More Record Lows for Mortgages


Original Post Date: July 30, 2010

By: Nathan Becker

U.S. mortgage rates fell again in the past week, with the average rate on 30-year and 15-year fixed-rate mortgages furthering record lows, according to Freddie Mac’s weekly survey of mortgage rates.

Rates have remained at or near record lows as the Treasury market has rallied amid stock-market volatility. A rally in Treasurys pushes yields lower, and mortgage rates generally track those yields.

“For the sixth week in a row, interest rates on fixed-rate mortgages eased to all-time record lows during a week of mixed housing-data reports,” said Freddie Chief Economist Frank Nothaft.

Mr. Nothaft noted that the number of markets experiencing increases in home prices appears to be growing, citing recent data from the S&P/Case-Shiller Indexes. But he also highlighted last month’s decline in existing-home sales.

The 30-year fixed-rate mortgage averaged 4.54% for the week ended Thursday, down from the prior week’s 4.56% and 5.25% a year ago. The rate sits at the lowest point since Freddie began tracking it in 1971.

Rates on 15-year fixed-rate mortgages were 4%, down from 4.03% and 4.69%, respectively. It is at the lowest point since 1991, when Freddie started tracking it.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.76%, lower than the prior week’s 3.79% and 4.75% a year earlier. One-year Treasury-indexed ARMs were 3.64%, down from 3.7% and 4.80%, respectively. The latest figure is the lowest since Freddie started following that loan type in 1984.

To obtain the rates, the mortgages required payment of an average 0.7 point. A point is 1% of the mortgage amount, charged as prepaid interest.

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New home sales bounce back in June


 Original Post Date: July 27, 2010

By: Roger Vincent

Sales of newly built houses in the U.S. rebounded overall in June from May’s record low but still continued to drop in the West.

The Commerce Department said Monday that new homes sold at a seasonally adjusted annual rate of 330,000 units in June — 23.6% above the revised May rate of 267,000 but 16.7% below the June 2009 figure. It was the second-lowest sales pace since the government began collecting such data in 1963.

Sales were up in three of four regions. The Northeast showed the biggest gain at 46.4%, followed by the South at 33.1%. Sales rose 20.5% in the Midwest but dropped 6.6% in the West. The median price of a new home slid 1.4% to $213,400 from $216,400 in May.
Sales of new and resale homes were expected to wane after a popular federal tax credit of as much as $8,000 for buyers expired at the end of April.

“If there’s a bright spot, it’s that new home inventories remain extraordinarily lean,” said Michael D. Larson, an interest rate and housing analyst with Weiss Research. “We have fewer houses looking for buyers than we’ve had at any point in the last 42 years.”

Even that somewhat good news, though, comes with an asterisk, Larson said. There is so much competition from distressed sales of existing homes that builders aren’t able to set their prices at levels they want.

“I expect the housing market to remain challenging for some time,” he said, “especially given the ongoing weakness we’re seeing in the labor market.”

A slightly more bullish analyst said two figures in the Commerce Department report point to improvements ahead. First, the number of new homes for sale slipped to its lowest level since September 1968, said Patrick Newport, an economist at IHS Global Insight.

“At some point, probably soon — since we expect job growth to stimulate housing demand — builders will need to restock by ramping up on starts, or they will lose sales,” Newport said.

The other positive figure to Newport was a drop in the median time for a sale, known as the turnover rate, which fell by 1.7 months to 12.4 months. That was the shortest turnover rate in a year and the largest drop ever.

He forecast that new home sales will slip to 368,000 this year from 374,000 last year but pick up next year to 528,000 and continue growing in 2012 to 781,000.

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Home prices tick up 1.3% in May


Original Post Date: July 28, 2010

By: Alejandro Lazo

Home prices posted strong gains in May as a federal stimulus program boosted sales. But many experts predict the housing market to soften this year as the effects of government support wane.

Prices of previously owned single-family homes rose 1.3% in May over April and 4.6% over May 2009, according to the Standard & Poor’s/Case-Shiller index of 20 metropolitan areas, a closely watched measure of prices.

