Month: September 2011

August Existing-Home Sales Leap Despite Headwinds

DAILY REAL ESTATE NEWS | WEDNESDAY, SEPTEMBER 21, 2011

Existing-home sales increased in August, even with ongoing tight credit and appraisal problems, along with regional disruptions created by Hurricane Irene, according to the NATIONAL ASSOCIATION OF REALTORS®. Monthly gains were seen in all regions.

Total existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 7.7 percent to a seasonally adjusted annual rate of 5.03 million in August from an upwardly revised 4.67 million in July, and are 18.6 percent higher than the 4.24 million unit level in August 2010.

Lawrence Yun, NAR chief economist, said there are some positive market fundamentals. “Some of the improvement in August may result from sales that were delayed in preceding months, but favorable affordability conditions and rising rents are underlying motivations,” he said. “Investors were more active in absorbing foreclosed properties. In additional to bargain hunting, some investors are in the market to hedge against higher inflation.”

Investors accounted for 22 percent of purchase activity in August, up from 18 percent in July and 21 percent in August 2010. First-time buyers purchased 32 percent of homes in August, unchanged from July; they were 31 percent in August 2010.

All-cash sales accounted for 29 percent of transactions in August, unchanged from July; they were 28 percent in August 2010; investors account for the bulk of cash purchases.

“We had some disruptions from Hurricane Irene in the closing weekend of August, when many sales normally are finalized, along the Eastern seaboard and in New England,” Yun said. “As a result, the Northeast saw the smallest sales gain in August, and some general impact is expected in September with widespread flooding from Tropical Storm Lee. Aberrations in housing data are possible over the next couple months as markets recover from disrupted closings and storm damage.”

Yun said an extremely important issue currently is the renewal and availability of the National Flood Insurance Program, scheduled to expire at the end of this month. “About one out of 10 homes in this country need flood insurance to get a mortgage, and we would see significant negative market impacts without it,” he said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.27 percent in August, down from 4.55 percent in July; the rate was 4.43 percent in August 2010. Last week, Freddie Mac reported the 30-year fixed rate fell to a record low 4.09 percent.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said the market is remarkably affordable for people with secure jobs, good credit and long-term plans. “All year, the relationship between home prices, mortgage interest rates and family income has been hovering at historic highs, meaning the best housing affordability conditions in a generation,” he said.

“The biggest factors keeping home sales from a healthy recovery are mortgages being denied to creditworthy buyers, and appraised valuations below the negotiated price. Buyers may be able to find more favorable credit terms with community and small regional banks, and Realtors® can often give buyers advice to help them overcome some of the financing obstacles,” Phipps said.

Contract failures – cancellations caused largely by declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price – were reported by 18 percent of NAR members in August, up from 16 percent July and 9 percent in August 2010.

The national median existing-home price for all housing types was $168,300 in August, which is 5.1 percent below August 2010. Distressed homes – foreclosures and short sales typically sold at deep discounts – accounted for 31 percent of sales in August, compared with 29 percent in July and 34 percent in August 2010.

Total housing inventory at the end of August fell 3.0 percent to 3.58 million existing homes available for sale, which represents an 8.5-month supply at the current sales pace, down from a 9.5-month supply in July.

Single-family home sales rose 8.5 percent to a seasonally adjusted annual rate of 4.47 million in August from 4.12 million in July, and are 20.2 percent above the 3.72 million pace in August 2010.

The median existing single-family home price was $168,400 in August, which is 5.4 percent below a year ago.

Existing condominium and co-op sales increased 1.8 percent a seasonally adjusted annual rate of 560,000 in August from 550,000 in July, and are 8.3 percent higher than the 517,000-unit level one year ago. The median existing condo price was $167,500 in August, down 3.3 percent from August 2010.

Regionally, existing-home sales in the Northeast increased 2.7 percent to an annual pace of 770,000 in August and are 10.0 percent above a year ago. The median price in the Northeast was $244,100, which is 5.1 percent below August 2010.

Existing-home sales in the Midwest rose 3.8 percent in August to a level of 1.09 million and are 26.7 percent above August 2010. The median price in the Midwest was $141,700, down 3.5 percent from a year ago.

