California March Home Sales

April 16, 2014

http://dqnewspressreleases.blogspot.com/2014/04/march-california-home-sale-press-release.html

An estimated 32,923 new and resale houses and condos sold statewide in March. That was up 28.2 percent from 25,680 in February, and down 12.8 percent from 37,764 sales in March 2013, according to San Diego-based DataQuick.

Last month’s sales were the lowest for a March since 2008, when 24,565 homes sold – a record low for the month of March. California’s high for March sales was 68,848 in 2005. Last month’s sales were 23.9 percent below the average of 43,251 sales for all months of March since 1988, when DataQuick’s statistics begin. California sales haven’t been above average for any particular month in more than eight years.

The median price paid for a home in California last month was $376,000, up 5.9 percent from $355,000 in February and up 20.1 percent from $313,000 in March 2013. Last month’s median sale price was the highest since it was $383,000 in January 2008. This March was the 25th consecutive month in which the state’s median rose on a year-over-year basis, and it was the 16th straight month with a gain exceeding 20 percent.

In March/April/May 2007 California’s median sale price peaked at $484,000. The post-peak trough was $221,000 in April 2009.

Of the existing homes sold last month, 7.4 percent were properties that had been foreclosed on during the past year. That was down from a revised 8.0 percent in February and down from 15.0 percent a year earlier. California’s foreclosure resales peaked at 58.8 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 7.4 percent of the homes that resold last month. That was down from an estimated 9.3 percent the month before and 18.7 percent a year earlier.

The typical monthly mortgage payment that California buyers committed themselves to paying last month was $1,496, up from $1,405 the month before and up from $1,134 a year earlier. Adjusted for inflation, last month’s payment was 35.9 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 48.1 percent below the current cycle’s peak in June 2006. It was 60.7 percent above the January 2012 bottom of the current cycle.

DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. DataQuick was acquired last month by Irvine-based property information company CoreLogic.

Indicators of market distress continue to decline. Foreclosure activity remains well below year-ago and peak levels reached in the last five years. Financing with multiple mortgages is low, while down payment sizes are stable, DataQuick reported.

Southland Home Sales Stuck at 6-year Low; Median Price Rises to 6-Year High

April 15, 2014

http://dqnewspressreleases.blogspot.com/2014/04/march-southland-home-sale-press-release.html

La Jolla, CA—Southern California home sales quickened last month compared with February, as they normally do, but remained far below average and at the lowest level for a March in six years. The median sale price rose to a more-than-six-year high, driven up by demand that continues to exceed supply in many areas, as well as a shift toward a greater share of sales in middle and high-end markets, a real estate information service reported.

A total of 17,638 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 25.7 percent from 14,027 sales in February, and down 14.3 percent from 20,581 sales in March last year, according to San Diego-based DataQuick.

For seasonal reasons sales shoot up between February and March, with that gain averaging 36.3 percent since 1988, when DataQuick’s statistics begin. Southland sales have fallen on a year-over-year basis for six consecutive months, and last month was the second in a row in which sales were at the lowest level for that particular month in six years.

Sales during the month of March have ranged from a low of 12,808 in 2008 to a high of 37,030 in 2004. Last month’s sales were 26.9 percent below the average number of sales – 24,115 – for March since 1988. Sales haven’t been above average for any month in more than seven years.

“Southland home buying got off to a very slow start this year, with last month’s sales coming in at the second-lowest level for a March in nearly two decades. We see multiple reasons for this: The inventory of homes for sale remains thin in many markets. Investor purchases have fallen. The jump in home prices and mortgage rates over the past year has priced some people out of the market, while other would-be buyers struggle with credit hurdles. Also, some potential move-up buyers are holding back while they weigh whether to abandon a phenomenally low interest rate on their current mortgage in order to buy a different home,” said DataQuick analyst Andrew LePage.