Federal tax credits of up to $8,000 drove sales during the spring; first-time buyers flooded into the real estate market, boosting sales of entry-level homes. The credits expired April 30 but will probably affect prices in coming months as consumers close their deals and sales are recorded.

“The spring is a particularly strong season for the housing market, and then of course you had this boost provided by the government,” said Dan Greenhaus, chief economic strategist for Miller Tabak & Co. “But it is still hard to argue that the supply-and-demand fundamentals don’t suggest further declines in prices.”

Some signs of softening have already emerged. Sales of previously owned U.S. homes fell 5.1% in June, a national trade group said last week, and economists expect further drops when July figures are released. The number of homes taken back by banks through foreclosure is also on the rise as financial institutions clear a backlog of bad loans on their books.

“While May’s report on its own looks somewhat positive, a broader look at home price levels over the past year still do not indicate that the housing market is in any form of sustained recovery,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s. “Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level.”

Home prices in California cities continued to appreciate on a month-over-month basis, the non-seasonally adjusted index showed, with Los Angeles up 1.7%, San Diego up 1.1% and San Francisco up 1.7%.

Other cities that gained in May included Minneapolis with the biggest gain, 2.8%; Atlanta, 2%; Boston, 1.6% and Dallas, 1.5%.

Las Vegas was the only city out of 20 to fall in May, declining 0.5%.

“They just had so much oversupply,” said Robert Dye, senior economist for PNC Financial Services Group. “There was a glut of condos built during the height of the housing boom, and they are still digging their way out of the recession.”

Adjusted for seasonal variations, the Case-Shiller index was up 0.5%. But Standard & Poor’s has warned that the index’s adjusted version is no longer a reliable gauge of prices because of distortions caused by the economic crisis.

Meanwhile, the uptick in foreclosures appears to be helping the U.S. rental market.

Landlords are seeing a surge in people renting as homeownership falls and younger renters enter the market, according to MPF Research in Carrollton, Texas. The group said Tuesday that the number of occupied apartments increased by 215,000 in the 64 biggest markets during the first six months of the year. That was almost twice the units added in all of 2009.

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Report: Foreclosures Reduce Home Values by 27%


Original Post Date: July 26, 2010

By: Nick Timiraos

On average, a foreclosure reduces the value of a house by 27%, says a new paper from an economist at the Massachusetts Institute of Technology and researchers at Harvard University.

In the study, which is due for publication in the American Economic Review, MIT economist Parag Pathak and Harvard researchers John Y. Campbell and Stefano Giglio conclude that a foreclosure puts a much bigger dent in a home’s value, compared to a forced sale as a result of bankruptcy or the death of the owner.

Mr. Pathak says he’s not surprised that there’s a discount due to foreclosure, but says, “It is surprising that it’s so large,” according to a press release. The paper uses data on house transactions in the state of Massachusetts over the last 20 years.

A forced sale as a result of the owner’s death chips only 5-7% off the price of the home, and a bankruptcy filing drops the home value by an average 3%, the researchers found.

The presence of a foreclosed home in a neighborhood, which can often become a blight on the community, drops the value of all homes within 250 feet by 1%, on average.

Foreclosure discounts are larger for low-priced properties in low-priced neighborhoods, the authors conclude, “which suggests that foreclosing mortgage lenders face fixed costs of homeownership, probably related to vandalism, that induce them to accept absolute discounts that are proportionally larger for low-priced houses.”

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Supply of Homes Set to Grow


Original Post Date: July 27, 2010

By: Robbie Whelan

Sales of new homes are near 47-year lows, yet the supply of new and existing homes is expected to grow in the months ahead as construction ramps up and a wave of foreclosed homes hits the market.

In June, new-home sales were running at a seasonally adjusted annual rate of 330,000 units, the Commerce Department said Monday. While that was up 23.6% from the all-time low of 267,000 in May, the June figures were the second lowest on record.

