Posts Tagged ‘foreclosures’
Tuesday, September 13th, 2011
Home prices revived somewhat during the 2nd quarter, but the housing market is still struggling. Prices climbed an impressive 3.6 percent, compared during the three months ending March 31. Despite the upbeat news, home prices are still down 5.9 percent compared with the 2nd quarter of 2010. The rise in home prices came after three straight quarters of drops, the S&P/Case-Shiller national index — a recognized gauge of residential real-estate markets — reported. The year-over-year decline was slightly more than the than the 4.7 percent drop that had been forecast by a consensus of experts at Briefing.com. A separate monthly index of home prices in 20 major metro areas reported a month-over-month gain of 1.1 percent for June, and a 4.5 percent decline compared with last year.
The quarter-over-quarter price increase may be the last one for a while, said Stan Humphries, chief economist for the real estate website Zillow. He expects prices will weaken again. “The August turmoil of credit rating downgrades, negative GDP revisions, stock oscillations and European debt woes are likely to leave a mark on both August home sales and home value appreciation,” according to Humphries. “Monthly home value appreciation in June may mark the last hurrah before beginning to weaken in the back half of this year,” Humphries said.
Foreclosures still constituted a higher proportion of sales throughout the winter and spring as families took a break from home shopping; cash-rich investors dominate the market. Nationally, home prices have returned to their 2003 levels.
Chicago, Minneapolis, Washington and Boston saw the largest monthly increases. Cities hit hardest by the housing crisis, such as Las Vegas and Phoenix, reported small seasonal increases. Housing has remained a drag on the economy and is one of the most important reasons why it is still struggling to recover two years after the recession officially ended. Home sales in 2011 are likely to be at the lowest level in 14 years. Home prices in many cities have reached their lowest points since the market bubble burst more than four years ago. Home prices in Cleveland, Detroit, Las Vegas, Phoenix and Tampa are at 2000 levels. “These shifts suggest that we are back to regional housing markets, rather than a national housing market where everything rose and fell together,” said David M. Blitzer, chairman of the S&P’s index committee. “This month’s report showed mixed signals for recovery in home prices. No cities made new lows in June 2011, and the majority of cities are seeing improved annual rates,” Blitzer said. “Looking across the cities, eight bottomed in 2009 and have remained above their lows. These include all the California cities plus Dallas, Denver and Washington D.C., all relatively strong markets.”
“There’s no theoretical floor for prices. If the economy worsens, housing will get into a vicious cycle of falling prices and foreclosures,” said Mark Zandi, chief economist at Moody’s Analytics. “When prices fall, confidence wanes.”
Foreclosures and short sales — when a lender sells for less than what is owed on a mortgage – accounted for approximately 30 percent of all home sales in July, an increase from about 10 percent reported in normal years. Nearly 1.7 million potential foreclosures are being delayed, according to real estate firm CoreLogic, either by backlogged courts or lenders waiting for the conclusion of state and federal investigations into questionable foreclosure practices.
“Prices aren’t going to rebound back rapidly,” said Paul Dales, a senior U.S. economist at Capital Economics Ltd. in Toronto. “Most people think that when the downturn ends the recovery will be pretty good, but that’s not going to be the case at all.”
“Consumer confidence is still weak, and the housing sector remains in a fragile state,” According to Robert Toll, chairman of Toll Brothers, Inc. the nation’s largest luxury homebuilder. “The nation’s economy continues to suffer from the lack of jobs in housing construction and the related manufacturing and service sectors that a decent new-home market would typically generate.”
Federal Reserve Chairman Ben Bernanke said “an overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and ongoing concerns by both potential borrowers and lenders about continued house price declines” are hurting the housing market.
Lawrence Yun, chief economist at the National Association of Realtors, described the activity as “underperforming. The market can easily move into a healthy expansion if mortgage underwriting standards return to normalcy,” he said. “We also need to be mindful that not all sales contracts are leading to closed existing-home sales. Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations, and streamlining the short sales process.”
Tags: Ben Bernanke, Briefing.com, Capital Economics Ltd., CoreLogic, Credit-rating downgrades, European debt woes, Federal Reserve, foreclosures, GDP, home prices, Inc., Moody’s Analytics, mortgages, National Association of Realtors, recession, S&P/Case-Shiller National Index, short sales, Toll Brothers, Zillow
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Monday, August 29th, 2011
Foreclosure filings fell a dramatic 35 percent in July to the lowest level in nearly four years as lenders and state and federal agencies ramped up their efforts to keep delinquent borrowers in their homes, according to RealtyTrac Inc. A total of 212,764 properties received default, auction or repossession notices, the lowest number in 44 months. Filings declined on a year- over-year basis for the 10th consecutive month, and were down four percent when compared with June. One in every 611 households across the country received a notice. “The downward trend in foreclosure activity has now taken on a life of its own,” RealtyTrac Chief Executive Officer James J. Saccacio said. “Unfortunately, the fall-off in foreclosures is not based on a robust recovery in the housing market but on short-term interventions and delays that will extend the current housing market woes into 2012 and beyond. It appears that processing delays, combined with the smorgasbord of national and state-level foreclosure prevention efforts, may be allowing more distressed homeowners to stave off foreclosure.”
