Rising Prices Could Lift 3.5M Homeowners Out of Negative Equity

11/29/2012 By: Krista Franks Brock 

While almost one-quarter of homeowners remain underwater, rising home prices over the past year have some economists hopeful negative equity could begin to diminish in coming months.

“The negative equity problem is still crippling many homeowners and the wider economy,” Capital Economics stated in a report.
In addition to the almost one-fourth of homeowners who owe more on their mortgage loans than their homes are worth, almost half of homeowners do not meet the 80 percent loan-to-value ratio required for a standard refinancing.
While “[a]dmittedly, the recovery is still in its infancy,” Capital Economics sees the potential for 3.5 million homeowners to move out of negative equity positions over the next 12 months.

CoreLogic reports prices have risen 5 percent over the past 12 months, and Capital Economics reports the greatest movement is occurring in the same locations that experienced the greatest price declines and highest instances of foreclosures and negative equity during the housing crisis.
For example, about 40 percent of homeowners in Arizona and Florida are underwater. However, home prices have risen 18.7 percent and 6.3 percent, respectively, in these two states over the past year.
While Capital Economics is sticking to its prediction that house prices will rise about 5 percent next year, the economists admit “the upside risks to that forecast are clearly rising.”
So far this year, rising home prices have helped 1.3 million households rise out of negative equity, according to CoreLogic.
If home prices were to rise by 10 percent next year, about 3.5 million borrowers would be lifted out of negative equity and 6 million would become eligible for standard refinancing after seeing their loan-to-value ratios fall back to or below 80 percent.
“The faster prices rebound, the quicker the negative equity problem will be resolved,” Capital Economics stated.
With home prices still about 27 percent below their 2006 peak, 10 percent under-valued compared to current rental rates, and 20 percent under-valued compared to per capita incomes, Capital Economics sees no need for concern over another bubble as prices continue to rise

Consumer Debt Continues to Fall with Mortgages Leading the Way

11/28/2012 By: Krista Franks Brock 

Consumer debt declined in the third quarter, largely due to decreasing mortgage debt throughout the nation, according to the latest Quarterly Report on Household Debt and Credit released by the Federal Reserve Bank of New York.

After decreasing by $74 billion in the third quarter, consumer debt now stands at about $11.31 trillion. This is 0.7 percent below last quarter and continues a downward trend of almost four years.
Mortgage balances make up the bulk of household debt but are on the decline as well. After a 1.5 percent decline over the third quarter, Americans hold $8.03 trillion in mortgage debt.

Home equity lines of credit also declined, falling by $16 billion or 2.7 percent over the quarter.
While mortgage debt is declining, other categories of debt rose 2.3 percent over the same quarter.
Mortgage delinquencies, however, are also declining, and foreclosures are slowing.
In the third quarter, 5.9 percent of mortgages were 90 or more days delinquent, down from 6.3 percent in the second quarter.
Delinquency rates for home equity lines of credit did not improve over the quarter, but neither did they decline. They remained constant at about 4.9 percent.
Foreclosures slowed by about 5.5 percent over the third quarter with about 242,000 new foreclosures showing up on credit reports during the three-month period.
At the same time, originations rose to $521 billion, according to the Fed.
The improvement in mortgage delinquencies is consistent with the broader trend of improving debt delinquencies overall, which declined from 9 percent in the second quarter to 8.9 percent in the third.

FHFA's Index Continues to Register Price Increases

11/27/2012 By: Esther Cho 

The Federal Housing Finance Agency (FHFA) reported home prices continued to climb higher in September, with prices gaining by 0.2 percent from August.

On the same day Tuesday, the Case-Shiller Indices posted a similar monthly increase of 0.3 percent.
FHFA’s house price index (HPI) also revealed a quarterly price gain of 1.1 percent from the second to the third quarter. Compared to the third quarter last year, prices rose 4 percent.

The agency stated the monthly index has increased for eight straight months now.
“With significant growth in home prices during the quarter and a modest inventory of homes available for sale, house price movements in the third quarter were similar to what we observed in the spring,” said FHFA Principal Economist Andrew Leventis.
Yet, even with the consistent price gains, Leventis added, “a number of factors continue to affect the recovery in home prices such as stagnant income growth, high unemployment levels, lingering uncertainty about the macroeconomy, and the large number of homes in the foreclosure pipeline.”
On a quarterly basis, the index also found price increases for 39 states. States that saw significant quarterly increases included
Delaware (+5.8 percent), Arizona (5.4 percent), and Nevada (+4.2 percent).
Of the nine census divisions observed, the Mountain led with a 3 percent quarterly gain. The Pacific region saw a 2 percent quarterly increase, while the East South Central and Middle Atlantic both struggled with quarterly losses of 0.15 percent.
FHFA’s report is based on data for Fannie Mae and Freddie Mac mortgages originated over the past 37 years.

Homeownership Remains Low Despite Decreasing Burden of Owning

11/16/2012 By: Krista Franks Brock 

The landscape of homeownership has undergone significant changes in recent years: The homeownership rate has declined, but so has the cost burden of owning a home. Both of these trends are most prevalent among young homeowners, according to a recent report from Fannie Mae.

The national homeownership rate has declined in each of the past four years, according to the most recent Census data, which extends through 2011. The 2011 homeownership rate of 64.6 is 2.6 percentage points lower than the 2007 rate.
The decline among those 25 to 44 years of age is more than twice the overall decline.
This shift, which Fannie Mae attributes to the Great Recession, comes after a decade of steady homeownership increases in which young households played a major role.

Despite the recent declines in homeownership, the cost burden of owning a home decreased in 2011 and has “fallen substantially for young owners during the last four years,” according to Fannie Mae.
When measuring housing cost burden, analysts often look for households paying more than 30 percent of their gross income in housing costs, which analysts define as rental or mortgage payments combined with utility spending.
In 2011, the percentage of homeowners who fell into this category decreased by about one percentage point. In contrast, the number of renters in this category grew.
The percentage of 25 to 44 year-old renters who paid more than 30 percent of their gross incomes on housing costs rose 4 percentage points between 2007 and 2011.
In the same timespan, the percentage of homeowners of the same age who paid more than 30 percent of their incomes on housing costs declined by 5.8 percentage points.
Rising affordability among younger homeowners can be attributed to low mortgage rates and perhaps “exits from homeownership by households who had high and unsustainable housing cost burdens,” Fannie Mae stated in its report.
Another factor is tightening mortgage standards, which “may have also helped to create a cohort of young homeowners who have housing costs that are better aligned with incomes,” according to Fannie Mae.
The report also noted growth for the single-family rental industry, which has attracted former homeowners who may be locked out of the market due to a foreclosure.

Threat of Shadow Inventory Fades as Delinquencies, Foreclosures Decline

11/15/2012 By: Esther Cho 

The percent of loans in foreclosure, or the foreclosure inventory rate, fell to the lowest level since the first quarter of 2009, according to the latest delinquency survey from the Mortgage Bankers Association (MBA).

On a non-seasonally adjusted basis, the foreclosure inventory rate in the third quarter was 4.07 percent, down 20 basis points from last quarter and 36 basis points from a year ago. MBA reported the quarterly decrease was the largest since the survey’s history.
“The level however, is still roughly four times the long-run average for this series as we continue to see back logs of loans in the foreclosure process in states with a judicial foreclosure system,” said Mike Fratantoni, MBA’s VP of research and economics, in a release.
MBA noted five states alone accounted for 51.7 percent of the nation’s share of foreclosure inventory: Florida (23.4 percent), California (8.3 percent), New York (7.2 percent), Illinois (6.5 percent) and New Jersey (6.3 percent).
On a seasonally adjusted basis, the national delinquency rate stood at 7.40 percent in the third quarter, according to the survey. The decrease is a quarterly and yearly decline of 18 and 59 basis points, respectively.
The non-seasonally adjusted rate, however, increased quarterly by 29 basis points to 7.64 percent. The MBA explained the a typical seasonal pattern is for the rate to increase from the second to third quarter.