“What we’re really seeing here is that new-home sales are at what I’d call rock bottom,” said Steve Blitz, an economist at Majestic Research in New York. “The last time we were running these kinds of numbers was the 1982-1983 recession, when we had 100 million less people.”

LPS Applied Analytics, a firm that tracks mortgage data, said Monday that there were 4.56 million loans in default or in some stage of foreclosure in June, down slightly from May. But the number of new foreclosures initiated on properties backed by Fannie Mae and Freddie Mac increased sharply, rising 21% in June from May.

The rise in foreclosures on Fannie and Freddie properties reflects the failure of many troubled borrowers to receive permanent loan modifications plans, analysts said. Having exhausted all options to rescue their homes, many troubled borrowers may now be giving up.

“Looking at the numbers you’re seeing about this pickup in foreclosure starts, it’s hard to see how it’s not going to translate into elevated levels of [properties taken over by banks] down the road,” said Herb Blecher, an analyst at LPS.

Home builders, which began buying up land lots late last year in anticipation of an economic and housing rebound, are stuck with thousands of acres that are prone to lose value as the market struggles. Many will build homes on the land, rather than write off its value and wait for the market to improve.

“Builders are willing to pay a premium to not have that risk on their hands. They’re still facing a tremendous amount of stress,” said Brad Hunter, chief economist at Metrostudy, a housing-market research firm based in Houston. “They’re discounting the homes, they’re making very small profit margins, but they’re building homes. They’re very interested in securing market share.”

Several former bubble markets are seeing the biggest increase in home construction. According to Metrostudy, new-home starts in the second quarter show signs of rising 68.1% in South Florida, 83.7% in Naples/Ft. Myers, 65.1% in Las Vegas and 59.7% in Denver from the same period in 2009.

Other indicators also point to builders preparing to increase home construction, despite lagging sales. The number of finished vacant lots, or parcels of land that have been developed and readied for building, stands at about 1.2 million nationwide, according to Metrostudy, or just 5% below the peak in late 2008.

Most metro areas are flush with vacant homes as well: Metrostudy found that of the 48 metro areas the firm covers, only four—northern Virginia, San Antonio, Houston and Baltimore—have what is considered a “balanced” inventory of unsold homes, or about three months’ supply or less.

Coastal Southern California, which includes many of the cities near Los Angeles, has an ample supply of builder-ready land—about two years’ worth—owned by banks, developers, investors, the government and the builders themselves, which are starting construction in earnest.

Irvine Co., a large land developer and master planner in the coastal region, said it presold 570 homes in the northern portion of its Irvine Ranch project in the first six months of the year, and the $300 million construction will begin soon. The company also has plans to start 700 to 800 additional homes in the coming months, using builders both public and private, including KB Home Inc., TRI Pointe Homes Inc., Van Daele Homes and Brookfield Homes.

“We’re doubling down,” said Dan Young, who heads Irvine Co.’s community-development and home-building division. “While the national home builder is probably still right to say things are still weak, and the mass market is not back, we are seeing improvements in local markets.”

But as inventories grow, it could put further downward pressure on home prices. The median price of a new single-family home has been falling steadily since its 2007 peak of $247,000. Monday’s numbers put the median price in June at $213,400.

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Credit rescoring can help you qualify for a mortgage


Original Post Date: July 25, 2010

By: Kenneth R. Harney

Reporting from Washington — Call it the great real estate disconnect of 2010: Mortgage rates have been at half-century lows and home prices have stabilized, but applications for mortgages to buy houses have declined most weeks during the last three months, as measured by the Mortgage Bankers Assn.

What’s going on here? Shouldn’t 30-year fixed-rate loans well below 5% be flying off the shelf? Economists say part of the reason is the expiration of the federal home purchase tax credits, which encouraged thousands of buyers to accelerate their transactions — starting with mortgage applications — into the early spring months to qualify for the April 30 contract deadline.