Nevada leads the nation with the highest foreclosure rate of any state, one filing for every 115 homes. California, with one foreclosure for every 239 homes came in second, while Arizona, with one in every 273 homes, was third. Las Vegas continued to record the nation’s highest foreclosure rate, with one in every 99 homes getting a foreclosure filing in July.
Foreclosure auctions, the final step in the agonizing foreclosure process were also scheduled on five percent fewer properties in July. The month’s auction total hit a three-year low and was nearly half (46 percent) below the March, 2010, peak. An estimated four million vacant homes not yet accounted for by lenders constitute an immense inventory of residential properties, approximately 2.2-million of which are in default and have not yet been formally foreclosed known as the “shadow inventory” weigh down the marketplace.
The Obama administration is proactively seeking ways to dispose of foreclosed homes that are under government control. The goal is to “bring stability and liquidity” to the housing market, Edward J. DeMarco, acting director of the Federal Housing Finance Agency (FHFA), said. The FHFA regulates Fannie Mae and Freddie Mac, which guarantee approximately 90 percent of American mortgages. President Obama has proposed a program to encourage the rental of foreclosed homes owned by the Federal Housing Administration, Fannie Mae, and Freddie Mac. Banks could adopt similar programs and offer homes at steep discounts to get residential real estate off their books. Financial institutions typically get lucrative write-offs from these and so might prefer to rent some properties. Other federal attempts to prop up the housing market have not been successful to date. The Making Home Affordable Program operation was launched in March of 2009 with the main component the Home Affordable Modification Program. This was created to cut mortgage payments for families who couldn’t afford them, but wanted to keep their houses. A Congressional Oversight Panel report said the programs had failed and fell far short of its goal to modify mortgages for three million to four million homes. The new Obama plan to rent foreclosed homes has the potential to positively impact home prices.
Writing on MSNBC, John W. Schoen says that “A sharp slowdown in the pace of home foreclosures may help ease the financial burden on bankers by helping them unload a glut of repossessed homes more slowly and delay booking losses from the sale of distressed properties. But it will do little to help millions of Americans families at risk of being tossed from their homes in the next few years. The slowdown follows a wave of legal challenges by homeowners that has all but shut down the machinery of bank repossession in some states. Some homeowners are disputing the widespread practice of ‘robo-signing’, in which lenders process batches of foreclosure fillings with little or no formal review. Other homeowners have successfully halted repossessions by questioning shoddy paperwork or broken paper trails that don’t establish clear title to a property. The slowdown has left millions of American households in legal limbo, prolonged the housing market’s four-year recession and delayed hopes for a broader economic recovery.”
“The process has more or less ground to a halt in a lot of states that do foreclosures through the court system,” said Rick Sharga, a senior vice president at RealtyTrac.
Tags: Arizona, California, Congressional Oversight Panel, Fannie Mae, Federal Housing Finance Agency, Foreclosure auctions, foreclosures, Freddie Mac, Home Affordable Modification Program, Inc., Las Vegas, Making Home Affordable Program, Nevada, Obama administration, RealtyTrac, robo-signing, “Shadow inventory”
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Wednesday, August 24th, 2011
A new phenomenon has emerged that is depressing the sales of existing homes. Contract cancellations are surging, dashing hopes that the distressed housing market is showing signs of improvement. According to the National Association of Realtors (NAR), sales fell 0.8 percent in June compared with May to an annual rate of just 4.77 million units, the lowest since November, and falling for the third consecutive month. Economists had expected sales to climb to a 4.90 million-unit yearly pace. “Buyers and sellers are increasingly running up against conservative appraisals, which often cause deals to fall through or be delayed,” said Mark Vitner, senior economist at Wells Fargo Securities. In fact, the market is unlikely to improve in the near term, said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
“A variety of issues are weighing on the market including an unusual spike in contract cancellations in the past month,” NAR chief economist Lawrence Yun said. Fully 16 percent of NAR members reported a sales contract was cancelled in June, up from four percent in May. “The underlying reason for elevated cancellations is unclear,” Yun said, suggesting possible problems like tight credit for buyers and low home appraisals.
