Pending Home Sales Rise Again

Pending home sales increased in November for the third-straight month and reached the highest level in two-and-a-half years, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 1.7 percent to 106.4 in November from a downwardly revised 104.6 in October and is 9.8 percent above November 2011 when it was 96.9. The data reflect contracts but not closings.

The index is at the highest level since April 2010, when it hit 111.3 as buyers were rushing to beat the deadline for the home buyer tax credit. With the exception of several months affected by tax stimulus, the last time there was a higher reading was in February 2007 when the index reached 107.9.

Lawrence Yun, NAR chief economist, said home sales are on a sustained uptrend. “Even with market frictions related to the mortgage process, home-contract activity continues to improve. Home sales are recovering now based solely on fundamental demand and favorable affordability conditions.”

On a year-over-year basis, pending home sales have risen for 19 consecutive months.

The upward momentum means existing-home sales should rise 8 to 9 percent in 2013 to approximately 5.1 million, following a 10 percent gain expected for all of 2012. The median existing-home price is projected to rise just over 4 percent in 2013, after rising more than 7 percent in 2012.

The PHSI in the Northeast rose 5.2 percent to 83.3 in November and is 15.2 percent above a year ago. In the Midwest the index edged up 0.1 percent to 103.8 in November and is 15.2 percent above November 2011. Pending home sales in the South were unchanged at an index of 117.2 in November and are 13.9 percent higher than a year ago. In the West the index rose 4.2 percent in November to 110.1, but is 3.2 percent below November 2011 with inventory constraints limiting sales.

What’s Really Driving the Rise in Home Prices?

The Wall Street Journal recently cited five significant factors behind the rise in home prices, as numerous markets see significant year-over-year gains. The big price drives are:

1. The rise in housing affordability - which is drawing more buyers out into the market who are looking to cash in on low mortgage rates and fallen home prices compared to a few years ago.

2. The rise in household formation - which is expected to hit 1 million new households this year. That is up from an average of 570,000 over the last five years, according to data by Bank of America Merrill Lynch.

3. The rise in rents - which has prompted more investors to purchase properties to rent out and more renters to second-guess why they are paying so much in rent when they could buy.

4. The decline in distressed sales and foreclosures - which has fallen significantly this past year. While distressed sales are still high by historical standards, they have fallen from their peaks in most markets, helping to alleviate the downward pressure on home prices in many areas.

5. Inventories of homes for-sale are at their lowest levels in nearly 50 years - and builders have cut back on construction and many home owners are waiting to sell until they can recover some equity on their properties.

Source: “Five Reasons Home Prices Have Been Rising,” The Wall Street Journal (Nov. 27, 2012)

Homes Are Selling Faster as Inventories Fall

The median time a home is on the market nationwide? Just 69 days.

The number of days on the market nationwide has fallen nearly 30 percent from year-ago levels.

Meanwhile, inventory levels are hovering at all-time lows, with the number of homes for-sale down 31.2 percent from a year ago. The inventory is at a 6.4-month supply of homes on the market, as of July data.

"As inventory has tightened, homes have been selling more quickly," says Lawrence Yun, the National Association of REALTORS®' chief economist. "A notable shortening of time on market began this spring, and this has created a general balance between home buyers and sellers in much of the country. This equilibrium is supporting sustained price growth, and homes that are correctly priced tend to sell quickly, while those that aren't often languish on the market."

For comparison, the time on the market for non-distressed homes peaked at 10 weeks in 2009. During the housing boom between 2004 and 2005, for example, the median selling time was just four weeks.

Source: “Low Inventory Levels Sells Homes Quick,” Realty Times (Nov. 2, 2012)

Agency Helps Consumers Resolve Credit Report Complaints

The Consumer Financial Protection Bureau announced that it is now accepting consumer complaints about credit reporting and will work to help resolve individual credit reporting issues.

“Credit reporting touches the financial lives of nearly each and every American,” writes Scott Pluta, CFPB’s assistant director for the Office of Consumer Response. “Credit reports affect whether or not you are able to get a credit card, a home loan, an auto loan, or a student loan, the ability to rent an apartment or get hired, and even tasks as simple as getting a cell phone or electricity for your home. It also can affect how affordable or expensive those things are for you.”

As such, CFPB says it will now help consumers with individual complaint assistance on issues with their credit report. Issues may include incorrect information on a credit report; improper use of a credit report; being unable to get a copy of a credit score or file; or problems with credit monitoring or identify protection services.

For consumers who think there is an error on their credit report, CFPB first recommends they go through the credit bureau’s process for trying to fix any problems. But for those who aren’t satisfied with the end result, the CFPB encourages consumers to contact the agency for assistance in resolving the issue.

CFPB says that it is using the submitted complaints as a way to better understand the challenges consumers face with credit reporting agencies.

Consumers can submit a complaint at the Consumer Financial Protection Bureau's Web site, www.consumerfinance.gov/Complaint.

Source: “Now Accepting Credit Reporting Complaints,” Consumer Financial Protection Bureau (Oct. 22, 2012)

Falling Foreclosures Pushing Up Home Prices

As foreclosure backlogs have decreased, so have many of the big discounts on home prices. The slowdown in foreclosures is partially behind the recent rise in home prices, some economists say.