But other key factors are at work: More stringent underwriting standards imposed by private lenders, declining consumer credit scores in the wake of the recession, and rule changes by Fannie Mae, Freddie Mac and the Federal Housing Administration have all combined to make qualifying for a new mortgage more challenging than it has been in years.

Take credit scores. While most lenders have raised the bar on minimally acceptable scores, Fair Isaac Corp., creator of the widely used FICO score, says there has been a deterioration in millions of Americans’ scores during the last two years. More than 25% of all consumers who have active credit files — roughly 43 million people — now have FICO scores of 599 and below. On Fair Isaac’s scale, which runs from 300 (highest risk) to 850 (lowest risk), a 599 score is considered unacceptable by most lenders.

In fact, since the housing boom went bust, lenders prefer to see minimum scores well into the 700s. Fannie Mae, for instance, gives its best combinations of rates and fees to applicants with 740-or-higher FICO scores.

How can buyers deal with the tougher rules? Tops on the list: Be aware that there are work-arounds and creative solutions to some of the roadblocks. For example, say your credit scores appear too low to qualify for the mortgage you need. Ignore the online and junk-mail “credit repair” come-ons that promise miraculous FICO-score improvements overnight. They are often rip-offs and may not even be legal in some instances.

However, an experienced mortgage broker or retail loan officer can get your credit file into a “rapid rescoring” program that just might get you the legitimate lift you need to qualify. Rapid rescorings performed by independent credit reporting firms — most of them members of the National Credit Reporting Assn. — use procedures approved by the three major credit bureaus to make direct changes to the information contained in credit files.

If there are documented errors in the file, or omissions that are dragging down your scores behind your back, the rescorers connect you, your creditors and the national bureaus — Equifax, Experian and TransUnion — to get the problems fixed. In some cases, rescorers can even spot steps you can take, such as cutting your usage percentage on a particular account, that will boost your score immediately.

Most rescorings take three to five days and cost an average of $30 per “tradeline” or credit account per borrower, says Marty Flynn, president of Credit Communications Inc. in San Ramon, Calif., a credit reporting firm. A typical rescoring costs from $90 to $200. Though extensive rescorings can push FICO scores up dramatically, Flynn said the average increase is more like 25 to 32 points. If you’ve been an irresponsible deadbeat, of course, rescoring your files won’t help much or at all.

Steve Stamets, a loan officer with Union Mortgage Group in Rockville, Md., said rapid rescoring can rack up transaction costs — and even pinch loan officers’ revenue — when an applicant’s scores are being depressed by issues in multiple accounts. One recent applicant had problems with three separate credit tradelines, throwing the entire mortgage application into jeopardy. Straightening them out cost $270.

“We got [the client] above the 620 FICO he needed” to be approved for the mortgages, Stamets said, “but believe me, it took some work.”

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Mortgage Delinquencies Fall in June, Still Near Record Highs


Original Post Date: July 26, 2010

By: Nick Timiraos

After rising in May, the rate of mortgage delinquencies and foreclosures fell in June.

Some 9.39% of all loans were 30 days or more past due, down from 9.54% in May, according to LPS Applied Analytics, which tracks loan data. An additional 3.69% of mortgages were in some stage of foreclosure, down from 3.72% in May and the record high of 3.81% in March.

The ratio of loans that were seriously delinquent, or 90 days or more past due, to the amount of loans in foreclosure still shows a sizeable overhang but fell for the second straight month, to levels last seen last September. The fact that there are still more than double the number of delinquent loans than loans in foreclosure suggests that the glut of bank-owned properties will continue to weigh on housing markets for many months to come.

Foreclosure starts increased sharply during the month on loans owned or guaranteed by Fannie Mae and Freddie Mac as more government loan-modification trials failed to convert to permanent modifications. On Friday, Freddie said that its share of seriously delinquent loans fell for the fourth straight month, to 3.96% in June.

Separately, the S&P/Experian index of consumer credit defaults showed that that mortgage defaults were down by 5% in June from May, and down by 45% from one year ago. Second mortgage defaults were flat from one month earlier.

