Surge in Investor Purchases Gave Home Prices Boost in February

04/27/2012 By: Esther Cho

While Radar Logic reported home prices in February showed a month-over-month increase, the real estate data provider sees this trend as possibly being temporary, considering that warm weather and investment buying helped to drive up sales.

Home prices increased 1.9 percent over the month ending February 16, according to Radar Logic’s RPX Composite Price, which tracks 25 major metropolitan areas.
This increase was bolstered by strong sales in February. Sales transactions for the RPX Composite increased 22.9 percent month-over-month and 16 percent year-over-year through February 16.
“We believe that investment buying and mild weather are contributing to this strength, and both may be temporary,” the Radar Logic report stated, which was authored by Director of Research Quinn W. Eddins.

Since 2009, purchases from corporate investors have increased rapidly in certain metro areas.
A leading example of this trend is Las Vegas, where corporate investor purchases increased 1,300 percent while housing transactions increased 264 percent from January 2009 to February 2012. In Miami, purchases from corporate investors increased 714 percent compared to 185 percent for total sales during that same period. In Los Angeles, corporate investor purchases increased 421 percent compared to a 36 percent increase in total sales. In New York, they increased 126 percent while sales increased 69 percent.
The result of increased investment activity has been argued to reap both benefits and disadvantages for home prices.
According to Radar Logic, investors, who are primarily interested in REO properties, buy homes at a significant discount, depressing the aggregate price for houses.
“Moreover, investor purchases of distressed properties at heavy discounts have hurt the values of surrounding properties by providing appraisers with low-priced comparable sales,” the report stated.
On the other hand, the influx of corporate investors into metropolitan housing markets, particularly those with high concentrations of foreclosures and large REO inventories, could strengthen aggregate home prices as people become aware of the fact that investors are buying up properties in large quantities, according to the report. Sellers could then have a strong incentive to raise their prices, which could start to firm prices in the market, Radar Logic explained.

Pending Home Sales Index Jumps in March

04/26/2012 By: Mark Lieberman, Five Star Institute Economist 

The Pending Home Sales Index (PHSI) rose sharply in March to 101.4 from February’s revised 97.4, the National Association of Realtors (NAR) reported Thursday.

Economists had expected the index to increase 1.0 percent from February.
The index is now at the highest level since April 2010 when it reached 111.3.
The index improved for the third straight month and fifth time in the last 6 months. The March reading is up 12.8 percent from March 2011, the strongest year-over-year gain since last July when the index was 15.4 percent over its year-earlier level.
Pending home sales are counted when sales contracts are signed and are viewed as a leading indicator of existing home sales; recent reports suggest that home re-sales should be a bit stronger over the next couple of months but at a level that is still fairly subdued. March pending sales would be included in the home sales report for May.

In January, the PHSI rose to 97.0 from 95.1, but existing-home sales in March fell to 4.48 million (seasonally adjusted annualized rate) from an upwardly revised February rate of 4.60 million. Based on the increase in the PHSI, economists had forecast the March sales pace would be 4.62 million.
In March, the PHSI rose 8.7 percent in the West and 5.9 percent in the South while slipping by less than one percent in both the Northeast and Midwest.
The PHSI has been drifting upward, albeit modestly for most of the past two years.
The March gain is consistent with the beginning of the traditional home buying season and tempered by the reality that a substantial number of sales contracts are failing to meet underwriting standards and/or other loan criterion as sales contract cancellations remain elevated.
Although a hopeful movement, home sales still appear to be searching for a sustainable level and continue to be subject to conflicting trends in labor markets, household formation, mortgage interest rates, and underwriting standards.
Nonetheless, the increase was cheered by Lawrence Yun, NAR chief economist.
“The housing market has clearly turned the corner. Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices will be rising in more areas as the year progresses,” Yun said.
The index is based on a large national sample, representing about 20 percent of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.

Mortgage Delinquencies Head Further South

04/25/2012 By: Carrie Bay 

Mortgage delinquencies fell back on both a monthly and annual basis in March, according to preliminary market data released by Lender Processing Services (LPS) for the month.