The delinquency rate includes loans that are at least 30 days or more past due but not in foreclosure and covers mortgages on one-to-four-unit residential properties.
The delinquency rate for loans that are 90 days or more past due was 2.96 percent, a drop of 23 basis points from the second quarter and 54 basis points from last year.
Fratantoni explained the decline in mortgage delinquencies was helped by a decline in 90-plus delinquencies.
“The 90 day delinquency rate is at its lowest level since 2008, and together with the decline in the percentage of loans in foreclosure, this indicates a significant drop in the shadow inventory of distressed loans-a real positive for the housing market,” Fratantoni stated.
The rate for 30-day delinquencies increased to 3.25 percent, rising quarterly and yearly by 7 and 6 basis points.
“The 30 day delinquency rate increased slightly, but remains close to the long-term average for this metric. Given the weak economic and job growth in third quarter, it is not surprising that this metric has not improved,” he added.
The serious delinquency rate, which includes loans 90 days or more past due or in the process of foreclosure, declined yearly by 86 basis points to 7.03 percent.
On a non-seasonally adjusted basis, the percentage of loans that began the foreclosure process in the third quarter also fell, dropping 18 basis points from last year to 0.90 percent. Quarter-over-quarter, the rate was down by 6 basis points.
“The improvement in total delinquency rates was accompanied by a further drop in the foreclosure starts rate, which hit its lowest level since 2007,” Fratantoni noted.
In a commentary, Capital Economics also suggested the data points to a decline in shadow inventory.
“Admittedly, we estimate that there are still a very high 3.8m homes which are waiting in the wings to join the visible supply. But this is down from a peak of 5.1m. In other words, the threat to the housing recovery from the shadow inventory is fading into the background,” the research firm stated.

Reports: Refi Numbers Low Despite Low Mortgage Rates

10/12/2012 By: Esther Cho 

It was no surprise when mortgage rates dropped in the weeks following the Fed’s announcement that it would purchase $40 billion of agency mortgage-backed securities (MBS) each month until the labor market shows substantial improvement.

Even with the record-low mortgage rates seen today, refinancing numbers are still not as high as expected.
In CoreLogic’ most recent MarketPulse report, Sam Khater and Molly Boesel noted, “the overall level of refinancing is still low given current mortgage rates, and there are still many homeowners nationwide with above market rates.”
Despite the new expansions from HARP 2.0, including the removal of its 125 percent LTV ceiling, other restrictions are still preventing homeowners from refinancing.
One of those restrictions is a HARP guideline that makes borrowers ineligible if they obtained their GSE-backed mortgaged after May 31, 2009.

CoreLogic conducted an analysis to find out who would be excluded from HARP based this particular requirement.
According to its analysis, CoreLogic found that “lifting the restriction on origination date would expand eligibility of HARP by an additional 2 percent of currently outstanding mortgage, or approximately one million borrowers.”
The report found that those borrowers who are ineligible based on their origination date have an average mortgage rate of 5.22 percent and would save an average of $333 a month.
The authors suggested removing the origination date restriction to extend HARP benefits to an additional one million borrowers, who could then use the savings as a economic stimulus.
Capital Economics also discussed the weak impact of low mortgage rates on refinancing in an analysis wrapping up economic news for the week.
Authored by economists Paul Ashworth and Paul Dales, the report did acknowledge that low mortgage rates led to a surge in mortgage applications, especially for refinancing.
Despite the surge, Capital Economics noted refinancing applications still didn’t rise above levels seen in early 2009 when interest rates were also declining.
Rather than focusing on what’s specifically preventing HARP refinancings, Capital Economics provided a more general picture of what is happening in refinancing.
“This illustrates how big a restraint it is that almost half of mortgage borrowers can’t qualify to refinance because, thanks to the collapse in home prices and tighter lending standards, they don’t have the 20% in home equity needed to qualify,” the research firm observed.

Rates Make Slight Increase After Dropping to Record Lows

10/11/2012 By: Tory Barringer 

Freddie Mac’s Primary Mortgage Market Survey (PMMS) showed surprisingly little life this week following the better-than-expected jobs report for September.

While rates did rise for the week ending October 11, most increases were mild. The 30-year fixed average posted the largest growth, rising to 3.39 percent (0.7 point) from 3.36 percent-a record low the week before.
The 15-year fixed-rate mortgage also saw an increase, averaging 2.70 percent (0.6 point), up from 2.69 percent previously. For the second week in a row, the 15-year fixed average was lower than the average for a 5-year adjustable-rate mortgage (ARM). Until last week’s survey, the last time the 15-year fixed dipped lower than the 5-year ARM was in October 2009.

Meanwhile, the 5-year ARM averaged 2.73 percent (0.6 point), up from 2.72 percent before, while the 1-year ARM edged up to 2.59 percent (0.4 point) from 2.57 percent previously.
Bankrate’s survey saw more dramatic increases, with the 30-year fixed hiking up seven basis points to 3.59 percent. At the same time, the 15-year fixed slid up to 2.84 percent.
The 5/1-year ARM inched up, averaging 2.68 percent for the week.
With the Federal Reserve working to keep rates down and a slowly recovering economy propping them up, the vast majority of experts-67 percent-interviewed by Bankrate anticipate little to no change in the coming week.
“A lower-than-expected unemployment rate in the U.S. and a lack of bad news out of Europe were the catalysts for the slight rise in rates,” said Michael Becker, a mortgage banker for WCS Funding Group. “Looking forward, QE3 and weaker third-quarter earnings keep bond yields and mortgage rates from rising. But it’s also hard to see them dropping from current low levels. I expect mortgage rates to hold steady in the coming week.”
Market expert Dan Green, one of the 19 percent minority who expect rates to fall again, offered much simpler reasoning for his forecast.
“Don’t fight the Fed,” Green told Bankrate. “QE3 for the win.”

Distressed Sales Interfere with Accurate Appraisals: NAR

10/10/2012 By: Esther Cho 

Inflated appraisals were identified as one of the causes of the housing bubble, and now undervalued appraisals are viewed as a reason for a stalled recovery.

In a September National Association of Realtors (NAR) survey related to home appraisals over the past three months, 11 percent of Realtors said a contract was cancelled because a home was appraised at a value below the negotiated price.
Another 9 percent said a contract was delayed, and 15 percent said a contract was renegotiated to a lower sale price.
A much larger majority, 65 percent, reported no contract problems stemming from home appraisals.
One reason for the low values, according to the NAR, is because some appraisers are not taking into account the difference between distressed and non-distressed homes when making comparisons.
“Some appraisers are using foreclosures, short sales and run-down properties as comparable homes, and are not making adjustments for market conditions or the condition of the property,” the group stated in a release.
Compared to traditional sales, a foreclosure sells for a 20 percent discount on average and a short sale for a 15 percent discount.

NAR acknowledged issues appraisers deal with, noting “appraisers have faced undue pressure – whether from a lender or an AMC – to complete appraisals using distressed sales as comps, to complete an appraisal in an unacceptably short time frame, and to complete a scope of work that is not justified by the fee being offered.”
NAR further added some appraisers have to use eight to 10 comparable sales when previously, three comparable homes were sufficient and the norm.
When using a high number of comps, discounted, distressed homes end up in the equation. NAR explained this can lead to traditional homes in good condition being compared to distressed homes without appropriate adjustments.
However, with the distressed market share decreasing, the impact of distressed inventory on appraisals should also subside.
According to the NAR, distressed sales accounted for about one-third of all sales in 2011, and by 2013, the association expects to see the share of distressed sales fall to 10 to 15 percent.
Even if the issue of distressed properties starts diminishing, there are still other issues in the appraisal industry NAR addressed, including out-of-town appraisers who are not familiar with the area or local market conditions, slow turnaround times, and inconsistencies and fluctuations in appraised values.
NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, explained the NAR’s position on the issue.
“Our long-standing policy is that all appraisals should be done by licensed or certified professionals with local expertise, which also is what Fannie Mae and Freddie Mac recommend, but clearly this isn’t practiced universally,” he said.
“In the meantime, buyers, sellers and real estate agents need to be aware that there are problems with some real estate appraisals, but also be aware of their rights to communicate with appraisers and lenders about errors or concerns with individual valuations,” he added. “In some cases, a second appraisal may be justified.

Mortgage Rates Find New Bottom for 2nd Straight Week

10/04/2012 By: Krista Franks Brock 

For the second week in a row, mortgage rates hit new record lows, and for the first time since mid-October 2009, the 15-year fixed-rate mortgage is lower than the 5-year adjustable-rate mortgage (ARM).

