Jul
30
Mortgages Rise to 5.25%
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WASHINGTON — Home-mortgage rates rose again this week as housing sales continue to pick up, according to Freddie Mac’s weekly survey of mortgage rates.
Sales have increased for several consecutive months, giving increased hope that the housing market may have bottomed. Meanwhile, it was disclosed this week that a closely watched home-price indicator rose for the first time in nearly three years.
The 30-year, fixed-rate mortgage averaged 5.25% for the week ended Thursday, up from last week’s 5.2% average and down from 6.52% a year ago. Rates on 15-year fixed-rate mortgages were 4.69%, up from 4.68% last week and down from 6.07% a year earlier.
Five-year, Treasury-indexed hybrid adjustable-rate mortgages averaged 4.75%, up from last week’s 4.74% and down from 6.07% a year earlier. One-year, Treasury-indexed ARMs were 4.8%, up from 4.77% last week and down from 5.27% last year.
Jul
27
June New Home Sales Rise 11 Percent
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WASHINGTON – New U.S. home sales rose by the largest amount in more than eight years last month, in another sign the housing market is finally bouncing back from the worst downturn in decades.
The Commerce Department said Monday that sales rose 11 percent in June to a seasonally adjusted annual rate of 384,000, from an upwardly revised May rate of 346,000.
It was the strongest sales pace since November 2008 and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 360,000 units. The last time sales rose so dramatically was in December 2000.
Sales have risen for three straight months. The median sales price of $206,200, however, was down 12 percent from $234,300 a year earlier and down nearly 6 percent from $219,000 in May.
The report is another encouraging sign that the beleaguered housing sector is finally coming back to life. Last Thursday, the National Association of Realtors reported that home resales posted a monthly increase of 3.6 percent in June.
There were 281,000 new homes for sale at the end of June, down more than 4 percent from May. At the current sales pace, that represents 8.8 months of supply — the lowest level since October 2007.
Fallout from the housing crisis has played a central role in the U.S. recession, now the longest since World War II. Foreclosures have spiked, homebuilders have slashed construction, and financial companies have lost billions.
Jul
17
Home construction surged in June, adding to evidence the housing market is gradually beginning to recover, the Commerce Department said Friday. But a separate report show rising unemployment threatens to hinder a strong rebound in the economy.
Construction of new homes rose in June by 3.6% from the prior month to a seasonally adjusted annual rate of 582,000. It was the third consecutive monthly gain, leaving the level of new home construction at its highest since November, although the pace remains well below the 1.1 million rate seen a year ago, in June 2008.
The overall gain was driven by a 14.4% jump in construction of single-family homes — the biggest monthly gain in four years and the fourth consecutive improvement this year, bringing the pace of new single-family home construction to 470,000 units at an annual rate. The gain offset a decline in construction of multifamily homes.
The report echoed news Thursday that home-builder confidence continues to recover, as an index of sentiment rose to 17 in July, its highest since September, from 15 in June. Later this month, reports on June home sales will show whether increased buying activity is behind the surge in home construction — or whether these new units will add to already bloated inventories and weigh further on prices.
One key barrier to a recovery in the housing market — and the economy overall — is the rising unemployment rate, leaving fewer workers in a position to buy a house. The U.S. unemployment rate rose to a seasonally adjusted 9.5% in June as the total number of jobs lost in this recession, which began in December 2007, hit 6.5 million.
Michigan has the nation’s highest unemployment rate, 15.2% as of June, according to a separate Labor Department report on state unemployment released Friday. It’s the first time since 1984 that a state has recorded a jobless rate above 15%, Labor noted. The next highest are Rhode Island at 12.4%, Oregon at 12.2%, South Carolina at 12.1% and Nevada at 12%.
North Dakota, by comparison, has the lowest unemployment rate in the U.S., just 4.2%, while Nebraska is next at 5% followed by South Dakota at 5.1%, Utah at 5.7%, and Wyoming at 5.9%.
Jul
16
U.S. Foreclosure Filings Hit Record 1.5 Million in First Half
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July 16 (Bloomberg) — U.S. foreclosure filings hit a record in the first half, a sign that job losses and falling property prices deepened the housing recession, according to RealtyTrac Inc.
