Distressed Inventory Fading Fast as Housing Market Strengthens

08/29/2013BY: ESTHER CHO

As the housing market heals, foreclosure inventory is depleting quickly, CoreLogic reported Thursday.

In July, about 949,000 homes were in some stage of foreclosure, down 32 percent from 1.4 million a year ago. Foreclosure inventory also showed a 4.4 percent decline from June. Year-to-date, foreclosure inventory is down by 20 percent.

Currently, about 2.4 percent of homes with a mortgage are in foreclosure inventory, the lowest level since March 2009.

In addition to shrinking foreclosure inventory, CoreLogic also reported steep declines in completed foreclosures and serious delinquencies.

According to the data provider’s estimate, about 49,000 properties were lost to foreclosure in July, down 25 percent from 65,000 in July 2012.

From June to July, completed foreclosures fell by 8.6 percent from 53,000 in the prior month.

At 5.4 percent, the serious delinquency rate decreased to the lowest level since December 2008, according to CoreLogic. The rate represents fewer than 2.2 million mortgages.

“Continued strength in the housing market will contribute to our outlook for ongoing improvement in the stock of distressed assets through the end of this year,” said Mark Fleming, chief economist for CoreLogic.

According to CoreLogic, the decreases were apparent across the country, with every state reporting an annual decline in foreclosures.

“Not surprisingly, non-judicial states have come the farthest the fastest in reducing shadow inventory and lowering delinquency rates,” noted Anand Nallathambi, president and CEO of CoreLogic.

Florida took the lead again as the state with the highest number of completed foreclosures. Over the last 12 months, about 110,000 homes were lost to foreclosure in Florida. California followed with 65,000 completed foreclosures. Other states in the top five were Michigan (61,000), Texas (45,000), and Georgia (41,000).

Florida also held the highest percentage of homes in foreclosure inventory, at 8.1 percent. New Jersey’s foreclosure inventory rate of 5.9 percent put it at second, with New York (4.7 percent), Connecticut (4.0 percent), and Maine (4.0 percent) filling out the top five.

However, in 36 states, foreclosure inventory sits below the national rate of 2.4 percent.

Home Sales Stage a Comeback in July

08/27/2013BY:

TORY BARRINGER

After observing a slowdown in sales throughout June—typically the peak selling month for the year—online brokerage Redfin reported a rebound in July, though other market indicators continue to cool.

According to Redfin’s data, “this July saw a healthy jump in homes sold throughout most of the 19 markets covered in this report,” improving 3 percent month-over-month and 17.6 percent year-over-year from a rather disappointing July 2012.

In fact, according to the Seattle-based brokerage, July 2013 saw the highest number of homes sold in the past four years, with the 19 markets together seeing about 94,000 sales.

“July’s numbers are probably the result of buyers shaking off the impact of mortgage interest rate increases, and opting to lock in rates before they rise further,” explained analyst Tommy Unger. “Chicago led the nation with

nearly 12,000 homes sold, up a strong 5.7 percent in July, and 36.9 percent year over year.”

While sales numbers picked up, Redfin believes the gains won’t last.

“With less inventory, higher interest rates and continued buyer fatigue, August won’t see the same 7 percent month-over-month sales increase as in 2011 and 2012,” Unger said. “In fact, based on current closed and pending sales, we expect a slight month-over-month drop in home sales for next month.”

At the same time, reports on home price growth and inventory were less positive in July.

Nationally, home prices per square foot were up 1.1 percent from June and 19.3 percent from July 2012, Redfin reported. However, a closer examination shows four of the 19 areas tracked posting monthly price decreases: Austin (-2.6 percent); Washington, D.C. (-2.5 percent); Philadelphia (-1.5 percent); and Boston (-0.9 percent).

Meanwhile, the number of homes for sale in July fell 4.6 percent month-over-month, outdoing the 4 percent drop recorded at the same time last year. Year-over-year, inventory fell 30.6 percent. With the exception of San Jose (which reported a 7.1 percent monthly increase in for-sale homes), inventory was down on a monthly basis in all tracked markets.

“The slight increase in inventory from May to June was partially attributable to the lower sales volume,” Unger said. “Now, it looks like inventory is back on its seasonal decline heading into fall.”

 

Case-Shiller Nears Five-Year High

08/27/2013BY:

MARK LIEBERMAN, FIVE STAR INSTITUTE ECONOMIST

Home prices rose in June to their highest levels in nearly five years, increasing 2.2 percent, according to theCase-Shiller Home Price Indices released Tuesday. The 20-city index was up 12.1 percent from a year earlier, and the companion 10-city index was up 11.9 percent.