The average 30-year fixed-rate mortgage for the week ending October 4 was 3.36 percent (0.6 point), down from last week’s average of 3.40 percent, according to Freddie Mac. Bankrate also recorded a fall in the 30-year fixed-rate mortgage but recorded an average rate a little higher at 3.52 percent (0.44 point).

The 15-year fixed-rate mortgage fell to an average of 2.69 percent (0.5 point), down from 2.73 percent the previous week, according to Freddie Mac. Again, Bankrate recorded a slightly higher average, albeit a record-low for its index. The 15-year fixed-rate mortgage averaged 2.84 percent, according to Bankrate.
The 5-year Treasury-indexed hybrid ARM was the only rate to rise over the last week, up to 2.72 percent (0.6 point) from 2.71 percent the previous week, according to Freddie Mac.
The 1-year Treasury-indexed ARM fell from 2.60 percent to 2.57 percent (0.4 point).
Frank Nothaft, VP and chief economist at Freddie Mac, attributes the falling rates to “mortgage securities purchases by the Federal Reserve and indicators of a weakening economy,” such as slow personal income growth in August–just 0.1 percent–a 2.6 percent decline in pending home sales, and last quarter’s downwardly revised Gross Domestic Product.
According to Bankrate, the “historically low rates led to a surge in refinances last week.”
Looking forward, Bankrate suggests it’s unlikely rates will rise “anytime soon.”

NAR: Tight Lending Standards Stunting Home Sales and Employment

09/17/2012 By: Ryan Schuette 

If Realtors have anything to say about tight lending standards, the observation would be such standards are preventing more home sales and holding back job creation.

The Washington, D.C.-based National Association of Realtors recently reached their conclusions in a survey conducted with real estate agents.
“Sensible lending standards would permit 500,000 to 700,000 additional home sales in the coming year,” NAR chief economist Lawrence Yun said in a statement. “The economic activity created through these additional home sales would add 250,000 to 350,000 jobs in related trades and services almost immediately, and without a cost impact.”
The findings? Lenders take too long with applications, requiring excessive information and preferring only interested homebuyers with high credit scores.
Survey respondents reported that 53 percent of loans went to borrowers with credit scores above 740 in August, a sharp contrast when compared with the fact that 41 percent of homeowners with the same credit held these mortgages from 2001 to 2004.

According to NAR, about three-fourths of loans bought by Fannie Mae and Freddie Mac went to borrowers with credit scores of 740 or above.
The trade group observed that loan applications backed by the Federal Housing Administration showed an average FICO score of 669 in May, significantly higher than 656 for loans originated in 2001.
Yun intimated that reportedly tight lending standards could hurt existing-home sales, which typically range from 5 million to 5.5 million in better times.
“Sales this year are projected to rise 8 to 10 percent. Although welcoming, this still represents a sub-par performance of about 4.6 million sales,” Yun said.
“These findings show we need to return to the sound underwriting standards that existed before the aberrations of the housing boom and bust cycle, and thoroughly re-examine current and impending regulatory rules that may cause excessively tight standards,” he added.
While looser lending standards can threaten default rates, NAR brought attention to improving loan performance in recent years.
Yun pointed out that since 2009, the 12-month default rates have been abnormally low, with Fannie Mae default rates averaging 0.2 percent and Freddie Mac rates averaging 0.1 percent. NAR stated this is notable considering higher unemployment in the timeframe.
In 2007, the twelve-month default rates peaked to 3.0 percent for Fannie Mae loans and 2.5 percent for Freddie Mac loans, according to NAR.

Freddie Mac: 95% of Refinanced Borrowers Opted for Fixed-Rate Loans

08/14/2012 By: Esther Cho 

For borrowers who refinanced in the second quarter, fixed-rate mortgages dominated consumer preferences.

Among those who refinanced in Q2, more than 95 percent opted for a fixed-rate mortgage, according to the Freddie Mac Quarterly Product Transition report.
For those who had a hybrid ARM, 81 percent transitioned into a fixed-rate loan during the second quarter; the percentage represents the highest share in two years. In contrast, for those with a 15-year fixed rate loan, 2 percent transitioned into a hybrid ARM.

Also, 30 percent of those who refinanced in the second quarter shortened their loan term. However, those who refinanced under HARP tended to choose long-term, fixed-rate mortgages.
Twenty-five percent of HARP borrowers opted for shortened terms versus the 30 percent who did not refinance through HARP.
Frank Nothaft, Freddie Mac VP and chief economist, explained the benefits of a shorter term loan.
“Compared to a 30-year fixed-rate mortgage, the interest rate on a 15-year fixed was about three-quarters of a percentage point lower during the second quarter,” said Nothaft. “For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term. Further, a shorter-term, fully amortizing loan reduces the loan balance faster and builds home equity sooner.”
The report also revealed different preferences between those who did and did not refinance under HARP. For HARP borrowers who originally had an ARM loan, 95 percent transitioned into a fixed-rate mortgage. For those who did not refinance under HARP and had an ARM loan, about half opted for another hybrid ARM.

Low Inventory Adding to Home Prices and Decreasing Days Listed: Redfin

08/10/2012 By: Esther Cho 

As homeowners hold back from selling, home prices are benefiting, according to a report from Redfin, which tracked home prices in 19 U.S. markets.

While prices remained flat month-over-month (-0.1 percent) from June to July, Redfin found prices rose 3.2 percent from July 2011 to July 2012.
However, the number of homes for sale fell 28.1 percent during the same one-year period and also declined 5 percent from June.

According to Redfin, the biggest challenge the housing market is facing is selection, and the problem will persist until the end of the year.
Among 19 markets measured by Redfin, 16 saw yearly price gains, with Phoenix seeing the biggest gain at 28.7 percent.
San Jose and Denver also had noteworthy gains at 11.9 percent and 8.5 percent, respectively. On the other hand, markets that saw yearly decreases included Long Island (-6.6 percent) and Chicago (-3.1 percent).
On a monthly basis, Phoenix actually saw prices dip 2.1 percent. Out of the 19 metros, eight others also saw month-over-month losses, including San Francisco (-2.5 percent), Washington D.C. (-1.9 percent), and Chicago (-1.9 percent). San Jose and Portland had the biggest monthly price gains, 4 percent and 2.1 percent, respectively.
With inventory low, Redfin found the percentage of new listings that were taken off the market within a matter of weeks remained high. For single-family homes, 27.8 percent were under contract within 3.5 weeks from their debut day in July.
Redfin also stated low inventory led to a slowdown in home sales, with July seeing a decline of 12.4 percent from June, but still up 6.8 percent from a year ago

Mortgage Rates Lifted by Encouraging Employment News

08/09/2012 By: Tory Barringer 

Strong employment reports boosted mortgage rates back up for the second week in a row, Freddie Mac reported Thursday.

The GSE’s Primary Mortgage Market Survey shows the 30-year fixed averaging 3.59 percent (0.6 point) for the week ending August 9, an increase from 3.55 percent the previous week.
The 15-year fixed also posted gains, averaging 2.84 percent (0.6 point) for the week, up from 2.83 percent a week ago.
The 5-year adjustable-rate mortgage (ARM) followed, increasing to 2.77 percent (0.6 point) from 2.75 percent the week before. The 1-year ARM actually continued to drop, however, falling to 2.65 percent (0.4 point) from 2.70 percent previously.

Frank Nothaft, VP and chief economist at Freddie Mac, said the week’s positive employment news may be a sign of more growth to come.
“Fixed mortgage rates inched up again this week following stronger-than-expected employment reports. The economy added 163,000 jobs in July, well above the market consensus forecast of 100,000 and the largest increase since February,” Nothaft said. “In addition, the number of announced corporate layoffs fell 45 percent in July compared to last July and was the third time this year that announced layoffs were less than the same month in 2011, according to The Challenger Report. This suggests further net gains in employment are likely in the near future.”
Bankrate reported marginal gains in mortgage rates. The 30-year fixed increased to 3.81 percent (from 3.77 percent last week), while the 15-year fixed inched up to 3.00 percent (from 2.99 percent). Meanwhile the 5/1-year ARM stayed flat at 2.91 percent.
“With investors no longer feeling as if the sky is falling, at least temporarily, fixed mortgage rates did move a tad higher. Mortgage rates are closely related to yields on long-term government bonds. Should the better economic news continue, it would keep further Fed stimulus at bay, and likely push up rates a bit more, so stay tuned,” Bankrate said.

