Monthly Archives: December 2011

Existing-Home Sales Rise in November

Existing-home sales rose again last month, according to data released Wednesday by the National Association of Realtors(NAR).

That assessment, however, is coming off of lower sales numbers than previously thought, reflecting revisions to NAR’s data going back to 2007. The trade group has adjusted sales and inventory figures for the last four years downward by 14.3 percent, signaling the housing crisis has run even deeper that earlier assumptions.

NAR’s latest monthly report shows sales of previously owned homes increased 4.0 percent to an annual rate of 4.42 million in November from 4.25 million in October, and are 12.2 percent above the 3.94 million-unit pace in November 2010.

Total housing inventory at the end of November fell 5.8 percent to 2.58 million existing homes available for sale, which represents a 7.0-month supply at the current sales pace, down from a 7.7-month supply in October.

The national median existing-home price was $164,200 in November, down 3.5 percent from a year ago.

Distressed homes – foreclosures and short sales typically sold at deep discounts – accounted for 29 percent of November’s sales (19 percent were foreclosures and 10 percent were short sales), compared with 28 percent in October and 33 percent in November 2010.

Although re-benchmarking resulted in lower adjustments to several years of home sales data, NAR says the month-to-month characterization of market conditions did not change.

Lawrence Yun, NAR’s chief economist, says November’s report indicates more people are taking advantage of the buyer’s market.

“Sales reached the highest mark in 10 months and are 34 percent above the cyclical low point in mid-2010,” Yun said. “We’ve seen healthy gains in contract activity, so it looks like more people are realizing the great opportunity that exists in today’s market for buyers with long-term plans.”

NAR also stressed that there were no revisions to home prices or month’s supply.

“From a consumer’s perspective, only the local market information matters and there are no changes to local multiple listing service (MLS) data or local supply-and-demand balance, or to local home prices,” Yun said.

A divergence developed over time between sales reported by MLSs and sales determined by a U.S. Census benchmark, with the variance beginning in 2007, NAR explained. The trade group cited growth in MLS coverage areas from which sales data is collected and geographic population shifts as reasons for the divergence.

“It appears that about half of the revisions result solely from a decline in for-sale-by-owners (FSBOs), with more sellers turning to Realtors to market their homes when the market softened,” according to Yun. “The FSBO market was overwhelmed during the housing downturn, and since most FSBOs are not reported in MLSs, national estimates of existing-home sales began to diverge based on previous assumptions.”

NAR’s says its 2010 benchmark shows there were 4,190,000 existing-home sales last year, rather than the 4,908,000 sales previously projected.

Revisions covering 2007 through 2010 are expected to have a “minor impact” on future revisions to Gross Domestic Product (GDP), according to NAR.

For Every Two Homes for Sale, There’s One in the Shadows

The number of distressed properties not currently listed for sale on multiple listing services (MLSs) stood at 1.6 million as of October 2011, according to CoreLogic.

This shadow inventory is approximately half of the industry’s visible inventory of homes available for sale, CoreLogic says. Thus, for every two homes available for sale, there is one home in the “shadows.”

CoreLogic’s latest shadow inventory assessment represents a supply of five months and is down from October 2010, when shadow inventory stood at 1.9 million units, or 7-months’ supply.

CoreLogic estimates the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of distressed properties not currently listed on MLSs that are seriously delinquent (90 days or more), in foreclosure, and real estate owned (REO) by lenders.

Of the 1.6 million properties currently in the shadow inventory, 770,000 units are seriously delinquent, 430,000 are in foreclosure, and 370,000 are REO, according to CoreLogic’s report.

Despite 3 million distressed sales since January 2009, a period when home prices were declining at their fastest rate, the shadow inventory in October 2011 is at the same level as January 2009, CoreLogic notes.

Growth in the shadow supply, though, has been reined in by the fact that the flow of new seriously delinquent loans into the shadow inventory has been offset by a roughly equal flow of distressed REO and short sale transactions, the company explained.

