Month: May 2013

Flippers once again ride the housing wave

By Nick Timiraos

LADERA RANCH, Calif. (MarketWatch) — Rising home prices have fueled the return of a practice that some blamed for inflating the bubble: house flipping.

In California, the number of homes sold in recent months that had been flipped — or bought and resold within six months — has reached the highest levels since late 2005, according to PropertyRadar, a real-estate data firm. About 6,000 homes have been flipped in the state this year through April, or more than 5% of all homes sold statewide.

MarketWatch/Tim Rostan

House in Chicago’s Lincoln Park whose prior owner halted a renovation of the 1888 structure. Construction resumed after the gutted house was sold in 2012.

While flipping is re-emerging nationwide, brokers say it is happening most in California, where home prices have risen sharply over the past year. Six of the 10 largest price gains in major U.S. cities over the past year have been in California, according to Zillow. In April, home values rose by 25% from a year earlier in San Jose, San Francisco and Sacramento, and by 18% in Los Angeles.

“When prices rise, this trade works. It’s not anything more sophisticated than that,” said Christopher Thornberg, an economist with Beacon Economics in Los Angeles. Prices are shooting up due to the short supply of homes for sale, which partly reflects the reluctance of homeowners to list homes at prices down sharply from their peak.

An expanded version of this report appears at

Latest data show housing prices are rising nationwide

As of May 1, all but nine of the 100 core-based statistical areas with more than 500 sales in the previous three months saw prices increase.,0,382861.story?utm_source=feedly

home pricesMiami’s price per square foot was up 17.4% to $112.74. Above, a sign outside a home in Miami. (Joe Raedle, Getty Images / April 29, 2013)
By Lew Sichelman

LA Times May 24, 2013

The latest sales numbers from the nation’s Multiple Listing Services are in, and housing is looking good.

As of May 1, only nine of the 100 core-based statistical areas (CBSAs) with more than 500 sales in the previous three months saw prices decline. The other 91 booked higher prices — some quite significantly higher.

According to data supplied by Pro Teck Valuation Services of Waltham, Mass., the average median price of the 100 most active CBSAs was up almost 12% from the same period a year earlier. CBSAs are defined as “micropolitan” areas of at least 10,000 people who are tied to an urban center by commuting.

The average median nationally as of May 1 was $212,869. At the same time last year it was $190,278.

Since all real estate is local, the national median is useful only as a headline. What’s more important to buyers and sellers is knowing whether the real estate market is rising or falling where they live.

Much more valuable in gauging the path of house prices is price per square foot, which is the great equalizer. Whereas other measures are often influenced by an unusually high number of sales at one end of the price spectrum or the other, the median price per square foot evens things out.

By normalizing for swings in the type and price of houses sold, the price per square foot represents a truer market snapshot and is a better way by which all houses can be judged against one another.

That alone makes Pro Teck’s figures more meaningful. And giving them ever greater credence is the fact that they are the most recent.

Other measures you might read or hear about are often up to six months old, but the numbers supplied to this column by the Massachusetts valuation company are collected from the country’s 850 Multiple Listing Services and updated daily. You can’t get much more current than that.

With that as a backdrop, let’s take a peek at what’s happening in selected places around the country.

The latest leader in the quarterly price dance is Atlanta. The median price per square foot of a house sold in the last three months in the Atlanta-Sandy Springs-Marietta CBSA jumped 41%, to $65.74 from $46.64 a year earlier, while the median price rose 43%, to $136,000 from $95,000.

Atlanta’s price-per-square-foot numbers compare quite favorably to the national average median, which was $115.91 per square foot as of May 1, an increase of nearly 11% from a year earlier.

Detroit was another big gainer. The median price per square foot there rose almost 33%, to $50.79 from $38.30, the lowest price per square foot of the 100 most active markets.

Of the eight next best-performing CBSAs, one is in Arizona, one is in Florida, two are in Nevada and four are in California. And in all eight, the average median jump in square foot price was from 22% to 28%.

The most expensive market is San Francisco. There the median price rose an astonishing $180,000, to $915,000 as of May 1 from $735,000 this time last spring, nearly a 25% gain.

And as a result, the per-square-foot price in the Bay Area rose 22%, only the 11th-strongest gain, to $545.60 from $448.61.

In Los Angeles the price per square foot rose 18.9% during the period, to $272.63 from $229.28, while in San Diego it rose 17.9%, to $235.77 from $200.

The median price per square foot was up 7.6% to $76.82 in Houston, and 7.5% to $85.19 in Dallas. In Chicago it was up 1.7% to $95.87.

In Florida the median was up strongly across the state. In Orlando it was up nearly 19% to $82.59. Miami’s price per square foot was up 17.4% to $112.74. In Tampa-St. Petersburg it was up 15.2% to $83.98. And in Sarasota it rose 13.2% to $66.71.

Sales of previously owned homes hit highest in 3-1/2 years

May 22, 2013

A for sale sign is seen in front of a home on April 29, 2013 in Miami, Florida.

Getty Images
A for sale sign is seen in front of a home on April 29, 2013 in Miami, Florida.

