March 26, 2013
Home prices continued their recovery, rising 8.1% in January, although a separate report showed a slight slowdown in new-home sales. The S&P Case-Shiller index, which tracks the 20 largest markets in the nation, showed the biggest year-over-year gain in prices since June 2006.
“This marks the highest increase since the housing bubble burst,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.
In a separate government report Tuesday, new homes sold at a 411,000 annual rate in February, down nearly 5% from the January sales pace but up 12% from year-earlier levels. The typical price of a new home sold in the month was $246,800, up about 3% from both the January and a year earlier.
Joseph LaVorgna, chief U.S. economist for Deutsche Bank, said that bad weather in February could be partly responsible for the slowdown in sales. But he said market fundamentals suggest that the market for new-home sales should remain strong.
“Despite the pullback in sales in February, the uptrend in housing remains clearly intact,” he said. He is forecasting even stronger sales in the second half of this year.
The Case-Shiller report shows the recovery in home prices is widespread. All 20 markets posted a year-over-year gain, and the pace of increase picked up in every market except Detroit. Some of the markets hurt the most by the bursting of the housing bubble have enjoyed the biggest gains, led by a 23% rise in Phoenix. Prices were also up more than 10% in San Francisco, Las Vegas, Detroit, Atlanta, Minneapolis, Los Angeles and Miami, all markets that had been hit hard by foreclosures.
CNNMoney.com © All Rights Reserved 2013
January 15, 2013
Maggie Medved was stuck with her Phoenix house for two years after the market crash wiped out the equity in the property. Last year, as prices in the area rose by the most in the U.S., she and her partner were finally able to sell the 3-bedroom 1950’s style home and move to a larger place.
“We were counting the days for when we could move,” said Medved, 40, who trains employees for weight loss company Jenny Craig Inc. “We definitely knew it was a waiting game because it would’ve been financial suicide if we had sold earlier.”
Medved was among the 12 million borrowers in the U.S. who at the peak of the real-estate downturn owed more on their mortgages than their houses were worth, blocking them from moving or saving money by taking advantage of the lowest borrowing costs on record to refinance. As prices recovered, the number of underwater borrowers fell by almost 4 million last year to 7 million, according to JPMorgan Chase & Co. (JPM), and could drop to 4 million within 2 years.
The housing market is rebounding faster than anyone thought possible, according to Blackstone Group LP (BX)’s global head of real estate Jonathan Gray, as the Federal Reserve buys mortgage bonds to keep rates near record lows and investors sop up a diminishing supply of properties for sale. Housing construction could boost U.S. gross domestic product by 0.4 percentage point and home price appreciation may add another 0.2 percentage point, Bank of America Corp. (BAC)’s senior economist Michelle Meyer forecasts.
“It supports household wealth, consumer confidence and can generate greater credit creation,” Meyer said. “If prices are rising, homeowners believe that they will once again have an appreciating asset. It’s a very big change in how they think about their wealth and their balance sheets.”
Medved’s Phoenix home was on the market for two days before it sold for $85,000, just shy of the price paid in 1998. She and her partner Wendy Thomas bought a larger property with a pool for $210,000 in Glendale, about 10 minutes away.
“We’d outgrown the house and the neighborhood took a turn we didn’t like,” Medved said. “Almost 12 years later we were in the hole $30,000. We couldn’t take that much of a loss and needed to stay regardless of what the neighborhood had become.”
Arizona’s capital city is leading the U.S. in price appreciation, surging 22 percent in the 12 months through October, according to an S&P/Case-Shiller index, which had the biggest year-over-year advance since May 2010. Eighteen of the 20 cities in the index showed increases from a year earlier.
Even with the gains, Phoenix prices were down about 45 percent through November from their 2006 peak, according to Zillow Inc. (Z) Nationally, prices peaked in May 2007, according to the real-estate website, and are down 19 percent.
Prices of properties in Phoenix climbed as the inventory of houses for sale dropped to about 14,700 in December, about half of the normal level, according to Tina Waggoner, a real estate broker in Phoenix, and the one who sold Medved’s property last year.
“The supply has dropped substantially,” said Waggoner, who specializes in distressed sales. “Cash investors are beating out buyers all the time.”
JPMorgan analysts led by John Sim estimate the price growth last year was responsible for a drop of almost 4 million in underwater borrowers. The number of homeowners that owe more on their mortgages than their properties are worth may fall to 4 million by the end of 2015, according to Sim, whose team was the top-ranked for non-agency residential mortgage securities in Institutional Investor magazine’s annual survey for the past four years.
While a 5 percent increase in home prices could lower the number of underwater borrowers to just above 5 million, a move of that magnitude in the other direction would push it back over 10 million, he wrote in the Jan. 4 report.
Supply across the country is being been constrained as institutional investors including Blackstone and Colony Capital LLC have pushed out traditional buyers competing for a dwindling number of properties.
Blackstone, the largest U.S. private real estate owner, has accelerated purchases of single-family homes as prices jumped faster than it expected, spending more than $2.5 billion on 16,000 homes to manage as rentals, Gray said during an interview last week. That’s up from $1 billion of homes owned in October, when Blackstone Chairman Stephen Schwarzman said the company was spending $100 million a week on houses.
Underwater borrowers, who can’t sell without taking a loss, contributed to rising levels of foreclosures, which blighted neighborhood prices by increasing the number of abandoned homes. It also increased the phenomenon of borrowers who saw little chance of their homes ever being worth what they owed on it sending the keys back to the bank and moving out, known as strategic default.
Foreclosure starts dropped 28 percent in November from a year earlier, data provider Lender Processing Services Inc. wrote in a report this week.
As real estate prices rise further, more homeowners will emerge from negative equity and may decide to sell, adding to supply.
Still, increasing prices will have a more gradual effect on the housing market, said Karen Weaver, head of market strategy and research at investment firm Seer Capital Management LP in New York. “Home prices are not rocketing up,” said Weaver. “But all the trends are in place. You have an improvement in the negative equity situation and you have a reduction in the amount of people in the default bucket.”
Home values climbed by more than $1.3 trillion to $23.7 trillion since the end of 2011, according to Zillow, and prices will rise by 3.3 percent after an estimated 4.5 percent jump last year, based on estimates of 15 economists and housing analysts surveyed by Bloomberg. Sales of existing homes will increase about 7.2 percent in 2013 to 4.98 million, the highest since 2007.
Lennar Corp. (LEN), the largest U.S. homebuilder by stock-market value, today reported fiscal fourth-quarter earnings that beat analysts’ estimates as revenue increased 42 percent to $1.35 billion.
Increasing prices compounded with Fed efforts to keep mortgage rates low could also widen the population of borrowers eligible to refinance and have implications for bond investors.
Higher levels of refinancing would be a boon for securities without government backing such as subprime bonds and option adjustable-rate mortgages issued during the housing boom that trade at discounts to par. Faster prepayments could hurt holders of government-backed mortgage bonds, whose prices average almost 108 cents on the dollar, according to Bank of America data.