“Deeply discounted existing homes have been subject to strong demand from cash buyers and investors looking to lock into housing’s attractive income returns,” says Paul Diggle, a housing economist at Capital Economics. “The supply of such homes, meanwhile, has been dwindling. That has bid up existing house prices, particularly at the lower end of the price spectrum."

The median price of existing homes nationwide was 9.5 higher in August compared to a year ago, and new home prices were up 17 percent in that same time period.

Distressed properties typically sell for big discounts. For example, in 2007 during a nationwide foreclosure surge, foreclosures tended to sell for about a third of the median price of the home. The housing markets with some of the largest price falls tended to have the highest number of distressed home sales.

Lately, foreclosures have been posting big drops. Last month, new foreclosure filings reached a five-year low, according to RealtyTrac, a real estate research firm that tracks foreclosure housing data.

“There is a shortage of inventory — as crazy as it sounds to say that,” says Daren Blomquist, a RealtyTrac spokesman. “In a lot of market there's less inventory of foreclosed properties than there is demand. You’re hearing about multiple bids for these properties.”

Source: “Foreclosure Slowdown Pushing Home Prices Higher,” NBC News (Oct. 11, 2012)

Foreclosures Drop to 5-Year Lows

Foreclosures continue to do the opposite of what most analysts had predicted: They keep falling rather than rising.

Foreclosure filings in September fell 7 percent from August and are down 16 percent from last September, RealtyTrac reported Thursday. Foreclosure filings include default notices, scheduled auctions, and bank repossessions.

The number of foreclosure filings in September reached their lowest level since July 2007. What’s more, foreclosure filings have decreased 13 percent in the third quarter compared to the third quarter of 2011, marking the ninth consecutive quarter with an annual decrease in foreclosure activity, RealtyTrac reports.

“We’ve been waiting for the other foreclosure shoe to drop since late 2010, when questionable foreclosure practices slowed activity to a crawl in many areas, but that other shoe is instead being carefully lowered to the floor and therefore making little noise in the housing market — at least at a national level,” says Daren Blomquist, vice president at RealtyTrac. “Make no mistake, however, the other shoe is dropping quite loudly in certain states, primarily those where foreclosure activity was held back the most last year.”

A backlog of delayed foreclosures in certain states may be problematic in some areas soon, Blomquist says, particularly in judicial states, where foreclosures must be approved by a court. Florida, Illinois, Ohio, New Jersey, and New York have posted the largest year-over-year increases in foreclosure activity.

Meanwhile, other states are seeing large drops in foreclosure activity, mostly centered in “non-judicial” states, where foreclosures do not have to be court-approved. For example, states like California, Georgia, Texas, Arizona, and Michigan have posted large drops in foreclosure activity.

Source: RealtyTrac

Shadow Inventory Drops 10% From Last Year

Predictions that the nation’s shadow inventory would rapidly rise have yet to materialize, as the shadow inventory continues to show signs of dropping, according to the latest report reflecting July data from CoreLogic. The nation’s shadow inventory has fallen 10.2 percent in July compared to a year ago.

As of July, 2.3 million properties were considered in residential shadow inventory, which represents a six-month supply. Of those properties, 1 million are from seriously delinquent loans; 900,000 are in some stage of foreclosure; and 345,000 are REOs, according to CoreLogic’s report.

Shadow inventory reflects the number of distressed homes that have not yet been listed on the multiple listing service but will likely reach the market soon.

“Broadly speaking, the shadow inventory continued to shrink in July,” says Anand Nallathambi, president and CEO of CoreLogic. “The reduction is being driven by a variety of resolution approaches. This is yet another hopeful sign that the housing market is slowly healing.”

Serious delinquencies, a main driver of shadow inventory, fell the most from April to July in Arizona (3.2%), Pennsylvania (2.8%), New Jersey (2.3%), Delaware (2.2%), and Maine (2.2%), according to CoreLogic.

CoreLogic calculates the shadow inventory by figuring the number of properties that are seriously delinquent, in foreclosure, and held as an REO by banks but not yet listed on the MLS.
Source: CoreLogic

Falling Foreclosures Mark Big Step in Recovery

Foreclosures continue to show signs of dropping across the country. In August, there were 57,000 foreclosures completed nationwide, down from 75,000 one year ago, according to CoreLogic's National Foreclosure Report for that month .

As of August, about 1.3 million homes — or 3.2 percent of all homes with a mortgage — were in the national foreclosure inventory or in some stage of foreclosure. In August 2011, that number stood at 1.4 million.

“The continuing downward trend in foreclosures and a gradual clearing of the shadow inventory are important signals that the recovery in housing is gaining traction,” says Anand Nallathambi, CEO of CoreLogic. “The reduction in foreclosure volumes is to some degree being facilitated by the rising popularity of alternative resolution methods, such as short sales and loan modifications.”

August marked the fourth consecutive month of fewer foreclosures nationwide. Still, some housing markets are facing higher concentrations of foreclosures than others.

In particular, five states — California, Florida, Michigan, Texas, and Georgia — account for nearly half of all completed foreclosures nationwide in the past year, says Mark Fleming, CoreLogic’s chief economist.

The states with the highest percentages of foreclosure inventories are Florida (11 percent), New Jersey (6.5 percent), New York (5.2 percent), Illinois (4.8 percent), and Nevada (4.6 percent).

Meanwhile, the states boasting the lowest number of completed foreclosures in the last year are: South Dakota, District of Columbia, Hawaii, North Dakota, and Maine.