To Rent or Own: How Consumers Decide Between the Two

08/03/2012 By: Esther Cho

In a study to examine what factors would drive a person to rent or own in their next move, Fannie Mae found that a mix of demographics and attitudinal drivers were key, while negative housing events appears to do little to thwart would-be buyers.

The study categorized respondents into three groups: renters, those with a mortgage, and outright homeowners.
After gathering demographics for the three groups, the study found that renters tended to be younger and fall into the low income category. For the survey, 46 percent of renters were in the 18 to 34 age group, and 43 percent of renters had an annual income under $25,000. Renters also tended to be single (41 percent) and employed part-time (47 percent).
Homeowners with a mortgage, on the other hand, were more likely to be in the 35-49 age group (41 percent), married (77 percent), and employed full-time (64 percent). They also tended to have a higher income, with 23 percent earning more than $100,000 and 39 percent earning between $50,000 to $100,000 thousand.
Those who were outright owners of their home tended to be 65 and older (46 percent) and retired (49 percent).
The study explained that traditionally, research has focused almost exclusively on demographic factors when trying to dissect the own-rent decision process.

But, based on the survey, attitudes toward housing and finances also had a significant influence on individual decisions to rent or own. The groups most affected by attitudinal drivers were renters and those with a mortgage.
The housing attitude that was found to be the most influential is the belief that “owning or renting makes more sense financially over the long term.” This is what drove all three groups to behave accordingly, depending on their situation.
One attitude that affected renters and discouraged them from buying was concern with affordability and housing maintenance.
An individual’s existing homeownership experience, whether it was positive or negative, was a primary driver of the own-rent intention for a mortgage owner, but not for those who owned their home outright. According to Fannie Mae, the results suggest that once consumers buy a home and have a positive ownership experience, they want to continue being a homeowner rather than consider renting.
For renters and those with a mortgage, the belief in homeownership and aspirations to own a home one day was important in determining whether one expected to own or rent in the future.
For outright owners, demographics, rather than attitudes, determined housing choice preference. According to the study, this is probably due to the fact that the upside financial possibilities are less likely, considering most outright owners are retired and past their income peak.
The study also found that troubles in the housing market over the years did not prevent people from aspiring to buy. Even factors such as exposure to mortgage default, perceived home value appreciation/depreciation, and self-reported underwater status were not significant in predicting intentions to own or rent.
The study analyzed full year 2011 data from the Fannie Mae National Housing Survey and incorporated 12,014 individuals.

Barclays: Trends Suggest Recovery is Sustainable

07/20/2012 By: Tory Barringer 

The housing recovery is strengthening and turning onto a sustainable path, Barclays said in a report Wednesday.

According to the firm’s U.S. Housing report, single-family housing starts are expected to trend upward, matching the strength of multi-family starts that has driven the housing recovery over the past year. Barclays also anticipates that home price indices will close out the year strong, suggesting a broadening and lasting recovery.
The rising supply and steady sales pace of single-family starts apparently encouraged homebuilders. The National Association of Home Builders (NAHB) Housing Market Index rose from 13 in mid-2011 to 35 as of July 2012. The rising index reflects the organization’s optimism in single-family sales, which in the past have been a reliable indicator for single-family starts as supply tries to keep up with demand.
“This suggests to us that single-family starts will have to rise just to keep new home inventories at historical lows. Based on our macro forecast, which has the U.S. remaining in a moderate growth environment, we forecast that housing starts will average 732,000 in Q2 12 and 760,000 in Q3 12. Against a gradual pickup in new home sales to an average of 357,000 units in Q2 12 and 363,000 units in Q3 12, months’ supply of inventory should continue to gradually move lower to 4.3 months,” said Barclays in the report.

Based on improved affordability, increased demand, and falling inventory, the firm projected a year-over-year home price increase of 2.9 percent by the end of 2012. The report cited greater than expected increases in the S&P/Case Shiller Home Price Indices in March and April, pointing to the spread of price increases even in regions hit hardest by the housing crisis.
Barclays noted that its baseline forecast assumes that policymakers will work to prevent the European financial crisis from becoming a global issue on the scale of 2008’s crisis. The firm also assumed that U.S. legislators will not impose any excessive financial tightening. If these events occur, Barclays said, the risk of another U.S. recession will increase, and housing demand will likely fall off, leading to decreased prices.
Given this information, Barclays issued its prediction that second-quarter profits for homebuilders are likely to increase, with new orders showing the largest year-over-year increase since 2005. This momentum is expected to continue through the second half of 2012, leading to a relatively successful year.
Barclays also expects to see firm and favorable building prices during the spring selling season, with homebuilders cutting incentives and increasing prices. Several homebuilding companies, including Hovnanian Enterprises, Toll Brothers, and KB Home, reported favorable pricing trends during the quarter. Only two builders-KB Home and Beazer Homes USA-are expected to be unprofitable.
Based on the happenings in the year’s second quarter, Barclays announced that it is adjusting its ratings on several building material credits that are likely to benefit from the upturn in housing demand. Owens Corning was upgraded to from Market Weight to Overweight, while Masco, USG, and Whirlpool moved up from Underweight to Market Weight.

Housing Market Gains Strength as Mortgage Rates Slip Again

07/19/2012 By: Tory Barringer 

The third week of July brought news of more mortgage rate lows, according to Freddie Mac’s Primary Mortgage Market Survey (PMMS).

For the week ending July 19, the 30-year fixed averaged 3.53 percent (0.7 point), down from 3.56 percent the previous week and 4.52 percent the year before. In all of 2012, the average 30-year fixed has only gone to 4.00 percent or higher for one week.
The average 15-year fixed for the week was 2.83 percent (0.6 point), down from 2.86 percent the week before and 3.66 percent at the same time in 2011. This week marks the eighth consecutive week that the average 15-year fixed-rate mortgage has been below 3.00 percent.

The 5-year adjustable-rate mortgage (ARM) also fell, averaging 2.69 percent (0.6 point), a drop from 2.74 percent last week. The 1-year ARM saw no changes, hovering at 2.69 percent (0.4 point).
Frank Nothaft, VP and chief economist at Freddie Mac, explained how the low rates are aiding in the housing market’s recovery.
“With little signs of inflation and the Federal Reserve’s ‘Operation Twist’ keeping U.S. Treasury bond yields in check, fixed mortgage rates are remaining low and helping to stir the housing market,” said Nothaft. “For instance, the 12-month growth rate in the core Consumer Price Index has been in a narrow 2.1 to 2.3 percent band over the past nine months ending in June. Meanwhile, new construction on one-family homes rose for the fourth consecutive month in June to its strongest pace since April 2010 with builders restocking their lean inventories of new homes. In fact, homebuilder confidence for the next six months rose for the third month in a row in July to its highest reading since March 2007.”
Bankrate also posted new record lows, with the 30-year fixed falling to 3.78 percent from 3.79 percent the week before. The 15-year fixed averaged 3.04 percent, inching down from 3.05 percent in the previous survey. Meanwhile, the average 5/1 ARM rate fell to 2.89 percent, a slide down from 2.95 percent.

Mortgage Defaults Down in June, Index Reveals

07/17/2012 By: Tory Barringer 

An already positive trend in mortgage defaults continued through the month of June, according to data released Tuesday in the S&P/Experian Consumer Credit Default Indices.

The data shows that most loan types-including bank card and first and second mortgage loans-saw a decrease in default rates, many of them for the sixth consecutive month. Four loan types posted their lowest rates since the end of the recent recession.

The national composite fell in June to 1.52 percent from 1.62 percent in May. The first mortgage default rate decreased to 1.41 percent (from 1.50 percent in May and 2.02 percent in June 2011), a level last seen in May 2007. The second mortgage default rate dropped to an eight-year historic low of 0.73 percent in June (down from 0.88 percent in May and 1.40 percent a year ago).
“June 2012 data continued a positive trend in consumer credit quality,” said David M. Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices. “Consumer default rates are falling, and we are approaching new lows across most loan types. In the last recession, most default rates peaked in the spring of 2009; since then the decline has been bumpy but consistent.”
Of the five metropolitan statistical areas (MSAs) covered in the data, Dallas posted the lowest rate, falling down from 0.94 percent in May to 0.87 percent in June. Los Angeles followed with nearly double Dallas’ rate (1.60 percent in June, down from 1.82 percent in May). New York was the only MSA to post a default rate increase in June (up to 1.64 percent from 1.61 percent in May).
Blitzer said the data is evidence of better household financial conditions across the country.
“There is only positive news in June’s numbers,” he said. “In the past three years, households have come a long way in repairing their balance sheets.”

