Month: August 2011

Home prices bounce back, but market still struggles

By Les Christie August 30, 2011

CNNMoney.com

NEW YORK (CNNMoney) — Home prices made a comeback during the second quarter, but the struggling housing market isn’t out of the woods yet.

Prices rose a substantial 3.6%, compared with the three months ended March 31. But home prices are still down 5.9% compared with the second quarter of 2010.

The rise in home prices came after three consecutive quarters of drops, as reported by the S&P/Case-Shiller national index — an influential gauge of residential real-estate markets.

The year-over-year decline was a bit more than the than the drop of 4.7% that had been forecast by a consensus of experts at Briefing.com.

A separate monthly index of home prices in 20 major metro areas also reported a month-over-month gain of 1.1% for June, and a drop of 4.5% year-over year.

The quarter-over-quarter price increase may be the last one for a while, according to Stan Humphries, chief economist for real estate website Zillow (Z). He expects prices will weaken again due to economic woes.

“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,” Humphries said.

The economic woes already seem to have affected new homes sales,which declined in July. Real estate gurus have been pushing back forecasts for a housing market recovery.

Even mortgage interest rates hitting new lows in August failed to move many potential homebuyers. The number of people applying for loans to purchase homes dropped nearly every week during the month, according to the Mortgage Bankers Association.

None of the 20 cities coverted in the report recorded price decreases in June: 19 posted gains and one, Portland, Ore., was flat.

The biggest gains were made by Chicago and Minneapolis, which were both up 3.2%. Boston prices were up 2.4% and Washington’s rose 2.3%.

The 20-city index is at approximately the same level it stood at in June 2003, following a roller-coaster ride of big gains and losses. The index peaked in mid-2006 and is down nearly 32% from that high.

Anthony Sanders, a real estate professor at George Mason University, called the latest gains a “blip.”

“I would take it with a grain of salt,” he said, “and I’d be very surprised if, come fall, the increases continue.”

Hi attributed some of the improvement to a change in the mix of homes being sold. There are more short sales these days — up 19%, according to RealtyTrac — compared with sales of properties repossessed by banks.

That would be enough to account for much of the quarterly increase in the Case-Shiller index.

Investor sentiment: Get a clue or get out of the way

by KERRI PANCHUK

http://www.HousingWire.com

Tuesday, August 30th, 2011, 5:02 pm

 

There’s a feeling in the air, and it’s not one of hope, change or prosperity.

It’s more like an unsettling, quiet feeling that has pushed real estate investors to a point of frustration. You can almost hear them sitting at their desks, pounding away, wanting to shout out, “Hey, either get a solid plan for the housing market, or get out of the way.”

Federal Reserve Chairman Ben Bernanke politely sent the same message to Washington when he spoke last week. The chairman’s speech lightly touched on a key point: the Fed can only do so much. At some point, policymakers in Washington need to adopt a solid, concise fiscal plan and restore the housing market or let someone else do it for them.

All of these frustrations stem from a type of schizophrenia that is currently infecting the nation’s political elite.

James Frischling, president of NewOak Capital put it this way: “The U.S. government has been unable to stop the slide or relieve the congestion in the housing market thus far. Private capital is both available and interested in this market, but not with the looming uncertainties that have been created with regulatory reform and newly formed government programs.”

And perhaps speaking directly to the powers that be, he said, “like it or not, if you want to re-start the housing market, attract capital and put people in that industry back to work, the government will need to make the rules clear and then get out of the way.”

Many investors agree with Frischling’s call to action.

And, investors perked up when a proposal was announced to sell government properties in bulk to investors for the purpose of turning them into rental properties. But if it’s like other plans, it will take forever to get additional details.

The American Securitization Forum came out with a novel idea Tuesday, suggesting the best risk-retention rule for financial institutions that pack mortgages into securities is one that holds the parties to the exact terms of the contract, making them 100% liable for misrepresenting loan data. In other words, write those contracts tightly and follow the rule of law or else you buy back the loan.

Compare that to the government’s proposed 5% risk-retention rule which comes with varying standards for determining when a party must retain 5% of the risk on MBS.

The rule and its accompanying qualified residential mortgage proposal are equally unpopular, but no one has killed them yet.

This leads to another issue: the fact that after three years of deliberations nothing is finalized. It’s still unclear how many of the rules introduced to govern the future mortgage markets will shape out. Having no concise plan, means market players are unable to plan, which stifles growth.

So where has this taken us?

Billionaire Sam Zell told Bloomberg this week he’s favoringreal estate deals outside the United States.