Economists surveyed by Bloomberg had expected the 20-city index to increase 2.3 percent from May and 12.2 percent from a year ago.

Case-Shiller’s national index, reported quarterly by Standard & Poor’s, was up 7.1 percent in the second quarter to 146.32, its highest level since third quarter 2008.

All 20 cities included in the survey improved both month-to-month and year-to-year.

The two surveys have improved monthly and yearly for 13 consecutive months.

The national index has improved in four of the last five quarters, dropping only in the fourth quarter of 2012 in that stretch. The 7.1 percent quarter-over-quarter matched the increase in the second quarter of 2012 as the largest quarterly improvement since the national index began in 1987.

The national index was up 10.1 percent year-over-year, matching the gain in the first quarter as the largest annual jump since the first quarter of 2006.

The 10-city index rose to 173.37, up 3.73 from May, to the highest it has been since August 2008 when it was 173.35. The 20-city index rose 3.41 to 159.54, its highest since September 2008 when it was 161.64

In the same month, according to the National Association of Realtors, the median price of an existing single-family home rose 5.4 percent, up 13.3 percent from a year earlier.

According to the NAR, homes prices were held back by sales of distressed homes. Foreclosures, eight percent of transactions, the NAR said, sold for an average discount of 16 percent below market value in June, while short sales, seven percent of transactions, were discounted 13 percent.

Home values improved as well despite higher mortgage rates, which could have both a positive and negative impact: rising rates themselves might bring prices down as buyers look for affordable monthly payments, but also increase demand as buyers try to lock in rates before further increases. The increased demand against weak inventories would send prices up.

While good news for home sellers, the continued sharp increases—the indices have shown double-digit year-year increases for four months in a row —are likely to revive concerns of a growing housing bubble as personal income growth continues to stagnate.

Still the increase in home values, according to economic theory, should mean improved consumer spending. The “wealth effect” theory holds that consumers spend based on increase in net worth, not income. Home values accounted for about 25 percent of the increase in net worth in the first quarter, according to the latest data from the Federal Reserve.

The Case-Shiller Indices have gone up for seven straight months and 13 times in the last 15; each index dipped last October and November.

The monthly increases were led by Atlanta, where prices rose 3.4 percent from May to June. The price index for Atlanta is at its highest level since July 2010. The price index rose 3.3 percent in June in Chicago, bringing prices there to their highest level since October 2010. Prices rose 2.8 percent each in San Diego and Las Vegas, while prices were up 2.7 percent in San Francisco.

Prices have increase for 16 straight months in San Francisco to the highest level since February 2008. Prices in Las Vegas have increased for 15 straight months and are at their highest level since February 2009.

Prices were up 1.8 percent in Phoenix, the 21st straight month-over-month gain, and 2.3 percent in Los Angeles, the 16th consecutive monthly improvement.

Year-over-year the price gains were led by Las Vegas, where prices were up 24.9 percent since June 2012 and San Francisco, where prices rose 24.5 percent in the last 12 months. Those year-over-year price increases were followed by Los Angeles, up 19.9 percent, Phoenix, up 19.8 percent, and Atlanta, up 19.0 percent.

Despite the June improvement, the 10-city index is down 234 percent from its June 2006 high of 226.29, and the 20-city index is off 22.7 percent from its July 2006 peak of 206.52.

Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 am eastern time.

 

Home prices in the second quarter continued to see strong upward momentum

Home prices in the second quarter continued to see strong upward momentum, according to the Federal Housing Finance Agency’s ( FHFA) House Price Index ( HPI ).

The purchase-only, seasonally adjusted HPI—calculated using home sales price information from mortgages sold to or guaranteed by the GSEs—rose 2.1 percent quarter-over-

quarter, marking the eight consecutive quarterly increase. In June alone, the index was up 0.7 percent month-over-month.

“The housing market experienced one of its strongest quarters since the boom in the middle of the last decade,” said FHFA principal economist Andrew Leventis.

Compared with the same quarter last year, home prices increased 7.2 percent, while prices of other goods and services inched up only 1.0 percent. According to FHFA , the inflation-adjusted price of homes rose approximately 6.2 percent over the latest year.

Of the nine census divisions, the Pacific region posted the strongest increase in the most recent quarter, seeing a 4.6 percent quarterly gain. Prices were weakest in the East South Central division, increasing only 0.9 percent quarter-over-quarter.

FHFA’s expanded-data HPI—a metric introduced in August 2011 that adds transaction information from county recorder offices and the Federal Housing Administration—rose 2.4 percent over the latest quarter. Over the last four quarters, that index has risen 7.5 percent.

