week ago and the lowest ever recorded by the trade group since its survey began in 1972. Other measures show that rates continued to fall this week: Zillow’s Mortgage Marketplace quoted an average of 4.37% on Tuesday.
Those low rates haven’t done much to drive up demand for new home loans in recent weeks. Purchase activity is still more than 40% down from its highs of April, though it ticked up by 3.4% last week. That’s largely because home-buyer tax credits pulled demand forward. But the recent drop in applications to 14-year lows “smacks of more than a temporary, one-off fall in activity,” says Paul Dales, chief economist at Capital Economics.
Refinance activity has held up better because it’s driven much more by low rates than other economic factors that go into buying a house. Refinance applications were up by 9% last week and are up by almost 30% over the past four weeks, though activity is still below the near-term May 2009 peak. Around 80% of mortgage activity last week was for refinances, the highest refinance share since April 2009.
Still, refinancing activity isn’t as high as would be expected at current rates, in part because it’s harder to get a loan today. Also, many borrowers have lost equity or taken a hit to their incomes or credit and either can’t qualify or aren’t willing to pay extra fees that come with being a bigger credit risk.
Of course, it doesn’t make sense for everyone to refinance. Borrowers who plan to sell in the next few years will want to think twice about paying closing costs to get a low rate. Also, borrowers who’ve had their loans for a long time—and are therefore paying a greater share of their payment towards their loan principal, as opposed to interest—may not want to refinance.
Tuesday, July 20, 2010
Banks Repossess US homes at a record pace
Compliments of Green Street Realty
Banks Repossess US homes at a record pacePosted on 19 Jul, 2010 by admin If you were running the US Government, and had the choice on how to resuscitate the Real Estate housing economy, how would you do it? Would your answer be 1) to have the lenders repossess homes, that will eventually go back on the market at a slashed price in order to sell them fast, or 2) would you force the lenders to take a reasonable offer at or near current market value, get a new homeowner into the home at a fixed interest rate for 30 years?
An ideal situation would be option number 2, but there are so many investor backed loans that lenders are being forced to gamble by refusing these reasonable offers. The investor will take a hit, no matter the circumstance, but why take more of a hit by seeking the alternative?
We feel, that it’s time for the economy to rebound, but putting houses back on the market at a slashed price, after they’ve been foreclosed on, only continues to drive the value of the rest of the properties in the subdivision much lower than is necessary.
At some point, someone will do the math and understand when the time is right to stop the foreclosure process and start following the rules of the short sale. Take less of a hit now, get the property off the lenders’ books, and move on. At face value, it’s a win-win-win situation for everyone involved. There has to be something much deeper than what is seen at face value. Maybe it’s a bonus on the back end for the investor by taking it to auction. When doe the greater good for the economy outweigh the individual outcome of this foreclosure process?
As the market continues to tumble, we may look to the repossession of these homes by lenders as a reason for the continued struggle.
Banks Repossess US homes at a record pacePosted on 19 Jul, 2010 by admin If you were running the US Government, and had the choice on how to resuscitate the Real Estate housing economy, how would you do it? Would your answer be 1) to have the lenders repossess homes, that will eventually go back on the market at a slashed price in order to sell them fast, or 2) would you force the lenders to take a reasonable offer at or near current market value, get a new homeowner into the home at a fixed interest rate for 30 years?
An ideal situation would be option number 2, but there are so many investor backed loans that lenders are being forced to gamble by refusing these reasonable offers. The investor will take a hit, no matter the circumstance, but why take more of a hit by seeking the alternative?
We feel, that it’s time for the economy to rebound, but putting houses back on the market at a slashed price, after they’ve been foreclosed on, only continues to drive the value of the rest of the properties in the subdivision much lower than is necessary.
At some point, someone will do the math and understand when the time is right to stop the foreclosure process and start following the rules of the short sale. Take less of a hit now, get the property off the lenders’ books, and move on. At face value, it’s a win-win-win situation for everyone involved. There has to be something much deeper than what is seen at face value. Maybe it’s a bonus on the back end for the investor by taking it to auction. When doe the greater good for the economy outweigh the individual outcome of this foreclosure process?
