Jun
5
Demand for loans to buy U.S. homes fell last week for the fourth straight week, holding 13-year lows, as the housing market adjusted to a selling environment without the federal tax credits that had stoked April sales, the Mortgage Bankers Association said on Wednesday.
Home buying ran out of steam after eligible borrowers sprinted to meet the April 30 deadline for up to $8,000 in tax credits. The incentive pulled house sales forward and triggered the largest monthly construction spending gain in nearly a decade.
Total loan applications eked out a 0.9 percent rise in the week ended May 28, seasonally adjusted, as a 2.4 percent in refinancing demand offset a decline of 4.1 percent in purchase loan requests to the lowest level since April 1997.
“Purchase applications are now almost 40 percent below their level four weeks ago, while the refinance share, at 74 percent, is at its highest level since December,” Michael Fratantoni, MBA’s vice president of research and economics, said in a statement.
Average 30-year mortgage rates rose 0.03 percentage point to 4.83 percent last week, but the low rate drove more homeowners to apply for refinancing.
The rate rose as high as 5.31 percent in early April before euro zone market troubles triggered a flight to safety in U.S. Treasurys, driving down their yields, which are used as a peg for mortgage rates.
A so-called “hangover” from more than a year of the tax credits had been widely expected, and most economists expect U.S. housing can stand on its own footing as the year progresses.
“This volatility in activity is the price paid for higher average levels of sales across the year as a whole than would have occurred without the tax credit,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote on Tuesday.
Buying a home, for qualified purchasers, remains affordable with mortgage rates historically low and prices down about 30 percent on average from their peaks in 2006.
But at least in the weeks since the tax credits expired, homeowners are concentrating on shaving costs by refinancing.
The MBA’s refinance applications index has risen for four straight weeks to its highest level since October 2009.
Still, refinancing is also experiencing “burnout,” with fewer people acting to refinance each time mortgage rates fall near current levels, Fratantoni said in an interview.
The refi index, at roughly 3,300 last week, is well below the most recent peak of about 7,400 in early January 2009 when 30-year mortgage rates were roughly similar. In 2003, when the loan rate was just under 5 percent, the refinance index shot up to about triple last week’s level.
“A lot of people would benefit from getting a lower rate but they don’t have equity, they don’t have income, they don’t have credit,” Fratantoni said. “You’re getting a response, but it’s a fairly muted response.”
May
27
The U.S. economy grew at a slower pace than previously estimated in the first quarter as businesses investment slackened, while hard-hit state and local governments curbed spending at the steepest rate since 1981, a government report showed on Thursday.
Gross domestic product expanded at a 3.0 percent annual rate, the Commerce Department said, instead of the 3.2 percent pace it reported last month.
Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 3.4 percent rate in the January-March period. The economy expanded at a 5.6 percent pace in the fourth quarter and has now grown for three straight quarters.
Economists are monitoring the U.S. recovery closely to see how well the economy can endure the debt troubles that threaten to slow Europe’s growth. The above-trend first-quarter U.S. growth suggests a solid base of support.
Output in the first three months of the year was revised down as business spending rose at only a 3.1 percent rate instead of the 4.1 percent initially reported last month. Spending grew at a 5.3 percent pace in the fourth quarter. Business spending on software and equipment increased at a 12.7 percent rather than the 13.4 percent rate reported last month.
State and local government spending contracted at a 3.9 percent rate, the largest decline since the second quarter of 1981.
However, consumer spending, which is key to the economy’s recovery, held up well. Consumer spending increased at a 3.5 percent rate, rather than the 3.6 percent rate reported last month. Although it was revised down slightly, it was still more than double the 1.6 percent pace in the fourth quarter and the largest advance since the first quarter of 2007.
Consumer spending, which normally accounts for 70 percent of U.S. economic activity, added 2.42 percentage points to GDP last quarter, the largest contribution since the first quarter of 2007.
