Month: November 2012

BBVA: Housing market recovery expected to soar through 2013

By Christina Mlynski

• November 26, 2012 •

A strong housing market gained momentum in November and is expected to continue through 2013, especially with low mortgage rate, which will keep affordability high, according to the BBVA Compass ($8.25 -0.08%) US Weekly Flash analysis.

The Housing Market Index rose to 46 compared to 41 October, which is the highest level since 2006. The jump is a result of homebuilder’s confidence in the housing market. New home sales and construction are expected to continue on a strong trend throughout the remainder of the year.

However, the index of potential homebuyers did not change between October and November.

Existing home sales increased 2.1% to 4.79 million, with most of the strength centered in the West region, up 4.4% and the South region, up 2.1%. Sales in the Northeast decline 1.7% as an impact of Hurricane Sandy.

Click on the graph to view existing home sale trends.

Supply of the existing homes on the market is down to 5.4 months in October as a result of constrained supplies, which is limiting immediate sales. While median sales prices increase, it was not enough to offset the declines from the last three months.

Housing starts rose 3.6% in October following a 15.1% leap in September. Multifamily housing is up 26.4% in September and 11.9% in October.

Building permits declined 2.7% after a large increase from last month. Although there was a decline, permits are still slightly below the highest level of the recovery so far.

Click on the graph to view housing starts and building permit trends.

For the remainder of the month there is expected impact from Hurricane Sandy on the Northeast region. However, the effect is projected to be positive. The complete restoration and rebuilding of properties will effect upcoming housing starts, according the analysis.

Fiscal battle over mortgage deduction

By Jennifer Liberto @CNNMoney November 27, 2012

WASHINGTON (CNNMoney) — Washington should stay away from touching the mortgage interest tax deduction, warns the U.S. housing industry.

Lately, housing is on the mend and one of the few bright spots in a lumbering economic recovery. Taking away a key tax break could throw a wrench into home buying plans and hurt a long-sputtering recovery.

Lawmakers in both parties are on the lookout for tax revenue as a way to avert the fiscal cliff.

But the housing industry is preparing to fight against any move to get rid of the mortgage interest tax break.

“[Getting rid of it] would throw the housing sector into turmoil … and chill the market just as it is trying to recover,” said Jerry Howard, CEO of the National Association of Home Builders.

Powerful housing lobbying groups are taking their fight to the grass roots, armed with granular data on the benefits of the homeowner tax break in every congressional district.

Lobbyists from the industry have spent a combined $30 million this year, up from $27 million last year, according to Center for Responsive Politics figures. The bulk of that came from the powerful group, the National Association of Realtors, which spent a record $25 million on lobbying this year, more than any other year, federal records show.

They’re ensuring that leaders don’t do anything “penny-wise and pound foolish,” said David Stevens, CEO of the Mortgage Bankers Association.

This isn’t the first time Washington has taken a critical look at the mortgage interest tax deduction.

It is one of the oldest tax breaks and designed to encourage home ownership, by lowering the tax bill for homeowners.

It tends to benefit upper middle class families the most, according to the Tax Policy Center. For those earning more than $250,000 a year, the annual tax savings run about $5,460. For those with annual incomes of less than $40,000 a year, the average savings is just $91, according to the center.

The deduction is the third largest tax expenditure on the federal budget, according to the Congressional Research Service. The amount of revenue the government would forgo from those claiming mortgage interest deductions is estimated to reach $100 billion by 2014.

President Obama has proposed in his budget a cap on itemized deductions to 28% of gross income from 35% for high-income Americans. The cap would apply to many popular deductions such as mortgage interest and charitable donations.

But Obama’s proposals have gotten nowhere, thanks to lobbying from home builders, the National Association of Realtors and the Mortgage Bankers Association.

But this time, lobbyists are worried. That’s because for the first time in years, House Republicans say they are open to scrubbing any tax breaks from the books as part of shrinking federal deficits.

Stevens of the Mortgage Bankers Association said the economy “could actually move backwards” if the deduction is taken away, he warned because it has a significant impact on middle class Americans’ cash flow.

