Aug
31
National home prices jumped a substantial 3.6% in the past year, according to the S&P/Case-Shiller Home Price Index released on Tuesday. Prices also climbed 4.4% in the second quarter compared with a 2.8% plunge in the first quarter.
NEW YORK (CNNMoney.com) — Despite a recent spate of bad news coming out of the housing industry, home prices show signs of stabilizing.
National home prices jumped a substantial 3.6% in the past year, according to the S&P/Case-Shiller Home Price Index released on Tuesday. Prices also climbed 4.4% in the second quarter compared with a 2.8% plunge in the first quarter.
“While the numbers are upbeat, other more recent data on home sales and mortgages point to fewer gains ahead,” said David M. Blitzer, chairman of the Index Committee at Standard & Poor’s. “Even with concerns about near term developments, we recognize that the housing market is in better shape than this time last year.”
Of course, the positive report was buoyed by the government’s tax credit program, which refunded as much as $8,000 for homebuyers. With that program now over, markets could cool.
“We all know what happened to housing after the homebuyers tax credit ended,” said Mike Larson, real estate analyst for Weiss Research. “It’s been an Acapulco-sized cliff-dive.”
And because this report is a lagging indicator, Larson adds that “it would be foolhardy to think that this report tells us that prices will continue to rise.” Instead, he expects prices to slowly deteriorate over the next several months.
In fact, home prices across the country could be substantially lower a year from now, according to Pat Newport, an analyst with IHS Global Insight. “It’s now apparent that the demand for housing is a lot weaker than anyone thought,” he said.
That has resulted in a glut of inventory, which a slew of bank repossessions of foreclosed properties is only making worse. Plus job gains are still proving elusive.
“These three factors are enough to bring home prices down,” Newport said.
Winners and Losers
A market basket of 20 metro areas tracked by the S&P/Case-Shiller home price indexes showed that prices gained in all markets but one. The index is up 4.2% year-over-year, well above a 3.1% forecast from industry experts as compiled by Briefing.com. The month-over-month gain was 1%.
“Las Vegas was the only city to record a fall in prices during June (-0.6%), compared with a month earlier. All 19 other markets were either up or flat, with Chicago, Detroit and Minneapolis the biggest winners. Each gained 2.5%.
Fifteen of the 20 cities recorded 12-month price rises, with San Francisco leading the way. Its 14.3% increase was one of three cities posting double-digit gains, with San Diego prices jumping 11.2% and Minneapolis 10.7%.
Las Vegas had the biggest 12-month loss, down 5.2%.
Aug
27
Delinquencies Down Overall But First Time Delinquencies Up
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NEW YORK (CNNMoney.com) — Fewer mortgage borrowers are delinquent on their loan payments, according to the latest data from the Mortgage Bankers Association.
The nation’s overall delinquency rate dropped to 9.85% in the second quarter, down from 10.06% of all loans outstanding three months earlier.
Even better, the percentage of seriously delinquent loans — ones 90+ days late or already repossessed by lenders — dropped to 9.11% from 9.54% in the first quarter.
The drop in loans 90 days or more late was the biggest the MBA has ever recorded, according to the MBA’s chief economist, Jay Brinkmann. “That shows we’re making headway,” he said.
He cited three reasons for the improvement:
- Fewer loans are coming into the default process;
- The homebuyers tax credit, which increased demand for homes, generated many pre-foreclosure sales, removing the attached delinquent loans from the statistics;
- The government- and lender-led mortgage modifications “cured” some payment problems.
However, even with those bright spots, there was one troubling finding: First-time delinquencies increased after four quarters of decline. It inched up to 3.51% in the second quarter from 3.45% in the first quarter. According to Brinkmann, the reversal reflects the weakness in both the housing market and the overall economy.
“It’s a question of jobs,” he said. “It takes a paycheck to make a mortgage payment.”
Underscoring the trend is the foreclosure trend among borrowers with conventional loans, like 30-year, fixed rate mortgages. They accounted for nearly 36% of foreclosure starts during the quarter. And these safe loans rarely get into trouble unless they lose employment or income.
The four worst hit states — California, Florida, Arizona and Nevada — still account for nearly 60% of national delinquencies, but California’s numbers dropped dramatically this year. At the end of 2009, California foreclosure starts made up nearly 20% of the nation’s total. That dropped to 14.7% during the second quarter.
Another positive trend is the gradual downturn in the number of borrowers who are underwater on their mortgages, owing more than their homes are worth.
CoreLogic reported today that the rate of borrowers underwater dropped to 23% in the second quarter from 24% in the first.
When borrowers fall underwater, it increases the chance that they’ll lose the homes. Brinkmann calls it one of the two “triggers” that lead to foreclosure.
If homeowners have positive equity, they can use it as a source of cash to pay bills, including mortgages. But if their cash reserves are gone and they can’t afford to make payments because their income has dropped, foreclosure is almost inevitable.
CoreLogic found that negative equity is worst in five states: Nevada (68%), Arizona (50%), Florida (46%), Michigan (38%) and California (33%).
Aug
24
NEW YORK (CNNMoney.com) — With home sales plunging to their lowest level in 15 years, economists warn that a double-dip in housing prices is just around the corner, threatening to further slow the overall recovery.
Existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Much of that drop is attributed to the end of the $8,000 homebuyer tax credit.
That credit brought buyers out in droves, as they tried to sign home contracts before the April 30 deadline. Now, two months later, sales are 34% below April’s tax incentive-induced peak.
“Home sales were eye-wateringly weak in July,” said economist Paul Dales of Capital Economics. “It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, things could get a lot worse.”
The sales pace of all homes — single-family homes, townhomes, condominiums and co-ops — is at the lowest since NAR began tracking the figure in 1999. Sales of single-family homes, which account for a bulk of the transactions, are at the lowest level since May 1995.
Inventory has also continued to climb, rising 2.5% to 3.98 million existing homes for sale. That represents a 12.5-month supply at the current sales pace, the highest since October 1982 when it stood at 13.8 months. A six-month of supply is considered normal.
Aug
23
Mortgage Modifications Slip in July as Home Prices Level Off
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Fewer Americans received home-loan modifications in July under the Obama administration’s program to reduce foreclosures and delinquencies. A government report released Friday showed that 36,695 households received long-term mortgage modifications last month, compared to more than 51,000 in June.
Further, the number of Americans falling out of the Home Affordable Modification Program increased. Some 12,912 homeowners had their permanent modifications canceled in July, only 272 of whom paid off their loans, CNN Money.com reported.
The report said home prices steadied in July after 30 consecutive months of decline, with some areas actually gaining some ground. Still, the Obama administration’s Housing Scorecard said the U.S. housing market remains fragile, with serious delinquencies as well as foreclosures on the rise.
“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. “We know that we must continue to provide support to underwater borrowers, unemployed homeowners and to the nation’s hardest hit neighborhoods.”
The report noted there have been more than twice as many loan modifications (3.15 million) as there were foreclosures (1.24 million) from April 2009 through the end of June. It also said that more than 4.2 million households have benefited from counseling since the program’s inception in February 2009.
Still, with the economic recovery seemingly halted, the need for foreclosure-prevention programs has taken on renewed importance. A rise in foreclosures, along with weak home sales, could send home prices down further.