Writing for the Wall Street Pit, Dirk van Dijk says that “Regionally sales were down on the month in two of the four Census regions. All four regions were down year over year. The Northeast fared the worst, with sales down 5.2 percent for the month and down 17.0 percent from a year ago. The West had a month to month decrease, with sales falling 1.7 percent, down 2.6 percent from a year ago. In the Midwest, sales rose one percent for the month but are down 14.0 percent year over year. The South, the largest of the four regions, saw a 0.5percent rise on the month, but a 5.6 percent year-over-year decline. After all, it is better to simply sell the house and get something for it, rather than let the bank take it and get nothing for it. The more people under water, and the deeper they are, the higher foreclosures and strategic defaults are going to be. A strategic default is when someone has the cash flow available to continue to make his mortgage payment, but simply decides not to, since paying is a just plain stupid thing to do from a financial perspective. If you have a house that could only sell for $150,000 in the current environment, and you owe $200,000 on the mortgage, in effect you have the option of ‘selling’ the house to the bank for $200,000 simply by not writing the checks. Of course that will be a hit to your credit rating, but $50,000 is probably worth a bit of a tarnish on your Fico score. If the difference is only $5000, then the hit to your credit score makes less sense, and there are lots of non economic factors (a house is after all a home, not just an investment) that come into play.”
Despite the disappointing existing house data, homebuilders appear to have more confidence than buyers, because May housing starts climbed to a five-month high, according to the Department of Commerce. The month was the first time in five years that more homes were started than completed. A majority of the buyers were investors, with 29 percent of the transactions being all cash.
Writing for The Hill, Vicki Needham says that “Distressed homes — foreclosures and short sales generally sold at deep discounts — accounted for 30 percent of sales in June, compared with 31 percent in May and 32 percent in June 2010. Foreclosures have flooded the market, providing good deals for some potential homebuyers but hindering new construction. Mortgage rates for a 30-year, conventional, fixed-rate mortgage were 4.51 percent in June, down from 4.64 percent in May. The rate was 4.74 percent in June 2010, according to Freddie Mac.”
“With record high housing affordability conditions thus far in 2011, we’d normally expect to see stronger home sales,” said NAR President Ron Phipps. “Even with job creation below expectations, excessively tight loan standards are keeping many buyers from completing deals. Although proposals being considered in Washington could effectively put more restrictions on lending, some banking executives have hinted that credit may return to more normal, safe standards in the not-too-distant future, but the tardiness of this process is holding back the recovery.
Phipps noted that lower mortgage loan limits, which are scheduled to go into effect October 1, already are having an effect. “Some lenders are placing lower loan limits on current contracts in anticipation they may not close before the end of September,” he said. “As a result, some contracts may be getting canceled because certain buyers are unwilling or unable to obtain a more costly jumbo mortgage.”
Tags: Contract cancellations, credit, Department of Commerce, Existing house sales, Fico score, foreclosures, Freddie Mac, High Frequency Economics, homebuilders, Housing starts, mortgage rates, National Association of Realtors, short sales, Strategic defaults, Wells Fargo Securities
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Wednesday, July 20th, 2011
American home prices may start rising as soon as the 3rd quarter as a foreclosure decline makes more homes available for sale, according to Housing and Urban Development Secretary Shaun Donovan. “It’s very unlikely that we will see a significant further decline,” Donovan said. “The real question is when will we start to see sustainable increases. Some think it will be as early as the end of this summer or this fall.” Home sales have increased in six of the past nine months; the number of homeowners in default is declining, Donovan said on CNN’s “State of the Union” program.
“In the long run, it’s a good time to buy,” Donovan said. “It’s so affordable today compared to where it’s been for generations.” Contracts to purchase previously owned homes rose 8.2 percent in May, following a revised 11 percent drop in April, according to the National Association of Realtors (NAR). Another NAR report showed sales of existing houses, which make up about 96 percent of the market, fell in May to a six-month low. Home prices fell four percent in April over 2010, the biggest decline in 17 months according to the S&P/Case-Shiller index of values in 20 cities. An estimated 1.7 million U.S. homes were in the foreclosure process and expected to be put on the market in April, representing an 18 percent decline from the peak, as fewer loans entered delinquency and more distressed homes were sold, CoreLogic Inc. said.
Additionally, Donovan said that foreclosures are down approximately 40 percent when compared with last year. Although 1.3 million homes are still in the foreclosure process, Donovan said that housing prices are stabilizing in the aftermath of the worst financial crisis since the Great Depression. According to Donovan, “So, we are making progress, but rightly, the American people recognize we’re not where we need to be. We still have a ways to go.”