The median price paid for all new and resale houses and condos sold in the six-county region last month was $400,000, up 4.4 percent from $383,000 in February and up 15.8 percent from $345,500 in March 2013. Last month’s median was the highest since it was $408,000 in February 2008.

The median has risen on a year-over-year basis for 24 consecutive months. Those gains have been double-digit – between 10.8 percent and 28.3 percent – over the past 20 months. The 15.8 percent year-over gain in the median last month marked the lowest increase for any month since September 2012, when the $315,000 median rose 12.5 percent from a year earlier.

The March median sale price stood 20.8 percent below the peak $505,000 median in spring/summer 2007.

DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. DataQuick was acquired last month by Irvine-based property information company CoreLogic.

Home prices continue to rise at different rates depending on price segment. In March, the lowest-cost third of the region’s housing stock saw a 21.0 percent year-over-year increase in the median price paid per square foot for resale houses. The annual gain was 15.9 percent for the middle third of the market and 14.3 percent for the top, most-expensive third.

Last month the number of homes that sold for $500,000 or more increased 2.9 percent from one year earlier, while $800,000-plus sales rose 5.4 percent. Sales below $500,000 fell 26.4 percent year-over year, while sales below $200,000 plunged 45.7 percent.

In March, 35.1 percent of all Southland home sales were for $500,000 or more, up from 33.5 percent the month before and up from 27.8 percent a year earlier.

The impact of distressed properties continued to wane.

Foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 6.4 percent of the Southland resale market in March. That was down from a revised 6.7 percent the prior month and down from 13.8 percent a year earlier. In recent months the foreclosure resale rate has been the lowest since early 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 7.7 percent of Southland resales last month. That was down from a revised 9.3 percent the prior month and down from 18.7 percent a year earlier.

Absentee buyers – mostly investors and some second-home purchasers – bought 27.4 percent of the homes sold last month, down from 28.9 percent in February and down from 31.2 percent a year earlier. The monthly average since 2000, when the absentee data begin, is 18.7 percent. The number of homes purchased by absentee buyers in March fell nearly 30 percent from a year earlier and was at its lowest level for a March since 2010. Last month’s absentee buyers paid a median $337,500, up 22.7 percent year-over-year.

In March 5.3 percent of all Southland homes sold on the open market were flipped, meaning they had previously sold in the prior six months. That’s down from a flipping rate of 6.1 the prior month and it’s down from 6.3 percent a year earlier. (The figures exclude homes resold after being purchased at public foreclosure auctions on the courthouse steps).

Buyers paying cash last month accounted for 29.1 percent of Southland home sales, down from 30.9 percent the month before and down from 35.1 percent in March last year. Since 1988 the monthly average for cash buyers is 16.5 percent of all sales. Cash buyers paid a median $365,000 last month, up 28.1 percent from a year earlier.

In March, Southern California home buyers forked over a total of $4.04 billion of their own money in the form of down payments or cash purchases. That was up from a revised $3.36 billion in February and down from $4.46 billion a year ago. The out-of-pocket total peaked last May at $5.41 billion.

Credit conditions appear to have eased in recent months, although they remain tight in an historical context.

Last month 13.3 percent of Southland home purchase loans were adjustable-rate mortgages (ARMs) – nearly double the ARM level of a year earlier. Last month’s figure was up from 12.9 percent in February and up from 7.4 percent in March 2013. Since 2000, a monthly average of about 31 percent of Southland purchase loans have been ARMs.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 29.5 percent of last month’s Southland purchase lending. That was the highest level for any month since the credit crunch struck in August 2007. Last month’s figure was up from 27.2 percent the prior month and up from 23.8 percent a year earlier. Prior to the August 2007 credit crunch jumbos accounted for around 40 percent of the home loan market.

All lenders combined provided a total of $4.96 billion in mortgage money to Southern California home buyers in March, up from a revised $3.91 billion in February and down from $5.29 billion in March last year.

