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.

Rates Continue to Fall Hitting New Lows Amid Economic Concerns

05/10/2012 By: Esther Cho 

Just when it seemed like rates could not fall any further, Freddie Mac reported fixed mortgage rates sunk even further for the week ending May 10.

The 30-year fixed-rate mortgage averaged 3.83 percent (0.7 point), down slightly from last week’s average of 3.84 percent. A year ago at this time, the 30-year was 4.63 percent.
The 15-year fixed also moved downward, ending at 3.05 percent (0.7 point) this week. Last week it averaged 3.07 percent, and last year at this time it was 3.82 percent.
The 5-year ARM dropped to 2.81 percent (0.5 point) compared to 2.85 percent last week and 3.41 percent a year ago at this time.

The 1-year ARM moved up to 2.73 percent (0.5 point). Last week the 1-year ARM averaged 2.70 percent and 3.11 percent a year ago.
“Following April’s weaker than expected employment report, and the French and Greek election results raising concerns over the stability of the Euro currency zone, long-term Treasury bond yields declined allowing fixed mortgage rates to ease to new all-time record lows this week,” said Frank Nothaft, VP and chief economist for Freddie Mac.
Nothaft also noted the 115,000 jobs the economy added in April, which was below the market consensus forecast and less the prior month.
Bankrate.com also reported record low numbers after conducting its survey, which pulls data provided by the top 10 banks and thrifts in the top 10 markets.
The 30-year fixed fell to 4.02 percent, down from 4.05 percent last week.
The 15-year fixed hit a record low number at 3.20 percent, moving downward from the 3.25 percent reported last week.
For the first-time, the 5-year ARM fell below the 3 percent, averaging 2.99 percent this week compared to 3.02 percent last week.
The 3-year ARM tied with its record low of 3.06 percent

Delinquency Rate Reaches Lowest Level Since 2009: TransUnion

05/09/2012 By: Esther Cho 

After declining during the 2012 first quarter, the national mortgage delinquency rate is at its lowest level since the first quarter of 2009 and finally dropped after two consecutive quarterly increases. TransUnion reported Wednesday that the national delinquency rate, which includes borrowers 60 or more days past due, is 5.78 percent for the first quarter of 2012, a quarterly and yearly drop when the rates were 6.01 percent and 6.19 percent, respectively.

“To see that quarter over quarter, and year over year, more homeowners were able to make their mortgage payments is certainly welcome news,” said Tim Martin, group VP of U.S. Housing in TransUnion’s financial services business unit.
Martin also added that while we are still about three-times above the pre-recession norm, we should begin to see consistent improvements each quarter.
As for individual states, Florida (13.87 percent) took the lead for the highest delinquency rate, followed by hard-hit state Nevada (11.16 percent), then New Jersey (8.31 percent) and Maryland (7.11 percent).

States with the lowest delinquency rates were North Dakota (1.51 percent), South Dakota (2.11 percent), Nebraska (2.31 percent), and Wyoming (2.43 percent).
The three states that saw the greatest year-over-year increases in their rates were Vermont, which saw its rate go up by about 15 percent to 3.31 percent, followed by New Jersey and Arkansas, which saw smaller declines under 10 percent.
The three states that saw the greatest yearly declines in their mortgage delinquency rate were Arizona, which dropped its rate by about 25 percent to 6.86 percent, followed by Wyoming, which had a 23 percent reduction to 2.43 percent, and California, which fell to 6.66 percent after cutting its rate by 22 percent.
For metropolitan areas, 73 percent saw decreases in their mortgage rates in the first quarter of 2012 compared to the previous two quarters, when only 36 percent of metro areas saw a drop in their delinquency rate.
TransUnion predicts this will be a continuing trend and expects mortgage delinquency rates to fall further downward in 2012.
“We have seen increased traction of refinance activity related to HARP 2.0, a program that makes it easier for homeowners with negative equity in their home to refinance,” said Martin. “Going forward, as these homeowners take advantage of the historic low mortgage interest rates, and perhaps lower their monthly payment in the process, it may have some positive impact on the overall delinquency rate starting later this year.”
TransUnion’s forecast is based on various economic assumptions and is subject to change if there are unanticipated shocks to the economy.

HUD Secretary Wants to Break Through Refinancing Barriers

05/08/2012 By: Ryan Schuette 

Solvency issues re-emerged for the Federal Housing Administration (FHA) in a hearing convened Tuesday by the Senate Banking Committee, with HUD Secretary Shaun Donovan calling for lower loan-to-value thresholds and more servicer competition to expand refinance opportunities.