The company’s estimation puts the national delinquency rate – measured as 30 or more days past due but not in foreclosure – at 7.09 percent.
That’s down 6.3 percent from the previous month, an 8.8 percent drop from March 2011, and is the first time since

2006 that the delinquency rate has come in lower by both measurements, according to LPS.
The nationwide foreclosure rate stands at 4.14 percent by LPS’ assessment – up just barely one-tenths of a percentage point from February and down 1.6 percent from a year earlier.
LPS reports that there are 2,060,000 properties that comprise the nation’s foreclosure inventory.
Another 3,531,000 have missed at least one mortgage payment but haven’t made it as far as foreclosure yet. Of those, 1,643,000 are behind by three or more payments and will likely join the foreclosure inventory soon.
Altogether, the numbers equate to 5,591,000 mortgaged properties that are in arrears.
According to LPS’ report, the states with the highest percentage of non-current loans in March – including 30-plus days delinquent and in foreclosure – were Florida, Mississippi, Nevada, New Jersey, and Illinois.
States with the lowest percentage of non-current loans for the month included Montana, Alaska, South Dakota, Wyoming, and North Dakota.

Call for GSEs to Apply Principal Reduction Continues

04/24/2012 By: Esther Cho 

In a written speech to the National Council of State Housing Agencies on Monday, a Treasury official named a number of measures to address challenges in the housing market, and stressed one solution that has not been applied by Fannie Mae and Freddie Mac: principal reduction.

“We have also asked FHFA to allow the GSEs to participate in the principal reduction alternative of the Home Affordable Modification Program known as HAMP,” said Mary Miller, Under Secretary for Domestic Finance, in her written speech. “Given the large percentage of outstanding mortgages that are currently backed by Fannie or Freddie, it is important that the GSEs participate in this program.”

Calling principal reduction a useful tool, Miller said in “some targeted cases, principal reduction makes economic sense for both the homeowner and the lender – helping reduce investor losses and preventable foreclosures over the long term.”
Miller stated that this view not only belongs to the administration and government agencies, but also to those in the private sector.
Miller referenced a quarterly survey from the Office of the Comptroller of the Currency to further prove her point and stated the survey showed that of the mortgages held by private investors, nearly one in five that were modified also had reduced principal, and in the last six months, more than 40 percent of non-GSE mortgages modified through HAMP included principal reduction.
Recently, Edward DeMarco, FHFA Acting Director, has been under pressure to allow the GSEs to apply principal reduction in order to speed up recovery in the housing market and prevent underwater mortgages from going into foreclosure. Citing costs to taxpayers, DeMarco recently emphasized principal forbearance as a less costly form of relief.
To encourage the GSEs to apply principal reduction, the Treasury recently tripled incentives to between 18 and 63 cents for every dollar of principal reduced.
Other measures Miller mentioned to address the housing crises were the expanded HARP 2.0, a national program for GSEs to dispose of foreclosed properties, and hardship assistance such as the Hardest Hit Funds.

Three Nonprofits Join to Transform Vacant REOs into Future Residences

04/23/2012 By: Esther Cho 

Three nonprofits are working together toward an effort to rehabilitate vacant REO properties and support homeownership. Rebuilding Together, NeighborWorks America, and the National Community Stabilization Trust are committing to a three-year partnership to turn vacant and dilapidated properties into affordable homes in the communities they serve.

“Bringing stability back to neighborhoods hard hit by foreclosures will take new innovative collaborations between partners with the insight, resources, and expertise to impact change,” said Craig Nickerson, president of the National Community Stabilization Trust.
The joint initiative focuses on three areas. The first is providing training for local Rebuilding Together affiliates to operate programs to acquire, rehabilitate, and resell REO properties to help stabilize communities affected by foreclosure.
As part of an asset-building strategy for its affiliates, Rebuilding Together is creating a pilot REO fund to assist its local affiliates in acquiring and remediat REO properties.

Once rehabilitated, the properties will be sold at affordable prices to low- or moderate-income homebuyers in the community.
The National Community Stabilization Trust will provide Rebuilding Together affiliates with access to listings of REO properties and other services to locate and acquire the properties to be resold.
The second is the expansion of NeighborWorks America’s Loan Modification Scam Alert campaign, which educates homeowners on protecting themselves against loan modification scams.
Finally, the partnership will provide one local Rebuilding Together affiliate with an opportunity to participate in the NeighborWorks America board governance program, which trains nonprofits to more effectively use existing tools and resources to improve the performance of their governance boards.
Rebuilding Together is a nonprofit working to preserve affordable home ownership and revitalize neighborhoods by providing extensive rehabilitation and modification services to those in need at no cost to those served.
NeighborWorksAmerica creates opportunities for people to improve their lives and strengthen their communities by providing access to homeownership and to safe and affordable rental housing.
The National Community Stabilization Trust is a nonprofit organization that was created to help revitalize neighborhoods affected by the foreclosure crisis. Formed in 2008, Stabilization Trust builds the capacity of state and local governments, and community-based housing organizations to acquire, manage, rehab, and sell foreclosed properties.