Source: CoreLogic

Obama, Romney Spar on Mortgage Rules

Daily Real Estate News | Thursday, October 04, 2012
Mortgage rules being drafted by federal banking regulators came under the spotlight last night in the first election debate between President Barack Obama and his Republican challenger, former Massachusetts Gov. Mitt Romney.

The President defended provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010, as necessary to prevent a repeat of the loose lending practices that resulted in the country’s financial crisis in 2007. “Does anybody out there think that the big problem we had is that there was too much oversight and regulation of Wall Street?” Obama said midway through the 90-minute debate.

Gov. Romney cited the qualified mortgage (QM) rule as a key example of the problems Dodd-Frank has created in the mortgage market, because the law left it unclear what a qualified mortgage looks like. That has created confusion among lenders, hurting mortgage availability to consumers.

“Dodd-Frank correctly says we need to have qualified mortgages,” Romney said, “and if you give a mortgage that’s not qualified, there are big penalties, except they [lawmakers] didn’t ever go on and define what a qualified mortgage was. It’s been two years. We don’t know what a qualified mortgage is yet. So banks are reluctant to make loans, mortgages. Try and get a mortgage these days. It’s hurt the housing market because Dodd-Frank didn’t anticipate putting in place the kinds of regulations you have to have. It’s not that Dodd-Frank always was wrong with too much regulation. Sometimes they didn’t come out with a clear regulation.”

The qualified mortgage rule is intended to ensure lenders make loans only to borrowers who can demonstrate a reasonable ability to repay them. NAR’s position is that the definition should be broad, rather than prescriptive, so lenders can make safe, affordable mortgages to all creditworthy borrowers, not just those with the strongest credit profiles.

The candidates’ discussion of the QM rule was the only time housing came up in the debate. They also sparred over a broad range of domestic issues, including the economy, taxation, the federal deficit, health care, energy, and education.

On taxation, Gov. Romney said he wants to reduce rates across the board, including bringing the top corporate rate down to 25 percent from 35 percent, and decrease deductions and credits.

“I want to bring down the tax burden on middle-income families,” he said. “And I’m going to work together with Congress to say, OK, what — what are the various ways we could bring down deductions, for instance? One way, for instance, would be to have a single number. Make up a number, $25,000, $50,000. Anybody can have deductions up to that amount. And then that number disappears for high-income people. That’s one way one could do it.”

President Obama said he wants to continue existing tax rates, although for households with incomes of more than $250,000 a year, rates should return to what they were in the 1990s. He also said he would seek to bring down the top tax rate for small businesses.

On health care, Obama defended the Patient Protection and Affordable Care Act, enacted in 2010, saying premium increases last year rose “slower than any time in the last 50 years. So we’re already beginning to see progress.”

Romney said he would seek to replace the law, although he supports the law’s protection for people with preexisting conditions and the provision enabling adult children to stay on parents’ coverage.

— Robert Freedman, REALTOR® Magazine

What Influences Credit Scores

Its a three-digit number that carries a lot of influence over your future. It can dictate whether or not you'll qualify for a home, car, or business loan. It can also be the deciding factor in whether or not you qualify for a low interest rate.

What exactly is a credit score and what factors contribute to its number?A credit score is a number from 200 to 800 that reflects your payment and borrowing history. Are you a big spender? Do you make payments faithfully and on time? It's what lenders use to decide a number of factors, including whether or not to lend to you.There are three main reporting agencies: TransUnion, Experian, and Equifax. Can a credit score from these agencies be biased? The simple answer is no. Your credit score is a true and honest reflection of your debt and payment history. This means that neither a lender nor credit agency can "have it out for you." You are the only person responsible for your score. There are several factors that contribute to this score.

Type of Credit: Lenders want to see that you have a history of multiple types of credit. This can include credit cards, installment loans, and mortgages.

Amount of Debt: The more debt you have the riskier you appear to a lender. This means paying down or off debt is a great way to make yourself more desirable for a home loan.

Payment History: You want to be on time with every bill. This includes everything from cable and phone to credit card payments. Late payments may be reported to the credit reporting agencies and will negatively affect your score.

New Credit: Do NOT under any circumstances open new lines of credit, no matter how small, before you start looking for a home. Several new lines of credit will dock your score and may indicate to a lender that you are on a spending spree.

Credit History Length: Younger borrowers are always at a slight disadvantage because they have a shorter credit history. A longer credit history gives lenders a better picture of what kind of borrower you really are. Be sure to check out your credit report three times a year at annualcreditreport.com. It's free, easy, and secure. You'll have to pay a nominal fee in order to see your score, but checking out your report can help you assess areas that need improvement or areas that have errors which need corrected.

Published: September 10, 2012

Existing Home Sales Increase

Existing home sales for July rose 2.3% to 4.47 million, up from 4.37 million in June. Year-over-year existing home sales are up 10.4%. The median home price also rose year-over-year, increasing 9.4% to $187,300 from July 2011.

Existing Home Sales is a measure of the selling rate of pre-owned single-family homes, collected by the National Association of Realtors from 650 realtor associations. It includes a geographical breakdown, as well as a measure of prices and house inventory, the number of months it would take to deplete the existing supply of pre-owned houses at the current sales pace. The data is timely and is used in conjunction with the new home sales release from the Census Bureau. Sales of existing (or pre-owned) houses account for roughly 84% of all houses sold.