The most active lenders to Southern California home buyers last month were Wells Fargo with 7.1 percent of the total home purchase loan market, Bank of America with 3.0 percent and IMortgage with 2.4 percent.

Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 18.4 percent of all purchase mortgages last month. That was down from 18.9 percent the month before and down from 22.5 percent a year earlier. In recent months the FHA share has been the lowest since early 2008, mainly because of tighter FHA qualifying standards and the difficulties first-time buyers have competing with investors and cash buyers.

The typical monthly mortgage payment Southland buyers committed themselves to paying last month was $1,591, up from $1,516 the month before and up from $1,252 a year earlier. Adjusted for inflation, last month’s typical payment was 33.9 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 45.9 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to decline. Foreclosure activity remains well below year-ago and far below peak levels. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.

To view the county-by-county home sale chart, visit DQNews.com.

Private capital is returning to the mortgage market

Shrinking spread between jumbo and conforming mortgages is a positive indicator

The spread between jumbo and conforming mortgages is shrinking. And that’s a good thing for the mortgage market. It means that private capital is coming back into the market, according to analysis from Capital Economics.

“We think that the decline in the jumbo-conforming mortgage interest rate spread is a positive sign for the future of the mortgage market,” Capital Economics Property Economist Paul Diggle said.

The spread between jumbo and conforming mortgages has progressively fallen since the early part of 2013, even turning negative for a brief period in February. Diggle says this is due to two factors:

  • The guarantee fees which Fannie Mae and Freddie Mac charge lenders for buying or guaranteeing mortgages, and which lenders pass on to borrowers in the form of higher rates, have increased. Put-back risk, as well as a 10-basis-point premium mandated by the Treasury, has been behind the rise in guarantee fees. But guarantee fees do not apply to jumbo mortgages, meaning that the increase in fees has served to close the jumbo-conforming spread.
  • The tapering of the Fed’s asset purchase program, which includes purchases of agency mortgage-backed securities, has driven an increase in conforming mortgage rates. The Fed has been buying only those mortgage bonds issued by the GSEs, which are by definition made up of conforming mortgages. So while the winding down of the program has led to an increase in conforming mortgage rates, it has hardly affected jumbo mortgage rates.

Diggle says that the shrinking spread is a positive for mortgage lending. “After all, the spread is one indicator of the willingness or ability of private capital to compete with GSE money in the mortgage market,” he said.

“Consistent with that, the evidence suggests that jumbo mortgages are becoming increasingly available. In addition, the tight spread is an encouraging step towards the goal of running down the role of Fannie Mae and Freddie Mac in the mortgage market. That’s arguably the single most important reform which would put the US housing market on a long-term sustainable path.”

Renewal of federal tax breaks for homeowners facing bumpy road

Homeowner benefits such as mortgage debt forgiveness may not stand up to a planned rigorous evaluation by Rep. Dave Camp, the House’s most influential tax legislator.

WASHINGTON — Renewal of important expired federal tax benefits for homeowners took a major step forward recently, but the route to final congressional approval is beginning to look longer — and potentially bumpier — than previously expected.

Here’s why. The Senate Finance Committee overwhelmingly approved a package of tax code goodies that includes a two-year reauthorization of the Mortgage Forgiveness Debt Relief Act, plus similar extensions for deductions of mortgage insurance premiums and energy-saving improvements to homes.

Mortgage debt relief is crucial for thousands of underwater owners who receive cancellation of a portion of their principal balances from banks in connection with loan modifications, short sales and foreclosures. Without an extension retroactive to Jan. 1 — which the Senate Finance Committee package includes — these owners would be hit with federal income taxes on the mortgage amounts canceled.

Now for the bumps: The full Senate must still pass the so-called extenders bill containing the housing provisions. That vote could happen relatively soon — this spring — or could be put on a back burner based in part on the level of urgency the Senate leadership detects from the House side.