The National Association of Realtors, which has spent the most on lobbying this year, declined to share its plans on defending the deduction. But earlier this month, president Gary Thomas touted that the NAR had “secured 183 bipartisan cosponsors,” this year to support a House resolution that would protect the current tax deduction for mortgage interest.

“We will continue to work with members of Congress on the consumer’s behalf on this issue,” Thomas said in a statement.

Home prices: Biggest rise in more than 2 years

By Chris Isidore @CNNMoney November 27, 2012

Home prices are up for the 2nd straight quarter, the biggest year-over-year increase in more than two years.

NEW YORK (CNNMoney) — In another sign of a housing market rebound, home prices posted the biggest percentage gain in more than two years in the third quarter, according to the closely followed S&P/Case-Shiller index.

The 3.6% increase from a year earlier is more than three times the rise in the previous quarter and was the biggest jump in prices since the second quarter of 2010. But that 2010 rise was much more of a temporary blip caused by a homebuyer’s tax credit of up to $8,000 on homes purchased in late 2009 and early 2010.

This latest rise comes as the housing market has shown numerous other signs of recovery in recent months. The rebound is spurred by a combination of record low mortgage rates, an improving jobs market and a drop inforeclosures to a five-year low, reducing the supply of distressed homes available. There is also a tighter supply of both new and previously owned homes on the market.

The improvement in housing market fundamentals have helped to lift the pace of both home sales and home building.

Dean Baker, the co-director of the Center for Economic and Policy Research who was one of the earliest economists to warn about the housing bubble and the trouble that lay ahead, said this recovery in the housing market should lead to some sustained housing price increases in the coming years.

“I’ve been an optimist as of late,” he said. “Some think it’ll get back to bubble prices and that’s crazy. But we’ll probably do better than inflation for the next few years, and people who have been underwater on their mortgage will get out from that, and build some equity.”

The latest rise in the Case-Shiller index was the second straight quarter of year-over-year improvement, while the monthly annual reading has climbed for four months in a row, with six straight month-over-month increases.

“With six months of consistently rising home prices, it is safe to say that we are now in the midst of a recovery in the housing market,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.

The increases are widespread, with only two of the 20 cities tracked by index — Chicago and New York — showing modest price declines from a year earlier. The biggest rise was in Phoenix, one of the cities hardest hit when the housing bubble burst. Prices there in September were 20.4% higher than a year ago.

“Home price gains are becoming more widespread across cities, and some of the largest rebounds have been in areas that were most heavily affected during the initial housing slump,” said Cooper Howes, an economist with Barclays Capital. “We expect this trend to persist into next year as part of a broad-based housing recovery that includes starts, sales and prices”

Home prices are now back to where they were in early 2003, before the housing bubble inflated over the next three years before bursting. Even with the recent gain, the national index is down 28.6% from the peak level reached the first quarter of 2006.

FHA’s reserves fall into the red

Agency has a shortfall of $16.3 billion that could force it to tap Treasury funds.

November 17, 2012|Jim Puzzanghera
LA Times

WASHINGTON — As the housing market recovers, one government agency is still paying the price for helping to stabilize it — and taxpayers could get the bill.

The Federal Housing Administration, whose mortgage insurance business skyrocketed during the Great Recession of 2007-09, said Friday that its reserves to cover losses dropped into negative territory for the fiscal year that ended Sept. 30.

The agency has $30.3 billion in cash reserves to cover $46.6 billion in projected losses in coming years — a shortfall of $16.3 billion that could force it to tap the U.S. Treasury for the first time in its 78-year history to shore up its finances.

“Clearly, they’re in trouble financially,” said Guy Cecala, publisher of Inside Mortgage Finance. “I don’t think there’s any argument that FHA was ill-equipped to handle that overnight change to their business volume, and they’ve been playing catch-up ever since.”

The FHA insures loans with down payments of as low as 3.5%, often to low-income borrowers, and its role in the mortgage market began expanding dramatically in 2007 as banks pulled back on lending in the face of plunging home prices — unless the agency guaranteed the loans.