The improving housing market has already helped the broader economy heal after the crash triggered the worst recession since the Great Depression. The unemployment rate has dropped to 7.8 percent, the lowest level since January 2009 and Fed officials in December projected economic growth in a range of 2 percent to 3.2 percent in 2013. Consumer spending, which accounts for about 70 percent of the economy, is also showing signs of improvement. Retail sales rose more than projected last month, according to Commerce Department figures today in Washington.
“For most middle class households, homes are by far their biggest asset,” Weaver said. “So once the housing market starts to recover it helps consumer spending, it helps the whole economy.”
Bloomberg.com © All Rights Reserved 2013
November 27, 2012
Not so surprisingly, yet another national housing report — this time from the Federal Housing Finance Agency — has determined that home price gains this year in both metro Phoenix and Arizona have once again far outpaced the rest of the country.
The FHFA data released Tuesday shows Arizona landed the No. 1 spot for the biggest year-over-year increase — about 20 percent — in median sales prices in the third quarter. The District of Columbia trailed behind in second place with a 15.5 percent jump during the same period, followed by Idaho’s 9.5 percent rise, according to the report.
Arizona’s home price appreciation was also significantly greater than the national year-over-year average of 4.04 percent in the third quarter. However, the Grand Canyon State was still notably down — by almost 37 percent — from the boom times in 2007, the report said.
The FHFA report also ranked home price appreciation in the nation’s 25 largest metropolitan areas and Phoenix clenched the No. 1 spot there as well — and by a long shot — for both year-over-year and quarter-over-quarter gains.
The Valley’s 26 percent spike in median prices from the third quarter last year was way ahead of the Houston and Miami metro areas, which both saw gains of roughly 10 percent.
Phoenix’s 7.2 percent jump from just the second quarter of this year also far outpaced the second-place ranking of 3 percent in the Oakland, Calif. area, the report said.
While housing data from different research entities almost always has some degree of variation, the FHFA figures seem to be in line with some previous reports this summer from Zillow Inc. and CoreLogic. Both ranked Phoenix and Arizona as having the biggest upswing in home prices.
Andrew Leventis, principal economist at the FHFA, said in Tuesday’s report that home appreciation in the third quarter mirrored the springtime this year, which is traditionally the busiest in real estate, but said the housing recovery is still somewhat hampered.
“The past year has seen consistent price increases, but a number of factors continue to affect the recovery in home prices such as stagnant income growth, high unemployment levels, lingering uncertainty about the macro economy and the large number of homes in the foreclosure pipeline,” Leventis said.
His latter point — foreclosure backlogs — is less applicable to Arizona.
In fact, I wrote a story about that very topic on Monday based on a recent study by Arizona State University’s W.P. Carey School of Business, which determined Arizona’s less-restrictive mortgage laws have played a big part in the rapid recovery of its housing market this year.
Phoenix Business Journal © All Rights Reserved 2012
November 26, 2012
Many parts of the country are still seeing a sluggish housing rebound, and a real estate expert at Arizona State University is putting the blame on one inconspicuous culprit: mortgage laws.
Unlike Arizona, so-called “judicial states,” where foreclosures are required to be done through a lengthy, convoluted and paperwork-intensive civil court process have fostered robust backlogs of distressed properties and thus stunted much-needed home value appreciation in recent years. That’s according to a study released Monday by Andra Ghent, an assistant real state professor at ASU’s W.P. Carey School of Business.
Such mortgage laws are, for the most part, outdated, Ghent said, and the recent housing crash should be reason enough to consider revising them to mirror less-restrictive systems such as the one in Arizona.
“The key is quick resolution of the situation,” Ghent said in the report. “For example, if a state requires a longer period before foreclosures can happen, then that generally means the homes deteriorate more as the borrowers realize they’re going to have to leave and stop taking care of the property. This is bad for the neighbors and the property values.”
Arizona is among 27 states that are so-called “nonjudicial states,” meaning lenders aren’t required to take borrowers to court in order to foreclose on properties, enabling a swift and less-expensive foreclosure processes.
As a result, Ghent said, what was once a flood of distressed properties on the Arizona market has slowed to a trickle within a short amount of time. It also has fostered some of the biggest home-value gains in the nation; metro Phoenix experienced a 27 percent year-over-year increase in median home prices in September, according to a previous ASU housing report.
Proponents of the judicial foreclosure process say such laws give the borrower more time to negotiate with the lender and also help prevent problems such as robo-signing, which has recently been a widespread problem of lenders signing mortgage documents without properly following procedures or thoroughly reviewing the details beforehand.
Ghent, on the other hand, believes such arguments are weak.
“In most of those cases, the borrowers were really behind on their payments and would eventually have lost the homes, anyway,” Ghent says. “Fraud is unacceptable, but it was also a case of sheer volume. If those particular states had required less paperwork, that’s what might actually have helped prevent more robo-signing.”
What the housing market really needs, she said, are more streamlined mortgage laws across all states.
“Can you imagine how much money, time and resources we could save, if we didn’t have 50 different sets of laws, paperwork and legal-expertise requirements?” she said. “Again, there appears to be no real economic reason for the differences. Many of these laws date all the way back to the 1800s, and some were changed just after the Great Depression.”
Phoenix Business Journal © All Rights Reserved 2012
October 24, 2012
Phoenix-area home values have been climbing at the fastest rate of any major metropolitan area this year and the dramatic surge may continue to outpace the rest of the nation through the next year, according to the latest report released Tuesday by Zillow Inc.
The Zillow Home Value Index showed the Phoenix area had an average home value of $149,400 during the third quarter of this year.
That’s a 5.9 percent jump from the the previous quarter and a 20.4 percent-spike year-over-year — both of which were by far the biggest increases among 30 major metro areas the index examines, as well as the national average.
For example, the second largest quarter-over-quarter increase was 3.9 percent in Las Vegas, followed by a 3.8 percent rise in Denver, the report said. Year-over-year, San Jose, Calif. trailed far behind Phoenix at No. 2 with its 9.7 percent jump in home values, followed by the 8.8 percent rise in Denver.
Nationwide, the average home value was $153,800 in the third quarter — up by only 1.3 percent from the previous quarter and just a 3.2 percent rise year-over-year.
Although the steep incline of the Phoenix housing market will likely taper moving forward, Zillow anticipates the area will maintain its reign through the next year, the report said.
By the third quarter of next year, the Zillow Home Forecast expects that Phoenix home values will rise by another 8.5 percent, which, again, would be the largest projected increase of any major market.
“We’re likely seeing home values fall back into the negative range in some markets due to the close of the traditional home-buying season,” Stan Humphries, chief economist at Zillow, said in the report. “While that doesn’t mean the recovery has come off the rails – in fact, most markets have hit bottom – it does present a confusing environment for consumers. Looking forward, we expect to see home values bump.”