U.S. home resales rose in April to the highest level in nearly 3-1/2 years as surging prices lured sellers back into market, which should support the housing sector and the overall economic recovery.

The National Association of Realtors said on Wednesday existing home sales advanced 0.6 percent to an annual rate of 4.97 million units, the highest level since November 2009.

The March sales pace was revised up to 4.94 million units from the previously reported 4.92 million units. The increase, however, was below expectations for a rise to a 4.99 million-unit rate last month. Compared to April last year, home resales were up 9.7 percent.

Tight supplies in some parts of the country are slowing down the pace of sales, but sellers are starting to wade back into the market, attracted by rising house prices.

The housing market is one of the bright spots in the economy, which has been hit by higher taxes and deep government budget cuts.

In April, the median home sales price increased 11 percent from a year ago to $192,800, the highest level since August 2008. With prices rising, more sellers put their properties on the market, lifting the inventory of unsold homes on the market 11.9 percent from March to 2.16 million.

That represented a 5.2 months’ supply at April’s sales pace, up from 4.7 months in March.

Still, it remained below the 6.0 months that is normally considered as a healthy balance between supply and demand. very accommodative monetary policy by the Federal Reserve, which has held mortgage rates near record lows, is helping to lift the housing market off the floor.

Home prices post strongest gains in 7 years

By Les Christie @CNNMoney May 28, 2013

home prices peak

U.S. home prices posted their strongest gains since 2006, as the housing recovery continued to gain steam.

Prices on the S&P/Case-Shiller national index rose 10.2% in the first quarter, according to the latest report.

That marked the fourth consecutive quarter of year-over-year gains, says David Blitzer, head of S&P’s index division.

The strong gains over the past year may be a bit of a statistical mirage, according to Robert Shiller, a Yale economist and co-founder of the index. Foreclosure sales are down, he said, and since foreclosures sell at a steep discount, that’s boosted average home prices.

But eventually the proportion of foreclosure sales will stabilize, and that will make annual price gains less dramatic.

There’s another factor arguing against continued price gains, according to Shiller. Home prices are already at what he considers “normal” levels, adjusted for inflation. Even the steep housing downturn only took prices to where they would have been if they hadn’t skyrocketed during the bubble.

Index co-founder Karl Case worries about the pace of new-home construction, which slowed in April. New construction is a big driver of GDP, he said, so that may be a sign that the economic recovery is flagging.

Both economists, however, are still cautiously optimistic for two main reasons. First is the fact that near-record low mortgage rates have made home buying more affordable. The second is all the pent-up demand in the housing market after years of sluggish sales.

Phoenix recorded the largest year-over-year price spike, with a 22.5% jump. San Francisco prices rose 22.2% and Las Vegas prices grew 20.6%. New York, at just 2.6%, saw a modest annual increase.

Short sales routinely show up in credit reports as foreclosures

Because of this glitch, borrowers who might be able to qualify for a new mortgage two or three years after a short sale find themselves shut out of the market.

 Short sales and foreclosures are both serious, negative credit events for the borrower. But for the lender, the financial losses generated by a foreclosure typically are more severe than by a short sale. (Ross D. Franklin / Associated Press)
By Kenneth R. Harney

LA Times

May 17, 2013,

WASHINGTON — Are large numbers of homeowners who have negotiated short sales with lenders at risk because of a startling omission in the American credit system? Do their credit reports and scores indicate that they were foreclosed upon, rather than having negotiated a mutually agreeable resolution with their lender?

The answer appears to be yes, and recently two federal agencies — the Federal Trade Commission and the Consumer Financial Protection Bureau — were asked to investigate why. The reality is this: The credit reporting system now in place does not have a separate code that distinguishes a short sale from a foreclosure. Yet there are crucial differences between the two.

In a short sale, the bank approves the sale of the house to a new buyer at a mutually acceptable price. Any unpaid remaining loan balance not covered by the sale proceeds may then be either partially or fully forgiven. The bank is an active participant throughout the process, negotiating for a higher price and higher repayment of principal from the original borrower.

In a foreclosure, the bank is essentially left holding the bag. The owners walk away at some point or live in the property rent-free until they’re evicted. Frequently there is damage to the house left by the departing owners, sometimes extensive. There is little or no cooperation between them and the bank.

Both transactions are serious, negative credit events for the borrower. After all, the mortgage wasn’t fully repaid. But the financial losses generated by a foreclosure typically are more severe for the lender than by a short sale.

Not only are there extended periods of nonpayment by the borrower but there are also substantial property management expenses, renovation costs, local property taxes and insurance while the house is being readied for resale. In some parts of the country, the average time to complete a foreclosure has exceeded two years.

The nation’s major sources of mortgage financing — Fannie MaeFreddie Mac and the Federal Housing Administration — all recognize the differences between short sales and foreclosures in their underwriting policies regarding new mortgages. Fannie Mae generally won’t approve a new mortgage application by borrowers with a foreclosure on their credit report for up to seven years, but will consider lending to people who were involved in short sales, and who otherwise qualify in terms of recent credit behavior and available down payment, in as little as two years.