LPS: Home Price Index Increasing at Fastest Rate Since 2005

07/16/2012 By: Tory Barringer 

Lender Processing Services, Inc.‘s (LPS) Applied Analytics division released its updated home price index (HPI), showing that although prices fell year-over-year, the HPI increase from this year’s low has been the most significant jump up in years.

The company’s recent HPI is an update from an earlier release to reflect residential sales concluded during April 2012. The index showed that home price values fell 0.1 percent from April 2011 to April 2012 ($201,000 to $200,000). However, price index values rose from January’s low ($195,000) at a pace not seen in more than half a decade.
“Home prices have risen 2.5 percent so far this year, indicating an exceptionally strong spring,” said Raj Dosaj, VP of LPS Applied Analytics. “While prices typically see a boost in the spring, the magnitude and speed of this increase and its consistency across the nation have not been seen since October 2005.”

The accelerated rate of the HPI’s increase represents an annualized rate of 13.1 percent per year (compared to negative 6.1 percent/year from May 2007 to January 2012). LPS noted that the current pace may not continue, however, and only pointed it out for comparison to the steady decline in recent years.
Prices increased in 563 of the 579 metropolitan statistical areas (MSAs) covered by LPS data and fell less than 0.2 percent in the remaining 16 MSAs. Los Angeles and Hartford, Connecticut saw very small decreases-0.04 and 0.03 percent, respectively.
Among the 26 biggest MSAs overlapped by LPS data and the Bureau of Labor Statistics, most showed increases of half a percent or more. Pittsburgh and Cincinnati posted slight increases (0.4 percent and 0.2 percent, respectively), and Los Angeles was the only MSA that did not post an increase in HPI.
The data showed sales volume staying near record lows. Volume started trending downward at the beginning of 2006 and fell along with HPI, bumping up only slightly with HPI at the end of the first-time buyers’ tax incentive in April 2010.
Distressed sales accounted for more than a third of sales volume.
Foreclosure and short sale discounts rose slightly, and the difference between the two closed even further (a 25 percent discount for foreclosures and a 22 percent discount for short sales).

Redfin: Rising Demand, Falling Supply Driving Home Prices Up

07/13/2012 By: Tory Barringer 

Real estate broker Redfin released the June results of its Real-Time Home Price Tracker, showing home price increases in nearly all 19 major U.S. markets.

The tracker showed an average year-over-year price gain of 3 percent across all major markets and a monthly gain of 2.6 percent. Sales volumes also rose year-over-year (a 7.4 percent increase) but fell 1.1 percent month-over-month. Overall inventory levels declined, falling 25.3 percent from June 2011 and 2.4 percent from May this year.
The price data, combined with an earlier Redfin report that showed demand broadening, points to a strengthening market, said Redfin CEO Glenn Kelman. Kelman expects prices to continue to rise, but said he’s interested to see what happens next.

“Prices in June rose year over year for the second straight month, but the true test lies ahead,” said Kelman. “For the first time in five years, we’re seeing sellers enter the market to take advantage of rising demand, not just out of sheer necessity. We thus expect listing prices to increase, even as employment remains weak and Europe’s debt crisis continues. In competitive markets like the San Francisco Bay Area, buyers will likely rise to the bait. Elsewhere the market may falter.”
Out of the 19 markets served by Redfin, 16 showed annual price increases, with Phoenix posting the greatest gains (28.7 percent, the only double-digit year-over-year increase in all markets). Of the markets that posted decreases, Long Island suffered the most (a 4.4 percent drop). In month-over-month data, 16 markets showed price increases-Portland and California’s Inland Empire stayed flat, and Austin fell 0.1 percent.
Additionally, the tracker showed that homeowners who listed their homes sold very quickly, with all single-family homes listed in the first three weeks of June finding a buyer within two weeks of debut. The San Jose market actually saw 52.5 percent of homes selling within that short time frame.
While sales occurred quickly, the number of closings grew only modestly since last year, owing partly to lack of inventory. Closings of single-family homes increased 4.3 percent since last year. The biggest drops in sales volume were found in places where inventory was in shortest supply: Sacramento, San Jose, the Inland Empire, and Denver.

Weak Jobs Report Sends Mortgage Rates Tumbling Again

07/12/2012 By: Tory Barringer 

Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) showed average fixed mortgage rates finding yet another record low.

The 30-year fixed averaged 3.56 percent (0.7 point) for the week ending July 12, down from 3.62 percent the previous week. At the same time in 2011, the 30-year fixed averaged 4.51 percent. This week marks the 16th straight week that the 30-year average has stayed below 4 percent.
The 15-year fixed also fell, averaging 2.86 percent (0.7 point), a drop from 2.89 percent last week. A year ago, the 15-year fixed averaged 3.65 percent.

The 5-year adjustable-rate mortgage (ARM) also fell, averaging 2.74 percent with a 0.6 point (down from 2.79 percent the week before). The 1-year ARM inched up a bit, going up to 2.69 percent (from 2.68 percent a week ago).
Frank Nothaft, VP and chief economist at Freddie Mac, attributed the falling rates to easing Treasury bond yields following June’s disappointing jobs report.
“Following a lackluster employment report for June, long-term U.S. Treasury bond yields eased somewhat this week, allowing fixed mortgage rates to reach yet another record low,” said Nothaft. “Only 80,000 net new jobs were added to the economy last month, not enough to lower the unemployment rate from 8.2 percent. This was the concern of the Federal Reserve’s monetary policy meeting held June 19-20. Minutes released from that meeting on July 11 revealed that a few members felt further monetary stimulus was needed to promote satisfactory growth in employment to meet the Committee’s goal.”
Bankrate’s findings showed that the jumbo 30-year fixed fell to 4.44 percent, while the 15-year fixed drop to 3.05 percent-both record lows. The popular 5-year ARM also fell to a new record low of 2.95 percent.
“Between the European debt crisis and evidence of weaker economic growth both in the U.S. and around the globe, investors have had plenty to worry about,” a release from Bankrate read. “And when investors worry, they gravitate toward secure investments like U.S. government bonds, to which mortgage rates are pegged.”

June Sees Housing Confidence Boost in Spite of Economic Worries

07/09/2012 By: Tory Barringer 

Downturns in economic confidence hasn’t shaken consumers’ optimism in the housing market, Fannie Mae’s National Housing Survey for June showed.

According to the survey, the average home price expectation rose to 2 percent in June, up 0.6 percent from May and the highest recorded value since the survey began two years ago. In addition, 35 percent of respondents expect that home prices will go up in the next year, the highest level recorded since the survey’s inception.
Thirty-seven percent of respondents said they think mortgage rates will go up in the next 12 months, a drop of 4 percentage points from May. According to Freddie Mac’s Primary Mortgage Market Survey, rates steadily fell through much of the year’s second quarter, reaching new lows week after week.

The combination of low rates and low home prices spurred a small boost of confidence in the housing market. The percentage of respondents who said it is a good time to buy a home increased slightly to 73 percent, while the percentage who said it is a good time to sell remained flat at 15 percent. Sixty-nine percent said they would buy if there were going to move, an increase of 6 percentage points from May’s survey and the highest level since the survey began.
This optimism grew in spite of faltering confidence in the economy. An upward trend of confidence in the economy saw a stall in June, with 36 percent of respondents saying they believe the economy is on a right track-a slight drop from April and May.
Forty-two percent of respondents said they expect their financial situation to stay the same over the next 12 months, a decrease of 4 percentage points. The number of those who expect their situation to get better steadied at 43 percent. Thirteen percent said they expect their situation to get worse, a slight increase from the last survey.
Finally, the survey found that household expenses remained stable, with 55 percent reporting that expenses stay about the same as they were a year ago. The number of respondents reporting a household income higher than it was a year ago fell 4 percentage points to 18 percent, while the percentage reporting a lower income stayed flat at 15 percent.
“While consumers remain cautious about the general economy, their attitudes toward the housing market continue to improve,” said Doug Duncan, SVP and chief economist of Fannie Mae. “Although this positive trend may be short-lived if the general economy falters, one might ask whether consumers are increasingly seeing the current environment as a unique opportunity to buy a home while home prices remain depressed, rental costs are increasing, and interest rates are near historic lows.”