As the market continues to tumble, we may look to the repossession of these homes by lenders as a reason for the continued struggle.
Friday, April 23, 2010
Realtors: Phoenix home prices, sales on the rise
The National Association of Realtors reports year-to-year increases in median prices and home sales in the Phoenix area.
Prices in March came in at $144,500, up from $127,500 in March 2009, a 13.3 percent increase. The number of home resales was up 10.1 percent, according to the association’s monthly report issued Thursday.
NAR’s prices are derived from estimates on a sample of Multiple Listing Service sales, unlike Arizona State University’s index, which measures prices of the same homes being resold at a later date and offers a different take on the local market.
Nationally, the number of single-family, townhome, condominium and co-op resales rose 6.8 percent to a seasonally adjusted annual rate of 5.35 million units in March from 5.01 million in February, and 16.1 percent in March 2009. NAR attributes the rise to increased affordability, the homebuyer tax credit and the annual “spring surge.”
NAR Chief Economist Lawrence Yun says it is encouraing to see a broad home sales recovery in nearly every part of the country. Still foreclosures are feeding into the pipeline at a fairly steady pace, he adds. “In fact, foreclosures are selling quickly, especially in the lower price ranges that are attractive to first-time home buyers.”
Of the 20 major metros surveyed by NAR, 14 showed gains in median price, led by San Diego at 20.4 percent. The Southern California city also had the highest median price at $393,600. At $113,600, Atlanta had the lowest median.
Sales were up in all markets but New Orleans, which saw a 2.3 percent decline. Portland experienced the highest year-to-year increase in sales at 45.6 percent, according to the report.
Read more: Realtors: Phoenix home prices, sales on the rise - Phoenix Business Journal:
Prices in March came in at $144,500, up from $127,500 in March 2009, a 13.3 percent increase. The number of home resales was up 10.1 percent, according to the association’s monthly report issued Thursday.
NAR’s prices are derived from estimates on a sample of Multiple Listing Service sales, unlike Arizona State University’s index, which measures prices of the same homes being resold at a later date and offers a different take on the local market.
Nationally, the number of single-family, townhome, condominium and co-op resales rose 6.8 percent to a seasonally adjusted annual rate of 5.35 million units in March from 5.01 million in February, and 16.1 percent in March 2009. NAR attributes the rise to increased affordability, the homebuyer tax credit and the annual “spring surge.”
NAR Chief Economist Lawrence Yun says it is encouraing to see a broad home sales recovery in nearly every part of the country. Still foreclosures are feeding into the pipeline at a fairly steady pace, he adds. “In fact, foreclosures are selling quickly, especially in the lower price ranges that are attractive to first-time home buyers.”
Of the 20 major metros surveyed by NAR, 14 showed gains in median price, led by San Diego at 20.4 percent. The Southern California city also had the highest median price at $393,600. At $113,600, Atlanta had the lowest median.
Sales were up in all markets but New Orleans, which saw a 2.3 percent decline. Portland experienced the highest year-to-year increase in sales at 45.6 percent, according to the report.
Read more: Realtors: Phoenix home prices, sales on the rise - Phoenix Business Journal:
Monday, April 19, 2010
Real Estate Outlook: Faster Recovery?
Real Estate Outlook: Faster Recovery?
by Kenneth R. Harney
What a great article...... thanks to Kenneth Harney and Realty Times.com
It's been a long time since we've seen the Wall Street Journal run a front-page article suggesting that the national economy appears to be rebounding faster than most analysts forecast. But that happened last week.
And over the past couple of years, we haven't seen retail sales -- a key barometer of consumer confidence -- jump by almost two percent in a single month. But we saw that last week as well.
And then there's real estate: The latest Federal Reserve "beige book" on economic conditions nationwide, issued last week, said something we haven't heard in a long, long time. Housing activity is up in 11 of the 12 bank districts.
All of this, of course, sounds like promising news for home sales in the coming months. In fact, Freddie Mac's economists see total sales this year at least 10 percent higher than last year, even with the possibility of higher mortgage interest rates.