Phoenix Business Journal © All Rights Reserved 2012
September 13, 2012
The most important housing decision that most consumers face is whether to rent or to buy. So to help them with this decision, we took a look at the key market factors affecting the cost of homeownership. First off, asking home prices have started to rebound and have risen by 2.3% year over year in August (3.8% excluding foreclosures); however, rents have risen more (4.7%). This means that prices are lower relative to rents than they were a year ago. But more importantly, mortgage rates have fallen: the best rates this summer have been around 3.5%, while last summer rates were closer to 4.5%. Based on asking prices and rents during the summer of 2012, buying is now 45% cheaper than renting in the 100 largest U.S. metros, on average – that’s a savings of $771 a month. If you plan to stay in a home for 7 years, which is the average time that Americans traditionally live in a home before moving again, it is more affordable to buy than to rent in ALL of the 100 largest metros in the U.S.
Costs aside, the decision to rent or buy a home is very personal. There’s a strong emotional component: some people want the security of homeownership and others want the footloose freedom of renting. But the financial factors are also very personal because the decision to rent or buy depends on:
- Can you qualify for a mortgage at the best rate available?
- Which tax bracket are you in, and do you itemize your deductions?
- How long will you stay in your home?
To calculate whether renting or buying costs less, we assume people can get a low mortgage rate of 3.5%, itemize their federal tax deductions and are in the 25% tax bracket, and will stay in their home for seven years. First, we looked at all the homes for sale and rentals listed on Trulia in June, July and August 2012. On for-sale homes, we took the asking price and estimated what it would rent for; for rentals, we took the asking rent and estimated what it would sell for. That way, we can calculate the average rent and asking price for an identical set of properties in a metro area, for a direct apples-to-apples comparison. By looking at homes currently for sale or rent, we’re able to illustrate the actual housing options that consumers face right now.
Second, we estimated the total costs of renting and buying for the typical property in a metro over a seven-year period. We factored in all the costs of homeownership (e.g., closing costs, maintenance, insurance, taxes, etc.), along with the tax benefit of deducting mortgage interest and property taxes, as well as the proceeds from selling the home after seven years with modest home price appreciation. On the rental side, we factored in renters’ insurance and the security deposit. Finally, we calculate the net-present-value of all those costs to capture the opportunity cost of tying your money up in a down payment. This gives us the total cost of buying versus renting. We then calculated the dollar difference and percentage difference between renting and buying.
Finally, we looked at alternative scenarios of the costs of renting versus buying, by changing the mortgage rate, the income tax bracket for tax deductions, and the time horizon.
With a 20% down payment, a 30-year fixed mortgage rate at 3.5% and at the 25% federal tax bracket, homeownership is cheaper than renting in all of the 100 largest metros by a wide margin. There is no market where the financial decision is even close, so long as you plan to stay in the home for at least seven years, get 3.5% mortgage, and itemize your tax deductions. However, how much cheaper it is to buy a home than to rent really depends a LOT on where you live.
Buying is 24% cheaper than renting in Honolulu, 28% cheaper in San Francisco, and 31% cheaper in New York. On the other end of the spectrum, homeownership is extremely affordable in Detroit, where buying a home is 70% cheaper to buy than to rent, and 63% cheaper in both Oklahoma City and Gary IN.
Note: Cost of homeownership assumes that the home is sold after 7 years and includes closing costs, maintenance, insurance, property taxes and other costs. Cost of renting includes security deposit and renters insurance. Monthly cost is based on net present value of costs over 7 years. Monthly costs are based on the average across all properties listed in the metro area, including those for sale and those for rent, in summer 2012.
What does this mean in dollars? Buying is cheaper than renting by several hundred dollars a month in every large metro. The charts above show how the percent difference in buying versus renting may be smaller in San Francisco (-28%) than in almost all other metros, but the annual dollar savings is big ($899) because the rents and home prices there are so high – so even a smaller percentage difference means a big dollar difference. (Remember that we’re looking at the annual cost of buying or renting the typical listed home. Most homes listed are for-sale, and for-sale homes tend to be much larger than rentals, on average. That’s why the monthly cost of renting the typical home is higher than the actual amount most renters pay.)
But what if you can’t get the best mortgage rate, don’t itemize your tax deductions or stay in your home for less than seven years? Each of those raises the cost of homeownership, so buying wouldn’t be quite as good of a deal relative to renting. The best mortgage rates are available for people with the best credit scores – and a not-so-hot credit score could make your mortgage a full percentage point higher, which translates to at least a 10% difference in your monthly mortgage payment.
Itemizing your tax deductions lets you subtract your mortgage interest and property tax payments from your pre-tax income, which lowers your tax burden especially if you’re in a higher tax bracket. How much does not itemizing raise the cost of homeownership? It depends on your tax bracket and the amount of mortgage interest and property taxes you would deduct.
Selling a home in less than seven years after buying it means that you’re spreading your buying and selling closing costs overfewer years – making the average monthly cost of homeownership higher.
For example, in Los Angeles if you can (1) get a 3.5% mortgage, (2) are in the 25% tax bracket and itemize your deductions, and (3) stay 7 years, it’s 32% cheaper to buy than to rent.
Change any one of those scenarios, and buying is still cheaper than renting but less so:
- With a 4.5% mortgage instead of a 3.5% mortgage, buying drops from 32% cheaper than renting to 24% cheaper.
- Failing to itemize tax deductions drops buying from being 32% cheaper to 21% cheaper.
- Staying 5 years instead of 7 makes buying 22% cheaper.
But all three – the 4.5% mortgage, not itemizing, and staying only 5 years – makes buying only 1% cheaper than renting in Los Angeles. In New York, these same differences make buying 3% MORE expensive than renting instead of 31% cheaper. In fact, with a 4.5% mortgage, not itemizing and staying only 5 years, buying is more expensive than renting in Honolulu (by 13%), San Francisco (by 10%), and San Jose (by 4%).
In the other 96 of the 100 largest metros, though, buying is still cheaper than renting. In Atlanta, for instance, where buying is 57% cheaper than renting in the best of circumstances (3.5% mortgage, itemizing, and staying 7 years), buying remains 40% cheaper even with a 4.5% mortgage, not itemizing, and staying only 5 years. In fact, today’s low mortgage rates make it financially better to buy even if you only stay put for 3 years in many metros. But buying a home also involves a lot of time, emotional energy and financial risk, so we can’t really recommend buying a home that you plan to live in for just 3 years even if the financial calculation is in favor of buying. Money isn’t everything.
If Buying is So Cheap…Why isn’t everyone doing it?
Home sales are still less than halfway back to normal, and the homeownership rate continues to fall. The big obstacle holding back renters who want to buy is the down payment – even more than getting a mortgage. And keep in mind, in the metros where the cost of buying is less than half of what it would cost to rent over the long term, it still takes years to save enough for a down payment. It may be 56% cheaper to buy than to rent in Denver, for instance, but it takes more than 8 years to save enough for a down payment there. And high unemployment during the recession made it even harder than usual for people to save for a down payment. On top of that, people who lost their homes or took on lots of debt might not qualify for a mortgage. Bottom Line: Buying may beat renting in every major metro by a wide margin, saving consumers thousands of dollars a year, but buying still remains out of reach for many would-be homeowners.