On the subject of requiring 20 percent downpayments to buy homes, Donovan said there should be a way for qualified people to buy a home with less money upfront. “We can’t go so far in the other direction that we cut off home ownership for people who really can be successful homeowners. We can get back to the place where it’s a good investment and we will be able to make money over time,” Donovan said, noting that Americans should no longer view their homes as ATMs.
Financial analyst A. Gary Shilling, writing in The Christian Science Monitor, isn’t as optimistic. In fact, he thinks that housing prices are likely to fall another 20 percent before bottoming out. According to Shilling, “Many housing optimists a year ago believed not only that the housing collapse was over, but also that a robust rebound was under way. Low mortgage rates and collapsed housing prices, not to mention the $8,000 federal tax credit for new home buyers and other initiatives, seemingly were going to kick-start housing activity nationwide. Then a funny thing happened on the way to the housing recovery. The tax credits expired, home sales dried up, and prices resumed their declines from their 2006 peak. Excess inventories piled up due to overbuilding and mounting foreclosures. In the meantime, buying those lower-priced houses became more difficult as lenders, burned by the housing crash, tightened lending standards and increased downpayment requirements. As a result, the housing sector not only has failed to bolster the weak economic recovery but is also likely to continue to struggle for years. And that’s bad news for the economy, which has softened in recent months. Excess inventories are the mortal enemy of housing prices. Lower prices are needed to unload surplus inventory, but in turn, lower prices bring forth more inventory from anxious sellers. The anxiety of house sellers and the reluctance of buyers are enhanced by the realization that house prices can fall – and are falling for the first time in 70 years.”
The idea of owning a home is becoming less attractive as many people realize that it may be many years before prices stop falling and stabilize, let alone revive. As proof, the national homeownership rate has fallen from its late 2009 peak of 69.2 percent to 66.4 percent in the 1st quarter of 2011 – the exact same level as in late 1998. As homeownership loses its luster, rental apartments are gaining. The homeownership rate is likely to continue to decline to its earlier long-term trend of around 64 percent as people continue to separate their abodes from their investments and as the baby boomers age, retire, and downsize. That means approximately 4.5 million new renters in coming years. Apartment construction, which normally totals 300,000 units annually, will be vigorous once surplus vacancies disappear.
Tags: ATMs, CNN “State of the Union” program, CoreLogic, Department of Housing and Urban Development, Distressed homes, Downpayment, Federal tax credits, financial crisis, foreclosures, Great Depression, Housing prices, Inc., National Association of Realtors, S&P/Case-Shiller index, Shaun Donovan
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Thursday, June 23rd, 2011
Homeowners who took out second mortgages, or borrowed against their homes to use the money as a cash advance, may regret their decisions. Close to 40 percent are now underwater on their loans — owing more than their home is worth, according to CoreLogic Data. The data show 38 percent of borrowers who took second mortgages are now under water, compared with 18 percent of mortgage holders who haven’t taken out home equity loans. The study did not examine how the cash was used. This type of negative equity can result from increased mortgage debt, a decline in home value — or both. Additionally, the report found that during the 1st quarter of 2011 the number of underwater homeowners fell to 22.7 percent from 23.1 percent in the 4th quarter of 2010. Although this decrease may seem like good news, it is due to the fact that completed foreclosures lessened the total number of homeowners in the market.
The study illustrates the consequences of easy borrowing amid the housing boom’s inflated prices. Home-equity loans, which total approximately 10 percent of the mortgage market, have been a problem for both homeowners and lenders. Second mortgages are any loan taken out on a property that is in addition to the first mortgage; they include home-equity loans and lines of credit. Second mortgages are taking a toll on a fitful recovery, in which housing has been the weakest spot. The S&P/Case-Shiller National Index recently showed that home prices fell another 4.2 percent nationally in the 1st quarter, its third straight quarter of price declines after a modest recovery in early 2010. Across the country, prices have fallen 34 percent since peaking in 2006. The inventory of unsold homes will take more than nine months to sell, according to the National Association of Realtors. This is approximately 50 percent longer than is considered a healthy market. “When a homeowner’s house is under water, “it’s harder to get a credit card or a car loan, you can’t put your home up for a small business loan,” said Mark Zandi, chief economist at Moody’s Analytics. “There are all sorts of little, pernicious effects that you don’t necessarily think about.”