The hearing follows a bill by Sens. Barbara Boxer (D-California) and Robert Menendez (D-New Jersey) to roll back refinancing barriers for homeowners with GSE-held mortgages and featured the legislation prominently as lawmakers discussed solutions to the housing crisis.
Donovan praised the bill and identified three barriers to refinance opportunities for a broader swath of homeowners, including lower fees, streamlined underwriting practices, and manual appraisals for borrowers even in communities with few recent home sales.
The hearing quickly turned to servicer competition, which the HUD official said is lacking in part because of strict underwriting guidelines under Fannie Mae and Freddie Mac, inflating home prices and keeping refinance opportunities out of reach for many homeowners.

“Servicers who don’t service that loan are being discouraged from competing to refinance those loans,” he told lawmakers, citing a “number of changes” that legislators and regulators could make to remove barriers to homeowners.
He faulted existing loan representations and warranties for discouraging servicers from allowing borrowers to refinance at historically low interest rates.
“Frankly, we think it doesn’t make a lot of common sense that a homeowner who actually has more equity in their home is a lower-risk borrower… [than] homeowners who may be underwater on their homes,” he said. “It’s a question of fairness to make sure refinancing is available across the board.”
Sen. Richard Shelby (R-Alabama), a frequent critic of the FHA’s failure to stay above its 2 percent capital ratio buffer, reiterated concerns about the overcommitted housing agency in his opening remarks and later in questions during the hearing.
“Do you share my overall concern about the solvency of FHA?” he asked Donovan.
The HUD official answered by highlighting recent “substantial premium increases,” as well as a new rule on lender indemnification that he billed as a measure to protect the FHA’s cash-strapped Mutual Mortgage Insurance Fund.
“I do think we’re taking series of a number of broad steps to protect the fund,” he said.
The FHA remains a political hotspot for the housing industry, with a recent paper by Joseph Gyourko, a professor at the University of Pennsylvania, claiming last fall that it would need anywhere from $50 billion to $100 billion in Treasury draws, if trends persist.

Fannie Mae: Confidence in Economy and Home Values Increasing

05/07/2012 By: Esther Cho

Both the expectation for home prices and the percentage of those who think the U.S. economy is on the right path reached record highs in Fannie Mae’s April 2012 National Housing Survey.

Americans continue to expect home prices to go up, with the projection averaging 1.3 percent over the next 12 months, the highest value recorded.
At 71 percent, a high percentage of Americans still say it is a good time to buy while the percentage who said it is a good time to sell was 15 percent, a 1 point increase from March.
“Overall, consumer views of housing market conditions have become more supportive of home purchases, and sustained healthy hiring is required to help realize these improved expectations,” said Doug Duncan, Fannie Mae chief economist.

Duncan also mentioned the recent figures on employment in April, which showed a decline in job growth.
“Friday’s report of a second consecutive setback in job creation supports the view that the housing recovery will remain uneven this year,” said Duncan.
The expectation for average rental prices decreased slightly to 3.6 percent; in March, respondents expected rent to go up by 4.1 percent over the next 12 months.
If respondents were to move, 32 percent said say they would rent while 64 percent said they would buy. The percentage of those who said they would rent increased 2 points and reached the highest level since November 2011.
The percentage of Americans who believe the economy is on the right track rose to 37 percent, a 2 point increase from the previous month and the highest level in the survey’s two-year history. Still, an even greater 56 percent believe the economy is moving in the wrong direction.
Also, 23 percent of Americans reported their household income is significantly higher than it was a year ago, while 36 percent said their household expenses are significantly higher since the same time period. Both categories rose 2 percentage points compared to March.
The percentage of those who think their financial situation will decline was unchanged from the previous two months at 12 percent, the lowest value recorded in over a year.
The Fannie Mae survey polled a nationally representative sample of 1,000 respondents aged 18 and older between April 4, 2011 and April 27, 2012.

HAMP Activity Slides, HAFA Holds Steady

05/07/2012 By: Carrie Bay 

The government’s Home Affordable Modification Program (HAMP) continues to add borrowers to its roster each month, but the pace has slowed.

Data released Friday by Treasury and HUD shows 19,940 permanent HAMP mods were granted during the month of March. That’s down 10 percent from the 22,263 permanent mods completed in February and down 45 percent from 36,432 in March 2011.
Raphael Bostic, HUD assistant secretary, says fewer borrowers are falling behind on their mortgage these days. “We’re making important progress in providing relief to homeowners under the Obama administration’s programs,” Bostic said.