Still, the shadow inventory is approximately four times higher than its low point (380,000 properties) at the peak of the housing bubble in mid-2006, CoreLogic says.

The company contends that a healthy housing market should have less than one-month’s supply of shadow inventory, which would be an easily absorbed stock of distressed assets with little or no discernable impact on house prices, unless the inventory was geographically concentrated.

Currently, Florida, California, and Illinois account for more than a third of the shadow inventory, CoreLogic reports. The top six states, which would also include New York, Texas, and New Jersey, are home to half of the shadow inventory.

2012 Mortgage Delinquencies Seen Dropping Sharply

If the U.S. economy does not suffer more setbacks, the rate of mortgage holders behind on their payments should decline significantly by the end of next year, according to credit reporting agency TransUnion.

Mortgage delinquency rates – the ratio of borrowers 60 or more days behind on their payments – will likely tick up to about 6 percent through the first three months of 2012, TransUnion said in its annual delinquency forecast issued Wednesday.

But by the end of next year, it could drop to 5 percent, TransUnion said. That’s well off the peak of 6.89 percent seen in the fourth quarter of 2009.

Chicago-based TransUnion’s forecast takes into consideration several factors, including expectations that consumer confidence and the economy will improve next year.

Also, banks are expected to get a good portion of pending foreclosures off their books next year, said Charlie Wise, TransUnion director of research and consulting.

Banks are still working through a backlog of foreclosures created by issues including the robo-signing scandal, in which bank officials signed mortgage documents without verifying the information they contained. The issue surfaced last year in areas with large numbers of foreclosures, and banks had to backtrack and review foreclosures across the country to make sure their paperwork was in order.

That slowed down the process, Wise said, and left mortgages listed as delinquent for longer than they otherwise might have been, temporarily boosting delinquency rates.

Economic uncertainty has also contributed. In the third quarter of 2011, mortgage delinquencies saw their first uptick in six quarters, largely fueled by concerns over the economy as lawmakers were debating the U.S. debt ceiling and Europe’s debt crisis was unfolding.

Helping to cut the mortgage delinquency rate are a slowly improving job market and a stabilizing housing market.

While the drop will be significant, the rate will remain well above the pre-recession average of 1.5 to 2 percent.

“We have a long way to go to get back,” said Steven Chaouki, a TransUnion vice president.

The situation with credit cards is much stronger. Card delinquencies – payments late by 90 days or more – dropped to their lowest levels in 17 years during the spring, then saw a slight increase in the third quarter, but still remained near historic lows.

TransUnion expects further edging up in the current quarter and the first three months of 2012, but then late payments on bank-issued cards should fall again.

One reason card delinquencies are expected to remain so low is that credit is much tighter than it was before the recession. TransUnion data showed that nearly a quarter million new card accounts were opened by people with less-than-stellar credit scores during the third quarter, which contributed to the slight increase in late payments during the summer months. But banks are mainly still going after consumers with top-tier credit histories.

“Lenders are willing to lend, but are still pursuing the best customers,” said Chaouki.

TransUnion predicts by the end of 2012, just 0.69 percent of cards will be considered delinquent, down from a predicted 0.74 percent in the current quarter. The rate has wobbled in the last few years, peaking at 1.36 percent in the fourth quarter of 2007, then dropping and bouncing back up to 1.32 percent in the first quarter of 2009.

The figures reflect a shift in which debt payments consumers consider most important, largely because home prices fell so far.

Chaouki said the conventional wisdom before the Great Recession was that homeowners would put their mortgages first because of concern about their reputation and the emotional attachment involved in owning a home. But what has become clear as housing prices have continued to fall, he said, is that bill payment is far more practical.

“People were protecting their home equity,” he said. Credit cards were relatively easy to come by in years past, he said, so when money got tight, it was an easy decision to default on cards and maintain house payments. Now it’s common to owe more on a mortgage than a house is actually worth, but credit cards are harder to get. So consumers are being practical and protecting what is more valuable to them.

Source: The Associated Press

What will new homes look like in 2015?