Home Improvements That Sell

In a mash-up survey of 450 real estate agents and 1,660 homeowners, homeowners get it - most of the time - when it comes to home improvements that help induce sales and higher prices.

Realtor.com's home improvement survey, conducted online from June 6 to June 13, 2012, tapped agents and Realtor.com users who are homeowners planning to improve their home before putting it on the market.Given today's home buyers are aware of soft market conditions that can put a drag on values, they want a home that's ready to appreciate and that's a home in the best shape possible.Nearly 90 percent of real estate agents believe home improvements can help a home sell faster, and nearly 73 percent say home work can boost the price, provided the home improvements are the right home improvements.Nearly three in four (71.4 percent) real estate agents say sellers too often underestimate the power of simple home improvements - repairs, painting and cosmetic upgrades.Not so, say more than one in four (75.21 percent) of homeowners polled. They most certainly plan to repair broken household items before listing their home for sale.Also, 65.9 percent of real estate agents said another common mistake among homeowners is not making "the right" home improvements for the local market. Like upgrades from home to home help pull up values overall.Agents, 62 percent of them, also said too many homeowners make specialty improvements based on their own tastes rather than what might appeal to a buyer.Recommended home improvementsThe most common home improvements recommended by real estate agents included:• The vast majority, 96.5 percent, of real estate professionals surveyed recommend sellers repair household items that are broken before putting a home on the market.• More than half, 63.8 percent, of real estate agents recommend sellers make kitchen improvements. • Most, 59.3 percent, of real estate professionals recommend sellers make bathroom improvements. What sellers improveAre sellers complying with real estate agents' recommended home improvements? Again, for the most part, yes. The most common improvements made by home sellers:• A majority, 75.21 percent, of sellers planning renovations will repair broken household items before selling their home.• Most, 53.43 percent, of owners plan to add new flooring before selling their home.• Also most, 53.37 percent, of sellers plan bathroom improvements before selling their home.Homeowners appear to have dropped the ball on kitchen work, but they aren't pinching pennies when it comes to home improvements that sell.Home improvement budgets were $2,001 to $5,000 for 24.1 percent of home sellers planning improvements; $5,001 to $10,000 for 22.23 percent and $10,001 to $20,000 for 16.63 percent.Published: August 16, 2012

California is leading the real estate recovery

Real Estate Economy Watch reviews California's turnaround markets.
The state that gave America Alt-A loans, Countrywide, the first tidal wave of foreclosures, the highest prices during the boom and the fastest fall during the bust now is leading the nation out of the six-year housing depression.
In the second quarter, California replaced Florida as the state dominating Realtor.com’s quarterly list of top turnaround towns. In the first quarter of 2012, seven Florida markets and one California market made the top 10 positions in the Realtor.com ranking. Just one market in Florida and six in California now dominate the first 10 positions.
Leading economists like Clear Capital’s Alex Villacorta now describe the West, led by California, as leading the recovery beyond its first phase.
“Now at the start of a more advanced recovery, mid and top tier price segments in the West reported yearly gains in July of 5.0 percent and 2.7 percent, respectively.

These gains indicate the buyer pool in the West has expanded beyond the segment focused on investment opportunities in low tier homes, to the owner occupied segment purchasing higher priced residences,” wrote Villacorta in Clear Capitals July market report.
The California Association of Realtors reports prices continued to improve, with the median home price posting both month-over-month and year-over-year gains for the fourth consecutive month in June. June’s price rose 1.3 percent from a revised $316,410 in May and 8.1 percent from a revised $296,410 recorded in June 2011.

The June 2012 figure was 30.7 percent higher than the cyclical bottom of $245,230 reached in February 2009. The median price has posted above the $300,000 level for the third straight month after remaining below that mark for 15 months.
Major California markets have cut inventory dramatically, reduced REOs and now are witnessing growing demand and improving prices. REOs are down 41.7 percent from last year, according to Foreclosure Radar, and short sales are up.
In Sacramento, for example, 54.4 percent of all resales (single family homes and condos) were distressed sales. This was up slightly from 54.2 percent last month, and down from 61.3 percent in July 2011. The percentage of REOs fell to 22.4 percent, according to the Sacramento Association of Realtors.
From Realtor.com and other sources: here’s a review of turnaround markets.
Oakland. In the second quarter of 2012, median list prices in Oakland are up 10.79 percent compared to the same time last year, and inventory is moving 58 percent faster than in Q2 2011. Oakland also reduced its inventory by just over half (57 percent). The foreclosure rate in Contra Costa County is one in every 242 units while Alameda County is one in every 402, both significantly greater than the national rate of one in every 666 housing units.
San Jose. The median sale price of Silicon Valley homes neared a four-year high in June 2012, also the 12th consecutive month with year-over-year increases in home sales. One of the sharpest inventory level decreases occurred in San Jose in Q2 2012; totals were down 41 percent compared to Q2 2011, while median list prices increased 12.03 percent over the same quarter last year. Homes moved 29 percent faster in the last quarter compared to Q2 2011.
Bakersfield saw median list prices appreciate 7.62 percent in the second quarter of 2012 on a quarter-over-quarter basis. While Kern County today generates one foreclosure filing for every 197 homes, its for-sale inventory decreased 49 percent in compared to the same quarter last year. Bakersfield’s 35-day median age of inventory, 40 percent faster in the second quarter of 2012 than the same quarter last year, positions this agricultural capital as the fifth fastest-moving market. New-home closings in Bakersfield in April 2012 were up 66.1 percent from a year ago.
San Francisco housing costs have been one of the most expensive in the nation for years, and its median list price of $699,000 for Q2 makes it one of the most expensive in the nation. Yet, its Q2 2012 inventory is 39 percent lower than it was a year ago and prices are up 11 percent on a year-over-year basis. Its 8.5 percent unemployment rate is higher than the national average. Key to the market’s improvements is fewer foreclosures and an increased number of high-end sales, as well as improved mortgage availability and ultra-low interest rates.
Fresno has seen a nearly 50 percent year-over-year quarterly reduction of inventory. Its age of inventory was 37 days in Q2 2012, which placed it in the top 10 fastest moving markets in the country. Fresno still suffers from very high negative equity at 46.3 percent , compared to 27.3 percent nationwide.