But there are complications in the mix: The Fed's "beige book" report essentially said, yes, housing is on an upward path at the moment, but what happens to sales after the home purchase tax credits expire mid-year?
Will expansion elsewhere in the economy be able to sustain sales and prices?
Lawrence Yun, chief economist for the National Association of Realtors, has similar concerns. In his latest commentary, Yun says steadily rising employment will be essential to keeping housing positive once the credits disappear.
The employment report for March was encouraging: 162,000 net new jobs, Yun noted, even in hard hit sectors like manufacturing. Yun's forecast model projects one million additional new jobs this year, plus another two million next year.
But even that sort of rebound in employment won't be enough to replace the 8.2 million jobs lost in the recession years. So the unemployment challenge is likely to be with us for a few years -- at best.
Meanwhile, though foreclosures remain troublingly high, the rate of delinquencies on existing mortgages may have actually peaked and could be headed downward. Equifax and Moody's Economy.com report that the percentage of home loans thirty days late dropped in the first quarter - the first decline in four years.
And in major housing markets that took hard hits during the bust, signs of recovery continue to multiply. For example, in the six counties of Southern California, home sales were up 33 percent in March over February, and were up five percent over 2009 levels, according to MDA Data Quick.
Even median prices were on the rise -- by 14 percent over year-earlier levels.
Published: April 19, 2010
by Kenneth R. Harney
What a great article...... thanks to Kenneth Harney and Realty Times.com
It's been a long time since we've seen the Wall Street Journal run a front-page article suggesting that the national economy appears to be rebounding faster than most analysts forecast. But that happened last week.
And over the past couple of years, we haven't seen retail sales -- a key barometer of consumer confidence -- jump by almost two percent in a single month. But we saw that last week as well.
And then there's real estate: The latest Federal Reserve "beige book" on economic conditions nationwide, issued last week, said something we haven't heard in a long, long time. Housing activity is up in 11 of the 12 bank districts.
All of this, of course, sounds like promising news for home sales in the coming months. In fact, Freddie Mac's economists see total sales this year at least 10 percent higher than last year, even with the possibility of higher mortgage interest rates.
But there are complications in the mix: The Fed's "beige book" report essentially said, yes, housing is on an upward path at the moment, but what happens to sales after the home purchase tax credits expire mid-year?
Will expansion elsewhere in the economy be able to sustain sales and prices?
Lawrence Yun, chief economist for the National Association of Realtors, has similar concerns. In his latest commentary, Yun says steadily rising employment will be essential to keeping housing positive once the credits disappear.
The employment report for March was encouraging: 162,000 net new jobs, Yun noted, even in hard hit sectors like manufacturing. Yun's forecast model projects one million additional new jobs this year, plus another two million next year.
But even that sort of rebound in employment won't be enough to replace the 8.2 million jobs lost in the recession years. So the unemployment challenge is likely to be with us for a few years -- at best.
Meanwhile, though foreclosures remain troublingly high, the rate of delinquencies on existing mortgages may have actually peaked and could be headed downward. Equifax and Moody's Economy.com report that the percentage of home loans thirty days late dropped in the first quarter - the first decline in four years.
And in major housing markets that took hard hits during the bust, signs of recovery continue to multiply. For example, in the six counties of Southern California, home sales were up 33 percent in March over February, and were up five percent over 2009 levels, according to MDA Data Quick.
Even median prices were on the rise -- by 14 percent over year-earlier levels.
Published: April 19, 2010
Monday, April 12, 2010
Fed: Low Rates Likely Through 2010
Fed: Low Rates Likely Through 2010
Interest rates are likely to remain low into 2011, Federal Reserve policymakers hinted this week in at least two presentations. These indications came one week after the Fed shut down its program to buy mortgage-backed securities, which had kept rates at or near record lows in recent months.
In a speech Thursday, Fed Governor Daniel Tarullo said, "The relatively modest pace of recovery, the continued high rate of unemployment, subdued inflation trends, and well-anchored inflation expectations together suggest that the need for highly accommodative monetary policies will not diminish soon.”
Likewise, Donald Kohn, Fed vice chairman in a speech in San Francisco, said the Fed would raise rates, “in due course,” but he also noted that low rates "help offset the lingering restraining effects on economic activity and prices."
