December Existing-Home Sales Up 1%

Author: Tory Barringer January 23, 2014 0

Existing-home sales finished 2013 with a slight increase, closing the book on the strongest year for sales since 2006, the National Association of Realtors (NAR) reported Thursday.
Total existing-home sales--including all completed transactions of single-family homes, townhomes, condominiums, and co-ops--increased 1.0 percent month-over-month to a seasonally adjusted annualized rate of 4.87 million last month. November's sales rate was revised down to 4.82 million.
December's sales were down year-over-year, coming up 0.6 percent short of December 2012's pace of 4.90 million.
Removing all other types of sales, sales of existing single-family homes rose 1.9 percent from November to an adjusted annual rate of 4.30 million. Compared to the prior year, single-family sales were down 0.7 percent.
For all of last year, NAR estimates there were 5.09 million existing-home sales, a 9.1 percent improvement from 2012.
"Existing-home sales have risen nearly 20 percent since 2011, with job growth, record low mortgage interest rates and a large pent-up demand driving the market," said NAR chief economist Lawrence Yun. "We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population."
While sales were up from November, it wasn't new homeowners driving the increase: First-time buyers accounted for 27 percent of purchases in December, down from 28 percent in November and 30 percent in December 2012. All-cash sales--often reflective of investor activity--made up 32 percent of December transactions, unchanged from November and up from the previous year.
Even with prices and mortgage rates slated to rise, NAR president Steve Brown says sales should hold strong in 2014 as job numbers improve. That doesn't mean the year won't be without challenges, though.
"The only factors holding us back from a stronger recovery are the ongoing issues of restrictive mortgage credit and constrained inventory," Brown said. "With strict new mortgage rules in place, we will be monitoring the lending environment to ensure that financially qualified buyers can access the credit they need to purchase a home."
The national median existing-home price for all housing types in December was $198,000, up 9.9 percent year-over-year. A comparatively smaller share of distressed sales (14 percent compared with December 2012's 24 percent) accounted for some of the price growth, NAR reported.
The median existing single-family home price was $197,900, up 9.8 percent from the year prior.

Housing Recovery Unmoved by Rising Interest Rates

Authors: Krista Franks-Brock January 23, 2014 

Mortgage rates may be rising, but the housing market doesn’t seem to mind. In fact, several indicators have improved alongside rising rates, according to the HousingPulse Tracking Survey released by Campbell Surveys and Inside Mortgage Finance this week.
The lending atmosphere is becoming friendlier, especially to first-time buyers. Simultaneously, the average time on market for non-distressed properties and the average sales-to-list price ratio both improved year-over-year in December, according to the survey.
“Six months after the May-June 2013 rise in interest rates, the housing market is showing remarkable resilience,” said HousingPulse research director Thomas Popik.
“[U]nderwriting standards are getting a little looser” at Fannie Mae and Freddie Mac, as well, according to Campbell and Inside Mortgage Finance.
The average credit score for GSE loans in the fourth quarter was 743, down from 758 a year earlier. Loan-to-value ratios at the GSEs rose from 75 percent to 76 percent year-over-year in the fourth quarter.
Fannie Mae and Freddie Mac increased their share of the purchase market as well as their share of the first-time homebuyer sector. In fact, the GSEs posted survey highs in both categories, according to the four-year HousingPulse survey. The GSEs accounted to 19.2 percent of purchase loans originated over the last three months of 2013, up from 16.5 percent a year earlier. The GSEs’ share of the first-time buyer market reached 19.5 percent, up from 14.1 percent a year earlier.
Looking at the broader market, time on market over the last three months of the year averaged 9.7 weeks, a decline from 12.4 weeks recorded at the end of 2012. The average sales-to-list price ratio increased from 95.5 percent at the end of 2012 to 97.1 percent at the end of 2013.
“A year-over-year comparison of key metrics points to a housing market that was stronger at the end of 2013 than it was at the end of 2012,” Popik said.
The HousingPulse Tracking Survey relies on input from 2,000 real estate agents each month and calculates its metrics on a three-month moving average.