Those mortgages, many of them now underwater, are a major drag on the finances of an agency that has been funded entirely through insurance premiums.

“With its dual mission of providing access to homeownership for underserved populations and supporting the housing market during tough times, there is little doubt that FHA helped prevent a much deeper crisis,” Housing and Urban Development Secretary Shaun Donovan told reporters.

“That progress, however, has not been without stress,” he conceded.

The FHA’s net worth must not drop below 2% of the outstanding balances of the loans it guarantees. But in its annual actuarial report to Congress, the agency said its reserve ratio ended the fiscal year at -1.44%, down from the seriously low level of 0.24% at the end of the previous fiscal year. The figure was 0.5% at the end of 2010.

A final determination on tapping into Treasury’s funds would not come until September and could hinge on continued improvement in the housing market, officials said. The agency also plans to boost its reserves by making such changes as increasing the premiums it charges homeowners to back their loans.

Obama administration officials hope the changes will help the FHA avoid drawing money from the U.S. Treasury, which the agency has the authority to do without seeking congressional approval.

“We are taking all the actions that we feel are appropriate, including increase in premiums [and] including changes in policies, to ensure that we are generating appropriate revenue moving forward,” said acting FHA Commissioner Carol Galante.

“It is literally impossible to say that we will or won’t need a draw,” she said. “We are doing all of this to increase the likelihood that we will not.”

The FHA’s expanded role in the housing market has drawn criticism from some lawmakers and analysts, especially in light of the bailouts of seized housing finance giants Fannie Mae and Freddie Mac.

Taxpayers are on the hook for $137 billion in those rescues, though Fannie and Freddie have turned profitable and have started paying down what they owe.

But FHA’s finances have been getting worse. One specific criticism is the agency’s practice of lending to so-called rebound buyers, people who defaulted on a mortgage as recently as three years earlier.

Senate Banking Committee Chairman Tim Johnson (D-S.D.), said he was “deeply concerned” by Friday’s FHA report and would call Donovan to testify about how to get the agency on a fiscally sustainable path.

Rep. Scott Garrett (R-N.J.) said the news of FHA’s deteriorating finances was not surprising given warnings about its finances in recent years.

“This is yet another example in which the government has stepped in, mispriced risk, acted as a backstop and put the taxpayer in a position of bailing them out,” he said. He blamed the Obama administration for not doing more to stabilize the agency’s finances.

But Rep. Maxine Waters (D-Los Angeles) noted that the FHA has helped millions of people buy homes since it was created in the Great Depression. And although the agency’s finances are in trouble, she said, Congress “should not act precipitously to limit loan availability, especially as the housing recovery remains fragile.”

In 2009, the agency boosted premiums and took other steps to shore up its capital reserves. But the FHA’s finances continued to be dragged down by the loans it backed from 2007 to 2009, Donovan said.

Mortgages backed by the agency in the last two years are performing much better, he said.

The FHA insures more than $1 trillion worth of mortgages. It has backed about 14% of new mortgages this year, up from less than 5% in 2007 but down from a high of nearly 30% in 2008.

The White House will use the report to help make its own projections of agency funding as part of President Obama’s 2014 budget, to be released in February. At that point, the administration would determine whether taxpayer money is needed to prop up the FHA, with a final determination coming at the end of the fiscal year in September.

Continued improvement in the housing market would help the FHA’s long-term outlook. And the changes coming soon also will help generate more revenue and reduce future losses, officials said.

The FHA plans to increase mortgage insurance premiums by about $13 a month for the average homeowner for new loans it guarantees, as well as end a policy for future loans that allowed homeowners to stop paying insurance premiums before the loan was paid off.

Among other changes are selling off at least 40,000 delinquent loans a year and streamlining short sales to reduce losses from foreclosures.

Housing recovery revs up as home resales rise

NBC News staff and wire reports November 11th 2012


A U.S. flag decorates a for-sale sign at a home in the Capitol Hill neighborhood of Washington, DC. Home resales took a surprise rise in October.