Data from Equifax and Moody’s showed that mortgage delinquencies had the largest increase in San Diego; Sacramento, Calif.; and Charlotte, N.C. during the second quarter.

For the year ended in June, delinquencies were up most sharply in Phoenix, Seattle, and Charlotte, while St. Louis, Washington, and Denver posted the largest declines.

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59,000 see taxable property value rise


Original Post Date: July 22, 2010

By: Jonathan Lansner and Jeff Collins

Some 59,000 Orange County property owners will get a likely unexpected surprise in their annual value review for tax purposes: their taxable values of these residences will rise a collective $2.9 billion.

In an era of falling property values, the Orange County Assessor found that some slices of Orange County are enjoying a bit of a real estate rebound. Many taxpayers forget that the county can raise your taxable value in excess of the mandated cap on increases (this year is a bit odd, so there’s no mandated increase) if your value has previously been pruned and remains below full Prop. 13 value.

And, remember, taxable values determines one’s tax bill. (The valuation notice is in the mail, by the way!) Also, values are set as of Jan. 1.

Some of these 59,000 value restorations will see increases greater than 5% year to year. Assessor Webster Guillory notes that was no  pattern as to where these value hikes occurred. “The market is mixed,” he says.

Overall, the Assessor report says …

  • 300,000 property values were reviewed, including “single-family homes, townhouses, condominiums, multi-family apartments, commercial/industrial buildings and timeshares.”
  • 148,000 of these Orange County properties got taxable values reduced or kept the same.
  • 78,000 residences got further back-to-back decreases vs. over 160,000 last year. To the Assessor, “This reduction is reflecting a stabilizing residential real estate market.”
  • Over 7,000 commercial, industrial, and multi-family properties got value reductions vs. about 1,800 last year to over 7,000 properties this year. To the Assessor, “The market for these properties continued to decline in 2009.”

One quirk this year is that the Prop. 13 cap on increases on taxable values actually was a decrease of 0.237% for this 2010-2011 tax year. Why? Because the cap is based on a statewide Consumer Price Index, a benchmark that fell in 2009 — the first drop since Prop. 13 passed in 1978. So for many taxpayers, those with market values in excess of their discounted Prop 13. values, their tax bill will fall modestly in the coming year.

When it all added up, Orange County secured property roll totaled $396.1 billion, down $1.69 billion or 0.43% than last year. Orange County’s unsecured roll — business personal property, plus marine and aircraft  — was $20.6 billion, off $340 million or 1.61%. Combined, it’s $417 billion, down $2 billion in a year.
Since the Assessor’s Office does its valuations based on property trends, we had to ask if Guillory had seen evidence that the worst was over for local real estate. He told us:”We’re not there yet .. that a market bottom is here.” He adds: “Look across all property types, they’re all behaving differently … the market is not homogeneous”

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Awful Real-Estate Listing Photos: How Not to Take Them


Original Post Date: July 22, 2010

By: Sarah Max

With the market in a post tax-credit slump, you’d think home sellers would be bringing their A-game in trying to unload their property. But a search through some recent home listings reveals some pretty horrid house photos. A recent post on Seattle Bubble has some great examples of bank-owned listing photos that would scare away most buyers, save for maybe Gomez and Morticia Addams.

You don’t need to be an expert in consumer psychology to know that when buyers troll through a sea of online listings, they’re going to click on the pretty pictures and ignore those showing unkempt yards or an explosion of chintz. Yet, many sellers – and the real estate professionals they’ve hired to know this stuff – are still so bold, or clueless, that they showcase their homes with really, really bad photos.