Survey: Mortgage Hurdles Least of Consumer Concerns

Authors: Tory Barringer January 21, 2014 0

As analysts continue to watch market indicators for trends that might hamper the borrowing experience, a recent poll shows that borrowers themselves are more focused on customer service problems.
The poll, conducted by real estate search engine Qazzoo.com, asked new homebuyers which aspect of the experience they found the most frustrating. Available answers covered the entire purchase timeline, starting with reaching out to a real estate agent and concluding with the loan application process.
According to the company, the most common source of aggravation cited by respondents was "lack of timely follow up by the real estate agent," an answer that garnered 42 percent of responses.
The next most popular answer was also service-related: "being shown homes that don't meet your needs" (36 percent).
The other three options, all market-related, came up in fewer responses, with 11 percent of consumers complaining about a "lack of real estate inventory," 5 percent citing problems "understanding the mortgage options available," and 4 percent pointing to "difficulty in qualifying for a mortgage."
Two percent of consumers responded with issues falling into the "other" category.
Michael Urbanski, CEO of Qazzoo.com, said the idea behind the survey choices was to "illustrate what can and cannot be controlled by the real estate professional." For example, while interest rates and loan programs are beyond an agent's control, timely follow up is not.
"Surprisingly, the single largest issue and therefore the most likely bottle necks occur in the service category. This could be because the answers that relate to the market are not likely to become bottlenecks unless the first two issues have been overcome," Urbanski said.
"However, the first two answers are also the easiest to overcome as the local real estate agent does have some control over timely follow up and showing the homes that meet the home buyer's desires."

Mortgage Rates Pull Back Further

01/16/2014 By: Tory Barringer 

December’s discouraging jobs report caused mortgage rates to pull back once again this week.

Freddie Mac’s weekly Primary Mortgage Market Survey shows the 30-year fixed-rate mortgage (FRM) falling to an average rate of 4.41 percent (0.7 point) for the week ending January 16, down from 4.51 percent last week. A year ago, the 30-year fixed average sat at 3.38 percent.
The 15-year FRM averaged 3.45 percent (0.7 point) this week, down from 3.56 percent previously.

Adjustable rates were flat to down this week. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.10 percent (0.5 point), down from 3.15 percent, while the 1-year ARM averaged 2.56 percent (0.5 point), unchanged from last week, the GSE reports.
“Mortgage rates drifted downward this week amid signs of a weakening economic recovery,” explained Freddie Mac chief economist Frank Nothaft.
In addition to December’s disappointing jobs report—which showed payroll growth of only 74,000 along with a substantial drop in labor participation—Nothaft cited weak retail sales numbers as another factor in this week’s rate movements.
Finance site Bankrate.com also reported declines in fixed and adjustable rates for the week. The site’s weekly national survey shows the 30-year fixed falling from 4.64 percent to 4.57 percent, while the 15-year fixed was down from 3.69 percent to 3.62 percent.
The 5/1 ARM, meanwhile, fell to 3.40 percent, according to Bankrate’s data. The company’s report put it at 3.46 percent last week.

Freddie Mac: Short Sales More Attainable Than Homeowners Think

01/13/2014 By: Krista Franks Brock

When a homeowner is unable to make their mortgage payments or owes more on the home than it’s worth, a short sale can be a viable option that avoids the negative implications of a foreclosure for both the homeowner and the mortgage-holder.

However, common perceptions of short sales as difficult, lengthy, restricted to specific circumstances, and harmful to personal credit cause many to shy away from the option.
In a blog post Monday, Freddie Mac SVP Tracy Mooney aimed to set the record straight regarding Freddie Mac short sales.
While short sales have been known to drag on in the past, Freddie Mac’s Standard Short Sale requires servicers to approve or deny a homeowner’s application within 30 days. After approval, the short sale should close within 60 days, according to Mooney.
Misperceptions regarding eligibility requirements are also a barrier, Mooney says. She clarified that short sales can be an option for owners of investment properties or second homes, those with second mortgages, and homeowners who are current on their loans.
Those who are current on their loans must meet general eligibility requirements, “the property must also be your