And here’s the message that Senate Majority Leader Harry Reid (D-Nev.) is certain to get from the House’s most influential tax legislator, Ways and Means Committee Chairman Dave Camp (R-Mich.): Cool it. We’re not rushing. Camp says he’s more interested in reforming the entire federal tax code for the long haul rather than reapproving tiny pieces of it year after year.

He wants to look at the 50-odd special interest tax benefits in the extenders bill — one by one — to determine whether they merit a place in the code. Among the breaks he plans to evaluate apart from the housing-related ones: Should the federal tax code provide financial subsidies to owners of racehorses? TV and film producers? Auto race tracks? Rum producers in the Caribbean?

He’s got a point. Are all the now-expired tax subsidies for niche groups and industries, which sometimes cost billions of dollars in lost revenue to the Treasury, cost-effective? Do they benefit the economy as a whole, or are they simply sops to well-shod lobbies? If they can be justified on the merits, fine, we’ll keep them. If not, they should disappear.

To achieve this analysis, Camp plans to conduct months of hearings and markups — a challenge given Congress‘ already tight pre-election schedule. At the end of the process, it’s likely that there will be fewer special-interest tax benefits in the House’s bill than the Senate’s. Republicans may also insist that whatever short-term special interest provisions are approved be offset by revenue-raising measures — cutbacks in tax benefits — elsewhere in the code.

How well will homeowner benefits — such as mortgage debt forgiveness, mortgage insurance premiums and energy-conservation deductions — stand up to Camp’s planned rigorous evaluation?

It depends. At one level, mortgage debt forgiveness tax relief looks like a solid bet to make it into any final package. Since its enactment in 2007, it has helped thousands of owners who, often through no fault of their own, faced staggering tax bills on what amounts to phantom income — money that the tax code says they “earned” simply because a mortgage lender decided to subtract it from the principal debt the owner owed on the loan.

To illustrate, say the value of your home dropped sharply, not because you failed to keep it in good repair but because the economy went into deep recession. Your employer cut back on your work hours and you found it increasingly difficult to make full, on-time payments on your mortgage.

To help you past these problems, your lender agreed to reduce the amount you owed as part of a loan modification. It canceled $80,000 of your debt. Without the protection of the 2007 mortgage forgiveness relief provisions, the Internal Revenue Service could demand more than $22,000 in income taxes on the $80,000 that your lender wrote off — “income” you never pocketed and probably don’t have on hand.

(In California, owners who sell homes through short sales are not subject to taxation on the amounts forgiven because of protection provided by state law, a legal interpretation confirmed by the IRS.)

Mortgage forgiveness debt relief has strong bipartisan support in the Senate and some support in the House. But if Camp and the Republican majority in the House demand “pay fors” elsewhere in the tax code as the price of retaining it — the estimated revenue “cost” of this provision alone is $5.4 billion over 10 years — negotiations could get complicated.

Ditto for mortgage insurance premium deductions and home energy conservation. The political odds in an election year still favor their survival, but it’s likely to get messy along the way.

Foreclosure sales drop to lowest level since 2007

Loan modifications remain steady

February’s foreclosure sales and starts dropped significantly from January’s totals to a level not seen since 2007. There were only 36,000 foreclosure sales in February, down 24% from 48,000 in January.

In addition, there were approximately 69,000 foreclosure starts in February, down from 75,000 in January, according to data released by HOPE NOW, the voluntary, private sector alliance of mortgage servicers, investors, mortgage insurers and non-profit counselors. Those figures marked the lowest since the initiative began recording data in 2007.

Delinquencies of 60 days or more were under 2 million forthe second straight month. That marks a decrease of over 2 million since December 2009.

February’s loan modifications were down slightly from January, dropping from 44,000 to 42,0000. This total includes modifications completed under both proprietary programs and the government’s Home Affordable Modification Program.

That figure was made up of 12,455 HAMP modifications and approximately 30,000 proprietary loan modifications.