So far, rates have risen modestly, but analysts speculate they will likely become much more volatile down the road.
“It’s an uncertain type of market,” says Keith Gumbinger of HSH.com.
Michael Fratantoni, vice president of research and economics for the Mortgage Bankers Association, predicts that the Fed will have created a situation where there are days or weeks of low-rate opportunities, and other days and weeks when rates rise significantly.
Sources: The Wall Street Journal, Nick Timiraos (04/08/2010), and The Wall Street Journal, Jon Hilsenrath (04/09/2010)
Interest rates are likely to remain low into 2011, Federal Reserve policymakers hinted this week in at least two presentations. These indications came one week after the Fed shut down its program to buy mortgage-backed securities, which had kept rates at or near record lows in recent months.
In a speech Thursday, Fed Governor Daniel Tarullo said, "The relatively modest pace of recovery, the continued high rate of unemployment, subdued inflation trends, and well-anchored inflation expectations together suggest that the need for highly accommodative monetary policies will not diminish soon.”
Likewise, Donald Kohn, Fed vice chairman in a speech in San Francisco, said the Fed would raise rates, “in due course,” but he also noted that low rates "help offset the lingering restraining effects on economic activity and prices."
So far, rates have risen modestly, but analysts speculate they will likely become much more volatile down the road.
“It’s an uncertain type of market,” says Keith Gumbinger of HSH.com.
Michael Fratantoni, vice president of research and economics for the Mortgage Bankers Association, predicts that the Fed will have created a situation where there are days or weeks of low-rate opportunities, and other days and weeks when rates rise significantly.
Sources: The Wall Street Journal, Nick Timiraos (04/08/2010), and The Wall Street Journal, Jon Hilsenrath (04/09/2010)
Tuesday, March 30, 2010
Don't foreclose! Do a short sale
NEW YORK (CNNMoney.com) -- Short sales are the hottest thing going in the distressed-property market, and the trend is expected to get even hotter in coming weeks, when the government starts handing out cash to encourage lenders to close these deals.
"Banks have ramped up short sale approvals," said Duane Legate of House Buyer Network, which connects short sellers with buyers. "They're hiring a lot of the people who once worked in the mortgage-lending industry and moved them over to short sales."
These transactions, where lenders allow homeowners to sell their houses for less than they owe, accounted for 17% of all residential real estate sales in February, up from nearly 13% in November, according to a monthly real estate market survey by Campbell/Inside Mortgage Finance.
And Bank of America (BAC, Fortune 500), the country's largest mortgage servicer, has more than doubled the number of short sales it processed in recent months.
Elizabeth Weintraub, a Sacramento, Calif.-area real estate agent who handles many short sales, was amazed at how quickly a recent deal went through. "Bank of America approved it in 24 days," she said. "That flipped me out."
This is a huge change from even just six months ago when the short-sale market was stalled and most people would describe the process has real estate hell. Because lenders stand to lose so much on these transactions, they have been reluctant to make short sales happen, often waiting months before getting back to potential buyers.
Beware: You lost your house but still have to pay
"In the past, many short sales would never come to fruition and the ones that did averaged over half a year to complete," said Chris Saitta, CEO of Equator, which produces short sale software.
"Things would just fall into a black hole and not come out again," added Weintraub.
And even when banks did agree to the sale, the process could be further complicated if the original owner had a second mortgage.
In most cases, the first lender is repaid in full before any money flows to a second-lein holder. And because most distressed borrowers are severely underwater, there's usually nothing left to send on. As a result, second-lein holders are left holding the bag and have been killing many deals.
But that has been changing. For one thing, banks realize that they make out far better financially with a short sale than a foreclosure. "The lenders lose 50% on a foreclosure and only 30% on a short sale," said Glenn Kelman, founder of the real estate Web site Redfin. "And short sales offer a way to get distressed properties off their books quickly."
And on April 5, lenders and mortgage investors will have even more incentives to offer troubled borrowers short sales instead of foreclosing.