Fresno County’s foreclosure rate - at one in every 145 homes - and its 15.3 percent unemployment rate may make it especially challenging to generate the demand that its housing market will need to continue to improve at the current rate.
Santa Barbara-Santa Maria-Lompoc has seen a 31 percent decrease in year-over-year quarterly for-sale inventory and an increase of median list prices of 17 percent compared to the same time last year. Santa Barbara’s housing market moved 21 percent faster in the second quarter of 2012 than the same quarter last year. Santa Barbara County today generates one foreclosure filing for every 330 homes.

Signs Housing Is on the Mend

Some Americans are still jittery over the housing market, but here are eight positive signs that should quell some of their fears.

1.Housing prices are on the rise across the country.
2.Foreclosures have slowed. Analysts suggest that as the supply of distressed homes slows, buyers will be forced into higher-price properties too.
3.Inventories of for-sale homes on the market are decreasing. In fact, inventories of for-sale homes have dropped 24 percent from a year ago.
4.Mortgage rates are at ultra record level lows, for those who can qualify
5.Housing starts rose 6.9 percent in June. Also, existing-home sales were up 4.5 percent higher in June compared to one year ago.
6.Home building stocks are on the rise.
7.For investors who are buying homes, rents are soaring, allowing them to cash in on their investments. Rental prices are at a 10-year high as median units rent for $710 a month.
8.Home affordability is at record highs for the median income family, due to falling home values and super low mortgage rates. In fact, a recent study found that it is cheaper to buy a home than rent in basically ever major city in the U.S. For those who buy, you can save the cost of renting by owning the home for five years or less.
But while the signs point to a housing market on the mend, some Americans still remain hesitant. Many Americans are still underwater on their mortgage, owing more on their home than it is currently worth. Also, the economy continues to weigh on the recovery, particularly a dampening employment outlook, which analysts see as tied to housing.

Still, The Wall Street Journal concludes in a recent article that if you take into account all the positive signs lately in the housing market, “housing presents an attractive long-term investment that should hold steady or even have upside surprise in the short term.”

Source: “Finally, It Is Time to Buy a House,” The Wall Street Journal (Aug. 1, 2012)

3 Big Predictions for Real Estate

A few major predictions came out of the panel discussion that kicked off Inman's Real Estate Connect event yesterday morning in San Francisco. The session, moderated by Inman News founder Brad Inman, featured experts from the worlds of real estate and finance. Here were some of the most important forecasts for the real estate industry:

1. Rates will remain low for at least another year.

Amy Brandt, CEO of Vantium Capital, offered the most conservative prediction: that rates would probably start to rise significantly by the summer of next year. Bill Emmons, assistant vice president and economist of the Federal Reserve Bank of St. Louis, said he expects the Fed to do whatever it can to hold rates down until the end of 2014.

2. No matter what happens, the government will continue to play a major role in mortgage financing.

Brandt pointed out that more than 90 percent of mortgages are somehow supported today by the federal government. It will probably stay that way for a couple of reasons, the first being that investors want it that way, said Joel Singer, CEO of the California Association of REALTORS®. But another issue is that no private entity or group is big enough to fill that role right now. However, it's unclear whether the FHA or a reconstituted Fannie Mae and Freddie Mac would take the lead.

3. Hard assets such as oil, gold, and real estate will probably be on the rise for some time to come.

All of the panelists agreed, with some minor exceptions, that real estate is a good investment right now. And like other tangible assets, it will likely grow in value over the next few years.

They also all agreed that it will take some time before the economy returns to stable, long-lasting growth. The reason? The downturn was driven by major problems in the financial sector, and the broken system will have to be retooled before the economy can truly flourish, said Patrick Stone, president and CEO of the Williston Financial Group.

　

That rebuilding could take some time, Singer added. "This transition is going to take a while," he said. "The failure of institutions to grasp the problem and come up with solutions is what's caused this to last so long." Emmons said the extreme aversion to risk among business right now -- causing capital to flow into low-risk, low-return assets -- should improve soon, but added that unprecedented levels of public and private debt could hold back growth. "There's still a lot of debt to work through," he explained. "In some respects, we look like Japan. Rather than take the 18 months of hell to get through that, we're just kicking it down the road."