Writing on the Mortgage Rates &Trends: Mortgage Blog, Michael Kraus says “Unsurprisingly, there is a strong correlation between negative equity and home equity loans. Thirty-eight percent of borrowers with home equity loans are under water. Those with negative equity and HELOCs (home equity lines of credit) are down $98,000 on average, compared to $52,000 for those without HELOCs. Intuitively, this makes a ton of sense and serves to illustrate the danger of using your home equity as an ATM. Hindsight being 20/20, of course. The negative equity problem remains the most acute in all the same places. Nevada leads the nation in negative equity, with an incredible 63 percent of Nevada homeowners with mortgages under water. Fifty percent of mortgaged Arizona homes are upside down, followed by Florida (46 percent), Michigan (36 percent), and California (31 percent). These figures have changed relatively little since the last report on home equity, and negative equity will likely remain a massive problem in these markets for years to come. Also of interest is the amount that the average borrower with negative equity is underwater. Across the country, the average person who has negative equity is $65,000 underwater. The highest average negative equity is in New York ($129,000), followed by Massachusetts ($120,000), Connecticut ($111,000), Hawaii ($98,000), and California ($93,000). These areas typically have the highest home prices, so the high amounts of negative equity make sense.”
Treating your home as an ATM by taking out a second loan puts owners in the position of being more than twice as likely as single-mortgage homeowners to owe more than it’s worth. This scenario isn’t what economic leaders had pictured. During the housing market’s boom years, Federal Reserve chairman Alan Greenspan promoted second mortgages and home-equity loans as a way to tap homeowners’ most valuable asset to pay bills or buy a car. Then the bubble burst. Because home values are still falling, those loans have now become just another burdensome payment.
Tags: Alan Greenspan, ATMs, Cash advances, CoreLogic Data, Federal Reserve, foreclosures, HELOCS, Housing bubble, Moody’s Analytics, mortgages, National Association of Realtors, S&P/Case-Shiller National Index, Second mortgages, Under water
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Tuesday, June 14th, 2011
The current national inventory of foreclosed homes represents a three-year supply, according to RealtyTrac. Not surprisingly, that is depressing home prices. “This is very bad for the economy,” said Rick Sharga, a RealtyTrac spokesman.
In Las Vegas, the foreclosure situation is so dire that more than half of all homes sold in Nevada are foreclosures. In California and Arizona, 45 percent of sales are foreclosures; that totals 28 percent of all existing home sales during the 1st quarter of 2011.
Additionally, the nation’s stock of foreclosed homes are selling at deep discounts, particularly REOS, which are bank-owned homes. The typical REO sold for about 35 percent less than comparable properties, according to RealtyTrac. In some areas, the discounts were ever steeper: In New York, the discount for REOs was 53 percent during the 1st quarter and almost 50 percent in Illinois, Ohio, and Wisconsin.
“Short sales,” homes where the selling price is less than what is owed by the borrowers, are also dragging down the market. These sell for an average nine percent discount. When you consider both REOs and short sales, Ohio had the biggest discount of any state, at 41 percent.
During the 1st quarter, there were 158,000 sales involving distressed properties nationally, less than half the nearly 350,000 during the same period of 2009. With the slower pace of sales, it will take three years to sell off the inventory of 1.9 million distressed properties, according to Sharga. “Even if you look at REOs alone, it will take 24 months to clear them and that’s without any new foreclosures at all coming into the system,” he said.
RealtyTrac found that the average sales price of properties in some stage of foreclosure, scheduled for auction or bank-owned — was $168,321, down 1.89 percent from the 4th quarter of 2010.
A total of 158,434 bank-owned homes and those in some stage of foreclosure were purchased during the 1st quarter, a 16 percent decline from the 4th quarter of last year and down 36 percent from the 1st quarter 2010 total. Bank-owned properties that sold in the 1st quarter had been repossessed an average of 176 days before the sale, while properties that sold in earlier stages of foreclosure in the 1st quarter were in foreclosure an average of 228 days before they were sold. According to James J. Saccacio, chief executive officer of RealtyTrac, “While this is probably helping to keep home prices relatively stable, it is also delaying the housing recovery. At the first quarter foreclosure sales pace, it would take exactly three years to clear the current inventory of 1.9 million properties already on the banks’ books, or in foreclosure.”
Foreclosures are particularly attractive to all-cash buyers who demand discounts, pushing down the value of all properties. More than 75 percent of American cities experienced price declines in the 1st quarter. Bank-owned homes totaled 107,143 sales in the 1st quarter, down 11 percent from the 4th quarter and almost 30 percent from 2010. Sales of homes in default or scheduled for auction totaled 51,291, a 26 percent decline, according to RealtyTrac. That was less than half the peak of 348,629 distressed deals in the 1st quarter of 2009.
