Archive for August, 2010

Good news series 3 of 3

24 August, 2010 | Shauna Morris | No Comment

Courtesy of RISMEDIA, August 23, 2010—

The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury has released the August edition of the Obama Administration’s Housing Scorecard (www.hud.gov/scorecard), a comprehensive report on the nation’s housing market. In July, housing prices remained level after 30 straight months of decline, while some price predictions have improved. In addition, historic low interest rates continued to promote home affordability and refinancing options for the nation’s families. However, the market remains fragile with foreclosure starts showing a slight increase and serious delinquencies continuing to work through the pipeline.

“While there has been some stabilization in the housing market, it remains clear that we have more work ahead,” said HUD Assistant Secretary Raphael Bostic. “Through the Obama Administration’s efforts over the past 16 months, we have seen increased price stabilization and improved home affordability for prospective, qualified homebuyers. At the same time, we know that we must continue to provide support to underwater borrowers, unemployed homeowners, and to the nation’s hardest hit neighborhoods.”

The August Housing Scorecard features key data on the health of the housing market including:

• Stabilizing housing prices drive improving expectations in some regions. After 30 straight months of decline, home prices have leveled off in the past year; futures indices have shifted upward since January 2009 as signs of recovery continue, although overall housing outlook measures remain mixed.

• More than twice as many modification arrangements begun compared to foreclosure completions. More than 3.15 million modification arrangements were done from April 2009 through the end of June 2010. This includes more than 1.3 million trial Home Affordable Modification Program (HAMP) modifications started, over 472,000 Federal Housing Administration (FHA) loss mitigation and early delinquency interventions, and 1.4 million proprietary modifications under HOPE Now. The number of agreements offered continues to more than double foreclosure completions for the same period (1.24 million).

• More than 4.2 million families have benefited from housing counseling since April 2009. Working with a HUD-approved housing counselor can help borrowers manage debts apart from a mortgage – car payments, credit cards and personal loans, for example – and help them avoid falling into default.

• More than 37,000 homeowners received a HAMP permanent modification in July. While the pace of program entry has slowed due to upfront documentation requirements in place since June 1, this policy change streamlines the process to help more eligible homeowners convert to a permanent modification. Homeowners in permanent modifications are experiencing a median payment reduction of 36 percent, or more than $500 per month.

“HAMP, which represents just one, targeted piece of the Administration’s larger efforts on housing, has so far offered more than a million and half responsible homeowners the chance to modify their mortgages. This program has helped to stabilize a housing market that remains fragile and has redefined the modification standard for the industry – both of which are delivering real benefits to struggling homeowners in communities across the country,” said Treasury Assistant Secretary for Financial Stability Herb Allison. “Currently servicers are working through their pending modifications, and while Making Home Affordable works for a number of homeowners, many others are offered other means of avoiding foreclosure. As careful stewards of the scarce resources of the American taxpayer, we see this as prudent progress – and we will keep working to help the Americans hardest hit by this crisis.”

Data in the scorecard show that the recovery in the housing market continues to remain fragile, with some measures suggesting recovery will take place over time. For example, foreclosure starts went up slightly in July from the previous month, but remain well below July 2009 levels.

Foreclosure completions also inched upward as the volume of serious delinquencies continues to work through the pipeline.

Each month, the Housing Scorecard incorporates key housing market indicators and highlights the impact of the Administration’s unprecedented housing recovery efforts, including assistance to homeowners through the FHA and HAMP.

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Good news series 2 of 3

24 August, 2010 | Shauna Morris | No Comment

Courtesy of RISMEDIA, August 19, 2010—

(MCT)—As director of the Joint Center for Housing Studies at Harvard, Nicolas Retsinas has had a front-row seat for the real estate market’s dramatic boom and bust. After 12 years at the center, Retsinas left the director’s job to teach housing finance at Harvard Business School. He spoke recently with New Jersey’s The Record about why buyers got mortgages they couldn’t afford, and why real estate matters so much.

Were you surprised by the magnitude of the housing bust and how long it has lasted?
Nicolas Retsinas: Yes, by the severity of the housing bust but even more so, how credit just seized up.

When do you see any kind of loosening-up of the credit markets?
NR: I would suspect we’re likely to see the same dominance of the government at least through the balance of this year. One of the big issues facing public policymakers is what to do with Fannie Mae and Freddie Mac. If we want to attract private capital, not only from this country but also global capital, some part of that credit risk has to be borne by the government.

One of the biggest factors in the bust was that credit standards got too easy. Buyers who weren’t qualified got mortgages. Do you have any ideas about why this happened?
NR: In part, people were granted mortgages not on their ability to repay the mortgage, because it was clear that wasn’t going to happen. But there was an expectation that even if they couldn’t pay, the future increase in the value of the property would end up being the collateral for that loan. For a long time, that was a formula that worked. But we reached a point where even with these exotic—what turned out to be toxic—mortgage terms, they just weren’t affordable.