In the South, existing-home sales increased 5.4 percent to an annual pace of 1.94 million in August and are 16.9 percent higher than a year ago. The median price in the South was $151,000, which is 0.8 percent below August 2010.

Existing-home sales in the West jumped 18.3 percent to an annual pace of 1.23 million in August and are 20.6 percent higher than August 2010. The median price in the West was $189,400, down 13.0 percent from a year ago.

Source: NAR

Extension of conforming loan limits fails in House

by JON PRIOR

http://www.HousingWire.com

Friday, September 16th, 2011

The elevated conforming loan limit for mortgages guaranteed or insured by the government will expire on Oct. 1, according to three congressional staffers, but another chance to extend them will come later this year.

Congress raised the limit to as high as $729,750 in 2008 as the private market froze and financing for larger mortgages became unavailable. On Oct. 1, the limits will expire and drop to $625,500 in the most expensive areas, mostly affecting the West and East Coasts. According to Standard & Poor’s, there are around 110,000 nonconforming mortgages in the nation between $625,000 and $729,000 — about 2% of total jumbos.

Two bills to extend the limits, one introduced in the House and another in the Senate, were never voted on. A spokesman for Rep. John Campbell (R-Calif.), who co-sponsored the House bill, said an extension did not make it into a short-term spending bill the House will vote on next week.

“We are focusing all of our effort and attention on making sure that a temporary extension of the current conforming loan limits is included in an omnibus spending bill that it appears the House and Senate will consider late this year,” Campbell’s spokesman said.

Another staffer confirmed top leadership in the House had been trying to work the conforming loan limits into the spending bill ahead of the Oct. 1 deadline. Such a route had to come from the House, the staffer said. Yet another told HousingWire the odds of getting an extension after the limits expire were very long.

Industry trade groups pushed hard this past week, urging lawmakers to extend the limits at a time when the housing market is still fragile.

The Obama administration said in its white paper released in February that the first step toward winding down Fannie Mae and Freddie Mac would be to allow the loan limits to expire in October, allowing private capital to move back in.

Jaret Seiberg, a research analyst at the Washington think tank MF Global, said in a note that the expiration allows the largest banks to restart their securitization businesses.

“The real issue is whether investor demand has returned for private-label RMBS. We believe regulators have some doubts, but would like banks to test the waters,” Seiberg said.

Seiberg did say many borrowers could be forced to come up with higher down payments, and smaller banks will shy away from originating jumbo loans. Some analysts expect house prices to fall even further without the government support at the highest end of the market.

“We expect to see significant negative consequences for the struggling housing market as a result of the limit drop after Oct. 1,” Campbell’s office said. “Therefore, it will be even more pressing and pertinent that Congress acts quickly to reverse the limit reduction at the next opportunity.”

Freddie Mac finalizes new modification option

by JON PRIOR

Tuesday, September 13th, 2011

Freddie Mac finalized requirements for a new modification option that will be made available to qualified borrowers on Oct. 1.

Mortgage servicers must evaluate borrowers deemed ineligible for the larger Home Affordable Modification Program for the new “Standard Modification” beginning in January. Trial period plans can begin in October. Through the new program the borrower’s principal and interest payments drop at least 10%, according to Freddie.

Since March 2009, servicers granted roughly 791,000 permanent HAMP modifications and extended more than 1.6 million trials through the national program. But servicers canceled more than 763,000 trials because of redefault, not enough documentation or the borrower did not meet the requirements.

In order for a borrower to qualify for a standard modification, he or she must be at least 60 days delinquent. If they’ve missed fewer payments or are current, he or she must be an owner-occupant, in imminent default and provide a hardship document.

The borrower must have already been evaluated for HAMP within 12 months of the Standard Modification. Mortgages on homes without an owner-occupant can be eligible, even vacant homes that cannot be condemned.

The loan-to-value ratio of the mortgage must also be greater than 80%.

Servicers will receive $1,600 for each modification completed before the loan slips into 120-day delinquency. They get $1,200 for a modified mortgage between 120- and 210-days behind. For standard modifications completed after 210 days of missed payments, the servicer gets $400 from Freddie.

The standard modification program will fall under the joint servicing alignment initiative launched in April.