Jed Kolko, Chief Economist, leads Trulia’s housing research and provides insight on market trends and public policy to major media outlets including TIME magazine, CNN, and numerous others. Jed’s background includes a Ph.D. in Economics from Harvard University and more than 15 years of publications and research management in economic development, land use and housing policy, and consumer technology adoption.
Trulia Pro Blog © All Rights Reserved 2012
August 9, 2012
Fewer deeply discounted foreclosures are being sold these days, and that means the median price of homes sold in the U.S. is on the rise.
The trend shows that the median — the midpoint between the highest and the lowest price of a home sold — is an imperfect measure of home prices. It can be skewed by shift in the mix of properties sold — a greater number of expensive properties sold in any given period means a higher median.
That said, the numbers coming out of the National Association of Realtors on Thursday were another bit of encouraging news for home owners and sellers, and for the broader economy.
The trade group said home prices posted the strongest quarterly increase in more than six years in the second quarter of the year. They actually rose in 75% of local markets.
Nationwide, the median price for single-family homes sold in the April-June quarter was $181,500, up 7.3% from the same quarter a year earlier, the Realtors’ group said. It was the biggest increase since the first quarter of 2006.
The improvement was seen around the country. Prices rose compared with last year in 110 out of 147 metro areas tracked by the Realtors’ group. Prices fell in 34 metro areas and were unchanged in three. In the first quarter, median prices rose in 74 cities.
Lawrence Yun, the trade group’s top economist, acknowledged that part of the price increase has resulted from fewer sales of lower-priced homes, where there is less inventory available. Nevertheless, Mr. Yun said it is “most encouraging to see a growing number of metro areas with rising median prices” because it is helps homeowners who owe more on their properties than their homes are worth to rebuild equity.
In the second quarter, however, home sales declined slightly, dipping 0.7% on a quarterly basis. They were up 8.6% from the same quarter a year earlier.
The metro areas showing the biggest increase in median prices from a year earlier were Detroit (29.2%), Phoenix (29%) and Boise, Idaho (21.7%). Areas showing big price declines were Bridgeport, Conn. (-12.9%), Edison, N.J (-9.5%) and Gulfport, Miss. (-9.4%).
Nationwide, “distressed property,” including foreclosures and homes at risk of foreclosure, accounted for 26% of second-quarter transactions, down from 33% a year earlier, the Realtors’ group estimated.
Realtors want to keep the market’s recovery going and are hoping banks will loosen their standards so that more potential buyers can get credit. “With gains apparent in all of the price measures, banks also should have more confidence in expanding mortgage credit to home buyers using safe but sensible standards,” said the group’s president Moe Veissi, owner of Veissi & Associates Inc., in Miami.
Wall Street Journal © All Rights Reserved 2012
June 21, 2012
WASHINGTON – The average rate on a 30-year fixed mortgage fell this week to a record low for the seventh time in eight weeks. Mortgage buyer Freddie Mac said Thursday that the average on the 30-year loan dropped to 3.66% from 3.71% last week. It’s the lowest rate since long-term mortgages began in the 1950s.
The average rate on the 15-year mortgage, a popular refinancing option, declined to 2.95%. That’s down from 2.98% last week and just above the record 2.94% of two weeks ago. Low rates could provide some help to the economy if more people refinance. When people refinance at lower rates, they pay less on their loans and have more money to spend.
Still, the pace of home sales remains well below healthy levels. Sales of previously occupied homes dipped in May to a seasonally adjusted annual rate of 4.55 million, although they are up from the same month last year.
Many people are still having difficulty qualifying for home loans or can’t afford larger down payments required by banks. Some would-be home buyers are holding off because they fear that home prices could keep falling.
Mortgage rates have been dropping because they tend to track the yield on the 10-year Treasury note. Uncertainty about how Europe will resolve its debt crisis has led investors to buy more Treasury securities, which are considered safe investments. As demand for Treasurys increase, the yield falls.
And the yield will likely fall even lower now that the Federal Reserve has said it will continue selling short-term Treasury securities and using the proceeds to buy longer-term Treasurys. That goal of the program is to drive long-term interest rates lower to encourage more borrowing and spending.
To calculate average rates, Freddie Mac surveys lenders across the country Monday through Wednesday each week.
The average does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount.
The average fee for 30-year loans was 0.7 point, unchanged from last week. The fee for 15-year loans was 0.6 point, down from 0.7.
The average rate on one-year adjustable rate mortgages fell to 2.74% from 2.78% last week. The fee for one-year adjustable rate loans was unchanged at 0.5 point.
The Associated Press © All Rights Reserved 2012
May 29, 2012
Metro Phoenix home prices are rising faster than anywhere else in the country, according to the latest national data.
The Case-Shiller Home Price Index shows the average existing home price in the Phoenix metro area in March increased 2.2 percent over February of this year. That’s the largest increase of any of the 20 major U.S. cities tracked. Seattle’s average home price climbed 1.7 percent during March, the second-biggest increase on the index. For the year, metro Phoenix also had the highest price increase: 6.6 percent. Denver ranked second with a 2.6 percent uptick in its average house price.
Metro Phoenix’s home prices started to climb in September and have steadily increased since then. Recent data showed the region’s median resale-home price was a little more than $138,000, a 24 percent increase since the post-boom low in August. The Case-Shiller report lags a few months because of the time it takes to compile national data and the seasonally adjusted average.
Nationally, Case-Shiller reports, March home prices posted their smallest decline since the crash that started in early 2008. Still, home prices remain far below previous highs. National and Phoenix home values are around mid-2002 levels.
azcentral.com © All Rights Reserved 2012
May 3, 2012
NEW YORK (CNNMoney) — Buying a home may never get any cheaper than this. Several housing experts are predicting that this year will be the last chance for bargain hunters to cash in on the best deals of the weak housing market.
With home prices down 34% nationally since 2006 and mortgage rates at historic lows, homes have never been more affordable — but it won’t stay this way for much longer.
Stuart Hoffman, chief economist for PNC Financial Services (PNC, Fortune 500), said he expects home prices to flatten out by the third quarter and start climbing by next year.
A number of factors will help bolster the housing market, he said, including a decline in the number of foreclosures and continued job growth. In addition, homebuyers will have better access to mortgages as they get their finances in order and improve their credit scores.
Some economists, like Trulia’s Jed Kolko, expect home prices to pick up even more quickly. Trulia’s data shows that the national average for asking prices already increased 1.4% in the first quarter of 2012, compared with the last three months of 2011.
Mortgage payments at lowest level in decades
“This is a strong indicator that we will start seeing home price indexes, like the S&P/Case-Shiller, start to report home price increases this summer,” he said.
Prospective homebuyers who’ve been sitting on the fence shouldn’t worry if they aren’t quite ready to make the leap.
Analysts are predicting that the initial price gains will be modest, at least, in most markets.