However, the panel was generally optimistic about the long-term prospects of the economy. "We train and educate the innovators of tomorrow," Stone said. "And no country is better at connecting capital and innovation."

Brandt also expressed confidence in the ability of most real estate professionals to adapt to any major economic shifts, just as they did with the advent of the Internet. "I think this is an innovative group that can come up with solutions," she said, but added that practitioners should raise their awareness of and involvement in the mortgage financing part of the transaction.

"If I were running a real estate company, I would try to be more tightly integrated with the financial side," she said.

- Brian Summerfield, REALTOR Magazine

Housing Market Lifts Off From the 'Bottom'

Recent housing indexes have shown single-family home prices are on the rise, providing more evidence that the “bottom” of the market is already behind.

"We’re wiping out just about all of the decline,” Joel Naroff, chief economist at Naroff Economic Advisors, told NBC.com about recent housing data showing home prices inching up. “It indicates the market has turned the corner on the pricing side.”

Some recent housing indexes suggest that the “bottom” of the market was reached in January 2012. Since that time, housing prices have been picking up in many housing markets.

But "the turnaround in home prices was unexpected," says Patrick Newport, an economist with IHS Global Insight. "The conventional wisdom in February, following that landmark agreement [of the $26 billion mortgage settlement with the nation’s five largest banks], was that we would see a surge in foreclosures of some size that would lead to lower home prices. This surge never materialized and home prices have turned.”

Newport points to several signs of a housing market on the mend. For one, housing starts are up, after reaching a low in the fourth quarter of 2011. Also, he says the FHFA monthly House Price Index shows a 3.7 percent increase in May year-over-year, which he notes is higher than inflation and “means that real housing wealth, a consumer spending driver, was also up.”

The increase in home prices is also leading to a fewer number of home owners who are underwater on their mortgages, owing more on their mortgage than their home is currently worth. The number of underwater home owners fell from 12.1 million at the end of 2011 to 11.4 million at the end of the first quarter this year, according to CoreLogic data.

Source: “Evidence Mounts that Home Prices Hit Bottom Last Winter,” NBC News (July 31, 2012)

Where Home Ownership Rates Are Highest

The national home ownership rate has held mostly steady this year, standing at 65.5 percent for the second quarter, according to recent U.S. Census Bureau data. The rate is 0.4 percentage points lower than the second quarter of 2011, but 0.1 percentage point higher than the first quarter of this year.

The home ownership rate has steadily fallen over the last few years since last peaking in the first quarter of 2005 at 69.1 percent.

 Home ownership rates are highest in the Midwest at 69.6 percent whereas home ownership rates are the lowest in the West, at 59.7 percent, according to the Census data.

Here’s a closer look at the home ownership rate among different demographics, according to the second quarter U.S. Census Bureau housing data:

•The home ownership rate is highest at 81.6 percent for those ages 65 years and over.
•The home ownership rate is lowest at 36.5 percent for those who are under 35 years of age.
•Non-Hispanic whites have the highest home ownership rates among the races at 73.5 percent, while the Hispanic home ownership rate was 46.5 percent and 43.8 percent for African Americans in the second quarter.
Source: U.S. Census Bureau

Bernanke Warns of Another Recession

Federal Reserve Chairman Ben Bernanke warned on Tuesday of threats to the economic recovery and the nation being at risk of slipping back into a recession.

Bernanke did offer a positive outlook for the housing market, however: He acknowledged the housing market is showing signs of improving, but he said that it it is contributing less to economic growth than it has in past recoveries.

Bernanke announced no new action by the central bank to try to stimulate the sluggish economy, although some analysts predict that before the end of the year the Fed will act to buy up more Treasury bonds, which could lower long-term interest rates even further from record lows.

In testimony to the Senate Banking Committee on Tuesday, Bernanke pushed lawmakers to reach a compromise on tax increases and spending cuts that are to take effect by the end of the year. He said that if lawmakers don’t approve the tax increases and spending cuts by then, it’s likely a “shallow recession would occur early next year.”

"The most effective way that the Congress could help to support the economy right now would be to work to address the nation's fiscal challenges in a way that takes into account both the need for long-run stability and the fragility of the recovery," Bernanke told the Senate Banking Committee. "Doing so earlier rather than later would help reduce uncertainty and boost household and business confidence."

Source: “Bernanke Offers Downbeat View of Economy, but no Action,” USA Today (July 17, 2012)

The Next Big Threat to Home Owners Looms

While the housing market is showing signs of picking up across the country, housing experts warn of a new concern for home owners: resetting home equity lines of credit.

Home equity lines of credit often require low payments in the initial years as home owners only pay the interest on these loans at the onset. But later on, these loans reset with higher payments when home owners have to start paying down the principal.

About 44 percent of home owners with home equity lines of credit through Wells Fargo have paid only the minimum amount due on these loans, reports The New York Times.

Many borrowers may soon see their home equity lines of credit reset with higher payments and those higher payments may be too much for some borrowers.

The Office of the Comptroller of the Currency recently warned of the danger these resetting payments could pose for many home owners across the country. The OCC warned that nearly 60 percent of all home equity line balances would require payments of both principal and interest between 2014 and 2017.

The report highlights three main threats home equity borrowers face: Rising payments as they begin to pay back the principal and not just the interest on these loans; the risk of rising interest rates (many of these loans have adjustable rates); and refinancing challenges “because collateral values have declined significantly since these loans originated.”