primary residence and your debt-to-income ratio must be greater than 55 percent,” Mooney said.
For those who have second mortgages, Mooney said Freddie Mac is “offering up to $6,000 to subordinate lien holders—who are like second mortgage companies—in exchange for releasing the subordinate lien, extinguishing the underlying indebtedness, and waiving the right to pursue deficiency.”
Another major source of concern for homeowners is the impact a short sale will have on their credit scores and their ability to obtain another mortgage in the future.
“While only the credit reporting agencies that calculate your credit score will know for sure, it’s possible that a short sale might be better for your score than a foreclosure,” Mooney said.
“Even if it isn’t, a short sale gives you time to find a more affordable place to live and exit gracefully from your obligation,” she added.
Mooney also assured homeowners that in most cases, they will not be on the hook for the full mortgage loan amount, though they may be required to pay a portion of the unpaid balance after the short sale closes.
When a borrower enters into a short sale, the impact on his or her ability to obtain a new mortgage depends on the circumstances, according to Mooney.
Those who enter into a short sale after a financial hardship such as a medical emergency or loss of income must wait 24 months to re-establish credit and apply for a new mortgage loan, while those who opt for a short sale due to “personal financial mismanagement” must wait at least 48 months before applying for another mortgage, according to Mooney.
Mooney recommends homeowners consider a short sale if they do not qualify for other loss mitigation options, need to move to obtain or maintain their jobs, or are underwater.

What's ahead for 2014 housing market

Julie Schmit, USA TODAY 10 a.m. EST January 1, 2014

Look for prices to rise more slowly in 2014 and home building to push ahead of the housing market's recovery.

(Photo: Justin Sullivan, Getty Images)

Story Highlights

• Home price gains to lessen in coming years, economists say
• Fewer bidding wars, smaller increases in prices will help buyers
• Mortgage rates could be a point higher by end of 2014