Hoffman, for example, is forecasting a 2% increase in 2013 compared with 2012. Meanwhile David Stiff, chief economist for Fiserv, predicts that prices will turn in the last quarter of 2012 and will rise 4.2% for the 12 months through September 2013.
Foreclosures start to fade. One major factor that will drive the trend is the cooling of the foreclosure crisis. Stan Humphries, chief economist for Zillow, said that the percentage of mortgage loans 90 days or more late, a good predictor of future foreclosures, is “falling fast.”
That percentage dropped 15% year-over-year to 3.1% through the end of 2011, according to the Mortgage Bankers Association. And the decline is accelerating: More than 70% of the decline came in the last three months of the year.
Before things slow down, however, buyers should brace themselves for a temporary spike in the number of foreclosures as banks start expediting the processing of hundreds of thousands foreclosures that were stuck in the system following the robo-signing scandal. That backlog should move more quickly now that new guidelines for processing foreclosures have been outlined in the $26 billion foreclosure settlement.
Many of the bank-owned properties currently coming out of the foreclosure pipeline are being snapped up by investors who are fixing them up and renting them out — often to those who were displaced by the foreclosure of their own home. That has helped to lift prices on foreclosed properties, according to Alex Villacorte, the director of analytics for Clear Capital, which specializes in housing market valuations.
Home buying much cheaper than renting
“That could have a significant impact on the market overall in terms of providing a rising floor to home values,” he said.
In some markets hit hard by foreclosures, the turnaround in prices is already underway. Phoenix recorded an 8.4% jump in home prices during the three months ended April 30, compared with the three months ended January 31, according to Clear Capital.
“It’s crazy,” said Tanya Marchiol, founder of Team Investments, a Phoenix real estate investing firm. “Stuff I was selling six months ago for $60,000 to $80,000 is now $90,000 to $110,000.”
Miami saw a 4.6% increase quarter-over-quarter through April, and Tampa, Fla., was up 4.4%, according to Clear Capital.
Goodbye 3.8% mortgage. In addition to home prices, mortgages could also move higher.
Mortgage rates have been at or near historic lows for much of the past six months. The average interest rate for a 30-year, fixed-rate mortgage has not topped 4.5% since July 2011 and this week, it hit 3.84%, a new low.
But rates aren’t expected to remain at these record-low levels much longer. As the economy continues to recover, rates will move higher, said Doug Lebda, CEO of LendingTree, the online lending site. Although, he said, they will “stay very reasonable.”
The Mortgage Bankers Association is forecasting that the 30-year fixed will hit 4.5% by the end of the year.
Greater demand for loans will help fuel the increase, according to Lebda.
6 Ways to get a great mortgage deal
Even though mortgage rates have been cheap, borrowing for home purchases has been sluggish. The Mortgage Bankers Association estimates that homebuyers will take out mortgage loans totaling about $415 billion this year, an increase of less than 3% compared with 2011. Next year, however, it forecasts that amount will almost double to $706 billion.
As housing markets stabilize and prices stop falling, homebuyers will be even more confident about buying, said Humphries.
“People can now see the light at the end of the tunnel,” he said. “And that can be enough to get them off the fence.”
Cable News Network © All Rights Reserved 2012
PHOENIX—As home prices continue to drop in most cities, a nascent real-estate rebound here holds lessons for the rest of the country.
This sprawling desert metropolis was one of the hardest hit housing markets during the bust. Phoenix home prices declined 55% from 2006 through the end of 2011, and Arizona’s foreclosure rate jumped to No. 3 in the nation in 2009. Hundreds of thousands of homeowners are underwater, meaning they owe more than their homes are worth. Now real-estate economists across the country are studying an early but surprisingly broad Phoenix turnaround. The sharp drop in home prices has brought new buyers into the market. Unlike other markets where housing recoveries have been snuffed out by big overhangs of homes for sale and foreclosed properties, inventories are lean here.
“Phoenix has hit a bottom,” says Thomas Lawler, an independent housing economist who was one of the first to warn six years ago that prices in overbuilt metros were poised to fall.
The nation’s hard-hit housing markets face a tough act: engineering a housing recovery without traditional trade-up buyers, many of whom are either unwilling or unable to sell because of huge price declines.
Phoenix has found a viable formula. Low prices are igniting demand from first-time buyers and investors who are converting the homes to rentals. The local economy is on the upswing with several big employers like Amazon.com Inc. and Intel Corp. hiring again, which is further increasing demand for housing. And the region is benefiting from a surge of buyers from Canada who are using their favorable exchange rate to scoop up bargains in the desert.
Local mom-and-pop investors are also playing key roles in soaking up supply. “I’m running my Realtor ragged looking at properties,” said Robert Gerundo, who last month stood inside a two-bedroom condominium, scribbling his signature on an offer to buy the unit for $50,200, slightly above the listing price set by the bank, which recently foreclosed on the unit.
Mike Jones flips real-estate signs for a Realtor, David Rod, as they are printed. Investors are buying many Phoenix properties and renting them out.
Mr. Gerundo has bought 13 properties in Phoenix in the past two years and rents them out for as little as $950 a month. The 49-year-old, who drives around in a Jaguar with a Rutgers sticker on it, says he is making so much money as a landlord that he quit his job last year in New Jersey as a banker.
Nationally, housing demand still remains weak and bank-owned sales are expected to rise this year, putting more pressure on prices. Many economists say they expect home prices nationally could fall by another 3% or so this year before hitting a bottom next year. Most expect that prices will rise little for several years.
U.S. home prices fell another 2% in the fourth quarter on a seasonally adjusted basis, according to the Standard & Poor’s/Case-Shiller index tracking 20 cities. But prices rose by 2% in Phoenix, the biggest increase of any metro area in the country. Over the past year, prices in Phoenix are down by 1.2%, the smallest drop since its prices started falling in 2006.
Other markets are showing signs of life, too, as the spring buying season gets under way. Recent job gains for Detroit’s auto sector have helped rev up sales in recent months. Home prices in Washington, D.C., have fared better than in much of the country thanks to better employment prospects from government-related hiring.
Big price drops, like those in Phoenix, are another key. In Detroit, prices are down by 46% over the past six years and have fallen to levels last seen in 1994. Sales have picked up in Miami, where prices are down by 51% over the past five years.
But low prices alone haven’t been enough to so stabilize other epicenters of the housing bust where job growth still lags. In Las Vegas, where prices have tumbled 62% since 2006, including 8.9% over the past year, the local economy is heavily dependent on tourism and gambling, both industries that haven’t recovered. “A lot of markets in the country have hit a bottom, but I just don’t see them coming back the way Phoenix has,” says John Burns, a home building consultant in Irvine, Calif.
The improving housing market in Phoenix isn’t much comfort to anybody who bought a home there a few years ago. More than 52% of mortgage borrowers owe more than their homes are worth, according to CoreLogic, a real-estate data company. And not everyone in Phoenix is convinced that the improvements will last, especially if the economy falters or oil prices soar.