What has been the biggest human cost of the housing bust?
NR: The biggest human cost is the millions of people who have lost their homes. One can look back coldly and say, “Well, maybe a lot of them shouldn’t have bought a home in the first place.” But a lot of people lost their homes the old-fashioned way: they lost their jobs.

Who has benefited from the bust?
NR: Beside the investors who played with different sorts of financial products, I think the key winners probably have been first-time home buyers, who have maybe longed to buy a house but could not afford to. Now we’ve essentially transferred wealth from existing homeowners to new homeowners.

Some observers have been disappointed by the number of homeowners helped by the federal loan modification program.
NR: In defense of the government, when they designed this program 18 months ago, they based it on a premise that the principal problem in the housing market was egregious mortgage terms. And if those mortgage terms could be reset and recalibrated to more typical mortgage terms and could be afforded, through subsidy or whatever means, by the borrower, that would stem the hemorrhage of the defaulted loans and foreclosures.

As we moved into 2009, the problem was less about the subprime loans and more the traditional reason why people have problems making ends meet—which is that they lost their jobs. If you modify the loan so that your monthly payments are only 31% of your income, and your income is zero, that’s probably not going to work. The problem outran the solution.

Will home-price appreciation return anytime soon?
NR: The next couple of months will be an interesting test because we’ve had the withdrawal of the home buyer tax credit. I think we’re likely to have a sort of trawl-along-the-bottom type of recovery, a little bit lumpy for a year or so.

Congress is looking at new financial regulations. What effect are these likely to have on mortgages?
NR: I think it’ll make it more difficult to go back to the Wild, Wild West. There will be a new consumer financial agency, and I think that will be more likely to look at some of these (mortgage) products. I think that’s going to be critical. RE

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Good news series 1 of 3

24 August, 2010 | Shauna Morris | No Comment

Courtesy of RISMEDIA, August 13, 2010—

The real estate trend in firming home prices solidified in the second quarter with more metropolitan areas showing increases from a year ago, aided by a surge in home sales driven by the home buyer tax credit, according to the latest survey by the National Association of Realtors. In the second quarter, 100 out of 155 metropolitan statistical areas (MSAs) had higher median existing single-family home prices in comparison with the second quarter of 2009, including 14 with double-digit increases; two were unchanged and 53 metros showed price declines. In the first quarter of this year, 91 areas had higher prices, while only 26 MSAs experienced annual price gains in the second quarter of 2009.

The national median existing single-family price was $176,900 in the second quarter, up 1.5% from $174,200 in the same period of 2009. The median is where half sold for more and half sold for less. Distressed homes accounted for 32% of second quarter sales, down from 36% a year ago.

Lawrence Yun, NAR chief economist, said the correction in home prices appears to have ended in 2009. “All year we’ve been seeing relatively flat national home prices, which appear to be supported by market fundamentals,” he said. “Prices in some areas remain below replacement construction costs, so even with an elevated supply of existing homes on the market, we don’t expect any consequential movement in home prices for the foreseeable future. Very low inventory of newly built homes will also help to support home values.”

Yun urged caution on interpreting price data. “The median price is influenced by the mix of homes that were sold and do not reflect pure appreciation or depreciation,” he said. “The recorded home prices in many markets were significantly depressed last year because of a large percentage of distressed homes sold at discount. Now as more normal, non-distressed home sales are occurring, the median price in many areas is showing higher values.”

Total state existing-home sales, including single-family and condo, rose 9.1% to a seasonally adjusted annual rate of 5.61 million in the second quarter from 5.14 million in the first quarter, and were 17.3% above the 4.78 million-unit pace in the second quarter of 2009.

Sales increased from the first quarter in 44 states and the District of Columbia; 47 states and D.C. had increases over year-ago sales levels.

NAR President Vicki Cox Golder, owner of a Tucson, Ariz.-based firm, said record low mortgage interest rates will help cushion a summer slowdown. “As expected, sales are slowing down now that the home buyer tax credit has expired, but record-low mortgage interest rates, along with stable and affordable home prices in most areas, provide opportunities for buyers who weren’t able to take advantage of the credit,” she said.

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was a record low 4.91% in the second quarter, down from 5.00% in the first quarter; it was 5.03% in the second quarter of 2009.

“Job creation will give home buyers more confidence, but the market over the next few months is likely to be below what we would expect for the size of our growing population,” Golder said. “With improving bank balance sheets, credit restrictions should gradually improve—Realtors are a great resource for consumer information on loan availability as well as neighborhood market conditions, which vary widely.”

In the condo sector, metro area condominium and cooperative prices—covering changes in 55 metro areas—showed the national median existing-condo price was relatively flat at $175,700 in the second quarter, down 0.5% from the second quarter of 2009. Twenty-six metros showed increases in the median condo price from a year ago; the first quarter of 2010 showed 24 metros up, while only four metros saw annual price gains in the second quarter of 2009.