More than 1.5 million properties received a default or auction notice or were seized by banks in the six months through June, the Irvine, California-based seller of default data said today in a statement. That’s a 15 percent increase from the year earlier. One in 84 U.S. households received a filing.
“People are losing their jobs, seeing their income go down and are underwater on their mortgage,” Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles, said in an interview. “It’s a toxic combination.”
Home prices in 20 major U.S. metropolitan areas dropped 18.1 percent in April from a year earlier, according to the S&P/Case-Shiller index. The unemployment rate rose to 9.5 percent in June, the highest since 1983, bringing the total number of lost jobs to about 6.5 million since the recession started in December 2007, the Labor Department said.
Defaults by subprime borrowers with poor credit histories spurred the housing recession and spread to prime borrowers as home prices and sales declined. The Mortgage Bankers Association said May 28 that prime fixed-rate home loans to the most creditworthy borrowers accounted for 29 percent of new foreclosures in the first quarter, the biggest share of any type of loan.
One in eight Americans is now late on a payment or already in foreclosure, the Washington-based mortgage group said.
California, Florida Lead
Twenty of the 50 U.S. counties with the highest foreclosure rates were in California and 12 were in Florida, RealtyTrac said.
Clark County, Nevada, home to Las Vegas, had the highest rate in the nation with one in 13 households receiving a filing, according to RealtyTrac.
“I don’t see any turning of the tide,” said Donald Haurin, an economics professor at Ohio State University in Columbus. “The effect of more foreclosures will be continued downward pressure on house prices, and lead to difficulty making mortgage payments that are continuing to reset.”
Payment-option adjustable rate mortgages will contribute to higher defaults, said Rick Sharga, executive vice president of RealtyTrac. Option ARMs allow borrowers to pay less than the interest they owe each month, tacking on the difference to their total debt and creating the potential for bigger bills in the future.
Option ARMs
About three quarters of those loans will adjust to require higher payments next year and in 2011, with the peak coming in August 2011 when about 54,000 loans recast, according to data from First American CoreLogic of Santa Ana, California.
Government and lender-supported plans to help troubled homeowners — including President Barack Obama’s $275 billion pledge to jumpstart sales and encourage banks to modify sour loans — have had little effect, Haurin said.
As many as 3.2 million U.S. households will get a foreclosure filing by the end of the year, Sharga said.
“Stemming the tide of foreclosures is a critical component to stabilizing the housing market, so it is imperative that the lending industry and the government work in tandem to find new approaches to address this issue,” James Saccacio, RealtyTrac’s chief executive officer, said in the statement.
More than 8.3 million U.S. mortgage holders owed more than their homes were worth and an additional 2.2 million borrowers will be “underwater” on their loans if prices decline another 5 percent, First American said March 4.
Nevada, Arizona
Foreclosure filings in the second quarter totaled a record 889,829, up 11 percent from the first quarter and up 20 percent from a year earlier, RealtyTrac said. June filings were 336,173, the third highest monthly total in records going back to January 2005.
Nevada had the highest foreclosure rate in the first half, with one in every 16 households receiving a filing, RealtyTrac said. A total of 68,708 properties were affected, 61 percent more than in the first half of 2008.
Arizona had the second highest rate, one in 30 households; Florida was third at one in 33; and California ranked fourth at one in 34. Other states in the top 10 included Utah, Georgia, Michigan, Illinois, Idaho and Colorado.
Top 10 States
California led in total filings with 391,611, an increase of 15 percent from a year earlier; followed by Florida at 268,064 for a 42 percent increase, RealtyTrac said. Arizona was third with 89,799 filings, up 55 percent, and Illinois was fourth with 68,932, up 29 percent.
Other states in the top 10 for their sheer number of foreclosures and defaults were Nevada, Michigan, Ohio, Georgia, Texas and Virginia, said RealtyTrac, which collects data from more than 2,200 counties representing 90 percent of the U.S. population.
Jul
15
NEW YORK (Reuters) – U.S. mortgage applications rose for a second straight week, driven by a jump in demand for home refinancing loans as interest rates tumbled, data from an industry group showed on Wednesday.
However, demand for home purchase loans, an early indicator of home sales, fell to its lowest level since late-May. The drop does not bode well for the hard-hit U.S. housing market, which is plagued by a huge supply and demand imbalance amid mounting foreclosures.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended July 10 increased 4.3 percent to 514.4.