Phoenix saw a small run-up in prices three years ago when federal tax credits spurred a buying frenzy, but prices dropped again once the credits expired. Others worry that banks have delayed foreclosures and will begin to saturate the market with more properties in the coming year. “It feels like a temporary bottom,” says Brett Barry, a real-estate agent who lists properties for Fannie Mae.
Such concerns haven’t discouraged buyers like Lloyd Sheiner from taking advantage of low prices to build an inventory of 143 homes, which he rents out to families that haven’t been able to hold on to their homes.
“The panic is over,” says Mr. Sheiner, an apartment and commercial real-estate investor who lives in Montreal and began buying 18 months ago after he concluded prices were too low.
His average renter, he says, is a family of four with parents who have jobs. “They’ve been sitting around their kitchen table with a $350,000 mortgage on a house worth $140,000,” he says. “And they’re saying to themselves, ‘Geez, what are we going to do? Do we spend the next 20 years of our life paying this down or do we start over?’ ”
His company, Living Well Homes, has built its own property-management infrastructure that allows tenants to submit work orders online and automatically deducts rent from their checking account. “We don’t go running around the valley banging on the door collecting rent,” he says.
Out-of-state buyers accounted for one-quarter of all purchases last month. One in every 25 sales went to a buyer that listed a Canadian address when registering the sale, according to the Cromford Report, a local real-estate publication. Many are flush with cash from a real-estate boom of their own in Canada and an exchange rate that has given Canadians unusual buying power.
Dean Selvey, a real-estate agent and investor who has built his business around marketing to Canadian snowbirds, last month set up a big booth at a two-day trade show in nearby Mesa called “Canadian Snowbird Extravaganza Celebration” that drew 5,000 attendees. “It’s chase the Canadians—that’s our market,” he says.
A few days later, Jon Mirmelli, a local real-estate agent who has bought nearly a dozen foreclosures as rentals, knocked on the door of a homeowner whose home was slated for a bank foreclosure auction. After introducing himself and informing the occupant about the imminent foreclosure sale, he popped the question: “If you’re not able to keep your house, would you be interested in renting it?”
From the porch, Mr. Mirmelli’s business partner sized up the condition of the three-bedroom house, which the current owner bought for $150,000 in a short sale two years ago. At courthouse auctions, homes are sold as is, meaning the buyers may have to evict the former owner.
Nearly 29% of homes sold last month went to buyers who indicated they planned to rent out the properties, according to the Cromford Report. That figure has been on the rise over the past two years. In mid-2010, the share stood near 15%.
Competition from investors is frustrating for aspiring first-time buyers like Adam Brenner. “This does not feel like a buyer’s market at all,” says Mr. Brenner, a pharmacist who estimates that he has looked at 60 houses since last fall. “You hear and read about how there are so many homes for sale, but once you start looking, it’s a pretty big shock.”
Many real-estate agents have reported more bidding wars in recent weeks, and some buyers are agreeing to escalation clauses, a bubble-era provision where they agree to pay a certain price above the highest offer.
Arizona makes it easier for banks to take back properties through foreclosure without going to court. The state saw the largest decline in the share of loans that were seriously delinquent or in foreclosure during 2011, according to Lender Processing Services. So-called judicial states such as Florida, where banks must process foreclosures by going through court, have seen growing backlogs, which some fear could eventually drag down Florida markets again in the future.
Now prices are firming up because fewer homes are selling out of foreclosure. Foreclosed properties accounted for 36% of all home resales in January, down from 55% one year ago and a peak of 66% in March 2009, according to DataQuick, a real-estate data firm. Those declines have fallen, in part, because banks are also becoming more efficient at approving short sales, where it allows a sale for less than the mortgage debt owed.
Mike Orr, founder of the Cromford Report, says concerns that banks will begin to dump more foreclosures on the market are overblown, at least in Phoenix. “People think there’s a glut of homes the banks are hiding somewhere, and that may be the case in other markets, but not here,” he says.
Still, a market recovery on paper means little to hundreds of thousands of underwater homeowners. Consider the case of Gil Monti. In just two days, he received five offers for this home—four above his asking price.
But that offers little comfort: He has been forced to sell the home, which he built 34 years ago and where he raised all three of his children, in a short sale for $275,000.
Mr. Monti was one of many people who refinanced his home repeatedly during the boom, pulling out cash along the way to fund home improvements and his kids’ college educations. He paid $100,000 in construction and land costs in 1978, and the home was valued at nearly $600,000 in 2006. He sold the property last month in a short sale because his “interest only” $473,000 mortgage reset last year, requiring full interest and principal payments.
He realized the depth of his troubles last year when a neighbor sold a home for just $199,000, a third of what Mr. Monti’s home was worth at the peak.
Mr. Monti isn’t alone. “The recovery that gives people like Gil the freedom to sell their property is not going to happen, possibly ever, for a lot of people here,” says Greg Markov, his real-estate agent.
Mr. Markov also represents Mr. Gerundo, the investor who bought 13 properties as rentals. “That recovery is already here” for Mr. Gerundo, Mr. Markov says. “His investment is not going down in value.”
Wall Street Journal © All Rights Reserved 2012
April 2, 2012
In 2011 we experienced a relatively stable and predictable market with very little price movement. In 2012 we have a market in which dramatic change is not only to be expected, but is already happening. Prices have moved in the single month of March 2012 more than they did in the whole of 2011. In these circumstances it is very difficult to appraise homes accurately, and in many cases appraisals are coming well below current market pricing. Normally this would act as a brake on price movement, but as so much of our market is cash-based, with the buyer waiving the appraisal contingency, the braking effect is less than normal.
Let us look at some basic numbers for March 2012 relative to March 2011. So for all areas & types we record the following:
Active Listings (excluding AWC): 14,175 versus 30,230 last year – down 53%
Active Listings (including AWC): 21,841 versus 37,246 last year – down 41%
Pending Listings: 11,964 versus 12,923 – down 7.4%
Monthly Sales: 8,782 versus 9,952 – down 11.8%
Monthly Average Sales Price per Sq. Ft.: $93.06 versus $82.13 – up 13.3%
Monthly Median Sales Price: $129,900 versus $110,000 – up 18.1%
So we can conclude that supply is down dramatically year over year, while pricing is clearly well up over last year at this time. It is no longer possible to measure demand freely since it is now heavily constrained by the lack of supply. Sales volumes are nearly 12% down on last year, so this suggests at first sight that demand has fallen. However we know that sales numbers would be much higher if more homes were available. That is why multiple bids have become the norm for most properties under $450,000 and this supply shortage means the upward pricing pressure is continuing.
We have a confirmed market price bottom during the third quarter of 2011 and we are now a comfortable 18% above that low point when measured by average $/SF, and 21% above when measured by monthly median sales price. The average $/SF for pending listings on Apr 1 is $91.68. The improvement in pricing is due to two separate factors:
- Prices are increasing when comparing like with like properties;
- The sales mix is changing in favor of higher priced normal sales and flips and against distressed sales (especially lender-owned homes).