Fixed Rates Reach Record-Low Averages for 6th Consecutive Week

06/07/2012 By: Esther Cho

As the employment situation continues to raise concerns, fixed rates fell even lower, slipping yet again to new record-lows, according to a survey from Freddie Mac released Thursday.

The 30-year fixed-rate mortgage averaged 3.67 percent (0.7 point) for the week ending June 7, falling from last week’s average of 3.75 percent. Last year at this time, the 30-year fixed was 4.49 percent.
The 15-year fixed rate declined even further below 3 percent to 2.94 percent (0.7 point), down from last week’s 2.97 percent. A year ago at this time, the 15-year was 3.68 percent.

“Fixed mortgage rates reached new record lows for the sixth consecutive week as long-term Treasury bond yields declined further following downwardly revised economic growth and job creation data,” said Frank Nothaft, VP and chief economist for Freddie Mac.
Nothaft cited recent reports showing gross domestic product rose only 1.9 percent in the first quarter as well as the disappointing 69,000 jobs added in May. In addition, the unemployment rate moved to 8.2 percent from 8.1 percent the month before in April.
The 5-year ARM remained unchanged from last week at 2.84 percent (0.7 point); a year ago, the 5-year ARM averaged 3.28 percent.
The 1-year ARM moved up to 2.79 percent (0.4 point), up from last week’s 2.75 percent. Last year, it averaged 2.95 percent.
Bankrate also released its survey on mortgage rates and reported record-low averages. The 30-year fixed slipped to 3.92 percent, down from last week when it averaged 3.94 percent. On the other hand, the 15-year fixed rose slightly to 3.16 percent from last week’s 3.15 percent.
The five-year fell to 2.99 percent from 3.01 percent last week.
Bankrate’s national survey uses data provided by the top 10 banks and thrifts in the top 10 market

FHA 203(k) Program Offers Way to Finance Repairs for Foreclosures

06/06/2012 By: Esther Cho 

Purchasing foreclosures also means discounts, but with the markdown is the price of repairs. According to RealtyTrac, foreclosures or REOs sold at an average discount of 27 percent compared to non-distressed properties in the first quarter of 2012. Through an FHA 203(k) loan, potential buyers who want to purchase a discounted foreclosure but don’t have cash for the repairs may find a way to receive financing.

According to HUD, the 203(k) program is the department’s main program for rehabilitating and repairing single family properties, and it’s viewed as an important tool to revitalize neighborhoods.

In order to be eligible, the property must be purchased as a primary residence or it can be for a HUD approved nonprofit. Also, the property must be a one-to four-family residence that has been completed for at least one year.
Dan Green, loan officer with Waterstone Mortgage and author of themortgagereports.com, explained the FHA 203(k) program can be used on any 1-4 unit residential property and is not limited to just HUD properties or foreclosures.
The maximum amount that can be taken out for the property is based on the value or the purchase price of the property before rehabilitation (whichever is less), plus the estimated cost of rehabilitation or 110 percent of the property after improvements, according to HUD.
A down payment is required, and the minimal amount for a down payment is 3.5 percent of the accepted bid price plus the cost of financing repairs.
Since there is more “file” to underwrite for an FHA 203(k) loan, Green said the approval process takes longer than a standard FHA mortgage.
“FHA 203k approvals take more time, but are no more difficult than any other mortgage type,” said Green. “Borrowers should expect to provide the documentation required, and should respond to loan officer requests in a timely manner.”

Freddie Mac Announces Lower Modification Interest Rate

06/04/2012 By: Tory Barringer 

Freddie Mac announced Friday that starting July 1, the GSE’s Standard Modification interest rate will come down from 5 percent to 4.625 percent.

The Standard Modification is for borrowers who do not qualify for the government’s Home Affordable Modification Program (HAMP). The modification makes payments more affordable by lowering a borrower’s principal and interest payments by at least 10 percent. The modification includes a trial period as does HAMP to ensure borrowers can maintain modified mortgage payments.
When evaluating a borrower for a Standard Modification in Workout Prospector®, users will be prompted to apply the 4.625 percent interest rate if the “Workout Decision Date” is on or after June 1.
Servicers may implement the new interest rate sooner. However, new borrower evaluations done before July do not require the new rate.
Freddie Mac may adjust the interest rate used for Standard Modifications based on market conditions.
The Freddie Mac Standard Modification is part of the Servicing Alignment Initiative, which is an effort to create consistency in how delinquent GSE loans are serviced.

Freddie Mac: 15-Year Fixed Falls Below 3%, 30-Year Fixed Hits New Low

05/31/2012 By: Esther Cho 

Following lower bond yields, the 15-year fixed fell below 3 percent, while the 30-year fixed set a new record-low as well, according to Freddie Mac’s Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage dropped to 3.75 percent (0.8 point) for the week ending May 31. Last week, it averaged 3.78 percent, and last year, it was 4.55 percent.
The 15-year fixed slid into new territory, averaging 2.97 percent (0.7 point), down from 3.04 percent. A year ago at this time, the 15-year fixed stood at 3.74 percent.

The 5-year ARM averaged 2.84 percent (0.6 point), up from last week’s average of 2.83 percent. A year ago, the 5-year ARM averaged 3.41 percent.
The 1-year ARM remained unchanged from last week at 2.75 percent (0.4 point). The previous year, it averaged 3.13 percent.
Frank Nothaft, VP and chief economist for Freddie Mac, pointed to market concerns over the Eurozone, which led to a decline in long-term Treasury bond yields, as one reason for the drop in fixed rates.
“Compared to a year ago, rates on 30-year fixed mortgage rates are almost 0.9 percentage points lower which translates into nearly $1,200 less in annual payments on a $200,000 loan,” said Nothaft.
Bankrate.com also reported record-lows for fixed rates.
The 30-year fixed dropped to a new low of 3.94 percent, down from 3.97 percent last week. The 15-year fixed averaged 3.15 percent, also a record low. Last week, it was 3.19 percent.
The 5-year ARM slipped from 3.02 percent last week to 3.01 percent this week.
Bankrate’s national weekly mortgage survey includes data from the top 10 banks and thrifts in the top 10 markets.

Demand for Foreclosures Triples for Homebuyers: Realtor.com

05/30/2012 By: Tory Barringer 

The stigma associated with foreclosure purchases has apparently faded, with interest in foreclosures nearly tripling in the past two years, according to a survey released Wednesday by Realtor.com.

The survey, conducted over 1,004 phone interviews at the beginning of May, suggested that homebuyer interest in foreclosures has jumped 159 percent since October 2009, when foreclosures made up 29 percent of all home sales. Nearly two-thirds (64.9 percent) of homebuyers surveyed said they’re likely to purchase a foreclosure, a huge increase from 25.3 percent two and a half years ago. The vast majority of buyers said they would want to live in their foreclosure purchase, with 92.1 percent looking for a home to live in and only 6.9 percent looking for foreclosure investments.
“We see a combination of factors coming into play explaining the unexpected interest in foreclosures,” said Steve Berkowitz, CEO of Realtor.com operator Move, Inc. “Reductions in supply, expectations that home prices will rise, and changing attitudes towards foreclosures are contributing to the increased, especially among owner-occupants. As lenders begin processing their distressed inventories and releasing them for sale at the local level, we look to them to move carefully and monitor conditions so recently gained home values aren’t diminished.”
Realtor.com’s survey found that 55.7 percent of Americans are concerned that the more than 1.5 million backlogged foreclosures expected for release will lower home values in their markets. Midwesterners showed the most worry, with 62.2 percent expressing concern about their markets. Concern among homeowners and non-homeowners was nearly equal-56.1 percent and 54.5 percent expressed worry, respectively. The majority of backlogged foreclosures are expected to be released in judicial states, most of which are located in the Midwest and Northeast.