Real final sales to domestic purchasers, considered a better measure of domestic demand, rose at 2.0 percent rate. Sales were previously estimated to have increased at a 2.2 percent following a 1.4 percent rise in the fourth quarter.
Recovery from the longest and deepest recession since the Great Depression had so far been largely driven by the manufacturing sector as businesses replenished their warehouses to meet strengthening demand. Consumers, however, are now participating as the labor market begins to firm.
The GDP report also showed after tax corporate profits rose 2.1 percent in the first quarter after increasing 6.5 percent in the final three months of 2009. In the first quarter, business inventories rose $33.9 billion rather than $31.1 billion reported last month. It was first increase since the first quarter of 2008.
May
26
WASHINGTON, DC–(Marketwire – May 26, 2010) – Vacancy rates continue to rise in most commercial sectors and are not expected to level out in most markets until the end of this year or early 2011, according to the National Association of Realtors®.
Lawrence Yun, NAR chief economist, said there is one bright spot in commercial real estate. “The multifamily sector can expect increased demand as the economy creates jobs and new households are formed, likely in the second half of this year,” he said. “However, the office, warehouse and retail sectors continue to experience the delayed effects of the recession. These sectors should see gradual improvement after jobs pick up and create additional demand for space, meaning a broader improvement in commercial real estate is likely in 2011.”
The Society of Industrial and Office Realtors®, in its SIOR Commercial Real Estate Index, an attitudinal survey of nearly 700 local market experts,(1) confirms that significant fallout from the recession remains, but to a lesser extent.
The SIOR index, measuring 10 variables, increased 2.7 percentage points to 38.2 in the first quarter, compared with a level of 100 that represents a balanced marketplace. This is the second gain following nearly three years of declines; the last time the market was in equilibrium was in the third quarter of 2007.
Development activity remains at a standstill with nine out of 10 respondents saying that it is virtually nonexistent in their markets.
Looking at the overall market, commercial vacancy rates appear to be approaching a plateau, according to NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK.(2) The NAR forecast for four major commercial sectors analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data were provided by CBRE Econometric Advisors.Office Market
With an elevated level of sublease space available, vacancy rates in the office sector are projected to increase from 16.9 percent in the first quarter of this year to 17.6 percent in the first quarter of 2011, but should ease later next year.
Annual office rent is likely to fall 2.3 percent this year and decline another 2.1 percent in 2011. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, is forecast to be a negative 24.6 million square feet this year and then a positive 25.5 million in 2011.
Industrial Market
Leasing activity in the industrial sector is below historical levels with higher vacancies, more tenant concessions from landlords and a steeper decline in rental rates. In addition, obsolete structures remain on the market. Industrial vacancy rates are expected to rise from 14.3 percent in the first quarter of 2010 to 14.8 percent in the first quarter of 2011, then decline modestly as the year progresses.
Annual industrial rent will probably drop 6.3 percent this year, and decline another 1.5 percent in 2011. Net absorption of industrial space in 58 markets tracked is seen at a negative 90.0 million square feet this year and a positive 135.6 million in 2011.
Retail Market
Retail vacancy rates should rise modestly from 12.6 percent in the first quarter of this year to 12.8 percent in the first quarter of 2011, and should hold at that level for most of next year.
Average retail rent is projected to decline 1.5 percent in 2010, then edge up by 0.4 percent next year. Net absorption of retail space in 53 tracked markets is likely to be a negative 3.7 million square feet this year and then a positive 8.9 million in 2011.
Multifamily Market
The apartment rental market — multifamily housing — is expected to benefit from an improving economy and job market. Multifamily vacancy rates are forecast to decline from 7.3 percent in the first quarter of this year to 6.3 percent in the first quarter of 2011.
With recent additions to supply, average rent is likely to slip 1.5 percent this year, and then rise 1.2 percent in 2011. Multifamily net absorption should be 145,700 units in 59 tracked metro areas this year, and another 214,500 in 2011.