Of course, taking good listing photos isn’t just about cutting the grass and asking the neighbor to move his pick-up truck away from your front curb. It means staging the shot, finding the best angles and paying attention to lighting, says Larry Lohrman, a retired real estate agent who offers detailed tips on his site,

Here are some Do’s and Don’ts:

  • Don’t clutter your listing with a lot of pictures just for the sake of having… a lot of pictures, says Pat Giles, vice president of marketing and interactive marketing for John L. Scott in Seattle. Every picture should have a purpose and be consistent with look and feel.
  • Do put extra effort into the primary exterior shot. This shot is the virtual equivalent of curb appeal. If buyers don’t like what they see, they won’t click further. Take this shot about 10 or 20 feet above street level, says Mr. Lohrman. Put your garbage cans away, pull the ‘For Sale’ sign out of the yard and make sure your car – or anything else that detracts from your house – is out of the picture.
  • Do pay attention to the weather. A professional photographer can make your house look good rain or shine, but too much of either isn’t necessarily a good thing. “If it’s too sunny you get a lot of shadows,” says Linda Monforton, a virtual tour photographer for Coldwell Banker Select in Tulsa, Ok. Seasons are also something that buyers pay attention to, at least subliminally. If you’re marketing a ski house in January, pray for snow. But if the house hasn’t sold by spring, take a new exterior shot.
  • Do rearrange the furniture. Whether you want to show off a room’s best features, make it seem more spacious or get that outdated La-Z-Boy out of the shot, the time you put into staging a room before you snap photos can pay dividends. Pay particular attention to lighting; turn on overhead lights, open the drapes, or remove them altogether. Another secret to nailing a real estate shot: Use a wide-angle lens, says Mr. Lohrman.
  • Don’t give Fluffy or Spot a starring role in the photo. Unless you’re bent on selling exclusively to dog or cat lovers, keep your pets – or any signs of them – out of listing photos since buyers may associate them with bad smells, allergens or patchy yards. “The worst one is when people leave cat food dishes on the counters,” says Ms. Monforton, virtual tour photographer for Coldwell Banker Select in Tulsa, Ok.
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Housing: Right Back Where We Started?


Original Post Date: July 19, 2010

By: Robbie Whelan

With all the gloom and doom in the present conversation about the national housing market, you’d think we were recovering from a complete financial meltdown instead of the expiration of the first-time homebuyer’s tax credit.

Funny coincidence about that—these days, it seems like everyone, from the analysts to the big builders, is talking about how July 2010 looks a whole lot like April 2009, when the market was just emerging from the darkest days of the financial meltdown.

This morning, the National Association of Home Builders/Wells Fargo Housing Market Index- a monthly yardstick for investors and market-watchers that gauges whether CEOs of homebuilding companies are feeling like raising a glass of champagne or downing a stiff drink–showed that builder confidence in the market had fallen to its lowest level since April of last year. 

“The pause in sales following expiration of the home buyer tax credits is turning out to be longer than anticipated due to the sluggish pace of improvement in the rest of the economy,” explained the NAHB’s chief economist, in a statement.

But the NAHB also predicts an uptick in demand for the second half of the year, with new-home sales improving 10% in 2010, compared to 2009. That’s pretty ambitious, considering month-by-month new home sales plummeted 30% in May.

David I. Goldberg, an analyst with UBS, sent out a note Monday that pretty much says the same thing. “We continue to believe fundamentals in the housing market are approaching a trough,” Mr. Goldberg wrote, adding that towards the end of 2010, we should see signs of a gradual recovery.

But perhaps most tellingly, the builders themselves are saying sobering things about the market and parroting the message that if good news is in the offing, it will come slowly, and after a substantial wait.

“It’s not back to the darkest days post-Lehman, which really went from September 2008 to late March 2009, but the momentum that was starting has stalled a bit,” said Fred Cooper, a vice president at Toll Brothers Inc., in a recent interview.

That’s coming from a guy who works at the company that Mr. Goldberg, the UBS analyst, recently said is the top dog in the industry. Toll recently entered into an investment partnership with a large national private equity firm and its stock is buoyed by 17 neutral-to-positive analyst ratings, compared to just one “underperform” tag.

When the guys who by all rights should have the rosiest view of the market think things are stalling, maybe it’s time to take another look.

Or maybe it’s just time for a stiff drink.

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