While reluctance to purchase a foreclosure has declined, so too has the fear of losing a home to foreclosure. Today, 34.9 percent of Americans say they fear that they or someone they know will face foreclosure in the next year, down from 52.5 percent in March 2009. Fear of facing foreclosure is highest among people earning less than $30,000 a year and slightly higher among non-homeowners (38.6 percent) than it is among homeowners (33.6 percent).
Although worries about foreclosures have decreased, most Americans said they haven’t seen improvement in the foreclosure situation where they live. The survey found that 49 percent of Americans think the situation is about the same as it was last year, while 17.6 percent think it is worse. Foreclosures have decline by 34 percent in the past year, but only 21.3 percent of respondents said they think their market is better.
Respondents mostly said that the economy, the lenders, and the government are to blame for today’s foreclosure problems, with all three answers holding nearly equal percentages in the 22-25 percent range. The two factors that received the least blame in the survey were defaulting homeowners (10.3 percent) and Wall Street (9.4 percent). Lenders got the most blame from homeowners with $40,000 or higher annual incomes and respondents age 25-64, while Americans 65 or older and those who earned more than $50,000 a year blamed the government most. Consumers age 18-24 largely blamed the economy and defaulting homeowners for the country’s current foreclosure problems.
In order to keep the shadow inventory of foreclosures from lowering home values, the majority of Americans want lenders to offer lease-purchase programs to reduce foreclosure inventories. More than a quarter of respondents (28.3 percent) preferred the lease-purchase option over several alternatives, including slowing down sales, selling to investors, or renting them out until prices improve.
The survey also found that most prospective foreclosure buyers are holding realistic expectations about the discounts and appreciations that may come with their purchases. Most buyers expect to receive a discount between 10-30 percent, which keeps in line with today’s average discount of about 29 percent. Lower income buyers were the most realistic about their expected discounts, according to the survey results.
The majority of prospective buyers said they expect their purchases to appreciate about 2 percent a year over five years, with younger buyers (age 18-34) expressing the more realistic expectation that their purchases will appreciate about 1 percent a year. Middle income buyers anticipated a more conservative appreciation rate of less than 5 percent in five years.

Job Expectations Raise Consumer Confidence in May

05/25/2012 By: Tory Barringer 

Consumer confidence is at a level that hasn’t been seen for years, according to the results of Thomson Reuters and the University of Michigan’s Survey of Consumers for May.

Thomson Reuters and UM released the findings of the consumer survey, revealing that the consumer sentiment index improved to 79.3 percent in the month of May, an increase of 3.8 percent from April and 6.7 percent from May 2011. Consumer confidence has improved in each survey for the past nine months, but May’s level is the highest since October 2007.
While falling gas prices helped calm worried consumers and restored confidence, the survey indicated that consumers were mostly encouraged by news of favorable employment trends despite the fact that the Labor Department recently reported a jobs slowdown. The survey also showed that fewer consumers reported of hearing about job losses in May than in any other monthly survey since mid-2007. It is speculated that continued growth in consumer confidence is going to depend largely on job growth.

In the past three surveys, a majority of consumers reported an improved economy, and many more said they expected conditions will improve, if only a modest amount. Despite this optimism, 41 percent of consumers said they have faith in the government’s economic policies.
Few consumers expressed any concern about the impact of the European debt crisis on the United States’ economy.
Survey of Consumers chief economist Richard Curtin said that he expects these kinds of results to continue for a few more months.
“The upbeat consumer reports on jobs could mean that more positive numbers will soon be reported by the government, or that consumers have yet again pushed their expectations beyond the likely performance of the economy,” Curtin said. “The most likely prospect is that job growth resumes at a modest pace and that confidence remains largely unchanged until after the November election and decisions about tax policy are made.”
Views on buying conditions for household durables (such as cars or home appliances) were also very positive, with 63% of consumers expressing a positive attitude toward new purchases. This result, the highest percentage in more than a year, was achieved with the increased availability of discounts on items. More households with incomes of $75,000 or higher-those most likely to purchase new vehicles-held a favorable view of purchasing a vehicle than last month or last year.
Yinbin Li, principal economist at IHS Global Insight, said that while the growth of consumer confidence is a positive thing, consumers aren’t out of the woods yet.
“This is a good report,” Li said. “Consumer mood is slowly coming out of the ditch. However, there are still strong headwinds facing many American households such as rising student loan debt, a poor housing market, and weak wage growth.”

Economists Analyze Positive Reports on New Home Sales

05/23/2012 By: Esther Cho 

New home sales rose 3.3 percent month-over-month in April to a seasonally adjusted annual rate of 343,000, the Commerce Department and HUD reported Wednesday. On a yearly basis, new home sales rose 9.9 percent. And, the good news did not end there. The months’ supply of inventory fell to 5.1, and while sales were down in the South, they were up in Northeast, Midwest, and West.

This report was followed by the National Association of Realtor’s existing home sales report released Tuesday, which showed the sale of existing homes rose 3.4 percent on a monthly basis and 10 percent year-over-year.
In comparison to the sale of existing homes, Paul Diggle, property economist with Capital Economics, said new home sales will still continue to lag behind the existing home sales market.

“New homes are still having to compete with discounted foreclosures and short sales,” Diggle wrote. “Moreover, we have started to hear anecdotal reports that homebuilders are running low on high-grade lots for development, which opens the possibility that starts, and thus sales, may pause temporarily if builders need to replenish land supply.”
Even though the new home sales sector is not expected to improve as quickly, there were still noteworthy signs economists pointed out for the market.
In an analysis, Patrick Newport and Michele Valverde, economists with IHS Global Insight, commented, “Not only were sales a bit higher than expected, the numbers for the prior three months were revised up. Sales for 2010 and 2011 were also revised, but only marginally. This market is unquestionably improving. Activity, though, is still less than half of normal.”
Capital Economics also noted that new homes are also being sold earlier in the construction process, with 58 percent of new homes sold in the previous three months un-started or still under construction.
“The rising share of new homes selling earlier in the construction process strikes us as
further evidence of the improvement in buyer confidence. After all, you’re unlikely to
buy a home if you expect it to be worth significantly less by the time it has been built,” Diggle wrote.
With the slight drop in inventory from 5.2 months in March to 5.1 in April, Newport and Valverde said, “Inventory may have hit or is nearing a bottom. This is good news, since re-stocking inventory to meet rising demand will give housing starts a small boost in the coming months.”
As for the future, IHS economists said they project sales to rise to 361,000 in 2012 from 307,000 in 2011, and they do not expect to see sales climb above 800,000 until 2015.

Affordability Reaches All-Time High Again: NAHB/Wells

05/22/2012 By: Esther Cho 

With low rates and low prices, homeowner affordability continues to hit record levels, reaching another high during the first quarter of 2012, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI).
During the previous record-breaking 2011 fourth quarter, 75.9 percent of homes sold were affordable to median-income earners. For this most recent quarter, HOI data showed 77.5 percent of all new and existing homes sold were affordable to families earning the national median income of $65,000.

“Homes in this year’s first quarter were more affordable than they have been at any time in more than 20 years, yet many potential sales are not happening because of overly tight lending conditions that are keeping hardworking families from obtaining a suitable mortgage,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Florida. “Without this significant hurdle, the housing and economic recovery could be proceeding at a much stronger pace.”

Among the largest metros, Indianapolis-Carmel, Indiana was ranked as the most affordable since 95.8 percent of homes sold during the period were affordable to households earning the area’s median family income of $66,900. The least affordable larger metro was New York-White Plains-Wayne, New York-New Jersey, where 31.5 percent of homes sold was affordable for those earning the median income of $68,200. In the New York metro, the median sales price for a home was $400,000.
Cumberland, Maryland-West Virginia was ranked the most affordable among small metros and nationally. In Cumberland, 99 percent of homes sold during the first quarter were affordable to families earning the area’s median income of $53,000. The least affordable smaller metro was Ocean City, New Jersey, where 45.9 percent of homes sold in the first quarter were affordable to families earning the median income of $71,100.
On a national scale, Fairbanks, Alaska came in second after Cumberland. In Fairbanks, 98.9 percent of homes were affordable to those earning the area’s median income of $92,900. Wheeling, West Virgina-Ohio came in third, followed by Kokomo, Indiana. The larger metro Indianapolis ranked number five on a national scale.
The NAHB/Wells Fargo Housing Opportunity Index is a measure of the percentage of homes sold in a given area that are affordable to families earning that area’s median income during a specific quarter. Prices of new and existing homes sold are collected from actual court records by First American Real Estate Solutions, a marketing company.