The COMMERCIAL REAL ESTATE OUTLOOK is published by the NAR Research Division for the commercial community. NAR’s Commercial Division, formed in 1990, provides targeted products and services to meet the needs of the commercial market and constituency within NAR.The NAR commercial components include commercial members; commercial committees, subcommittees and forums; commercial real estate boards and structures; and the NAR commercial affiliate organizations — CCIM Institute, Institute of Real Estate Management, Realtors® Land Institute, Society of Industrial and Office Realtors®, and Counselors of Real Estate.
Approximately 79,000 NAR and institute affiliate members offer commercial brokerage services.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
(1) The SIOR Commercial Real Estate Index, conducted by SIOR and analyzed by NAR Research, is a diffusion index based on market conditions as viewed by local SIOR experts. For more information contact Richard Hollander, SIOR, at 202/449-8200.
(2) Publication of additional analyses, including metropolitan data, will be posted under Economists’ Commentary in the Research area of Realtor.org in coming weeks.The next commercial real estate forecast and quarterly market report will be released on August 26.
May
20
Mortgage delinquencies hit 10%
Filed Under Housing News | Leave a Comment
NEW YORK (CNNMoney.com) — A dubious distinction was reached during the first three months of 2010: More than 10% of all mortgage borrowers are now behind on their payments.
The delinquency rate hit a record of 10.06% in the first quarter, according to the Mortgage Bankers Association. The seasonally adjusted rate accounts for all mortgages on properties that have up to four units and that are at least one payment late.
The rate has been inching steadily toward this record, having ticked up almost a full point since a year go.
The report contained a sliver of good news, however. The non-seasonally adjusted delinquency rate dropped almost one point to 9.38% between the fourth quarter 2009 and first quarter 2010.
So while the seasonally adjusted number saw growth during that period, the non-seasonally adjusted number followed the traditional pattern. Rates usually peak in the fourth quarter, as holiday spending and heating bills kick in causing people to put off paying their loan. But then, when they get caught up in the first quarter, delinquencies fall again.
“The question is whether the drop represents anything more than a normal seasonal decline or a more fundamental improvement,” said Jay Brinkmann, MBA’s chief economist. “The normal seasonal drop is coming right at the point where we believe delinquencies could potentially be declining and the problem for the statistical models is determining which is which.”
Housing market diagnosis: Bipolar
The foreclosure inventory rate, which represents the percentage of mortgaged homes repossessed by lenders, was fairly flat quarter-over-quarter, inching up to 4.63% from 4.58%. But it jumped a lot from 12 months earlier, when the rate stood at 3.85%.
Nearly all varieties of loans suffered increased delinquencies compared with 12 months earlier. Prime fixed-rate loans hit 6.17%; prime adjustable-rate mortgages (ARMs) tipped 13.52%. Subprime fixed-rates jumped to 25.69%; and subprime ARMs are a whopping 29.09%.
The one bright spot was that delinquencies for FHA loans, the mortgages guaranteed by the Federal Housing Authority, dropped slightly to 13.15%.
The improvement is likely due to tighter FHA underwriting standards, which it adjusted after loans issued in 2007 and 2008 started souring. That should be a relief for taxpayers, who will be on the hook for any losses the FHA suffers.
Most of the overall rate increases are attributable to the seriously delinquent loans, Brinkmann said. Those loans, which are 90 days or more late, are going all the way through to foreclosure, but are not being foreclosed, keeping people in the system longer.
In the pre-housing-bust world, many borrowers would have already lost their homes and their delinquencies would no longer be counted in the survey.
Shift in problem-loan types
Lenders have slowed repossessions for various reasons: They may not have enough staff yet to handle the volume; the foreclosure prevention initiatives, such as the Home Affordable Modification Program, is postponing many foreclosures; and the banks themselves are trying to prevent defaults by approving more short sales.