U.S. home resales unexpectedly rose in October, a sign that slow improvements in the country’s labor market are helping the housing sector recovery gain traction.

That, in turn, is feeding hopes among construction companies, whose sentiment rose for a seventh straight month in November to its highest level in six years.

The National Association of Realtors said on Monday that existing home sales climbed 2.1 percent last month to a seasonally adjusted annual rate of 4.79 million units.

That was above the median forecast of a 4.75 million-unit rate in a Reuters poll.

NAR economist Lawrence Yun said superstorm Sandy, which slammed in the U.S. East Coast on Oct. 29, had only a slight impact on home resales. The only region where the pace of sales slipped was the Northeast. But Yun said the storm could temporarily hold back the pace of sales in November and December.

Nationwide, the median price for a home resale was $178,600 in October, up 11.1 percent from a year earlier as fewer people sold their homes under distressed conditions compared to the same period in 2011. Distressed sales include foreclosures.

The nation’s inventory of existing homes for sale fell 1.4 percent during the month to 2.14 million, the lowest level since December 2002.

At the current pace of sales, inventories would be exhausted in 5.4 months, the lowest rate since February 2006.

The price increase last month was measured against October 2011, and since then distressed sales have fallen to 24 percent of total sales from 28 percent.

The share of distressed sales, which also include those where the sales price was below the amount owed on the home, was flat from September.

Meanwhile, the NAHB/Wells Fargo Housing Market index rose to 46 from 41 the month before, the group said in a statement. Economists polled by Reuters had predicted the index would remain unchanged at 41. The index was at its highest level since May 2006.

However, the gauge remained below 50, showing that the housing market was still some way off full recovery. Readings below 50 mean more builders view market conditions as poor than favorable. The index has not been above 50 since April 2006.

Still, the measure has made strong progress over the last year, helping to cement optimism in the sector. In November last year it stood at just 19. Housing led the financial crisis of 2008-09 and has been one of the biggest overhangs in the economic recovery.

“Builders are reporting increasing demand for new homes as inventories of foreclosed and distressed properties begin to shrink in markets across the country,” said NAHB Chairman Barry Rutenberg in a statement.

Lansner: Housing’s October surprise


Business Columnist

October 15th 2012

You often hear of a presidential political campaign’s “October surprise” – the unexpected that shocks just before Election Day.

If you can think all the way back to last month – when presidential politics ran at a heated peak – you may recall the many so-called experts listing numerous reasons for grand economic anxiety.

Article Tab: This home at 3121 Third Ave. in Corona del Mar sold for $825,000 on Oct. 5, according to Redfin. The 1,100-square-foot house is on half a lot that's about 30-by-53-feet. It likely will be torn down to make way for a new home, listing broker Suzanne Wyrick said. It's located less than half a mile from the beach.
This home at 3121 Third Ave. in Corona del Mar sold for $825,000 on Oct. 5, according to Redfin. The 1,100-square-foot house is on half a lot that’s about 30-by-53-feet. It likely will be torn down to make way for a new home, listing broker Suzanne Wyrick said. It’s located less than half a mile from the beach.

Who’d be the next president? What would their policies truly be? What of global economic troubles? How about the doom and gloom of the impending federal budget’s “fiscal cliff” – a deficit-cutting debate that could harm housing’s critical mortgage deduction?

Well, this October surprise came after the election: 3,148 Orange County house buyers ignored numerous financial warnings – and made last month the busiest October for home shopping since 2005, according to DataQuick’s latest housing report.

It was an unexpected homebuying surge, and not just for the shaky business-climate backdrop. Autumn is a typically quiet period for real estate. The key homebuyer niche – families – typically finishes acquisitions in summer to get children set before the school year starts. Yet this year, Orange County home sales rose 17 percent from September to October. Homebuying surged only nine times in this period in the past 25 years.

Home prices acted accordingly. Orange County buyers paid a median sales price of $455,000 – up 12 percent in a year to the highest point since July 2008. That year-over-year gain was the largest annual rate of appreciation – minus the tax-incentive-juiced 2010 – since December 2005.