Writing on the website 24/7wallstreet.com, Douglas A. McIntyer offers an interesting perspective. “Any economist will say that when some homes are sold at 27 percent below the normal market, all home prices will be pulled lower. That may be the key to the home market recovery. Foreclosure inventory will continue to rise as banks put more backlogged homes onto the market. The glut will probably push down the average of all homes by several percent. This may be a reason home prices are predicted to fall another 10 percent this year. Buyers will not come back to the housing market until they believe that prices are too good to resist. That may mean homes that sold for $500,000 in 2005 will have to sell for $300,000 next year. Prices will not be driven down quickly without the reduction in inventory of foreclosed homes. There has to be a bottom to prices. The sooner it is found the better. The housing market is more than half dead. The only tonic is a belief by buyers that prices are so remarkably low that new buyers will make money on a house and not lose it. If the housing market is to continue to drop, the drop needs to be swift. Mortgage rates are near all-time lows. Inflation and concerns about the value of Treasuries due to the U.S. national deficit could change that. Home prices that are viewed as affordable need to be married with low mortgage rates for the market to catch fire.”
Tags: Arizona, Bank-owned homes, California, Distressed properties, foreclosures, Illinois, Las Vegas, mortgage rates, national debt, Nevada, New York, Ohio, RealtyTrac, REOs, short sales, Treasuries, Wisconsin
Posted in Economics, Financing, General, Residential | 1 Comment »
Tuesday, June 7th, 2011
There’s good news and bad news about foreclosures. Although the number of foreclosures fell to their lowest rate in 4 ½ years in April, the reason is a delay in processing the orders, not because Americans are experiencing less trouble paying their mortgages. “Foreclosure activity decreased on an annual basis for the seventh straight month in April, bringing foreclosure activity to a 40-month low,” James J. Saccacio, chief executive officer of foreclosure data company RealtyTrac, said. “This slowdown continues to be largely the result of massive delays in processing foreclosures rather than the result of a housing recovery that is lifting people out of foreclosure.”
According to Saccacio, “The first delay occurs between delinquency and foreclosure, when lenders and services are no longer automatically pushing loans that are more than 90 days delinquent into foreclosure but are waiting longer to allow for loan modifications, short sales and possibly other disposition alternatives. Data from the Mortgage Bankers Association shows that about 3.7 million properties are in this seriously delinquent stage. The second delay occurs after foreclosure has started, when lenders are taking much longer than they were just a few years ago to complete the foreclosure process.”
Nationally, homes typically are taking 400 days to go from the initial default notice to bank repossession, an increase when compared with 340 days a year earlier and 151 days in the 1st quarter of 2007, RealtyTrac said.
According to RealtyTrac’s report, 219,258 American homes were involved in the foreclosure process in April, either having received a notice of default, been scheduled for auction or been repossessed. This is nine percent less than from March and a 34 percent cut from April 2010. The report also shows one in every 593 American homes received a foreclosure filing during April 2011. In New York, it took a property 900 days to go through the process. In Florida, it was 619 days and in California, 330 days.
Nevada tops the list of states for foreclosures in proportion to its population, with one out of every 97 homes receiving a foreclosure filing in April. Arizona ranked second. Although Arizona foreclosures fell 15 percent, REOs (bank repossessions) rose 22 percent, keeping the state in second place for the fifth consecutive month. One in every 205 homes received a foreclosure filing. Similarly, a 22 percent jump in REOs kept California in third place for a sixth month despite a decline in activity, with one in every 240 units affected during the month. Other states in the top five are Utah (one of every 322) and Idaho (one of every 325).
Just ten states account for 70 percent of all foreclosure activity. The first two in terms of numbers of foreclosures, California with 55,869 filings and Florida with 19,649 and the fourth, Michigan with 12,996, have large populations. Arizona and Nevada, with relatively small populations rank in the top five by virtue of numbers as well as foreclosure rate with 13,419 filings and 11,761 filings. The next five states with the greatest number of foreclosures are Illinois, Texas, Georgia, Ohio, and Colorado.
Writing in The Atlantic, Daniel Indiviglio notes that “It’s hard to see how this is good news for the housing market. Prices are likely falling more slowly since the foreclosures aren’t hitting the market as quickly as they should be. But they cannot be held up artificially — the decline will just happen over a longer period of time instead of quickly and steeply. That means it will take longer for the housing market to hit its true bottom. Only when that occurs can a recovery begin. In other words, banks’ failure to process foreclosures in a timely manner will prolong the housing market’s struggles.”