Diane M. Ramirez, President of Halstead Property in New York, said confidence is the driving factor behind home sales and when interest rates on mortgages moved higher in late-May and early June it spooked some potential home buyers.
“During that time we saw a noticeable drop in the number of people attending our open houses,” she said.
“It is all about confidence right now and not the level of interest rates on mortgages because, quite honestly, anything below 6 percent is extremely attractive,” she said.
Indeed, with the U.S. unemployment rate at 9.5 percent, its highest in nearly 26 years, many potential home buyers who have lost or who fear they may lose their jobs are opting to stay sidelined even though home affordability has improved significantly.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.05 percent, down 0.29 percentage point from the previous week, the lowest since the week ended May 22, but higher than the all-time low of 4.61 percent set in the week ended March 27. The survey has been conducted weekly since 1990.
Interest rates, however, were well below year-ago levels of 6.22 percent.
Treasury yields, which are linked to mortgage rates, have fallen recently, with mortgage rates responding in kind.
Mortgage rates, however, remained above 5 percent for a seventh straight week. Experts say mortgage rates at 5 percent and below are what is necessary to make a significant impact on home loan demand.
The MBA’s seasonally adjusted purchase index fell 9.4 percent to 258.8, the lowest reading since the week ended May 22.
The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was unchanged.
WEEKLY REFINANCING ACTIVITY JUMPS
Halstead’s Ramirez said home owners seeking to refinance their existing home loans tend to react quickly to shifts in interest rates on mortgages.
“When you are seeking to buy a home, it is not as much of a driving factor,” she said.
The Mortgage Bankers seasonally adjusted index of refinancing applications increased 17.7 percent to 2,009.4.
The refinance share of applications increased to 54.9 percent from 48.4 percent the previous week, but significantly lower than the peak of 85.3 percent in the week ended January 9. The adjustable-rate mortgage share of activity increased to 5.0 percent in the latest week, up from 4.4 percent the previous week.
The U.S. housing market is in the worst downturn since the Great Depression and its impact has rippled through the recession-hit economy, as well as the rest of the world. Economists contend that the economy might not emerge from its slump unless the housing market stabilizes.
The housing sector, however, has been showing some signs of stabilization, with sales rising and home price declines moderating in many regions of the country.
“We are probably at or near a bottom in the Manhattan market,” Ramirez said.
“It seems like the worst is behind it,” she said.
The U.S. government has embarked on an aggressive plan to bring mortgage rates down to levels that will spur demand and help the hard-hit housing market begin to recover.
The Federal Reserve has set a goal to buy up to $1.25 trillion of agency MBS, $300 billion of Treasuries and $200 billion of agency debt in 2009. The purchases are part of efforts to lower borrowing costs.
Fixed 15-year mortgage rates averaged 4.59 percent, down from 4.83 percent the previous week. Rates on one-year ARMs decreased to 6.47 percent from 6.58 percent.
Jul
9
Commercial Real Estate: Do Rising Defaults Pose Systemic Threat?
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Congresswoman Carolyn B. Maloney, Chair of the Joint Economic Committee (JEC) in a hearing entitled, “Commercial Real Estate: Do Rising Defaults Pose Systemic Threat?” examined the growing financing problems faced in the commercial real estate market and potential solutions to the credit crisis in the sector.
The commercial real estate market has been severely stressed by the recession with rising vacancy rates for existing office, industrial, and retail properties and falling prices in the commercial real estate market. Experts will testify about the current difficulties in refinancing existing commercial real estate loans due to the reduced availability of credit and disruptions in the secondary market.
Jul
8
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NEW YORK (Reuters) – Demand for U.S. mortgages bounced from seven-month lows last week as average 30-year borrowing costs were unchanged, helping ease pressure for aggressive Federal Reserve actions to push down long-term interest rates.
The rise in applications, along with signs that home prices and sales have stopped hemorrhaging, suggests mortgage rates may not fall much lower and that a rebound in housing is dependent on improvement in the labor market, strategists said on Wednesday.
The Mortgage Bankers Association said its total loan applications index rose a seasonally adjusted 10.9 percent to 493.1 in the week ended July 3, after slumping the prior week to the lowest level since November.