The housing recovery hit high gear in 2013 with bigger than expected price gains and solid home sales. This year isn't likely to be as exciting. Rising mortgage interest rates will price out some potential buyers. Instead of double-digit price gains, look for single-digit ones, economists say, while existing home sales remain at last year's level.
Sound boring? "You want boring in the housing market," says Svenja Gudell, Zillow director of economic research.
Here's what's ahead for:
• Home prices. They were the highlight of the 2013 housing market, up 12.5% in October year over year, CoreLogic says. Prices are now 20% off their 2006 peaks after falling more than 30%, shows the Standard & Poor's Case-Shiller index.
Economist John Burns looks for a 6% gain in 2014. Many others see smaller increases ahead. Zillow forecasts just a 3% rise.
Prices will likely rise more slowly as more homes come on the market, fewer investors bid for homes and higher ownership costs — including interest rates and home prices — take a bite out of housing affordability, housing experts say.
Still, U.S. housing remains 4% undervalued when compared with other economic fundamentals, such as consumer incomes and the cost to rent, says Jed Kolko, Trulia economist. At their 2006 peak, home prices were 39% overvalued based on the same metrics, Kolko says.
•Existing home sales. They've started to slow. In November, they were down year over year for the first time in 29 months, National Association of Realtor data show.
The dip was driven by higher interest rates and a tight supply of homes for sale. It doesn't mean the housing recovery has come off the rails, because home prices and housing starts continue to improve, says Capital Economics economist Paul Ashworth.
Existing home sales, which came in at a 4.9 million seasonally adjusted pace in November, are expected to be about 10% higher in 2013 than 2012 and stay about the same at 5.1 million in 2014, NAR forecasts. That's roughly back to 2007 levels but below the inflated levels preceding the housing crash.
New-home sales, which make up a smaller part of the market, have more room to grow. They hit an annual pace of 464,000 in November, up almost 17% from a year ago but still below the 700,000-a-year pace generally considered healthy.
The new year will be different for home buyers, though.
Look for fewer bidding wars and a less frantic market, says Glenn Kelman, CEO of brokerage Redfin. Its data show bidding wars recently falling to one of two offers handled by Redfin agents, down from three of four at the peak in March.
Homes are taking longer to sell, and more sellers are also reducing prices to win sales, Kelman says. At the same time, the supply of existing homes for sale edged up to 5.1 months from 4.9 months in October, NAR says. That's still below the six-month supply that Realtors generally consider to be a balanced market for buyers and sellers.
Supply should get closer to that level in 2014, Kelman says.
Donaee and Jeff Reeve hope he's right. The couple sold their Seattle-area home in just 10 days amid a hot June market. They've been renting as they search for a new home with a few acres. Meanwhile, prices have risen. The lack of suitable homes for sale is "discouraging," says Donaee Reeve, 36, a dental hygienist.
• Housing construction. This part of the housing recovery has been a laggard.
November's data showed an improvement, with housing starts topping 1 million on an annual basis, the Commerce Department says. That was up almost 30% from a year earlier, but it's still far below the norm. Starts averaged 1.5 million a year before the mid-2000s housing boom.
Construction won't return to normal this year, but it will strengthen enough to be the main driver of the housing recovery as home price gains shrink, says investment manager Goldman Sachs Asset Management.
It sees housing starts increasing 20% a year for the next several years as household formation picks up with the strengthening economy.
More home construction means more jobs for construction workers, plumbers, civil engineers and others in the building trades, as well as related industries such as furniture manufacturing, it says.
Construction alone will add 300,000 to 500,000 jobs a year to the nation's job base for the next three years, GSAM predicts. That's up from about 100,000 in 2013.
"The construction revival is primarily a matter of when, not if," says Tom Teles, GSAM head of securitized and government investments.
• Mortgage rates. Sarah and Andrew Katz know home prices are going up, and mortgage interest rates, too. But they're still convinced it's a good time to buy a first home. They've set their sights on spring.
"We're banking on interest rates staying under 5%, but they are what they are," says Sarah, 29, who works in public relations in Manhattan.
The couple better not wait too long, economists warn.
Average rates for a fixed 30-year mortgage will rise to 5.5% by the end of 2014, says Lawrence Yun, NAR chief economist. Rates have already risen about 1 percentage point in the past year as the economy has strengthened. They'll be pushed up further as the Federal Reserve winds down its $85 billion monthly bond-buying program.
Each percentage point increase in mortgage rates makes homes about 10% more expensive in terms of higher housing payments.
Another factor could weigh on borrowers. Starting in January, lenders must make home loans that meet new federal qualified mortgage standards or face greater liability from borrower lawsuits, should the loans go sour.
At least 5% of mortgages extended in 2013 wouldn't meet the new standard, Yun says. More than that will likely face additional scrutiny from lenders as they implement all parts of the new rule, says Brian Koss, executive vice president of lender Mortgage Network.
He says the higher rates and tighter rules will likely drive some home buyers out of the market or into lower-priced homes than they could have afforded last year.
"People have gotten spoiled," Koss says. Higher rates and home prices will test the strength of the housing recovery in 2014, he says.

Regulator Reports Improving Loan Performance for 4th Straight Quarter

01/07/2014 By: Carrie Bay 

The performance of first-lien mortgages serviced by large national and federal savings banks continued to improve in the third quarter of 2013, reports the Office of the Comptroller of the Currency (OCC). It marked the fourth consecutive quarter the agency has recorded greater loan performance among regulated entities.

The regulator’s latest report on mortgage metrics indicates strengthening economic conditions, mortgage servicing transfers, home retention efforts, and home forfeiture actions all contributed to improved performance of banks’ residential mortgage assets.
The OCC says 91.4 percent of the 25.6 million loans (totaling $4.4 trillion in principal balances) covered in its report were current and performing at the end of the third quarter. That’s up from 90.6 percent at the end of the previous quarter and 88.6 percent a year earlier. The mortgages included in the OCC’s analysis comprise 50 percent of all outstanding mortgages in the United States, the agency reports.
Seriously delinquent mortgages—those 60 or more days past due or held by bankrupt borrowers whose payments are 30 days or more past due—decreased to 3.6 percent compared with 3.8 percent at the end of the previous quarter and 4.4 percent in Q3 2012. The percentage of mortgages labeled seriously delinquent dropped 16.8 percent from a year earlier.

