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.
Jul
22
Existing-Home Sales Slow in June but Remain Above Year-Ago Levels
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With the scheduled closing deadline for the home buyer tax credits, existing-home sales slowed in June but remained at relatively elevated levels, according to the National Association of Realtors®.
Existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 5.1 percent to a seasonally adjusted annual rate of 5.37 million units in June from 5.66 million in May, but are 9.8 percent higher than the 4.89 million-unit pace in June 2009.
Lawrence Yun, NAR chief economist, said the market shows uncharacteristic yet understandable swings as buyers responded to the tax credits. “June home sales still reflect a tax credit impact with some sales not closed due to delays, which will show up in the next two months,” he said.
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%
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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
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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.