Well, most will likely not resemble the photo, but it’s a fun thought for the future! Members of the National Association of Home Builders (NAHB) were asked earlier this year what they anticipate the new home size will be 2015. While the size of new American homes has been shrinking for years, the builders offered some insights into what home features will start to disappear and which will become more popular.

In terms of square footage, the anticipated drop isn’t drastic. Currently, single-family homes measure an average of 2,400 square feet, a slight decrease from an average of around 2,521 square feet five years ago. In 2015, industry professionals believe it will drop to around 2,150 square feet.

To make up for less square footage, many new homes won’t have living rooms. Of the builders surveyed, 52 percent believe traditional living rooms will be combined into other areas of the home, such as family rooms and kitchens, to form “great rooms.” About 30 percent of builders believe the living room will vanish entirely.

Also likely to become less in demand by 2015? Mudrooms, formal dining rooms, skylights, sunrooms, three-season porches, media rooms, butler ‘s pantries, and homes exceeding four bedrooms and three bathrooms.

However, surveyed builders expect to see more ceiling fans, larger laundry rooms, eat-in kitchens, first-floor master suites with walk-in closets, kitchens with double sinks and recessed lighting. And while two-car garages won’t go anywhere, demand will probably sink for three-car garages.

Sixty-eight percent of builders surveyed say that energy-saving technologies and features including low-E windows, energy-efficient appliances and LED lighting will be common, along with other green features, such as engineered wood products, dual-flush toilets and low-flow faucets. Whole-house Energy Star certification is likely to become the norm for new homes in 2015, but LEED certification will not. Green features considered “somewhat likely” to be in new homes include argon windows, tankless water heaters, above-code insulation, and solar photovoltaic and thermal systems.

Says Stephen Melman, director of Economic Services with the NAHB: “Although affordability is driving these decisions, smaller homes are a positive for builders. It allows for more creative design, more amenities, better flow. It’s an opportunity to deliver a better home.”

Source: Mother Nature Network, Matt Hickman. Distributed by MCT Information Services.

Fannie Mae, banks halt foreclosures for the holidays

Happy holidays struggling homeowners! Fannie Mae, Freddie Mac and several large mortgage lenders have pledged not to foreclose on delinquent borrowers during the Christmas season.

For homeowners with loans through Fannie Mae and Freddie Mac, the moratorium will run from Dec. 19 to Jan. 2. During this time, legal and administrative proceedings for evictions may continue, but families will be allowed to stay in their homes, Fannie said in a statement.

“No family should have to give up their home during this holiday season,” said Terry Edwards, an executive vice president for Fannie Mae.

Among some of the major banks that offer mortgage loans, Chase Mortgage said it will not evict anyone between Dec. 22 and Jan. 2. Wells Fargo will also suspend evictions during that period, but will not shut down its eviction machinery entirely.

The bank said it will observe the moratorium on foreclosed properties in its own portfolio but for loans it services for other lenders “foreclosure-related actions may still occur.”

Bank of America said that it would “avoid foreclosure sales or displacement of homeowners or tenants around the Thanksgiving and Christmas holidays.”

However,  that policy only applies to loans the bank itself owns. Like Wells Fargo, it will also honor the wishes of the owners of the loans it services, which could mean moving forward with certain foreclosures.

A holiday halt on foreclosures by the major mortgage lenders could affect tens of thousands of homeowners. An average of 89,000 foreclosure auctions a month have been scheduled this year, according to RealtyTrac. Once a home has gone through that process, eviction is the next step.

There could be a small handful of borrowers who might benefit permanently from the suspension, according to Daren Blomquist, a spokesman for RealtyTrac.

Sometimes, albeit very rarely, a Christmas miracle will occur where a borrower finds the cash to get current on their mortgage again and keep their home.

For the overwhelming majority of borrowers in default, however, “it’s a temporary reprieve, a symbolic gesture to help people out during the holidays,” said Blomquist.

Then, come the New Year, everyone gets back to business, including mortgage lenders.