Regionally, the median existing single-family home price in the Northeast declined 3.2% to $238,000 in the second quarter from a year earlier. Existing-home sales in the Northeast jumped 14.9% in the second quarter to a level of 980,000 and are 23.6% above the second quarter of 2009.

In the Midwest, the median existing single-family home price increased 1.4% to $148,500 in the second quarter from the second quarter of last year. Existing-home sales in the Midwest rose 14.5% in the second quarter to a pace of 1.30 million and are 20.9% above the same period in 2009.

In the South, the median existing single-family home price slipped 2.0% to $155,500 in the second quarter from the second quarter of 2009. Existing-home sales in the South increased 10.9% in the second quarter to an annual rate of 2.10 million and are 18.8% above a year ago.

The median existing single-family home price in the West rose 2.6% to $219,700 in the second quarter from a year ago. Existing-home sales in the West fell 2.6% in the second quarter to an annual rate of 1.23 million but are 7.6% higher than the second quarter of 2009.

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Rates are at all-times lows, but are buyers taking advantage of cheap money?

3 August, 2010 | Shauna Morris | No Comment

Courtesy of RISMEDIA, August 3, 2010—(MCT):

The 4.5% fixed-rate mortgage is here, although more than 14 months late. That magic number, or a close approximation, was reached recently, when Freddie Mac reported a 30-year rate of 4.54%. The possibility first arose in early 2009, when the government began mass-purchasing mortgages from Fannie Mae and Freddie Mac to prop up housing. Just about everyone predicted the rates would hit what builders and real estate agents call a “sweet spot” in a few months, and the housing recovery would begin, especially if consumer confidence had recovered to prerecession levels as well.

“What gets people buying again?” asked mortgage broker Peter Buchsbaum of Arlington Capital Mortgage in Horsham, Pa. “The answer is confidence—confidence in the value not falling and confidence they’ll still have a job.”

Even if behind schedule, the 4.5% rate has arrived, but in an environment that buyers perceive as anything but inviting.

Consumer confidence fell again in July, and why? Jobs and sagging real estate values.

“People will start buying houses again when they feel securely employed, house prices are rising, and they can make low down payments,” Bankrate.com columnist Holden Lewis said. “I don’t see any of those conditions coming anytime soon, at least in most parts of the country,” Lewis said. “Job security is the most important factor.”

Suburban homebuilder Marshal Granor said that “when we went under 6 percent, I was amazed and excited, but 4.5 percent artificially increases affordability. If rates start to climb, it will severely dampen already-spotty sales.”

Moody’s Economy.com chief economist Mark Zandi concurs. “The key to more homebuying is more jobs,” he said. “Once job growth kicks in earnestly, household growth will ramp up, and so will demand.”

Zandi added that despite these “extraordinarily low rates,” many prospective buyers have little savings for a down payment and tattered credit scores.” The securely employed appear to be nibbling at the bait, however.

“There’s a new group of buyers just entering the market because of the low rates,” said Art Herling, regional vice president of Long & Foster Real Estate, although the weather is keeping them “from totally getting into the buying mood.”

Buchsbaum also reports “a greater influx of buyers than past summers.”

Philadelphia Realtor Fred Glick compared the economy to a driver with his “feet on both the accelerator and the brake at the same time.”

“Until the jobs are produced, the banks start lending, and the underwriting guidelines start to make sense, we’ll be caught in this conundrum,” Glick said.

What about home prices?

Although the Case-Shiller Home Price Index rose again in May, economists believe that prices nationally will drop 6-8% more through the end of the year.

May’s increase, economists say, is attributable to the federal tax credit that expired April 30, and to seasonal buying patterns that typically boost prices.

The indexes are three-month moving averages, “so May’s readings reflect transactions in 20 markets that closed in March, April and May,” IHS Global Insight economist Patrick Newport said. With the credit gone, “we expect them to rise for two months, then start to decline,” with recovery in 2011.

That means a lot of buyers will remain on the sidelines until prices level off completely. The lowest fixed interest rates in 50 years won’t be enough to draw them in.

“Many people are bottom-fishing,” Herling said.

On the other hand, “People are starting to view houses as places to live and build equity over time, not financial assets where they can make a killing,” said economist Joel L. Naroff of Holland, Pa. If that is the case, demand for housing would rise much more moderately. “Add to that the lack of equity and the difficulty in qualifying for a mortgage, and the outlook for sales is not great,” Naroff said.

Interest rates are rock-bottom because the economy is rock-bottom. As more investors shift their money out of a volatile stock market and to the safety of Treasurys, rates will drop further, at least in theory.

Assuming “the debt crisis abates and the economy doesn’t double-dip, both of which seem more than likely,” Zandi expects rates to close in on 5% by year’s end and over 6% next year.

“I wouldn’t bet my mortgage payment on rates remaining this low for a long time,” Lewis said. “If I were refinancing, I would lock now instead of floating in hopes of rates falling further. I think there’s a greater possibility of rates rising than falling.”

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Posted in Financial/banking information, Housing Market News 2010, Interest Rates, Northern Nevada | No Comments »