There has been a fundamental change in the nature of the loans causing the most default problems, according to Brinkmann. And, he added, unemployment is the culprit. “Delinquencies are much more driven by the recession than by any one loan type now,” he said.
Subprime ARMs accounted for nearly 30% of all delinquencies a year ago, but just under 15% now. Meanwhile, prime fixed-rate loans delinquencies have grown so much that they represent the single biggest bucket of delinquent mortgages: 37% up from 29% a year ago.
Some of the prime loan defaults stem from an increase in people deliberately “walking away” from mortgages. These are homeowners who can pay their loans but choose not to because their homes have dropped so much in value.
According to a recent report, as much as 31% of all defaults in March were strategic.
Brinkmann opined that many of these “strategic defaulters” may be underestimating the impact of walking away. It may take them much longer to repair their credit histories than they realize as lenders assess more than their credit ratings to determine whether to finance future home purchases.
Underwriting involves more than just checking credit scores, and if a lender sees a strategic default on their records, homebuyers may not qualify for loans.
“They may be able to repair their credit scores,” he said, “but their ability to buy a home in the future may be negatively impacted for years to come.”
May
6
Memphis Foreclosure and Delinquency Rates Higher in March
Filed Under Housing News | Leave a Comment
Foreclosure rates among outstanding mortgage loans in Memphis increased in March to 2.19 percent, up from 1.57 percent in March 2009, according to CoreLogic, a company that provides real estate data.
Still, Memphis was below the national foreclosure rate of 3.23 percent for March.
The rate of Memphis homeowners late in paying their mortgages is also up. In March, 10.76 percent of mortgage loans were at least 90 days delinquent compared to 8.02 percent in March 2009, according to CoreLogic.
May
4
Signed contracts to buy homes surge 5.3 percent in March as buyers seized on gov’t incentives.
WASHINGTON (AP) — The number of buyers who signed contracts to purchase homes surged more than expected in March, another sign that government incentives are propelling the housing market this spring.
The National Association of Realtors said Tuesday its seasonally adjusted index of sales agreements for previously occupied homes rose 5.3 percent from a month earlier to a reading of 102.9.
The federal government has provided a big boost to home sales this spring by offering first-time buyers a tax credit of 10 percent of the purchase price, up to $8,000. There is also a credit of 10 percent, up to a maximum of $6,500, for homeowners who buy and move.
These incentives have stimulated home sales, but the deadline to get a signed sales contract was April 30. Many analysts project sales will drop sharply in the second half of the year.
“Strength in the spring was all but certain,” wrote Dan Greenhaus, chief economic strategist at Miller Tabak. “A slump following the credit’s expiration is likely although the exact timing is difficult to predict.”
Some analysts expect prices to slump as well, especially if mortgage rates rise and more foreclosed homes hit the market.
Nevertheless, economists and real estate agents alike hope the economy will be strong enough to bring down the unemployment rate from the current 9.7 percent. If that happens, it “could be enough to stabilize the housing market,” wrote Jennifer Lee, an economist with BMO Capital Markets.
March’s reading for pending home sales was the highest level since October and a 21 percent increase from the same month a year earlier. February’s reading was revised upward slightly to 97.7. Economists surveyed by Thomson Reuters had expected the index would rise 4 percent to 101.5.
The index provides an early measurement of sales activity because there is usually a one- to two- month lag between a sales contract and a completed deal.
Pending sales surged by 13 percent in the South, 2 percent in the West and 1 percent in the Midwest. They fell 3.3 percent in the Northeast.
R.J. Wroten, 34, who works at a concrete company east of San Francisco, made offers on around 30 homes over the past year. He finally signed a contract last Friday, the last possible day for buyers to qualify for the tax credit.
For Wroten, diligence paid off. He was up until midnight last Tuesday with his agent, Dalisa Porche of Coldwell Banker in Berkeley, Calif., getting together offers on five homes.