Roger Steiner of Access Realty Services told HousingWire he’s been an investor for the past 32 years and recently “the word ‘investor’ has a negative ring to it when coming from many politicians and talking heads on TV.”

He’s well aware of what is taking the market so long to recover.

“Homebuilders cannot build now, but they could buy bank-owned properties and rehab them for new owner-occupants and future buyers,” he told HousingWire. “This is a healthy environment for homebuilders and investors to provide housing to millions of Americans and speed recovery of the economy. Without the home and commercial building industry recovering, the general real estate and American economy is at the mercy of the federal government, which has proven it cannot manage and improve the economy the past two years.”

In other words, everyone has a plan on the table or some idea of what a plan should look like.

That is everyone except Washington.

HUD extends higher conforming loan limit for reverse mortgages

by JON PRIOR Housingwire.com

Friday, August 19th, 2011, 5:12 pm

 

The Federal Housing Administration conforming loan limit on forward mortgages is set to drop in October but not so for reverse mortgages.

The Department of Housing and Urban Development will extend the $625,500 maximum loan amount for a reverse or Home Equity Conversion Mortgage through Dec. 31, 2011 according to a lender letter sent Friday.

HECMs allow the borrower, who must be at least 62 years old, to convert a portion of the equity in the home for cash. Lenders do not require repayment until the borrower no longer uses the home as a principal residence, often in the event of death.

The limit is 150% above the cap set by Freddie Mac. It is the maximum loan amount FHA will insure.

HUD sent the letter out Friday, alerting lenders to the pending drop for forward mortgages to $625,500 from $729,750 in the most expensive neighborhoods. In areas where 115% of the median house price exceeds the current conforming loan limit, it will go unchanged in October. Congress pushed the limits for FHA, Fannie Mae and Freddie Mac up in 2008 to keep the mortgage market liquid through the financial crisis.

One bill was introduced in the House of Representatives andanother in the Senate to extend all of the conforming loan limits for another two years, though these bills have yet to reach committee.

The extended loan limits for reverse mortgages applies to all HECMs made in the U.S., including Hawaii, Alaska, Guam and the U.S. Virgin Islands.

Peter Bell, president of the National Reverse Mortgage Lenders Association said he hoped HUD and Congress would extend the higher loan limits beyond 2011.

“We’re glad to see that HUD has taken this interim step,” Bell said. “It helps eliminate uncertainty for seniors in the process of getting or contemplating a reverse mortgage and takes pressure off of counseling agencies with clients who want to be counseled in time to take advantage of current loan limits.”

Foreclosures fall for 10th straight month

By Les Christie | August 11, 2011

Housing market: Foreclosures fall for 10th straight month

NEW YORK (CNNMoney) — Foreclosure filings dropped once again in July, hitting their lowest level since November 2007, as processing delays and foreclosure prevention measures enabled a larger number of delinquent borrowers to remain in their homes.

Filings were down 4% compared to June and were 35% lower than July 2010, marking the tenth straight month of year-over-year declines, according to RealtyTrac, a leading online marketer of foreclosed properties.

RealtyTrac reported that 212,764 U.S. homes received some kind of foreclosure filing — notice of default, notice of auction sale or completed foreclosure — during the month. Bank repossessions totaled 67,829, down 33.6% from the peak month of September, 2010 — when banks took back 102,134 homes, and off 27% from 12 months earlier.

The steep foreclosure drop, according to RealtyTrac CEO James Saccacio, was triggered by a foreclosure processing slowdown that was sparked by the “robo-signing” controversy last fall. As a result of the scandal, in which the banks were accused of mishandling paperwork and failing to follow proper protocols, banks are being much more careful and many filings have been delayed.

“[T]he downward trend in foreclosure activity has now taken on a life of its own,” said Saccacio. “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.”

There were some small glimmers of hope in RealtyTrac’s report. One promising sign was the steep plunge in initial notices of default, which fell 39% year-over-year to fewer than 60,000.

The decline may indicate that fewer borrowers are falling behind on payments. Or, it could mean lenders are not filing those notices as promptly as they have in the past, according to Rick Sharga, a spokesman for RealtyTrac.

The company analyzed initial default notices in California and discovered that the average sum of missed payments has risen to $78,000 from $17,000 over the past four years. Sharga attributed the jump to delays in filing the initial papers.

Getting rid of repossessed homes

RealtyTrac’s release came a day after the Federal Housing Finance Agency (FHFA), the Treasury Department and the U.S. Department of Housing and Urban Development announced they were seeking suggestions on how to dispose of the 92,000 repossessed homes now owned by Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA).