The percentage of early stage delinquencies—mortgages that were 30-59 days past due—was 2.6 percent, a drop of 8.4 percent from the previous quarter and 15.5 percent from 12 months prior.
The number of loans in the process of foreclosure at the end of Q3 2013 fell to 604,763, a decrease of 47.8 percent from a year earlier. Its regulated servicers initiated 130,592 new foreclosures during the July-to-September period, a 48.3 percent decrease from the same period in 2012, the OCC reports. Annually, the number of completed foreclosures fell 27.8 percent to 82,841.
Factors contributing to the reduction in foreclosure activity include improved economic conditions, foreclosure prevention assistance, and servicing transfers of loans, the OCC said in its report.
During the third quarter, servicers implemented 311,660 home retention actions—including modifications, trial-period plans, and shorter-term payment plans—compared with 116,214 home forfeiture actions—completed foreclosures, short sales, and deeds-in-lieu-of-foreclosure. The number of home retention actions in Q3 decreased by 0.9 percent from the previous quarter and 18.6 percent from a year earlier.
The OCC says In the third quarter of last year, 62.5 percent of the modifications completed reduced borrowers’ payments by 20 percent or more. Mortgage modifications reduced payments by $365 per month on average.
According to the OCC’s data, servicers modified 3,288,717 mortgages from the beginning of 2008 through the end of the second quarter of 2013.
At the end of the third quarter of 2013, 45.5 percent of these modified loans were current or paid off, while 6.3 percent were 30 to 59 days delinquent, 11.1 percent were seriously delinquent, 5.1 percent were in the process of foreclosure, and 7.8 percent had completed the foreclosure process.

Online Technology Likely to Play Larger Role in Mortgage Process

01/03/2014 By: Tory Barringer 

A recently released borrower survey on shopping habits shows increasing reliance on online tools when mortgage shopping, though many still find the learning curve too steep.

Fannie Mae’s Economic & Strategic Research Group released Thursday the findings from its latest topic analysis. The data was taken from consumer survey results from throughout the second quarter of 2013.
According to the group, the collected data show higher income borrowers—those earning at least $100,000 per year—are more likely to use online applications to make their own mortgage calculations, while low earners—those

making less than $50,000 annually—rely more on real estate agents, lenders, and advice from family and friends in making their borrowing decisions.
In addition, when asked for suggestions in making the shopping process easier, high-income borrowers focused more on the technological side, with most saying they would like an improved way to compare multiple loan offers. On the other hand, low-income consumers were more likely to say they want easier-to-understand loan terms and costs.
“Higher income borrowers are using online shopping approaches about twice as frequently as lower income borrowers, which aligns with a stronger focus on doing their own calculations and using tools,” the research group’s business strategy director, Steve Deggendorf, said.
However, Deggendorf noted, all income groups said they would like to make greater use of the Internet than they currently do, “indicating that online technology will likely play an increasingly larger role for all borrowers in the mortgage shopping process and presents opportunities for shopping enhancements.”
“Enhanced online tools … could help consumers of all incomes to become better mortgage shoppers and achieve better outcomes by addressing the issues they think will make the process easier,” he added.

Mortgage Rates Start 2014 on the Up and Up

01/02/2014 By: Tory Barringer 

Mortgage rates began 2014 with a round of increases, kicking off a trend many experts believe will continue through the rest of the year.

Freddie Mac’s weekly Primary Mortgage Market Survey shows the 30-year fixed-rate mortgage (FRM) averaging 4.53 percent (0.8 point) for the week ending January 2, up from the last week of 2013, when it averaged 4.48 percent. A year ago, the 30-year FRM was at 3.34 percent.