One of those — an offer to pay $160,000 for a foreclosed property in Oakland — was accepted. He’s taking out an extra $20,000 in loans to pay for fix-up work.
“It was very gratifying,” Wroten said. With the deal now in the works, he said, “I don’t have to take up my weekends to go look at places.”
Apr
8
NEW YORK, April 8 (Reuters) – Rising bond yields sent U.S. 30-year mortgage rates to the highest level in eight months on the brink of the important spring sales season, data from home funding company Freddie Mac showed on Thursday.
Higher borrowing costs, combined with the end of some massive government interventions to stabilize housing, should curb buying. But pent-up demand after a three-year housing crash is already driving buyer traffic higher, housing experts said.
The 30-year loan rate average jumped to 5.21 percent in the week ended April 8 from 5.08 percent in the prior week and from 4.87 percent a year earlier.
The last time the long-term fixed borrowing rate was higher was in the week ended Aug. 13, 2009, when it averaged 5.29 percent, Freddie Mac said.
Treasury yields, which have been rising on signs of economic improvement, are used as a peg for setting mortgage rates.
Mortgage rates were also widely seen trending higher after the Federal Reserve pulled the plug March 31 on its 15-month program to buy more than $1.4 trillion in mortgage-tied debt aimed at keeping home borrowing costs low.
Fixed home loan rates should stay under 6 percent this year, most economists agree. The last time rates topped that psychological level was around October 2008.
“Higher mortgage rates will not impact the overall economic recovery,” said Craig Thomas, senior economist at PNC Financial Services Group in Pittsburgh, which forecasts 5.7 percent home loan rates by year-end.
“But we don’t expect significant house price growth in the months ahead as the rates take a little bit of the momentum out of housing,” he said, adding that was “combined with the fact that we’ve essentially borrowed home sales” pushed forward by the first-time buyer tax credit.
The first wave of that tax credit, which was ultimately extended last November, robbed some of this year’s sales.
Buyers who have yet to take advantage of the $8,000 first-time buyer credit or $6,500 repeat-buyer credit need to sign contracts by the end of April and close loans by the end of June.
Mortgage rates in the latest week “followed bond yields higher amid a positive March employment report,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement.
The economy added 162,000 jobs in March, the largest monthly gain in the past three years, and the employment in the two prior months was revised higher.
For rates table, click on [ID:nWAL8FE616]
The eight-month high in rates sapped demand for home loan refinancing last week but applications to buy homes rose slightly amid the final push for the tax credits, according to the Mortgage Bankers Association. To read story, see [ID:nNYS007890]
Pending home sales surprisingly rose 8.2 percent in February for the same reason, the National Association of Realtors reported on Monday.
Mar
16
MEMPHIS, TN – Shelby county homeowners facing foreclosure might get a little relief. Mediators may help them negotiate with banks. That’s the idea behind a bill pending in the Tennessee legislature.
“A professionally trained mediator would mediate between the lending institution and the homeowner and try to work out an agreement between the two,” explained Shelby County Commissioner Mike Carpenter.
Mediation would be voluntary, but the head of the Memphis Mortgage Bankers Association said homeowners need every option.
“There are a lot of people trying to keep their homes, a lot of people upside down on their loans or getting behind on their payments,” Sam Goff said.
He said mediation lets homeowners save homes, and banks save money.
“The public should really understand lenders do not want your home because its not in their best interest to foreclose,” Goff said.
Carpenter said foreclosure hits families — and communities – hard, so it’s in everyone’s best interest to avoid it.
“While there’s a lot of debate about what role the government should play in this issue of lending and foreclosure, I think it’s in everyone’s best interest at this point to mediate when we can between the homeowner and the lender,” Carpenter said, “So that everybody at least walks away with something.
“Our economy is impacted by these foreclosures,” he continued. “We all lose if we don’t find a solution to the foreclosure problem.”