Tags: Bank repossessions, Default notice, Delinquencies, foreclosures, Inc., Mortgage Bankers Association, mortgages, RealtyTrac, REOs, short sales
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Wednesday, May 25th, 2011
American renters who pay more than 50 percent of their income on housing has peaked at the highest level in 50 years, according to a report from the Harvard Joint Center for Housing Studies. Approximately 26 percent of renters – that’s more than 10 million people – are spending more than 50 percent of their pre-tax income on rent and utilities because salaries have fallen significantly amid rising rents. An analysis conducted by the Washington Post found that rents in the nation’s capital, for example, had risen 22 percent in 2009 over the past 10 years.
“It’s a real squeeze for the lower-income and moderate-income families, and we’re even starting to see it affecting middle-income families, too,” according to Erick Belsky, managing director of Harvard’s Joint Center for Housing Studies. “The prospects for improvement any time soon are dim.” In other words, finding an affordable house or apartment to rent can be difficult.
When the economy went south in 2008, developers stopped building new apartments at a time when foreclosures were pushing many Americans into the rental market. Because supply and demand were at odds with each other, rental rates climbed and are expected to remain high for the foreseeable future. “In real terms, it means more people have less money to spend on household necessities such as food, healthcare, or savings,” Belsky, said. Households that spend half or more of their income on rent also spend almost 40 percent less on food and more than 50 percent less on healthcare than households with more affordable rent. “In the last decade, rental housing affordability problems went through the roof,” Belsky said. “And these affordability problems are marching up the income scale.”
The report notes that – in a perfect world – renters should not have to pay more than 30 percent of their income on housing. Over the last 10 years, low-income renters have experienced difficulty staying within that limit. In 2009, 7.5 percent of moderate-income renters had to spend more than 50 percent of their salaries on rent, double the number reported in 2001.
According to the report, 28.6 percent of metropolitan Chicago renters are severely burdened by their rental costs. Ten years ago, only 20.4 percent of area renters paid that high a percentage of their incomes.
With the number of renters growing, the Low Income Housing Coalition says it’s time for policymakers to put more money into rental assistance and affordable housing. Throughout the housing crisis and recession, lawmakers have placed resources primarily on helping troubled homeowners avoid foreclosure; but approximately 40 percent of foreclosures also displace renter households. The coalition has asked Congress to fund the National Housing Trust Fund, which creates a permanent funding source to construct, renovate and preserve 1.5 million units of rental housing for low-income families over the next 10 years. Although the trust fund legislation passed in 2008, Congress hasn’t funded it because of the economic downturn. The fund will not increase government spending or taxes because it was designed to be funded through contributions from Fannie Mae, Freddie Mac and the Federal Housing Administration.
Sheila Crowley, the president of the coalition, said now was the time to act. “Providing $1 billion for the National Housing Trust Fund will help address the growing shortage of affordable housing, which is one of the most serious economic problems facing the country,” she said. Crowley expects the House of Representatives to begin debating the Section 8 Voucher Reform Act, which passed the House Financial Services Committee last summer. “We are very much hoping that the Senate will take it up as well,” she said. The bill would provide rent subsidies for 150,000 low-income families, , and the coalition is seeking another 2 million Section 8 housing vouchers over the next decade, doubling the current number.
Tags: congress, Department of Housing and Urban Development, Fannie Mae, Federal Housing Administration, foreclosures, Freddie Mac, Harvard Joint Center for Housing Studies, House Financial Services Committee, Income, Low Income Housing Coalition, National Housing Trust Fund, Pre-tax income, Rent, Rental Assistance, Renters, Section 8 Voucher Reform Act, Utilities
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Thursday, May 12th, 2011
New home sales rose in March, with the number of properties on the market at its lowest since the 1960s. Additional gains will be stymied by competition from the market’s glut of previously owned houses. Single-family home sales rose 11.1 percent to a seasonally adjusted 300,000 unit annual rate, according to the Department of Commerce, during a month when economists had expected a 280,000-unit pace. Even with the March uptick, new home sales are just bouncing along the bottom. Despite the good news, the number of houses sold still is 21.88 percent less than the level achieved one year ago. The news was released by the U.S. Census in its monthly New Residential Home Sales Report for March.
“Investors continue to drive the market and were about 22 percent of the purchasers in March, up from 19 percent a year ago,” said economist Joel Naroff, of Naroff Economic Advisors, in Holland, PA. Investors typically look for foreclosures or short sales. “They love those cheap distressed homes, which now make up 40 percent of the market,” Naroff said. “Given the tight lending standards cash buyers are more than welcome. To get a Fannie or Freddie loan, which are the only games in town, a borrower has to have a credit score of about 760. Before anyone gets excited and thinks housing is on the rebound, understand that we need to more than double the March sales pace to reach decent sales levels,” Naroff said. “Prices remain soft and are down by about five percent over the year.”