Fannie and Freddie’s steep fees hurting home buyers, critics say

http://www.latimes.com/business/realestate/la-fi-harney-20140406,0,7914991.story#ixzz2yJM2qb2r

WASHINGTON — When you’re raking in tens of billions of dollars in profits by helping credit-elite borrowers buy homes, couldn’t you lighten up on fees a little for everyday folks who’d also like to buy?

That’s a question increasingly being posed to government-controlled home mortgage giants Fannie Mae and Freddie Mac and their federal regulators.

Though most buyers are unaware of the practice, Fannie and Freddie — by far the largest sources of mortgage money in the country — continue to charge punitive, recession-era fees that can add thousands of dollars to consumers’ financing costs. This is despite the fact that the companies are enjoying record profits, low delinquency rates and rising home values, plus are protecting themselves from most losses with insurance policies paid for by consumers.

Critics say that by making conventional mortgages more expensive, these fees are partially responsible for declines in home purchases in recent months, especially among moderate-income, first-time and minority buyers. The add-on fees can raise interest rates for some borrowers from the mid-4% range to more than 5%. Since Fannie and Freddie operate under federal conservatorship and send their profits to the government, the fees amount to a federal surtax on home buyers.

Last year, the two companies had combined pre-tax income of $64 billion. By contrast, the entire private mortgage industry — big banks, small banks, mortgage companies, brokers, servicers and others — had $19 billion in pre-tax income, according to new data compiled by the Mortgage Bankers Assn.

Fannie and Freddie got into deep financial trouble acquiring and backing poorly underwritten loans during the boom years. But under regulatory supervision since 2008, they have improved their performances, primarily by severely tightening their credit standards.

As part of that effort, they created a series of fees known as “loan level pricing adjustments” designed to charge borrowers more if they have certain perceived risks. The fees generally are added to the base interest rate paid by borrowers.

Small down payments, for example, get hit with higher add-on fees than large down payments. Applicants with low credit scores are assessed much higher fees than those with pristine records. Buyers of condominium units who make down payments of less than 25% get charged a hefty extra fee no matter what their scores.

Fannie and Freddie also charge lenders fees to guarantee mortgage bonds — again ladled onto borrowers’ bills — and those have doubled since 2011.

But critics such as Mike Zimmerman, senior vice president of MGIC, a major private mortgage insurance company that does business with Fannie and Freddie, calls the companies’ add-ons “arbitrary” and excessive in view of current market conditions.

For some borrowers, he says, the fees can increase the monthly cost of a 5% down payment loan on a $220,000 house up to 7%, and lead to thousands of dollars of extra expenses. But since Fannie and Freddie are already insured against most losses on low-down-payment loans by private insurance policies, he argues, these add-ons are unnecessary, covering risks that are already covered.

Fannie and Freddie could save consumers a lot of money, say industry experts, by reducing or getting rid of the add-ons and deepening their mortgage insurance coverage. Zimmerman estimates that borrowers could see reduced interest rates of between one-quarter of a percentage point to nearly nine-tenths of a percentage point if the companies moved in this direction.

A spokesperson for the two corporations’ regulator — the Federal Housing Finance Agency — declined to comment on the issue of add-on fees. The agency has a new director, former Rep. Mel Watt (D-N.C.), who has made virtually no public statements since he took over effective control of Fannie and Freddie in January. He is said to be studying options regarding key policy issues but is not ready to announce changes, if any.

David Stevens, chief executive of the Mortgage Bankers Assn., says the companies’ excessive fees are thwarting home purchases. “We’re seeing significant declines in purchase applications because we have priced out a lot of Americans,” especially in the under-$417,000 segment dominated by Fannie and Freddie.

“It’s a wonderful thing to be a duopoly,” said Stevens in an interview, but the two companies’ total fees are out of line with their real risks and are hurting homeownership.

Could all this change and borrowers get a break? It’s up to Watt and, at least for the time being, he is mum.

http://www.latimes.com/business/realestate/la-fi-harney-20140406,0,7914991.story#ixzz2yJM9fCiv

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