Many of the home owners have seen their property values decrease since they first took out the home equity loans.

“These are among the riskiest loans in any bank’s portfolio,” The New York Times reports. “As borrowers are pressed to pay principal and interest, write-offs are almost certain to rise.”

Source: “Here Comes the Catch in Home Equity Loans,” The New York Times (July 14, 2012)

5 Real Estate Scams You Need to Know About

Don't be duped by mortgage fraud. Here are a few common scams and the red flags you should look for in a transaction.
Mortgage fraud is pervasive: An estimated $4 billion to $6 billion in annual losses result from mortgage fraud, according to FBI reports. “An entire community can be damaged by mortgage fraud,” says Rachel Dollar, a lawyer from Santa Rosa, Calif., and editor of the Mortgage Fraud Blog. Mortgage fraud can lead to a spike in foreclosures, home values plummeting, and lenders raising their rates and fees to recover losses.

The crimes are often complex, involving several parties and occurring over multiple transactions. To protect you and your clients, educate yourself about mortgage fraud and be on guard for any warning signs in a transaction. You can start by reviewing these five scams, and then test your knowledge by taking our Mortgage Fraud Quiz.

1. The Foreclosure Rescue Scheme
The Scam: “Rescuers” promise cash-strapped home owners that they can save their home from foreclosure. The rescue, which involves paying upfront fees, can take multiple forms, such as the perpetrator obtaining a new loan on behalf of the owner or by having the owner sign over the home’s deed and then rent the home until they can repurchase it. Eventually, the home owner loses the home, either to foreclosure or the fictitious rescue company.

Red Flags: With foreclosure rescue programs, borrowers are often advised to sign over the title of their house to a third party, become renters of their home, not contact their lender, or send mortgage payments to a third party, according to Fannie Mae, which provides fact sheets on mortgage fraud.

2. Loan Documentation Fraud
The Scam: This fraud involves numerous schemes in which a borrower provides inaccurate financial information — such as about their income, assets, and liabilities — or employment status in order to qualify for a loan with lower rates and more favorable terms. Occupancy fraud is one growing area: Borrowers say they plan to live in the property when they actually intend to rent it.

Red Flags: Documentation may raise suspicion if the employer’s address is shown as a post office box, accumulation of assets compared to the person’s income appears too high or low, the new house is too small to accommodate occupants, the person has no credit history, or the application is unsigned or undated, according to Fannie Mae.

3. Appraisal Fraud
The Scam: A faulty appraisal — saying a property is worth more than what it really is — is connected to many types of mortgage fraud. It entails manipulating or overstating comparables, market values, or property characteristics in order to obtain a higher appraisal. The higher property appraisal, which generates false equity, is done by falsifying an appraisal document or using an appraiser accomplice to obtain the higher value.

Red Flags: Be skeptical of appraisals that are dated prior to the sales contract, list comparable sales that do not contain similarities to the property or are outside the neighborhood, the owner is not the seller listed on the contract or the title, or a third party participating in the transaction orders the appraisal, Freddie Mac warns.

4. Illegal Property Flipping
The Scam: This entails purchasing properties and reselling them at inflated prices. These scams usually involve faulty appraisals and inaccurate loan documents. The property is then refinanced or resold immediately after purchase for an inflated value. The home is purchased at a higher price, often by straw buyers working with the “flipper,” and eventually falls into foreclosure.

Red Flags: Some key things to look for are rapid refinancing of a property; the seller recently having acquired the title or acquiring the title concurrent with the transaction; an appraisal that comes in too high; a property that was recently in foreclosure being purchased at a much lower price than its sales price; or the owner listed on the appraisal and title not matching the seller on the sales contract, according to Fannie Mae.

5. Short Sales Schemes
The Scam: Borrowers owe more than the current value of their home so they fake financial hardship and no longer make their mortgage payments. An accomplice of the borrower then submits a low offer to purchase the property in a short sale agreement. The lender agrees to the short sale, unaware that it was premeditated. The property, after being purchased at the reduced price, is then often resold at the home’s actual value for profit.

Red Flags: The borrower suddenly defaults on the mortgage with no workout discussions with the lender, an immediate offer is made to a lender at a short sale price, the short sale offer is less than current market value, or a cash back is offered at closing to the delinquent borrower (disguised as “repairs” or other payouts, for example) and is not disclosed to the lender, according to Fannie Mae.

Survey: Americans See More Opportunity in Housing

While Americans are more pessimistic about the direction of the economy, their optimism regarding the housing market continues to grow, according to Fannie Mae’s June 2012 National Housing Survey. Low prices and record-low interest rates are helping to lift Americans’ views on housing, according to the survey.

“While consumers remain cautious about the general economy, their attitudes toward the housing market continue to improve,” says Doug Duncan, Fannie Mae’s chief economist. “Although this positive trend may be short-lived if the general economy falters, one might ask whether consumers are increasingly seeing the current environment as a unique opportunity to buy a home while home prices remain depressed, rental costs are increasing, and interest rates are near historic lows.”

Thirty-five percent of the Americans surveyed say they expect home prices to rise within the next year, with expectations that home prices will rise 2 percent within that time. That marks the highest increases since the survey began in June 2010.

Also, 73 percent of the Americans surveyed said that now is a good time to buy, which matches the highest number recorded since the survey began.