RE/MAX Survey of 53 Metros Finds Home Prices Up Again

04/20/2012 By: Esther Cho 

According to a March 2012 housing report released by RE/MAX, home prices have risen for the second month in a row now on a year-over-year basis. The RE/MAX report included 53 metro areas and found the median price in March was $184,525, a 7.3 percent price increase from February, and a 5.8 percent increase from a year ago in March 2011. A consecutive increase on a year-over-year basis has not occurred since August 2010, according to the report.

Also, according to the March report, of the 53 metro areas, 36 experienced year-over-year price increases, with 10 seeing double-digit gains including Detroit, Michigan (+22.8 percent); Miami, Florida (+21.8 percent); St. Louis, Missouri (+18.5 percent); Phoenix, Arizona (+18.2 percent); Atlanta, Georgia (+13.7 percent); and Orlando, Florida (+12.7 percent).
“Although we don’t expect home prices to rise in every market at the same rate, the worst is definitely behind us, and a slow, steady recovery is taking hold,” said Margaret Kelly, CEO of RE/MAX.

March home sales surged 25.4 percent compared to February and rose by 1.5 percent a year ago. RE/MAX attributed the significant increase to good weather, low interest rates, attractive pricing, and improving consumer confidence.
Of the 53 metro areas included in the March survey, 33 experienced a year-over-year increases in sales, 17 of which saw double-digit growth including Wilmington, Delaware ( +41.8 percent); Omaha, Nebraska (+30.6 percent); Providence, Rhode Island (+26.6 percent); Tulsa, Oklahoma (+26 percent); Chicago, Illinois (+23.7 percent); and Milwaukee, Wisconsin (+21.4 percent).
For homes sold in March, the average number of days on market was largely unchanged at 101, two days less than February’s average and three days less than the year ago average.
The average inventory of homes on the market in March dropped 2.8 percent from the previous month of February and 23.2 percent from March 2011. The drop in March marks the 21st consecutive month inventories have fallen.
The months supply dropped to 5.3 months compared to February’s 6.6 month supply and the 7.1 month supply in March 2011. Months supply is the number of months it would take to clear a inventory at the current rate of sales. A six-month supply is considered a balanced market between buyers and sellers.
RE/MAX was founded in 1973 by Dave and Gail Liniger, real estate industry visionaries who still lead the Denver-based global franchisor. RE/MAX is a real estate franchisor with the a global reach of more than 80 countries.

Economists Respond to March's Fall in Existing Home Sales

04/19/2012 By: Esther Cho

The National Association of Realtors (NAR) reported Thursday that existing home sales decreased 2.6 percent, in March, to a seasonally adjusted annual rate of 4.48 million units, falling short of the 4.62 million economists had forecast. In response to this data, economists representing different institutions provided their insight to explain what the recent numbers might indicate.

Patrick Newport, U.S. economist, IHS Global Insight
“Existing home sales declined in March mainly because fewer investors bought homes. Sales to those looking for a home to live in have been flat (and weak) for the past six months, despite low borrowing rates, low home prices and rising rents. A critical

question is whether sales are set to take off soon, given the improving economy. Our view is that sales will improve during the course of this year, but unless credit conditions loosen significantly, a takeoff will not take place.”
NAR reported investors bought 21 percent of the homes sold in March, down from 23 percent in February.
Paul Diggle, property economist, Capital Economics
“March’s decline in existing home sales probably reflects the normal month by month volatility rather than renewed underlying weakness. The increase in households’ confidence in the outlook for the housing market, coupled with a gradual improvement in the pace of the economic recovery, should drive a rise in home sales later this year….It is possible that the pattern within the quarter has been driven by the weather, with falls in the most recent two months reflecting a degree of payback after January’s gain.”
Mark Vitner, senior economist and Anika R. Khan, economist, Wells Fargo
“Existing home sales dropped 2.6 percent, but are up 5.2 percent from a year ago. While existing sales are down for the second consecutive month, we are likely continuing to see payback from increases earlier this year. That said, we could see one more month of disappointing data, but we still contend the recent declines are not indicative of the trend. Stabilization will become more apparent once we return to normal weather.”