Nov
30
S&P and Case-Shiller Home Price Index Shows 0.7% Drop in September
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The average price of a single-family home fell 0.7% in September from August, as prices dropped in 18 of the 20 largest metropolitan areas during the month, according to the Standard & Poor’s/Case-Shiller index.
For the third quarter, the ratings agency’s benchmark 20-city composite index showed a 1.5% decline from a year earlier and a 2% drop from the prior quarter.
“While housing prices are still above their spring 2009 lows, the end of the tax incentives and still active foreclosures appear to be weighing down the market,” according to Standard & Poor’s.
The 20-city composite index rose 0.6% in September from a year earlier and the 10-city composite climbed 1.6%. The rates have moderated for four months in a row. For the 20-city index, home prices rose 1.7% in August, after a 3.2% gain in July and a 4.2% increase in June.
“Another weak report; weaker than last month,” said David Blitzer, chairman of the Standard & Poor’s index committee. “The national index is down 1.5% from the third quarter of last year and 15 of 20 cities are down over the last 12 months. Other than Tampa, there are no new lows this month but many analysts will argue that a double dip will be confirmed before spring. While some of the bad numbers may reflect the end of the government’s tax incentive for first time homebuyers, there are other problems weighing on the housing market.”
National average home prices have climbed 4.9% since reaching a bottom in the first quarter of 2009, but are now at levels last seen in the middle of 2003, according to the S&P/Case-Shiller indices. From the peak recorded in the summer of 2006, home prices included in the 20-city index are down 28.6% while the 10-city composite index is off 28.7%.
“The national economy is certainly the number one issue for housing,” Blitzer said. “Additionally, there is a large supply of houses on the market and further, hidden, supply due to delinquent mortgages, pending foreclosures or vacant homes. New construction is running at less than half the pace needed to meet normal demand, so a sustained recovery could be a ways off.”
Nov
12
Home Sales Fall 25%
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NEW YORK (CNNMoney.com) — Any possible housing market recovery hit a snag during the three months ended September 30, as a government tax credit for homebuyers wound down.
Home prices fell only slightly during the quarter, according to a report from the National Association of Realtors (NAR), but the number of homes sold plummeted more than 25%, compared with the previous quarter.
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The fall-off in sales volume remains a troubling feature of the current housing market scene because there’s rarely been a more attractive time to buy.
“Given the relationship between mortgage interest rates, home prices and median family income, the buying power in today’s market is matching the highest levels we’ve seen dating all the way back to 1970,” said NAR President Ron Phipps.
Many sales were undoubtedly happened in early 2010 as homebuyers accelerated their purchases to qualify for the tax credit, which shaved as much as $8,000 off their tax bills.
Contracts had to be signed by the end of April to qualify and the deals had to close by the end of September.
The national median price for a single-family home sold during the quarter was $177,900, down 0.2% from the same period a year ago and up 0.6% from the second quarter of 2010.
Single-family home prices rose 2.5% to $253,400 in the Northeast, the only region that showed price improvement. Midwest prices fell 3% to $145,600, prices dropped 1.9% in the South and 0.4% in the West region.
The metro area with the biggest gain was Burlington, Vt., where the median price of $286,300 was 17.6% higher than 12 months earlier. The biggest loser was Ocala, Fla., down 20% to $82,200.
San Jose, Calif., recorded the highest median price — $628,700 — during the quarter, just nosing out Honolulu at $628,100.
Youngstown, Ohio, the old steel town, had the lowest median sale price, at $60,400.
Condo prices fared worse than those of single-family houses. The national median fell 3.9% from 12 months earlier to $171,400.
Palm Bay, Fla., had the biggest year-over-year loss: down 32% to $73,000; Jacksonville. Fla., was off 31% to $63,200. Phoenix condo prices also plunged, down 26.6% to $73,300.
Condo prices in the New York metro area soared, up 34.5% to $400,000, the most, by far, of any city.
Nov
5
Bank Reports Highlight Growing Risks in Ginnie Mae Mortgage Pools
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Read the rest at HousingWire.com
Ginnie Mae bonds carry the full faith of the United States government, but investors should not take that to mean the risks are lower, according to two recent mortgage-backed securitization market reports.
Barclays Capital notes that the amount of previously delinquent and now-cured mortgages in Ginnie Mae pools are raising investor concerns because of higher probability of redefaults and spotty performances from individual servicers.
Ginnie Mae does not buy or sell loans or issue mortgage-backed securities. It guarantees investors a timely payment of principal and interest on MBS backed by Federal Housing Administration and VA loans.
The BarCap analysts estimate that as much as 12% to 13% of new production Ginnie pools are backed by reperforming loans — meaning servicers worked with the borrower to turn the mortgage from delinquent to current either through a modification or some other form of loss mitigation.
Analysts added that 45% of these reperforming loans will redefault over the next two years, which would boost prepayments.