Last week’s report was adjusted to account for the Independence Day holiday on Friday.
Average 30-year mortgage rates stayed at 5.34 percent. While up from a record low 4.61 percent in late March, the rate is below its recent peak of 5.57 percent in early June and sharply lower than 7.04 percent a year ago.
If borrowers expect mortgage rates have seen their lows, there could be another push to lock in rates before they rise. A sudden spike in home loan rates from record lows in the spring had derailed a race by homeowners to cut monthly costs by refinancing.
David Kelly, managing director and chief market strategist at JPMorgan Funds, said mortgage rates may have hit their lows, noting the Federal Reserve’s unchanged stance on its plans to buy up to $1.45 billion in mortgage-related securities and $300 billion of Treasuries in order to lower borrowing costs and help revive the economy.
Treasury yields act as a benchmark for mortgage rates.
“The fact that the Federal Reserve has not announced further purchases of Treasuries tells me that they are willing to let Treasury rates move up if the economy is perceived as improving,” said Kelly.
“Over the next month or two we’ll see a lot of economic numbers which suggest that the pressure on the Fed is easing” to attempt to chisel long-term rates, he added.
That would mean home loan rates may have seen their cyclical lows, Kelly said. “People shouldn’t sneeze at a 5-1/3 percent mortgage rate. If you want to buy, there’s no better time than right now.”
The Mortgage Bankers Association’s seasonally adjusted refinancing index rose 15.2 percent last week to 1,707.7, after a 30 percent plunge in the prior week.
Purchase applications, which lagged refinancing demand all through the spring home sales season, rose 6.7 percent last week to 285.6.
Susan Wachter, real estate and finance professor at The Wharton School, University of Pennsylvania, said the real issue for the housing market is improvement in the U.S. unemployment rate, now at its highest level in more than a quarter century — a view shared by many economists.
“Interest rates still remain relatively low, so that’s not right now the serious problem,” she said. “The real problem is the unemployment rate, which is still a negative and worsening force.”
Housing is key to the economy, and recent signals point to decelerating declines, Wachter said. But she said interest rates could rise.
“I do think the Fed if necessary can pile on more liquidity, but there’s danger to doing so. It has long-run consequences which are not totally under the Fed’s control,” she said.
Concerns that inflation will be stoked by the Fed’s aggressive moves to add liquidity to the financial system could also increase long-term interest rates.
Jul
7
Standard & Poor’s on Monday boosted its expectations for losses on risky loans backing U.S. mortgage securities to as much as 40 percent… suggesting [this will] “significantly impact” bonds originally carrying AAA ratings, S&P said in a report.
S&P boosted loss projections for subprime loans made at the peak of the market in 2006 and 2007 to 32 percent and 40 percent from 25 percent and 31 percent, respectively. For 2005 loans, loss projections rose to 14 percent from 10.5 percent.
For Alt-A loans, loss projections for 2006 and 2007 mortgages rose to 22.5 percent and 27 percent from 17.3 percent and 21 percent, respectively. S&P expects Alt-A loans from 2005 to post losses of 10 percent, up from its previous estimate of 7.75 percent.
Loss severities are expected to rise to 70 percent for 2006 and 2007 subprime bonds and 60 percent for Alt-A bonds issued in those years, S&P added.
“We have observed increases in loss severities and we expect them to continue to rise until we reach the trough of the market value decline, which we believe will be in the first half of 2010,” S&P said in the report.
Jul
7
U.S. Home Prices to Fall Through 2011’s First Quarter, PMI Says
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July 7 (Bloomberg) — Home prices may fall in more than half of the largest U.S. cities through the first quarter of 2011 as unemployment and foreclosures rise, mortgage insurer PMI Group Inc. said.
Thirty of the 50 biggest metropolitan areas have at least a 75 percent chance of lower prices through March 31, 2011, Walnut Creek, California-based PMI said in a report today. The decline is likely to spread to “all regions of the nation” from California, Florida, Nevada and Arizona, the states most affected by the housing slump, PMI said.
“The housing market has been hit by a demand shock of high unemployment and a supply shock of distressed foreclosure sales,” LaVaughn Henry, senior economist at PMI, the fourth- largest U.S. mortgage insurer, said in an interview.