According to Dirk van Dijk of the Wall Street Pit, “The March level was substantially better than the expected rate of 280,000. The 11 lowest months on record (back to 1963) for new home sales have all been in the last 11 months. We are down sharply from a year ago, and it is not like a year ago was a great time in the homebuilding industry either. Relative to the peak of the housing bubble (July ’05, 1.389 million) new home sales are down 78.4 percent. Inventories of new homes were down 1.1 percent on the month and are down 19.7 percent from a year ago. Supply is at 7.3 months, down from 8.0 months in February, but up from 7.1 months a year ago. While that is well off the peak of 12.0 months, it is still above normal. A healthy market has about a six month supply of new houses and during the bubble, four months was the norm.”
The median price of new houses sold in March was $213,800, according to the Census Bureau. “It’s a decent start to the spring selling season, but we’re coming off all-time lows here, so we’re not going to get too excited,” said Brett Ryan, economist with Deutsche Bank Securities. “The overhang of foreclosures drags on new home sales. Builders are waiting for a clearing process to take place.”
The housing market was either “little changed from low levels” or weaker across the country, the Federal Reserve said in its most recent Beige Book report. The absence of a continued housing rebound is one of the reasons why policymakers will complete their $600 billion asset purchase plan and keep borrowing costs at nearly zero to encourage growth.
Last year was the fifth consecutive year of declining new-home sales. According to economists, it could take years before sales return to a healthy pace. Slow new-home sales add up to fewer jobs in construction, which normally powers economic recoveries following recessions. Each new home creates an average of three jobs for a year and adds $90,000 to the local tax base, according to the National Association of Home Builders.
Tags: Beige Book, Credit scores, Department of Commerce, Deutsche Bank Securities, economic recovery, Fannie Mae, Federal Reserve, foreclosures, Freddie Mac, Housing bubble, National Association of Home Builders, New home sales, New Residential Home Sales Report for March, Previously owned homes, recession, short sales, U.S. Census Department
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Tuesday, March 29th, 2011
Although analysts are sounding a cautionary note, the number of Americans applying for mortgages rose by 16.1 percent in the first week of March – the largest monthly increase since June of 2009. The activity could be due to investors with money to spend, and not the first-time homebuyers who will play a vital role in the housing market’s recovery. The refinance index increased 17.2 percent and the purchase index increased 12.5 percent, to the highest level this year. The refinance share of activity increased to 65.5 percent of all applications from 64.9 percent the last week of February. That’s the good news. That bad news is that mortgage applications are likely to decline over the next several months because homeowners are unable to sell their current homes and trade up. At present, cash buyers and investors — lured by low prices and soaring rents — represent the majority of sales, said Paul Ashworth, chief U.S. economist with Capital Economics. Also, rates are low. According to Zillow.com, the average 30-year fixed-rate mortgage is now 4.73 percent.
During January, first-time homebuyers fell to 29 percent of the market, the lowest percentage in almost two years. Foreclosures made up 37 percent of sales and all-cash transactions were 32 percent of sales — twice the rate when compared two years ago when the National Association of Realtors began tracking these deals. New-home sales fell to a seasonally adjusted rate of 284,000 in January. That is significantly less than the 700,000-to-800,000 pace considered healthy by a number of economists.
“Taking into account typical seasonal patterns, purchase applications rose to their highest level of the year last week. On an unadjusted basis, purchase application activity is the highest since last May,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “An improving job market is beginning to pave the way for an improving housing market. Additionally, mortgage interest rates remained below five percent for a second week, maintaining affordability for buyers and leading to an increase in refinance applications.” The four week average for the seasonally adjusted Market Index rose percent. The four week average rose 1.2 percent for the seasonally adjusted Purchase Index, while this average is up 3.6 percent for the Refinance Index. The refinance share of mortgage activity increased to 65.5 percent of total applications from 64.9 percent the previous week. Adjustable-rate mortgages (ARM) rose to 6.0 percent from 5.5 percent of total applications from the previous week.
“The housing market in the U.S. still has a lot of challenges ahead of it,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. “Ultimately it’s all about how many homes still are going to hit the market. People don’t want to buy homes because they feel prices could fall further.”
Tags: adjustable-rate mortgages, BMO Capital Markets, Capital Economics, foreclosures, home sales, Market Composite Index, Mortgage applications, Mortgage Bankers Association, mortgage rates, National Association of Realtors, Purchase Index, Refinance Index, refinancing, Weekly Mortgage Applications Survey, zillow.com
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