Median Home Prices Rise in April: RE/MAX

05/18/2012 By: Tory Barringer 

The RE/MAX National Housing Report found that the national median home price rose for the third straight month in April, indicating that the housing recovery in 2012 is continuing.

The report surveyed 53 metropolitan areas and found that the median home price was $161,000, 3.2 percent higher than in March and 5.9 percent higher than in April 2011. February marked the first time in 18 months that home prices experienced an increase, and data from March and April shows a positive trend.

Data revealed that of the 53 metro areas surveyed, 43 saw an increase in median home prices over last year, and 12 of those saw double-digit percentage increases.
Also encouraging was the fact that home sales in April were 4.1 percent higher than the previous year, making it the 10th month in which sales pushed higher year-over-year. Of the metros surveyed, 39 reported more home sales than a year before, with 18 showing double-digit percentage increases. These increases indicate a strong season, RE/MAX said.
The average Days on Market for all home sales in April was 96, a drop from March’s 101 and April 2011’s 98. In the last 12 months, the average for Days on Market has been below 90 in only two months. This is in contrast to what is expected in a market with a dwindling inventory and increased sales.
Based on the 53 metro areas surveyed, the report also showed that the inventory of homes for sale fell 3.7 percent and was 25.6 percent lower than April 2011. Month-to-month inventories have fallen for 22 consecutive months, owed largely to the fewer foreclosure properties coming to market.
At the current rate of sales, the average Months Supply is now 5.3, the same as March but two months lower than the 7.1 supply last year. Months Supply is the number of months it would take to clear a market’s active inventory at the current rate of sales. A six-month supply is considered a balanced market between buyers and sellers.

Week After Week, Rates Continue to Break Record-Low Numbers

05/17/2012 By: Esther Cho 

Just when it seemed like they could not fall any further, fixed-rate mortgages continued to drop, breaking record-low numbers once again, according to Freddie Mac’s weekly mortgage market survey.

“The European debt crisis overshadowed improving economic indicators for the U.S. and allowed Treasury bond yields and fixed mortgage rates to ease for another week,” said Frank Nothaft, VP and chief economist for Freddie Mac.

The 30-year fixed-rate mortgage averaged 3.79 percent (0.7 point) for the week ending May 17, slipping from last week’s average of 3.83 percent. Last year at this time, the 30-year rate was 4.61 percent.
The 15-year fixed-rate mortgage ended the week at 3.04 percent (0.7 point), dropping from 3.05 percent last week. Last year at this time, the 15-year averaged 3.80 percent.
The 5-year ARM rose to 2.83 percent (0.6 point) from last week’s average of 2.81 percent. A year ago, the 5-year ARM averaged 3.48 percent.
The 1-year ARM also moved up, averaging 2.78 percent (0.5 point) this week compared to last week’s average of 2.73 percent. Last year at this time, the 1-year ARM averaged 3.15 percent.
Bankrate.com, which releases a weekly survey using data provided by the top 10 banks and thrifts in the top 10 markets, reported a record-low average for the 30-year fixed, which dropped below 4 percent.
The 30-year averaged 3.97 percent, down from 4.02 percent last week, while the 15-year rate remained unchanged from last week at 3.20 percent.
The 5-year ARM moved up slightly to 3 percent; last week, it averaged 2.99 percent.

HUD Studies Suggest Counseling Keeps Owners in Homes

05/16/2012 By: Esther Cho 

Buying a home is the biggest financial investment many people will ever make. It’s also an investment that, in recent years, has become lost for millions. According to data from CoreLogic, since September 2008, there have been 3.5 million completed foreclosures.

Through counseling, HUD found homeowners are more likely to stay in their properties, even when facing foreclosure.
HUD released reports on two types of counseling: pre-purchase and foreclosure prevention. In both studies, HUD reported counseling significantly improved the likelihood homeowners remained in their homes.
The studies enrolled clients in the fall of 2009 and early 2010. For those who enrolled into pre-purchase counseling, HUD revealed that 35 percent of participants became homeowners within 18 months of pre-purchase counseling and only one of those buyers fell behind on mortgage payments.
The foreclosure counseling study revealed that of those who received assistance, nearly 70 percent obtained a mortgage remedy to retain their home, and 56 percent cured their defaults and became current again.
“The evidence is clear, with a little investment on the front end, we can go a long way toward improving the chances families will buy a home they can afford and sustain their homes in the long run,” said Raphael Bostic, HUD’s assistant secretary for policy development and research.

Pre-purchase study
For the pre-purchase study, 573 people enrolled in counseling services in fall 2009 from 15 HUD-funded counseling agencies across the country.
Most purchasers, or 71 percent, had a FICO score of 620 or higher, and 72 percent were reported as having completed counseling by their housing counselor.
Participants represented different racial backgrounds (52 percent African American, 32 percent White, 16 percent of another race or multi-racial, and 19 percent Hispanic), and 51 percent were under age 35.
Foreclosure study
HUD’s foreclosure counseling study included 824 foreclosure clients. About three-quarters of the homeowners fell behind on payments because of a loss of income, and very few had any savings for their missed payments.
Homeowners who sought counseling before becoming delinquent or in the early stages of delinquency (1-3 months) were more likely to obtain a remedy, retain their home, and become current on their mortgages.
Most study participants attempted to contact their servicer when they first fell behind but were unsuccessful in negotiating with their lenders.
At the 18-month follow up period, nearly 70 percent of clients who sought counseling before becoming delinquent were in their home and current on payments, whereas only 30 percent of clients who were six or more months behind at the time they entered counseling were in their home and current at follow-up.
The study also found that those who sought counseling via telephone tended to have more income and savings, were less likely to be a minority, lived in more geographically dispersed areas, and achieved stronger housing outcomes.
According to the study, this may suggest expanding telephone counseling provided an important alternative for those who can’t receive in-person couns

NAR Finds Income to Qualify for Mortgage Well-Below U.S. Median

05/11/2012 By: Esther Cho          

Interest rates continue to slide further down alongside the decline in home prices. In addition to these factors improving affordability for homeowners, the National Association of Realtors (NAR) found the amount of income needed to qualify for a mortgage is actually well below the median income in most parts of the U.S.

The national median family income was $61,000 in the first quarter. If a buyer wanted to purchase a home at the national median price, he or she would need an annual income of $34,700 if making a 5 percent downpayment. A 10 percent downpayment would lower the requirement to $32,900, while a 20 percent downpayment requires about $29,300.
The information on qualifying incomes to purchase a median-priced single-family home on a metropolitan area basis assumes a favorable credit rating and an interest rate of 4 percent with 25 percent of gross income set aside for principal and interest.

Lawrence Yun, NAR chief economist, provided a more specific example and said a buyer in Indianapolis would only need an annual income of $24,000 after a 10 percent down payment to purchase a median-priced home, while in Seattle, the income would be $55,300.
“For now, buyers are facing an extraordinarily advantageous situation if they can obtain a mortgage,” he said.
The NAR report also found that 32 percent of home purchases paid all-cash in the first quarter o 2012, and investors, who make up the bulk of cash purchasers, accounted for 22 percent of all transactions in the first quarter.
Inventory has also seen a decline, with the number of existing homes for sale dropping 21.8 percent the first quarter of 2012 compared to a year ago during the same quarter, according to NAR. The number of homes for sale this quarter was 2.37 million and a year ago there were 3.03 million homes on the market in the first quarter.
NAR also reported the national median existing single-family home price was $158,100 in the first quarter, down 0.4 percent when it was $158,700 in the first quarter of 2011. The median price was down by even more compared to the previous 2011 fourth quarter when it was $163,500.
Yun explained that sales transactions were negotiated mostly in the previous quarter so home prices actually lag sales activity.
“Given the steadily dwindling supply of inventory and notably higher listing prices that are being negotiated today, prices are expected to show further improvements in the near future,” he said.
Distressed homes – foreclosures and short sales which drag prices down, made up 32 percent of first quarter sales compared to 38 percent a year ago.