With annual appreciation now in highly positive territory we repeat our analysis of which cities are looking strongest from that perspective. Here’s a ranking table which shows the change in monthly average sales $/SF between March 2011 and March 2012 for single family detached homes:
Coolidge – up 33.5%
El Mirage – up 23.5%
Maricopa – up 22.8%
Florence – up 20.7%
Buckeye – up 20.6%
Queen Creek / San Tan Valley – up 19.2%
Eloy – up 16.8%
Casa Grande – up 15.5%
Waddell – up 14.7%
Tolleson – up 13.8%
Phoenix – up 13.8%
Avondale – up 12.7%
Apache Junction – up 12.4%
Chandler – up 11.9%
Mesa – up 11.6%
Cave Creek – up 11.2%
Peoria – up 10.7%
Glendale – up 10.0%
Laveen – up 9.0%
Surprise – up 8.0%
Gilbert – up 7.5%
Wittmann – up 5.7%
Scottsdale – up 4.9%
Youngtown – up 4.9%
Anthem – up 4.7%
Litchfield Park – up 4.0%
Arizona City – up 2.5%
Goodyear – up 1.4%
Fountain Hills – up 1.2%
Sun City – up 1.2%
Tempe – up 0.8%
New River – down 0.7%
Paradise Valley – down 6.3%
Rio Verde – down 6.9%
Carefree – down 8.4%
Sun Lakes – down 8.4%
Sun City West – down 11.9%
Wickenburg – down 12.5%
It is surely encouraging that we have 18 cities showing double digit appreciation rates, including the giant cities of Phoenix and Mesa. Scottsdale is now well into positive territory but is held back by its relatively slow super-luxury segment, as are Paradise Valley and Carefree. The active adult cities are also much weaker than average.
There is another obvious pattern here. Those cities least affected by foreclosures are seeing the least improvement in pricing (with several still showing negative appreciation). Those with a history of very high foreclosure rates and huge price collapses in 2006 through 2009 are seeing the fastest price improvement as distressed properties start to become a much smaller part of the market. So for example we have Coolidge, one of the most devastated cities where developers pulled out and abandoned their subdivisions, and prices fell by 79% from April 2006 to February 2011. Coolidge has seen average monthly sales $/SF jump by over one third in 12 months. Now it has to be admitted this is a jump from an eye-wateringly low $27.45 to a still very low $36.65 per sq. ft., but 33% is still a healthy percentage growth in value in anybody’s book.
We also note that Pinal County is extremely strong, and much of the west valley and southeast valley is doing well. One exception is Tempe, where appreciation is a modest 0.8%. Tempe saw fewer foreclosed homes because it had very little new construction and therefore fewer problem purchase-money loans issued during the crucial bubble period of 2004 to 2007. Its pricing therefore stayed higher for longer than most of its neighbors.
So what we are seeing so far is primarily a strong bounce back for the over-corrected areas. We are still a long way below the long term trend line for Greater Phoenix pricing. So despite the increases so far, housing is still very cheap by any historic measure and relative to our surrounding states. The recovery is still in a very early phase and the supply shortage is yet to have a big impact on normal (non-distressed) transaction pricing.
The Maricopa County foreclosure statistics are:
New Notices of Trustee Sale: 4,487 versus 4,584 in February – down 2.1% for the month
Trustee Deeds Recorded: 2,091 versus 2,219 in February – down 5.8% for the month
To put the current levels of foreclosure in proper context we need to compare March 2012 to March 2011:
New Notices of Trustee Sale: 4,487 versus 5,693 – down 21.2%
Trustee Sales: 2,091 versus 5,173 – down 59.6%
Since fewer than half of the trustee deeds were issued in favor of the beneficiary, we have a lower supply of REO properties coming onto the market than we have seen since 2007. There is still much talk of a “shadow inventory” supposedly manipulated in a conspiracy by the banks, but no sign whatsoever of it actually coming onto the market any time soon. Anyone attempting to buy a residential property in Greater Phoenix would love to see some of that mythical “shadow inventory” emerge in volume to relieve the severe shortage of homes currently offered for sale. My advice is: don’t hold your breath!
The Cromford Report © All Rights Reserved 2012
“Is now the time to buy?” “Has real estate hit bottom?” “When will prices start to rise?” These are the questions dominating the minds of people considering Arizona Real Estate. Because no one knows the future with absolute certainty, market experts rely on a broad range of statistics for answers.
At the following link, you’ll find current information that may assist you in making this very important decision.
Arizona Turns to Short Sales
An agency in Arizona created to prevent foreclosures has turned instead to helping people sell their homes for less than they owe, officials said this week. “Save Our Home AZ” can’t modify more than a handful of Arizona’s sour mortgages, so the $268 million fund is aiding short sales.
The $268 million was allocated to Arizona by the US Treasury Department beginning in 2009 as part of the Hardest Hit Fund, which went to five states slammed by the housing crisis. The fund has since expanded to 18 states and the District of Columbia, all of which have programs specifically tailored to their needs. “The modification effort has been pretty much a failure,” said Michael Trailor, director of the Arizona Department of Housing. “The short sale may be the best tool we have considering the failure of modification.”
The fund will pay closing costs and can provide the seller with up to $4,500 to pay for a move in a short sale. The Treasury does allow fund money to be transferred from one program to the next so all of the money is, in essence, available for unemployment and short-sale assistance. But hurdles remain. Restrictions on debt-to-value ratios mortgages that are deeply under water – and on cash-out refinances keep many from tapping into the fund. “There are a lot of people who need this help, and they’re not able to get it,” said Todd Francis, chief operating officer of Neighborhood Housing Services of Phoenix.
Unlike many other states, Arizona currently does not assist homeowners who performed a cash-out refinance, which means taking out a loan on the property without repaying the original lien. The rule is meant to keep from helping irresponsible borrowers who took out loans to buy luxury items. Trailor estimated that 20% of Save Our Home AZ’s denials are because of cash-out refinancing. But some of those people used the money for medical bills, home improvements or other uses that are sensible in Trailor’s eyes. He said Save Our Home AZ is trying to exempt the more-responsible borrowers. That leniency could open up the unemployment program to many more Arizona homeowners, said Liza Vasquez, a foreclosure counseling supervisor with Neighborhood Housing Services of Phoenix.
Spending Bill Passes
A stop-gap spending bill won final US congressional approval yesterday to avert a threatened government shutdown that had subjected lawmakers of both political parties to public scorn. That will give the full 435-member House time to return from a week-long recess and provide anticipated final approval on Tuesday to a Senate deal that would fund the government through Nov. 18. Leaders in the Senate reached the bipartisan agreement Monday after the Federal Emergency Management Agency said it could get through Friday with the money on hand.
That ended a stalemate over whether additional emergency relief had to be offset with spending cuts. The battle marked the third time this year the sharply divided Congress had pushed the US government to the brink. Earlier fights took the government to the edge of a shutdown in April and to the edge of default in August, drawing outrage and ridicule from the public that pushed Congress’ approval rating to a record low of 12%. The newest deal would fund the government for an additional six weeks at an annual rate of $1.043 trillion, $7 billion below previous funding levels.