“Increasingly [Ginnie Mae] investors have been concerned by the preponderance of new issue pools with very high delinquencies shortly following issuance,” according to BarCap. This, they add, raised concerns over Ginnie valuations for mortgage derivatives.
Nov
5
Tom Hoenig, the Fed banker who has said at seven straight Federal Open Market Committee meetings that he believes the Fed’s current policy is a mistake, repeated Friday that he believes the Fed should raise interest rates to put the economy on a path to balanced growth.
This is not a huge surprise, as Hoenig has spent the entire year urging his colleagues on the FOMC to wean the economy off the zero-rate drip it has been on for almost two years.
Even so, you’d have to say he picked about the toughest possible crowd to make his latest pitch for a normalized rate policy: the annual conference of the National Association of Realtors.
“I realize that advocating an interest rate increase is not the best applause line at a Realtors’ conference,” said Hoenig, who is president of the Federal Reserve Bank of Kansas City. “However, I believe that moving rates modestly off of zero, where they have been since December 2008, still represents highly accommodative monetary policy. More importantly, such action is necessary if we are to ensure a more stable economy that can thereby foster a more sustainable housing market.”
Speaking of which, Hoenig wasn’t content to propose just one policy the Realtors hate. Having laid out the case for higher rates, he went on to explain why he believes the government should vastly scale back subsidies it provides to homeowners.
“Housing policy is badly flawed, and today’s budget environment requires reform,” he said Friday morning in New Orleans. “We must move toward a system with fewer subsidies and misdirected incentives.”
Nov
1
NEW YORK (CNNMoney.com) — The robo-signing controversy is just another issue that the already sluggish housing market didn’t need — but most analysts do not think it will have far-reaching impact.
Nevertheless, the housing market still faces many problems: a weak economy, sluggish hiring, tight mortgage underwriting, falling home prices, and slowing sales.
Then there’s the potentially disastrous number of foreclosures that may occur over the coming years.
“The market faces much bigger problems than the robo-signing issue,” said Mike Larson, a housing market analyst for Weiss Research.
Prime among them are declines in home prices. And while cheaper homes are good for buyers, they also speak to a housing market that won’t stabilize.
Fiserv, a market analytics company, has scaled back its home price projections considerably. In February, it forecast national price gains of about 4% through the end of 2011. The company’s latest prediction is for a 7.1% drop in prices between June 30, 2010 and June 30, 2011.
In fact, after five months of gains, prices in the 20 largest metro areas fell 0.2% in August, according to the latest S&P/Case-Shiller report.
The good news is, “There’ll be no vicious, self-reinforcing spiral down,” according to Mark Zandi, chief economist with Moody’s Analytics.
But, he added, “more home price declines are coming.”
He’s forecasting another 8% drop in home prices through the third quarter of 2011, which will put the total peak-to-trough decline at 34%.
Even after that, in 2012, he sees very little price growth.
Home prices continue to fall because sales aren’t taking off. Without buyers, the market can’t bottom out.
New home sales continue to languish around historic lows, barely exceeding an annual rate of 307,000. Existing home sales did rise to a 4.53 million annualized rate in September, up 10% compared with a month earlier, but are still well below the boom years.
Of course, nobody is buying homes when they can’t find jobs. And still more people can’t hang on to their homes because they’re out of work.
Nearly a million homes are expected to be repossessed this year, and analysts seem to be competing to issue the most dire forecast for future foreclosure numbers.
- Morgan Stanley reported that about 3.1 million borrowers are seriously delinquent with many expected to lose their homes.
- Zandi said more than 4 million are in trouble with half of those expected to go to foreclosure.
And Laurie Goodman, of Amherst Securities, estimates the number of homes in danger of foreclosure at a whopping 11 million.- Real estate analyst Kyle Lundstedt of LPS Applied Analytics said serious delinquencies will continue to spike and will not return even to the current rates — which are already at peak levels — until late 2012 or early 2013.
“The housing market is very fragile,” said Goodman.
However, Zandi sees a few factors that are positive.
These include: Low interest rates; FHA, Fannie Mae and Freddie Mac all lending to qualified buyers; and an improving job picture.
Zandi is especially confident that the employment picture is about to brighten. Corporate profits have spiked and, historically, hiring follow profits — with a lag of eight to 10 months. That means companies should start hiring workers very soon, Zandi said.
And once Americans start returning to work, they’ll find home prices are very reasonable. Housing is the most affordable it’s been since the pre-boom years. During the boom, Zandi said, prices were overvalued by about 50%; today it’s close to zero.
That has attracted many investors, including foreign buyers. They’ve been scooping up single-family-homes and condos in hard-hit markets like Florida, the Southwest and the Midwest and renting them out.
“The reason they’re in these markets is because they see value,” said Zandi.
But, he added, “If they see the robo-signing issue continue, they could begin to exit the market. If they do, there could be more price declines. That’s one reason why a foreclosure moratorium could be destructive.”