I’m sure that October’s buyers were not aggressively buying while blind to the economic challenge debated during the campaign. Rather, it’s likely these shoppers perceived Orange County’s economy as outpacing the national pace and that local housing was a relative bargain.

The local economy is producing jobs at the fastest pace since 2005. That certainly gives buyers confidence that employment is secure – or that opportunity is growing.

Then there’s also the stunning lack of housing choice. Analyst Steve Thomas says the supply of homes for sale is down 60 percent in a year to the lowest level in the eight years he’s been tracking the market.

This inventory shortage is nudging shoppers to quickly pull the trigger on deals in what have often become multibid, feeding frenzies on properly priced homes.

And don’t forget landlords are helping ownership, too. Numerous reports show significant price hikes for rentals, with the cost of an apartment at local big complexes is at an all-time high, according to at least one measure.

Still, do not overlook the most important fuel for this rally: cheap mortgage rates. Let me give you an example of how mortgages rates under 4 percent translate to a shopper.

DataQuick each month calculates for the Register an estimate of the typical house payment obtained by Orange County buyers. For October, this loan cost index ran at $1,987 a month. That is down 11 percent in a year – in the same time frame when the median selling price rose 12 percent.

That’s part of a long-running, dramatic cost reversal – part cheap money, part the result of the housing crash. This estimated monthly house payment is off 45 percent from its 2006 peak – at $3,555.

In 2012, this homebuying cost index has run below $2,000 each month to date. The last time we saw 10 straight months of this mortgage cost so low was late 2001 and early 2002 – in the economic slump after the Sept. 11 terror attacks.

To the typical O.C. wallet this means that the monthly house payment has essentially not budged in more than a decade.

Can you say that about much else? Go back to the end of 2001 and remember, if you can, that gasoline was $1.10 a gallon and a Big Mac cost $2.54. The consumer price index has jumped by 30 percent since 2001.

Sure, today’s housing may be a bargain with risks – from another recession to disinterest with homeownership.

But I’m guessing that October’s house shoppers have a long-term view and will own for an extended period. That makes their homebuying surprise not so totally shocking: New owners are betting they can outlast today’s uncertainty.

O.C. housing market shrinks to 8-year low

November 12th, 2012,  by 

OC Register

Orange County had just 3,753 homes for sale as of Thursday, the smallest number on the market in the eight years that Steve Thomas of has been tracking the county’s housing inventory.

That’s equivalent to one home for sale for every 165 owner-occupied households in the county.

By comparison, the county had nearly 18,000 unsold homes on the market as the recession neared its peak in September 2007 — or one listing for every 35 owner-occupied households.

“These lows are absolutely unprecedented and so incredibly low that it is currently applying tremendous pressure on housing values,” Thomas said in his report released Monday. “It is anybody’s guess as to when the unabated drop is going to stop.”

Thomas said the active listing inventory dropped 24 percent below the prior low established in March 2005, when there were just 4,912 homes on the market.

“Unbelievably that was an additional 1,159 more homes than today,” he said.

Listings have been dropping because fewer homeowners are putting their properties up for sale, Thomas said. In addition, the number of bank-owned foreclosures has been dwindling over the past year.

Inventory fell by 290 homes, or 7 percent, in the past two weeks, Thomas said. It’s down 11 percent in the past month.

At March 2005 levels, “everybody had a hard time navigating” the market, with homebuyers competing for the few homes for sale and homes selling almost as soon as the for-sale signs went up.

Now, he said, “everything that is coming on the market below $750,000 that is priced right is absolutely flying off the market. Buyers are now willing to pay a few thousand dollars above the last closed sale. Closed sales are establishing higher prices throughout Orange County.”

Thomas warned, however, that home sellers shouldn’t see the current market as an opportunity to cash in. Buyers are not going to pay an additional 10 percent above the last comparable sale because are appreciating at a very slow rate, not thousands of dollars every month.

“Regardless of the craziness of today’s market, buyers are still not ready to pay well above recent comparable sales,” Thomas said. “Instead, prices will gradually increase.”