During this period, FEMA’s disaster relief fund would get $2.65 billion, beginning on Saturday, Oct. 1, the start of the new fiscal year.
NAR – Pending Home Sales Down
The Pending Home Sales Index,(PHSI) a forward-looking indicator based on contract signings, declined 1.2% to 88.6 in August from 89.7 in July but is 7.7% above August 2010 when it stood at 82.3, according to the National Association of Realtors (NAR). The PHSI in the Northeast fell 5.8% to 63.6 in August but is 1.3% higher than August 2010. In the Midwest the index declined 3.7% to 76.2 in August but is 8.2% above a year ago. Pending home sales in the South rose 2.6% to an index of 96.9 and are 7.6% higher than August 2010. In the West the index declined 2.4% to 108.1 in August but is 10.5% above a year ago. Lawrence Yun, NAR chief economist, said the market is underperforming given a pent-up demand in household formation. “We continue to experience a pattern in which financially qualified home buyers, willing to stay well within their means, are being denied credit – a factor in elevated levels of contract failures,” he said.
“Based on the improving fundamentals of population growth, some job additions, rent increases and higher stock market wealth, we should be seeing existing-home sales closer to 5.5 million, but are expecting just over 4.9 million this year. The unnecessarily restrictive mortgage underwriting standards are attenuating the housing recovery and are a risk factor for the overall economy.”
Weak Income Drives Spending Down
The Commerce Department said real consumer spending was unchanged after rising 0.4% in July. Nominal spending was up 0.2% after increasing 0.7% in July. The increase last month was in line with economists’ expectations. Consumer spending accounts for about 70% of US economic activity. Weak incomes as employment growth ground to a halt and earnings fell hurt spending in August.
Income slipped 0.1%, the first decline since October 2009, with private wages and salaries dropping $12.2 billion. Economists had expected income to edge up 0.1%. Consumer spending growth slowed sharply to a 0.7% annual pace in the second quarter after advancing 2.1% in the first three months of the year. Last month real spending on goods fell 0.2%, while services ticked up 0.1%.
Disposable income was unchanged for the first time since September, but when adjusted for inflation fell 0.3%, the largest drop since October 2009. With real disposable income weak, savings fell to an annual rate of $519.3 billion, the smallest since December 2009, from $550.5 billion in July. The savings rate dropped to 4.5%, also the lowest since December 2009.
Treasury to Help Military Qualify for HAFA
The Treasury Department clarified guidelines for the Home Affordable Foreclosure Alternatives (HAFA) program yesterday. The move is an effort help more military service members qualify for short sales and deeds-in-lieu of foreclosure. Enough military families raised an issue with a caveat in the program: a permanent change of station was not being considered a financial hardship. A Treasury spokesperson said enough phone calls through the Homeowner’s HOPE Hotline persuaded officials to make the clarification. “An example of such hardship includes a service member citing a ‘Permanent Change of Station’ order as the basis for his or her financial hardship when requesting HAFA even if such service member’s income has not been decreased, so long as the service member does not have sufficient liquid assets to make his or her monthly mortgage payments,” the Treasury said in a directive sent to mortgage servicers Thursday.
HAFA launched in April 2010 as another way for homeowners to avoid foreclosure if they fell out of a Home Affordable Modification Program trial or permanent workout. But the program has underwhelmed. Through July, servicers completed 12,888 short sales and DILs, up from 10,438 the previous month. Holly Petraeus, assistant director of the office service member affairs at the Consumer Financial Protection Bureau said too many military families are struggling with negative equity but remained current on their home up until they receive orders to move. “Service members in this situation face an array of tough choices that can include years-long separation from family, foreclosure, and even financial ruin,” Petraeus said. “I applaud the Department of Treasury for updating its program guidance to recognize that military orders to move can trigger a genuine hardship for military homeowners.”
Fed’s Balance Sheet Shrinks
The Fed’s balance sheet — a broad gauge of its lending to the financial system — was $2.834 trillion on Sept. 28, down from $2.841 trillion on Sept. 21. The Fed’s ownership of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and the Government National Mortgage Association (Ginnie Mae) fell to $870.9 billion from $879.2 billion last week. The Fed’s holdings of debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Bank system was unchanged from last week at $108.3 billion. Meanwhile, the Fed’s holdings of Treasuries totaled $1.665 trillion, up from $1.663 trillion the previous week.
On Friday, the US central bank will announce the first schedule for latest bond buying operation, which involves the sale of its Treasuries that mature in three months to three years and the purchase of US government debt with maturities of six years or more. Last week, the Fed announced this program with the goal to lower mortgage rates and long-term borrowing costs in a bid to stimulate borrowing and investments, whose combined sluggish growth has been a drag on the overall economy. It also said it will use proceeds from maturing agency debt and MBS to reinvest into agency MBS.
Meanwhile, the Fed’s overnight direct loans to credit-worthy banks via its discount window averaged $29 million a day in the week ended Wednesday, up from $23 million a day in the previous week.
Las Vegas Sales Spike
Las Vegas home sales jumped to their highest August level in five years, with 5,412 homes sold last month, housing markets analytics firm DataQuick said Thursday. That’s up 19.3% from July and 26.4% from a year ago. Investors and first-time buyers energized the market by snapping up homes in the sub-$150,000 market, DataQuick said.
Meanwhile, home prices either stayed the same or trended downward. Overall, the median sales price hit $112,500 in August, its lowest level in more than 16 years based on statistics from real estate data providers quoted by DataQuick. That is 63.9% lower than the median price peak of $312,000 reached in November 2006. In terms of financing models, government insured FHA loans represented 39.9% of all home purchase loans.
Cash buyers dominated the market, purchasing 52.3% of the Las Vegas areas homes in August, up from 48.8% last year. The median price paid by cash buyers was $84,000 for a home in Vegas, down from $85,243 in July and $100,000 a year ago. Absentee buyers – or those considered investors and vacation homeowners – bought up 47.1% of the homes sold in August. That is up from 43.3% a year earlier. Absentee buyers paid a median price of $92,000 in August, down from $110,000 last year.
New home sales played a small role in last month’s market, making up only 9.8% of all transactions. August condo sales represented 20.3% of total Vegas sales, compared with a 10-year monthly average of 13.5%. Distressed sales, meanwhile, represented 70% of Vegas resales. That segment includes both foreclosed homes and short sales. Additionally, Clark County – the county seat of Vegas – noted a spike in default notices in August, with filings growing 58% over July, hitting 5,354. ” A significant portion of the month-to-month gain in NODs reflects a nearly 190% increase between July and August in the number of NODs filed where Bank of America is listed as the ‘beneficiary’ – from 747 in July to 2,163 in August,” DataQuick said. DataQuick says the surge in filings is attributed to the fact that some lenders have new strategies for working more aggressively through backlogs of delinquent loans.