This proposal would create a pilot program for Shelby County, but the bill still needs approval from state legislators. Even though the proposal makes mediation voluntary, lenders who take that route would get a break. They would not face penalties for any violations of the state law that protects homeowners from predatory lenders.
Mar
16
The US housing market will face another retreat while mortgage-backed securities and Treasurys are likely to go through a “material” correction, Meredith Whitney, CEO of Meredith Whitney Advisory Group, told CNBC Tuesday.
“The housing market surely will double dip,” Whitney told “Worldwide Exchange.”
Government programs to support housing have been “murky” and when the modifications caused by them come to an end, a lot of supply may come to the market and that’s when the real-estate market is likely to go down, she explained.
Hopes that an improvement in liquidity and continuing investment from China in US assets will prop up mortgage-backed securities (MBS) and Treasurys are exaggerated, Whitney also said.
“The asset classes of MBS and Treasurys are priced for a material correction in my opinion,” she said. “The only buyers of agency MBS are the Fed and banks so you see how precarious that market is.”
“If the Fed pulls back, that’s a really big deal… because there’s no substitute buyer.”
Banks Model Is Broken
The Federal Reserve can’t make banks start lending again because the business model financial institutions used before the crisis is broken, Whitney also said.
“I don’t think there’s much the Fed can do to get banks to start lending again. That’s a structural problem, the model is broken,” Whitney told “Worldwide Exchange.”
Before the financial crisis erupted in 2007 banks were able to offer customers low-priced mortgages because they were making money on securitizing these mortgages and selling them on, she explained.
But now that the securitization market is effectively closed, the prices of mortgages for consumers have not risen to compensate banks for that loss of revenue, so banks have been playing defense for the past two years, Whitney added.
The Federal Open Market Committee holds a meeting later Tuesday to decide on monetary policy. Fed officials have been saying that interest rates are likely to remain low for an “extended” period of time.
Whitney said she will be watching for anything regarding the Fed’s stance on buying mortgage-backed securities in the statement after the meeting.
“The Fed has been supporting the housing market, a third of the Fed’s balance sheet is tied to mortgages,” she said.
“The banks aren’t issuing anything (in terms of mortgages) to hold, they’re issuing everything to dump on” Fannie Mae, Freddie Mac and Ginnie Mae, Whitney added.
Much of the profit banks made last year was due to their performance in capital markets and this is “unreplicable” this year, Whitney also warned.
“I think that people that expect an earnings handoff to a normalized scenario are going to be disappointed,” she said.
“Normal will not be what it has been over the last 20 years and there’s disappointment baked into that.”
Mar
11
Standard 30-year fixed loan is now 4.95 percent, down from 4.97 percent. Mortgage rates held below the 5 percent threshold for the second straight week, a report said Thursday, weeks before a government program that has been keeping rates low is scheduled to expire.
The average rate on a 30-year fixed rate mortgage was 4.95 percent this week, down from 4.97 percent a week earlier, mortgage finance company Freddie Mac said.
Rates dropped to a record low of 4.71 percent in December and have hovered around 5 percent since, kept down by a Federal Reserve campaign to stabilize the housing market by lowering mortgage rates.
The central bank’s $1.25 trillion program to buy up mortgage securities issued by Freddie Mac and sibling company Fannie Mae is set to expire March 31. But the Fed has held the door open to extending the program if the economy weakens.
Some analysts argue that rates could rise once the Fed’s program ends, hurting both the recovery in housing and the overall economy. But government officials are optimistic that the Fed will be able to end its program without a major disruption.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, often in line with long-term Treasury bonds.
This week, the average rate on a 15-year fixed-rate mortgage was 4.32 percent, down from 4.33 percent last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.05 percent, down from 4.11 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.22 percent from 4.27 percent.
The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.
The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 of a point for 30-year and 15-year loans and 0.6 of a point for five-year and one-year loans.