As of the end of March, there were 794,748 borrowers in active permanent HAMP modifications, and 76,218 of these also had payments reduced on a second lien or the lien extinguished entirely through the Second Lien Modification Program (2MP) of the government’s mortgage relief effort.
Bostic notes that in addition to HAMP modifications, homeowners are finding relief under the Home Affordable Refinance Program (HARP). Nearly half a million families have taken advantage of HARP, standing to save on average $2,500 a year, Bostic explained.
Though he described these efforts as providing “significant positive benefits,” Bostic followed that with an appeal to lawmakers to help improve program results. “[W]e are asking the Congress to approve the President’s refinancing proposal so that more homeowners can receive assistance,” he said.
While HAMP activity has slowed, other government-assisted foreclosure alternatives have held fairly steady. During March 2012, 4,486 homeowners received a short sale or deed-in-lieu of foreclosure through the Home Affordable Foreclosure Alternatives Program (HAFA).
There were 4,340 HAFA deals put in place the month before and 5,447 a year earlier in March 2011. To date, servicers have completed a total of 40,252 HAFA transactions

Freddie Mac: Fixed-Rate Averages Hit Record-Low Numbers

05/03/2012 By: Esther Cho 

Homebuyer affordability is even greater now with the fixed mortgage rates slipping to new record lows, according to Freddie Mac’s Primary Mortgage Market Survey.

The 30-year fixed averaged 3.84 percent (0.8 point) for the week ending May 3, down from the previous record low of 3.87 percent on February 9, 2012. Last week, the 30-year fixed-rate was 3.88 percent, and last year at this time, it averaged 4.71 percent.
The 15-year fixed mortgage averaged 3.07 percent (0.7 point), also below its all-time record low when it was 3.11 percent April 12 of this year. Last week, the 15-year averaged 3.12 percent, and a year ago, it was 3.89 percent.
The 5-year ARM was unchanged from last week’s average of 2.85 percent (0.7 point). A year ago, the 5-year ARM was 3.47 percent.

The 1-year ARM also reached a new record low at 2.70 percent (0.6 point). Last week, the 1-year ARM was 2.74 percent and averaged 3.14 percent a year ago.
“Signs of slowing economic growth and inflation remaining subdued allowed yields on Treasury bonds to ease somewhat and brought most mortgage rates to new all-time record lows this week,” said Frank Nothaft, VP and chief economist for Freddie Mac.
One sign of a slowing economy Nothaft mentioned was real Gross Domestic Product, in which he explained rose at an annualized rate of 2.2 percent in the first quarter of this year, a drop from the previous quarter of 3 percent and below the market consensus forecast of 2.5 percent.
Bankrate.com’s weekly national survey aligned with trends seen in Freddie’s survey by also reporting declines and record low numbers.
The 30-year fixed mortgage slipped to 4.05 percent, a drop from last week’s 4.09 percent.
The 15-year fell to 3.25 percent, a record low and decline compared to last week’s average of 3.28 percent.
Adjustable mortgage rates were mixed, with the average 3-year ARM moving upward to 3.07 percent, while the 5-year ARM tied with February’s record low of 3.02 percent.
Bankrate’s survey includes data provided by the top 10 banks and thrifts in the top 10 markets.

Recent Articles

Principal Reduction: A Matter of Analysis or Ideology for DeMarco?

05/02/2012 By: Esther Cho 

Based on documents Reps. Elijah Cummings (D-Maryland.) and John Tierney (D-Massachusetts) received, FHFA Acting Director Edward DeMarco’s reason for not allowing principal reduction appears to be based on ideology, not analysis, according to a May 1 letter they wrote to the director.

The letter states beginning in 2009, Fannie Mae officials worked with Citibank to develop a “shared equity” principal reduction pilot program that was “suddenly suspended” in July 2010, which prompted Citibank officials to ask what changed at the “11th hour.”
In the letter, the representatives stated that on February 8, a former Fannie Mae employee informed them the pilot program on principal reduction was terminated by officials who were “philosophically opposed to writing down principal balances.”
“Fannie Mae officials strongly supported the concept of principal reduction and fully evaluated its risks and benefits as they obtained the necessary internal approvals to finalize the program,” the letter stated.
One of the benefits Fannie Mae officials determined from their analysis is that implementation of the program would cost about $1.7 million, while benefits could exceed $410 million, according to the letter.
Another conclusion from Fannie Mae cited in the letter is that underwater borrowers will perform better on a modification that provides equity, and re-default rates on loans with principal reduction are far below rates on loans with other modifications.