FHFA, the agency that supervises Fannie/Freddie, and HUD, which oversees FHA loans, want to be able to reduce that inventory quickly and in a manner that helps stabilize communities that have been hard hit by foreclosures.

They’re seeking proposals from private enterprises, municipalities and non-profits that will result in bulk sales and result in their refurbishment and eventual resale or rental.

Hardest hit markets

Among the markets where these efforts may be most concentrated are those hardest hit by the foreclosure crisis. According to RealtyTrac’s report, Las Vegas continued to record the highest rate of foreclosures in the nation, with a filing for every 99 homes, but the gap between “Sin City” and other metro areas has shrunk.

Foreclosure filings in Stockton, Calif. jumped 57% month-over-month, one for every 124 homes, the second highest rate.

Nevada continued to post the highest foreclosure rate of any state, one filing for every 115 homes. California, one in every 239 homes came in second place, and Arizona, one in every 273 homes, was third.

Fed says it will hold rates fast until mid-2013

More explicit time frame, unusual for central bank, may be aimed at calming investors

By MARTIN CRUTSINGER

updated 8/9/2011 

WASHINGTON — The Federal Reserve sketched a dim outlook for the U.S. economy Tuesday, suggesting it will remain weak for two more years. As a result, the Fed said it expects to keep its key interest rate near zero through mid-2013

It’s the first time the Fed has pegged its “exceptionally low” rates to a specific date. The Fed had previously said only that it would keep its key rate at record lows for “an extended period.”

The Fed announced no new efforts to energize the economy in its statement released after its one-day policy meeting. But the statement held out the promise of lower rates on mortgages and other consumer loans longer than many had assumed.

The decision was approved on a 7-3 vote. Three Fed regional bank presidents who have been worried about inflation objecting. It was the first time since November 1992 that as many as three Fed members have dissented from a policy statement.

The Fed’s new timetable and its implications for the economy led to a wild afternoon of trading on Wall Street. Stocks plunged after the statement was released, but then shot up shortly after. The Dow Jones industrial average sank more than 176 points, then recovered its losses and closed up 429 points for the day.

Investors seemed to look past the more downbeat language the Fed used to describe economic conditions. The economy has grown “considerably slower” than the Fed had expected and consumer spending “has flattened out,” it said in a statement released after the one-day meeting.Many investors sought the safety of long-term Treasurys. The yield on the 10-year Treasury note briefly touched a record low of 2.03 percent before heading higher.

The Fed also said that temporary factors, such as high energy prices and the Japan crisis, only accounted for “some of the recent weakness” in economic activity. Federal Reserve Chairman Ben Bernanke had previously said that the economy would rebound in the second half of the year after such factors eased.

Fed officials “are very nervous about the economy,” said Mark Zandi, chief economist at Moody’s Analytics. “This is unprecedented for the Fed to indicate they are ready to keep rates low for two more years.”

The federal funds rate is the interest that banks charge each other on overnight loans. The Fed has kept its target for the rate at a record low near zero since December 2008, a response to the recession and financialcrisis.

Since March 2009 the Fed has only said that it would keep the rate at “exceptionally low” levels for an “extended period.” On Tuesday, the Fed dropped the “extended period” language, and said rates would likely stay at those levels “at least through mid-2013.”

Some economists said the Fed didn’t offer any remedies for the deteriorating economic conditions it described.

University of Oregon economist Timothy Duy called the clearer language about how long rates would stay low “weak medicine.” He wanted the Fed to commit to buying more Treasury bonds.

Earlier this summer, the Fed ended a $600 billion Treasury bond-buying program. The bond purchases were intended to keep rates low to encourage spending and borrowing and lift stockprices.

The Fed did hold out the promise of further help in the future. But it did not spell out what else it might do.

Dean Maki, chief U.S. economist at Barclays Capital, said the large number of dissents suggests that Bernanke would have trouble building consensus for another round of bond purchases.

“Nothing here says they’re not going to do (it),” Maki said. But “it does suggest that there is significant resistance on the committee.”

Fed officials met against a backdrop of speculation that they would say or do something new to address a darkening economic picture. The stock market has plunged and government data have signaled a weaker economy in the four weeks since Bernanke told Congress that the Fed was ready to act if conditions worsened.

The economy grew at an annual rate of just 0.8 percent in the first six months of the year. Consumers have cut spending for the first time in 20 months. Wages are barely rising. Manufacturing is growing only slightly. And service companies are expanding at the slowest pace in 17 months.

Employers hired more in July than during the previous two months. But the number of jobs added was far fewer than needed to significantly dent the unemployment rate, now at 9.1 percent. The rate has exceeded 9 percent in all but two months since the recession officially ended in June 2009.