Unemployment rose to 9.5 percent in June, bringing the total number of jobs lost to 6.5 million since December 2007, the Labor Department said July 2. Foreclosure filings may hit a record 1.8 million in the first half of the year as more jobless homeowners default on their loans, real estate data service RealtyTrac Inc. said last month.
Home prices in 20 major U.S. metropolitan areas dropped 18.1 percent in April from a year earlier, following an 18.7 decrease in March, according to the S&P/Case-Shiller index. Prices are forecast to fall 41.7 percent from their peak, Deutsche Bank AG analysts led by Karen Weaver wrote in a June 15 report.
Florida Drops Predicted
“Affordability is no longer the driving issue in the housing market, and we believe prices still have a ways to fall in many areas before home prices reach their trough,” the Deutsche Bank analysts wrote.
The 15 areas with the highest probability of lower prices in 2011 each have a 99 percent chance, PMI said. They include Miami, Fort Lauderdale, West Palm Beach, Orlando, Tampa and Jacksonville in Florida; Riverside, Los Angeles, Santa Ana, Sacramento and San Diego in California; Las Vegas; Phoenix; Providence, Rhode Island; and Detroit.
Edison and Newark in New Jersey have a 97 percent and 96 percent chance, respectively, and Nassau, New York, has a 92 percent chance. New York City showed an 88 percent chance of lower prices, according to PMI.
“The New York area has gone from a moderate level to an elevated level because of the big hit from the financial crisis,” Henry said.
Washington showed a 92 percent chance of lower prices; Portland, Oregon, and Baltimore each have 90 percent; Atlanta has 81 percent; Boston has an 80 percent chance; San Jose, California has 78 percent; and Minneapolis has a 75 percent chance, PMI said.
The areas with the least chance of lower prices, each with less than a 6 percent probability, include Cleveland; Pittsburgh; Columbus, Ohio; San Antonio; Houston; Dallas, and Fort Worth, Texas, according to PMI.
The insurer compiles its “market risk” index from income, interest-rate, home-price and affordability data going back to the early 1980s.
Jul
2
Housing Rebound Continues, Barely
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A 0.1% gain in Realtors’ index – 4th straight advance – could be tempered by complications in appraisal process.
NEW YORK (CNNMoney.com) — Home sales continued their modest upward swing in May, according to a closely watched industry report that rose for the fourth straight month for the first time in nearly 5 years.
The Pending Home Sales Index, reported Wednesday by the National Association of Realtors (NAR), rose 0.1% during the month. The index was up 6.7% compared with May 2008. It was the first four-month run up in the pending sales measure since October 2004
Industry prognosticators had forecast no growth at all in the index for the month, according to Briefing.com, expecting it to settle back after ramping up 6.7% in April.
But the rise in sales contracts may not yield a like increase in completed sales, according to Lawrence Yun, chief economist for NAR.
“Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he said.
Many industry insiders have complained that home appraisals are being too often based on values of foreclosed properties, which sell for significantly less than the homes of ordinary sellers.
The banks that have repossessed the foreclosed homes are anxious to sell and accept offers at large discounts than comparable homes not in foreclosure.
“We see that distressed homes often are selling for 20% less than normal homes in the same area, but some appraisals don’t distinguish between traditional homes and distressed property,” said NAR President Charles McMillan, a broker in Dallas-Fort Worth.
Overall, home sales are still slow, about a third below the peak years of 2005 and 2006.
The market will probably not rebound very fast, according to Robert Dye, a senior economist with PNC Financial Services, the Pittsburgh-based bank
“[The May number] is not a robust indicator of future market expansion,” he said. “Taken with the April number, it points to a gradual but slow recovery.”
One factor favoring a rebound is lower home prices. NAR’s Housing Affordability Index remains near historic highs, although it declined in May to 171.6 from 178.8 a month earlier, mostly due to higher interest rates. April was the high point for the index, which dates back to 1970.
“Under these conditions the typical family would devote only 14.6% of gross income to mortgage principal and interest, which is one of the lowest percentages on record,” said Yun.
“If rates hadn’t crept up, we may have seen a better number [for the May index],” said Dye.
Still, many other economic factors are decidedly negative, pointed out Dye. Consumer confidence is low, unemployment is up and prospects for more layoffs, work furloughs and slashed hours high.
“Market conditions are still poor,” he said.