Under the new Home Affordable Foreclosure Alternatives program, borrowers will earn a $3,000 "relocation incentive" and servicers will get $1,500 for handling a short sale.
The investors who actually own the mortgage notes will get $2,000 in exchange for sharing proceeds of the short sales with any second-lien holders. And, finally, those second lien holders will receive up to $6,000 for releasing their claims.
Lenders participating in the program must also determine the market values of properties early on and inform the owners of just what price they're willing to accept. Then, if owners come back to the lenders with bonafide offers, they have to be accepted within 10 days.
Equator's Saiita anticipates a short sale explosion in response to the new program. "The challenge will be handling all the volume," he said.
The company has already tweaked its software, which 58 servicers use, to handle the new HAFA rules. And that should help reduce the time it takes to execute a sale, which currently averages 88 days.
The boom in short sales may accelerate the end to the foreclosure crisis by cleaning out the overhang of borrowers in distress and replacing them with more stable homeowners.
Plus, these sales are better for distressed borrowers because their credit scores suffer less. Going through a foreclosure can knock 200 points off a FICO score, twice as much as the penalty for a short sale.
"Banks have ramped up short sale approvals," said Duane Legate of House Buyer Network, which connects short sellers with buyers. "They're hiring a lot of the people who once worked in the mortgage-lending industry and moved them over to short sales."
These transactions, where lenders allow homeowners to sell their houses for less than they owe, accounted for 17% of all residential real estate sales in February, up from nearly 13% in November, according to a monthly real estate market survey by Campbell/Inside Mortgage Finance.
And Bank of America (BAC, Fortune 500), the country's largest mortgage servicer, has more than doubled the number of short sales it processed in recent months.
Elizabeth Weintraub, a Sacramento, Calif.-area real estate agent who handles many short sales, was amazed at how quickly a recent deal went through. "Bank of America approved it in 24 days," she said. "That flipped me out."
This is a huge change from even just six months ago when the short-sale market was stalled and most people would describe the process has real estate hell. Because lenders stand to lose so much on these transactions, they have been reluctant to make short sales happen, often waiting months before getting back to potential buyers.
Beware: You lost your house but still have to pay
"In the past, many short sales would never come to fruition and the ones that did averaged over half a year to complete," said Chris Saitta, CEO of Equator, which produces short sale software.
"Things would just fall into a black hole and not come out again," added Weintraub.
And even when banks did agree to the sale, the process could be further complicated if the original owner had a second mortgage.
In most cases, the first lender is repaid in full before any money flows to a second-lein holder. And because most distressed borrowers are severely underwater, there's usually nothing left to send on. As a result, second-lein holders are left holding the bag and have been killing many deals.
But that has been changing. For one thing, banks realize that they make out far better financially with a short sale than a foreclosure. "The lenders lose 50% on a foreclosure and only 30% on a short sale," said Glenn Kelman, founder of the real estate Web site Redfin. "And short sales offer a way to get distressed properties off their books quickly."
And on April 5, lenders and mortgage investors will have even more incentives to offer troubled borrowers short sales instead of foreclosing.
Under the new Home Affordable Foreclosure Alternatives program, borrowers will earn a $3,000 "relocation incentive" and servicers will get $1,500 for handling a short sale.
The investors who actually own the mortgage notes will get $2,000 in exchange for sharing proceeds of the short sales with any second-lien holders. And, finally, those second lien holders will receive up to $6,000 for releasing their claims.
Lenders participating in the program must also determine the market values of properties early on and inform the owners of just what price they're willing to accept. Then, if owners come back to the lenders with bonafide offers, they have to be accepted within 10 days.
Equator's Saiita anticipates a short sale explosion in response to the new program. "The challenge will be handling all the volume," he said.
The company has already tweaked its software, which 58 servicers use, to handle the new HAFA rules. And that should help reduce the time it takes to execute a sale, which currently averages 88 days.
The boom in short sales may accelerate the end to the foreclosure crisis by cleaning out the overhang of borrowers in distress and replacing them with more stable homeowners.
Plus, these sales are better for distressed borrowers because their credit scores suffer less. Going through a foreclosure can knock 200 points off a FICO score, twice as much as the penalty for a short sale.
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