Fear that another recession is unavoidable, along with worries that Europe may be unable to contain its debt crisis, has rattled stock markets. The Dow Jones industrial average has lost nearly 15 percent of its value since July 21. On Monday, it fell 634 points — its worst day since 2008 and sixth-worst drop in history.

The tailspin on Wall Street was further fueled by Standard & Poor’s decision to downgrade long-term U.S. debt

Bernanke didn’t speak publicly after Tuesday’s Fed meeting. The chairman this year made a historic change by scheduling news conferences after four of the Fed’s eight policy meetings each year, but Tuesday’s wasn’t one of them.

Later this month at the Fed’s annual retreat in Jackson Hole, Wyoming, Bernanke will likely address the weakening economy, the S&P downgrade and the market turmoil.

Full text of the Fed’s statement
Information received since the Federal Open Market Committee met in June indicates that economic growth so far this year has been considerably slower than the Committee had expected. Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up. Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity. Inflation picked up earlier in the year, mainly reflecting higher prices for some commodities and imported goods, as well as the supply chain disruptions. More recently, inflation has moderated as prices of energy and some commodities have declined from their earlier peaks. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, downside risks to the economic outlook have increased. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee currently anticipates that economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.

Voting against the action were: Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an extended period.

June home prices rise 0.7% from May but fall 6.8% from June 2010

By Alejandro Lazo, Los Angeles TimesAugust 4, 2011

U.S. home prices rose 0.7% in June from May, according to a home price index released Wednesday, although some of that increase is probably the result of seasonal variations.

The home price index, which includes so-called distressed properties, fell by 6.8% in June when compared with the same month last year, according to Santa Ana research firm CoreLogic.

Excluding foreclosures and other distressed properties, prices were up 1.5% in June over May. They fell 1.1% when compared with June 2010. Distressed sales include foreclosure properties as well as short sales, a transaction in which the bank allows a property to be sold for less than the outstanding debt on the property.

“While there is a consistent and sustained seasonal improvement in prices over the last three months, prices are lower than a year ago due to the decline in prices after the expiration of the tax credit last year,” CoreLogic Chief Economist Mark Fleming said.

The most recent Standard & Poor’s/Case-Shiller index of prices in 20 major metropolitan areas showed a 1% increase in May compared with April but a 4.5% decline from May 2010. The Case-Shiller index is probably the most widely followed home-price gauge, but many economists and analysts also look to the CoreLogic home price index as an indicator of where the housing market is headed.

Mortgage rates plunge, flirting with new lows

By Les Christie August 3, 2011 CNN Money

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NEW YORK (CNNMoney) — As Congress and President Obama hammered out a debt deal over the past week, mortgage rates plunged — hitting new lows in some instances.

The 30-year fixed rate, usually the most popular choice for homebuyers, fell to 4.45% from 4.57% last week — its lowest point since last November, according to the Mortgage Bankers Association.

Meanwhile, the rate on the less popular 15-year fixed plunged to a new record low of 3.52%, down from 3.67% a week earlier.

The up-front points lenders charged dropped as well, to 0.78 from 1.14 for 20%-down loans, according to the industry group. A homebuyer financing a $200,000 mortgage could save $14 a month and pay $720 less at closing based on the current points.

The rock-bottom interest rates drove up total mortgage applications — both for purchases and refinancings — by about 7%, compared with a week earlier, said Michael Fratantoni, the Mortgage Bankers Association’s vice president of research and economics. While the increase may seem substantial, he noted that applications are still well below last year’s level.

“Refinance application volume increased, but even though 30-year mortgage rates are back below 4.5 percent, the refinance index is still almost 30 percent below last year’s level. Factors such as negative equity and a weak job market continue to constrain borrowers,” he said.

On Bankrate.com Wednesday, a 30-year fixed was available that carried an annual percentage rate of just 4.03%. The overnight average was 4.37%, the site reported.

Mortgage rates are following bond yields lower, explained Greg McBride, Bankrate’s chief economist. The yield on 10-year Treasury notes hit 2.6% on Wednesday down from 3.03% the last week of July.

“The plunge in Treasury yields is because we’ve been hit with a string of poor economic readings,” said McBride.

Those include a weak GDP report and slowdowns in manufacturing,consumer spending and hiring.

With rates so low and home prices down more than 30% from peak, there has probably never been a more affordable time to buy a home.

For some buyers though, “Time is of the essence.,” said McBride. “The loan limits (for Fannie/Freddie mortgages) drop on October 1 so acting now for closing by Sept. 30 is important for buyers in the upper price levels.” To top of page