Administration: As Market Shows Stability, It’s Time to Reform Housing

08/09/2013BY: KRISTA FRANKS BROCK

Newly initiated foreclosures are on the decline, reaching their lowest numbers since December 2005 in June, according to the latest Housing Scorecard from the Obama administration. Meanwhile, the administration continues to add to the tally of homeowners helped through itsMaking Home Affordable Program, bringing the total to more than 1.7 million as of June.

Foreclosure starts and completions declined in June. Foreclosure starts fell from 72,700 in May to 57,300 in June, while foreclosure completions fell from 38,900 to 35,500.

Despite the decline in foreclosures, the delinquency rate among both prime and subprime mortgages increased in June, according to the Housing Scorecard.

The delinquency rate for prime mortgages is 3.5 percent, and the subprime delinquency rate is 30.9 percent. The previous month’s prime and subprime delinquency rates were 3.1 and 28.7 percent, respectively.

More than 1.2 million homeowners have benefited from the Home Affordable Modification Program since the program was initiated, and another 1.9 million homeowners have gone through loss mitigation or early delinquency interventions with the Federal Housing Administration (FHA).

Homeowners receiving HAMP modifications save about $547 per month on their mortgages as of June.

Despite the administration’s original goal of aiding 4 million homeowners directly through HAMP, the administration congratulates itself for “creating standards that have helped millions more” homeowners beyond those 1.2 million who have received HAMP modifications, Tim Massad, assistant secretary of the Treasury said in the latest Housing Scorecard.

“Clearly without HAMP, national foreclosure rates would have been much higher and many borrowers would not have received the assistance they needed,” Massad said.

As of the end of May, HOPE Now, an alliance of mortgage professionals, reported the completion of 3.7 million mortgage modifications, which were influenced by Making Home Affordable, according to the administration.

The pace of new trial HAMP modifications slowed somewhat in June. About 15,700 homeowners received trial modifications in June, down from 18,300 in May.

On the other hand, permanent modifications increased in June to 17,300, up from 15,600 in May.

The administration’s other headline-making program —the Home Affordable Refinance Program slowed somewhat in June. About 84,600 homeowners received HARPrefinances in June, down from 106,900 in May.

Looking forward, the administration says it will focus on forming a new housing finance system.

“As we regain stability in our housing markets, it is time to begin the process of reforming the housing finance system to reduce the federal government footprint and ensure that private capital takes a sustainable central role,” said Kurt Usowski, deputy assistant secretary for economic affairs at the Department of Housing and Urban Development.

Consumers Still Confident Prices Will Rise Despite Hike in Rates

08/07/2013BY: TORY BARRINGER

American consumers grew increasingly positive in July, according to results in Fannie Mae’s National Housing Survey.

Undeterred by rising mortgage rates, the majority of consumers polled expressed belief that the market will continue to improve, with 53 percent saying they expect home prices will go up in the next year—though that figure does represent a decline of 4 percentage points from June’s high. The percentage of those expecting prices to drop fell to a survey low of 6 percent.

The average home price change expectation over the next 12 months increased slightly to 3.9 percent, matching the survey high first achieved in May.

At the same time, the steady rise in mortgage interest rates over the past several months didn’t go unnoticed. The share of respondents who believe interest rates will continue to rise over the next year increased another 5 percentage points over June to a new survey high of 62 percent.

Perhaps motivated by ongoing gains in interest rates and home prices, 74 percent of respondents said now is a good time to buy a home (up from 72 percent in June), while the share of those saying it’s a good time to sell increased to 40 percent, matching May’s survey high.

“Consumers have taken the interest rate rise in stride. Expectations for continued improvement in housing persist, and sentiment toward the current buying and selling environment is back on track from its dip last month,” said Doug Duncan, SVP and chief economist at Fannie Mae. “These results are consistent with our own analysis of previous housing cycles, which finds that interest rates and home prices are not strongly correlated.”

Still, consumers find themselves stymied by a tight credit environment. Forty-five percent of those surveyed said they believe it would be easy to get a home mortgage today, down 2 percentage points from June.

Americans offered lukewarm sentiments on economic topics. The share of those who said the economy is on the right track increased to 40 percent in July, while the share of those saying it’s on the wrong track fell a single point to 54 percent. At the same time, however, the share of people who expect their personal financial situation to improve over the next year fell 3 percentage points—resting at 43 percent.

As far as personal finances go, 26 percent of respondents said their household income is significantly higher than it was last year, unchanged from June’s record high. Meanwhile, 30 percent said their household expenses are significantly higher than they were a year ago, a decline of 6 percentage points.