The 15-year FRM this week averaged 3.55 percent (0.7 point), climbing from 3.52 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) also saw an increase, rising to 3.05 percent (0.4 point) from 3.00 percent. The 1-year ARM was flat at 2.56 percent (0.5 point).
Frank Nothaft, VP and chief economist for Freddie Mac, cited three major factors behind the week’s increases: rising consumer confidence as reported by the Conference Board, a strong showing for home prices in the most recent S&P/Case-Shiller Indices, and a slight gain in pending home sales for November—all of which served as “signs of a stronger economic recovery,” he said.
Meanwhile, finance site Bankrate.com reported on the findings in its weekly survey, putting the 30-year fixed at 4.69 percent—up 6 basis points—with the 15-year fixed at 3.73 percent—up 3 points. The 5/1 ARM was up to 3.52 percent, nearly 10 basis points up, Bankrate reported.
“Mortgage rates finished 2013 more than a full percentage point higher than where they began,” Bankrate said in a release. “While mortgage rates are still below September’s high point of the year, they did finish 2013 near the upper end of this year’s range.”

New Mortgage Rules Won't Knock Out Many Borrowers

By Peter Coy December 27, 2013

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Are you in the market for a house and worrying about whether it will be harder to get a mortgage after Jan. 10, when new federal rules kick in? Don’t fret. For most people the rules won’t make much difference. If the new rules do prevent you from landing a mortgage loan, it could be a sign that you aren’t financially ready for homeownership.

The rules put out by the Consumer Financial Protection Bureau require lenders to make “a reasonable, good-faith determination” that borrowers can repay their loans. For so-called qualified mortgages, there are additional standards which give their issuers legal protection against charges of inappropriate lending. Qualified mortgage loans are no longer than 30 years and have fees and points totaling no more than 3 percent of the loan’s value. Lenders managed to win a reprieve on another piece of the standard, which is that a borrower’s total debt payments (including credit cards and student loans) can’t exceed 43 percent of income. Loans eligible for purchase by Fannie Mae (FNMA) or Freddie Mac (FMCC) or for insurance by federal agencies don’t have to meet that debt-to-income standard until 2021.

The conservative Heritage Foundation argues that the rules “unleash predatory regulators” and unfairly restrict borrowers’ choices without dealing with what it says are the real causes of the housing bubble and bust—namely, loose monetary policy and various rules promoting homeownership for low-income families. On the whole, though, the rules won’t make a huge difference for most families—simply because lenders have already tightened lending standards drastically. The best evidence for that is the Mortgage Credit Availability Index published by the Mortgage Bankers Association. According to the association, the index would have stood at around 800 in 2007 if it had existed at the time. It’s around 110 now, meaning it’s much harder to get a mortgage than before the housing crash.

Data: Mortgage Bankers AssociationAvailability of mortgage credit has increased since 2012
That’s not to say that preparation for the new rules isn’t having any effect. As the Mortgage Bankers Association puts it:

“A significant number of loan programs allowing for more than 95 LTV [loan-to-value] and low-to-mid range minimum FICOs were either discontinued in November, or transitioned into programs with lower LTV maximums and/or higher minimum credit scores. Investor pull-back from programs with greater than 30-year terms and interest-only programs continued as the industry prepares for new regulations coming into effect in January 2014.”

But even with that tightening, mortgage credit was easier to get in November than in all of 2012 and the first half of 2013. Starts on residential construction hit a five-year high in November, and sales of new homes are running near their highest since 2008 as well.
The bigger influences on housing affordability in 2014 will be the economy (whether it will grow strongly enough to create jobs and lift incomes) and interest rates (whether the Federal Reserve’s tapering of purchases of Treasury bonds and mortgage-backed securities will push mortgage rates out of range).
Under the new mortgage rules, the people who are most likely to get rejected for a loan are ones who live in states where housing prices are very high or where the bounce-back from the crash has been weakest. Also vulnerable are young people who are hoping to “grow into” their mortgages by progressing in their careers and winning raises. It will be harder to squeeze into a home with an adjustable-rate loan because the rules require lenders to take into account how high the rate might get over the life of the loan, not just the teaser rate.
CoreLogic (CLGX), a real-estate data company, calculates that 12.8 percent of new mortgages in 2012 didn’t meet the “qualified mortgage” standard. You can still try to get a loan even if it’s not a qualified mortgage, but it will be considerably harder. Then again, that’s not necessarily a bad thing. If banks and the government are telling you that you can’t afford a house, they just might be right.