The representatives also stated that the wide range of internal documents show that “Fannie Mae officials conducted detailed, substantive analyses and concluded years ago that principal reduction programs have enormous potential to save U.S. taxpayers significant amounts of money.”
DeMarco has cited taxpayer losses as one of the reasons for not allowing principal reduction, and FHFA’s estimate is principal reduction will cost taxpayers $100 billion, in addition to the $180 billion rescuing the GSEs has cost already.
The representatives said they obtained some of documents directly from FHFA, and others from an independent source, who provided documents labeled “confidential,” “proprietary,” and “internal.”
In response to the letter, DeMarco wrote his own addressing the claims, in which he stated, “I wish to convey my disappointment with this letter, the failure to contact FHFA to address your concerns, and the release of selective elements of the proprietary and confidential materials you received.”
With his May 1 letter, DeMarco attached an agency letter released April 12, 2012, that was an earlier response to the representatives regarding FHFA’s analysis of principal forgiveness.
In the April letter, authored by General Counsel Alfred M. Pollard, it was explained that the pilot program in question on principal reduction, among others, “ended due to complex operational issues involving system changes, accounting considerations and the interest level of Fannie Mae’s partners.”
As for the motive behind DeMarco’s decision on principal reduction, the acting director said FHFA makes decisions based on the analysis of facts.
“The fact that FHFA continues to consider principal forgiveness alternatives, including recent HAMP program changes initiated by the Treasury Department, belies any ideological tilt on our part, but rather a strict analytical-based approach to gathering and evaluating data to determine what options best fit within the legal constraints that fall upon this agency as conservator for the Enterprises,” he said in Tuesday’s letter

REO Prices Increase, Fair Market Prices Drop, Home Values Stabilizing

04/30/2012 By: Esther Cho 

According to data from Clear Capital, over the last year, REO prices have increased 5.5 percent, while fair market prices dropped 2.9 percent. The real estate data provider explained that demand for REOs is most likely causing the increase in prices and named Carrington Holding Company, Amherst Securities Group, and Waypoint Financial as examples of investors purchasing single-family REOs with the purpose of converting them into rental properties.

“There has been quite a bit of buzz in the housing industry surrounding turning REOs into rentals. Our data suggests early activity from these programs could be starting to take effect, with national REO-only home price gains on a price per square foot basis vastly outpacing fair market prices on a national level,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital.
According to data from the Census Bureau, rental vacancy rates have also seen a steep decline, with the rate at 8.8 percent in the 2012 first quarter, a significant decline from the 2010 first quarter, when the vacancy rate was 10.6 percent.
Villacorta also added that if investor interest continues to expand the REO-to-rental programs over the next several months, this could lead to a significant impact on the market in terms of increasing home values.
REO saturation, or the portion of REO sales relative to total sales, increased on a quarterly basis in April for the third straight month. Nationally, REO saturation increased quarterly from 25.3 percent in December 2011 to 27.9 percent in April 2012.
The Midwest regions saw the greatest quarterly increase of REO saturation, increasing to 37.1 percent in April compared to 31.1 percent in December.

In the West, REO saturation increased from 31 percent to 33.3 percent during the same quarterly period, and in the South, saturation increased from 24.2 percent to 25.3 percent. In the Northeast, REO saturation remained low compared to other regions; the region posted a quarterly increase from 8.4 percent to 10.2 percent.
Presenting further evidence that the housing market may be stabilizing, Clear Capital released its Home Data Index (HDI), which showed that overall, home prices fell 0.2 percent on a quarterly basis, and 1 percent year-over-year.
The data gathered was good through April 2012, and the HDI includes both fair market and REO transactions.
Based on regions, the Midwest was the only one that posted quarter-over-quarter losses, declining 2.7 percent. The West (+0.5 percent), Northeast (+0.2 percent), and South (+0.6 percent) all posted small quarterly gains. Year-over-year, all regions posted loses except for the Northeast, which saw a 0.7 percent increase.
Compared to the March 2012 report, the West and South posted improvements, decreasing their year-over-year losses by 1.4 and 0.3 percentage points, respectively.
The Midwest was the only region not following the positive trend and posted a yearly loss of 0.2 percent compared to the previous month’s report.
As for metro areas, hard hit market Phoenix posted the greatest quarterly price gains and yearly increases at 8.4 and 12.5 percent, respectively.
Miami posted the second highest quarter-over-quarter increase at 4.6 percent, closely followed by Tampa (+4.4 percent); Richmond, Virginia (+4.4 percent); and Washington, D.C. (3.6 percent).
On a yearly basis, Orlando posted a 9.8 percent increase, while Miami saw a 9.1 percent gain.
Milwaukee saw the greatest quarterly drop in prices, decreasing 12.5 percent. Columbus had the second greatest quarterly drop at -7.5 percent, followed by Birmingham, Alabama (-6.1 percent), Memphis (-5.4 percent), and Detroit (-4.2 percent).
Year-over-year, prices in Birmingham, Alabama fell 13 percent, Memphis 11.4 percent, Milwaukee 9.4 percent, Philadelphia 8.3 percent, and Columbia 6.2 percent.