Uncle Sam is a reluctant landlord of foreclosed homes

Washington has issued a plea to the public for ideas on how to get rid of houses

By Lorraine Woellert and Clea Benson

9/5/2011 

For sale or rent by distressed owner: 248,000 homes. That’s how many residential properties the U.S. government now has in its possession, the result of record numbers of people defaulting on government-backed mortgages. Washington is sitting on nearly a third of the nation’s 800,000 repossessed houses, making the U.S. taxpayer the largest owner of foreclosed properties. With even more homes moving toward default, Fannie Mae, Freddie Mac and the Federal Housing Administration are looking for a way to unload them without swamping the already depressed real estate market.

Trouble is, they haven’t figured out how to do that. The government admitted as much in August, when Fannie, Freddie and FHA issued a joint plea to the public for ideas about how to solve the problem. (Give it your best shot: You have until Sept. 15 to email ideas to reo.rfi@fhfa.gov.) “They’re stuck,” says Karen Shaw Petrou, managing partner of Federal Financial Analytics, a Washington-based consultant that advises banks and other clients on government policy. “They don’t know what to do.”

Since the 2008 financial collapse, the government has spent billions of dollars trying to extricate borrowersfrom high-cost loans, aid delinquent homeowners and stabilize neighborhoods. The results have been disappointing. The Obama Administration’s signature loan-modification program has helped about 657,000 homeowners — far short of its goal of 3 to 4 million. The program was a victim of its complexity and its inability to cope with overwhelming demand. Many families hit hardest by the housing downturn are concentrated in states that are having the most difficulty recovering from the recession, including Florida, Ohio and Nevada.

The government’s call for ideas is a sign it is deluged with repossessions, commonly known as real-estate-owned properties or REO. “It’s almost like having the captain of the Titanic go on the public address system and say, ‘Does anybody have an idea?’” says Mark Wiseman, a former director of Cleveland’s foreclosure-prevention program. “It’s not a confidence builder.”

Fannie Mae, Freddie Mac and FHA made progress in the first half of this year, reducing their combined backlog from 295,000 single-family homes in December to about 248,000 in June, according to the Housing and Urban Development Dept. The nation’s total number of repossessions also fell during that period, from nearly 981,000 to about 817,500. The government’s share has remained steady at about 30 percent. In coming months, however, as lenders and the courts clear up the “robo-signing” scandal that slowed new disclosures, the number of government-owned properties will likely grow. More than a fifth of the 3.65 million homes for sale at the end of July were foreclosures, according to RealtyTrac, a housing data provider.

“It isn’t necessarily our preference that FHA is going to itself continue to hold these properties,” says FHA Acting Commissioner Carol Galante. “We want to move homes through the system so we can recover.” The agency has to be careful as it goes, she says. “If you’re putting too much through that system you are helping to drive down prices.” That’s especially true in regions congested with government properties.

Shielding the market from a flood of government homes might be good for property values and the economy. It’s not such a great deal for taxpayers, who bear the costs when government-guaranteed loans go bad and who pay for maintenance on vacant homes the feds take over. One idea the Administration is exploring: allowing Fannie, Freddie and FHA to keep an ownership stake in the properties by converting them to rentals in partnership with private investors. When the market recovers, the government would sell the homes for more than they could get now and not risk glutting the market. Structured properly, such joint ventures could reduce the impact of foreclosures on struggling neighborhoods.

It’s not at all clear whether that would work on a large scale. The government would have to spend money to bring the rental properties — many of them old and dilapidated — to code; pay still more to insure the rentals; and build a bureaucracy to manage and maintain them. Even if they do all that, there might not be people willing to move in. In parts of Cleveland and Detroit, for example, some houses are stripped and vandalized the minute they’re vacant. “Some of the neighborhoods, you can’t move into,’’ says Wiseman. “There are so many empty houses, it’s just not safe.”

In places like that, it’s sometimes difficult to convince people to stay in their houses. Freddie Mac allows occupants of foreclosed homes to remain on a month-to-month lease until the house is sold. Few do, says spokesman Brad German. “People prefer to take cash for keys and move on.”

The bottom line: The government, struggling to figure out what to do with 248,000 foreclosed homes it took over, has issued a plea to the public for ideas.