But if short sales routinely show up in credit reports coded as foreclosures, borrowers who might be able to qualify for a new mortgage two or three years after a short sale find themselves shut out of the market. George Albright, who completed a short sale on his home in New Port Richey, Fla., in 2010, has been trying for months to get through the hoops for a Fannie Mae conventional mortgage.

According to his mortgage broker, Pam Marron, Albright has a solid 720 FICO credit score, 20% down payment cash and more than adequate monthly income and reserves for a new home. But he keeps getting rejected because his credit report indicates a foreclosure, not a short sale.

That’s not unusual, Marron said, since there is no specific code to identify short sales. In a highly automated and strict underwriting environment, lenders go by the codes, according to Marron, harming creditworthy applicants like Albright.

“I did my time,” Albright said. “I’m ready to move on,” but because of the inadequacy of current credit reporting practices “I’m still paying more for rent than I’d be paying on a new mortgage.”

After a Capitol Hill hearing May 7 on credit reporting issues, Sen. Bill Nelson (D-Fla.) sent requests to both the FTC and the CFPB to investigate what he called the “disturbing practice” of misidentifying short sales, and to “penalize responsible parties in the mortgage- and credit-reporting industries, if they don’t fix this coding problem within 90 days.”

Nelson said real estate industry data indicate that there have been 2.2 million short sales nationwide during the last several years. Consumers who opted for a short-sale route rather than a more costly foreclosure are now being blocked from “reentry into the housing market,” he said, thereby “stifling economic recovery for all homeowners.”

Officials of the main trade group for the credit reporting industry, the Consumer Data Industry Assn., were not available for comment on Nelson’s short-sales complaint to the federal agencies.

Housing inventory shortage lifts prices


The home value forecast from Pro Teck Valuation Services reveals the impact low housing inventory has on home prices, which it calls the sold-to-list price ratio.

In the May update, the Honolulu, Tucson, San Francisco and Chicago metro areas are highlighted to determine how the indicator has been useful from a historical perspective as well as in current market conditions to best predict home price appreciation in markets.

“While many were predicting that REO and the ‘shadow inventory’ would keep real estate markets depressed, in reality the shortage of housing inventory has lead buyers to bid more competitively against one another leading to significant home price increases and tighter housing conditions,” said Tom O’Grady, CEO of Pro Teck Valuation Services.

The sold-to-list price ratio typically fluctuates between 92% and 98%, but can exceed 100% in very hot markets, according to the authors of the home value forecast.

“The sold-to-listed price ratio has historically lead home prices by approximately six months over the past three real estate cycles and its turning points have been excellent signals for the same in condo prices,” added O’Grady.

The May home value forecast update also provides a listing of the top-10 best and worst performing metros as ranked by its market condition ranking model. Sales/listing activity and prices, months of remaining inventory, days on market, sold-to-list price ratio and foreclosure and REO activity are all indicators of the best and worst markets.

“Two of the top markets this month are in Nevada (Las Vegas-Paradise and Reno-Sparks), both of which had been very distressed since their respective market peaks in 2005 and 2006. Also, California continues to be well represented on the list by Los Angeles, Oakland, and Sacramento metros,” said Michael Sklarz, principal of collateral analytics and contributing author to Home Value Forecast.

Sklarz added, “Nashville’s metro area is a new entrant this month. Although the market has a more shallow correction than many of the other markets in the recent recession, it appears to be experiencing improving overall economic conditions and one of the most affordable markets in the U.S. now.”

“The bottom ranked metros also represent an interesting mix around the U.S. While all have nine to thirteen Months of Remaining Inventory, many of the indicators are showing positive trends even for the bottom metros area this month,” added Sklarz.

Back to the Future: The Cost of Mortgage Rates Present and Past

Mortgage rates have never been lower — but they most certainly have been higher!

This latest infographic takes mortgage loan rates back in time from the last decade, to the 90s and even back to the 80s! It turns out, you could have spent a lot more on your mortgage loan payments in the past than you could or would today.

We thought the best way to understand the savings that today’s mortgage loan interest rates brings is by comparing present day costs with the past’s.

Do you remember when Kelly Clarkson won American Idol Season One? It was in September of 2002, and 30-year home loan interest rates averaged 6.09 percent. This means that after 30 years, you would have paid a total of $653,776.93 on a $300,000 mortgage loan. That’s the equivalent of 43 Kawasaki Ultra 300X Jet Skis!

On August 6, 1991, the World Wide Web was first publicized. Interest rates stood at 9.25 percent. Your monthly payment would have $2,468.03 on a $300,000 mortgage loan. That could have bought you one first class plane ticket to Hawaii — every month!

On June 11, 1982, the film “E.T.” was released in theatres. Interest rates were a whopping 16.70 percent. Your monthly payment would have been $3,503.36. That could have bought you three-and-a-half pizzas with caviar and lobster toppings from Nino’s Restaurant in NYC.

Let’s come back to the future though, where mortgage rate trends continue to hover near historic low levels.

Scroll down to see the rest of the data for our “Back to the Future: The Cost of Mortgage Rates Past and Present” infographic.

Back to the Future of Interest Rates

Infographic created by