Source: “Housing Survey Shows Consumer Attitudes Demonstrative of Macroeconomic Indicators,” RISMedia (July 9, 2012)

 

Several Cities Declared ‘in the Clear’ from Downturn

Daily Real Estate News | Thursday, July 05, 2012
Nearly 30 cities are “in the clear” from dipping into another housing crisis, posting a “solid base” housing recovery, according to a new report released by Trulia

The “big six cities” that are seeing the most improvements in housing are: Denver; San Jose, Calif.; Pittsburgh; Little Rock, Ark.; Austin, Texas; and Colorado Springs, Colo., according to the report. Those cities posted gains in asking prices of 4 percent or more year-over-year and have seen their foreclosure rates decrease.

Those six markets “avoided the worst of the bubble,” says Jed Kolko, Trulia’s chief economist. “Those metros didn’t have big price declines that we saw in Miami, Phoenix, and Detroit — places that still have a lot of homes left in foreclosures."

Kolko says that Trulia defined “in the clear” in its report as markets with “positive year-on-year asking price growth and low or moderate share of homes in foreclosure.” The other 23 markets cited “in the clear” saw only slight price growth in comparison to the “big six,” Kolko told MSNBC.com.

The six markets saw the following increases in year-over-year asking price increases in June, according to the report:

1.Denver: 7.2 percent increase
2.San Jose, Calif.: 6.2 percent increase3.Pittsburgh: 5.1 percent increase
4.Little Rock, Ark.: 5 percent increase
5.Austin, Texas: 4.4 percent increase
6.Colorado Springs, Colo.: 4.3 percent increase
However, several cities posted even higher price increases in June, but the Trulia report still labeled them “at risk.” Those markets included Phoenix (18.9 percent); Miami (16.1 percent); Cape Coral-Fort Myers, Fla. (14.9 percent); and West Palm Beach, Fla (9.6 [ercent). Even though these markets have seen annual asking prices increase, the Trulia report notes they still have a high share of homes in foreclosure.

Source: “Some U.S. Metros ‘in the Clear’ of Housing Crisis,” MSNBC.com (July 3, 2012) and Trulia Price Monitor Report (June 2012)

Projections of Where the Housing Market's Headed

Real estate markets across the country are inching their way to a slow recovery after bottoming out, according to several real estate economists who spoke at a forum hosted by the National Association of Real Estate Editors.

National Association of REALTORS®’ Chief Economist Lawrence Yun, Zillow Chief Economist Stan Humphries, and National Association of Home Builders Chief Economist David Crowe shared their views on the direction of the housing market during the forum.

"Last year was the worst year on record for [new] house sales, for 60 years of housing-sale info," Crowe said.

But things are picking up, the economists note, despite several challenges still threatening that recovery. Yun says that appraisal issues are holding back up to 20 percent of home sales and that lenders’ tightened mortgage underwriting standards are likely holding back another 15 to 20 percent of potential home deals.

Here are some of the economists’ forecasts:

1. New-home market: The NAHB predicts a 19 percent increase in single-family housing starts this year over last (from 434,000 last year to a projected 516,000 this year).

2. Single-family rental market: This could be the next housing market bubble, Humphries warns. He expects this sector to cool as rental rates continue to increase and as home ownership looks more attractive to the public again.

3. Distressed home sales: The percentage of distressed homes sales is projected to drop by 25 percent in 2012 and 15 percent in 2013, Yun says.

4. Home price appreciation: Yun says it’s possible some markets may see a 10 percent rise in home-price appreciation next year due to an increase in demand, or a 60 to 70 percent increase in housing starts. Yun argues it won’t be both, however, but rather one or the other. He notes it greatly depends on whether lawmakers reach an agreement once again on the looming debt-ceiling deadline.

5. Home owners’ negative equity: About a third of home owners are underwater, owing more on their mortgage than their home is currently worth. As such, the housing recovery will likely be “stair stepped,” Humphries says. He says home owners with negative equity will gradually begin to list their homes as they see prices inch up, but when they do, that may temporarily swell the housing supply and cause a brief pause to the recovery.

Home Owners with Foreclosure Errors May Get $125K

Home owners who were subject to foreclosure abuses during 2009 and 2010 may be eligible to receive more than $125,000 in compensation from banks, regulators announced Thursday as part of the Independent Foreclosure Review.

More than a year ago, regulators uncovered numerous foreclosure errors from lenders’ processing paperwork on foreclosures against home owners. Mistakes ranged from errors on loan modifications to wrongful foreclosures.

The Office of the Comptroller of the Currency and the Federal Reserve released Thursday how much compensation affected home owners will receive.

However, the regulators caution that the majority of eligible home owners may not see any money. More than 4 million borrowers received letters from banks saying they were eligible for a review of their foreclosure cases by independent consultants. However, only 340,000 cases have been reviewed as of May 31. Regulators have extended the deadline so that more affected home owners can take advantage. The deadline is now Sept. 30. (Originally it was July 31.)

The following is a list from the agencies of possible compensation home owners may see from their foreclosure reviews:

▪ Home owners who wound up in foreclosure after errors during or after a trial loan modification

Possible compensation: They’ll receive the value of their home's equity at the time of foreclosure, plus $125,000. If they were able to get their home back prior to foreclosure, they'll receive $15,000.

▪ Military members who lost their homes to foreclosure while still on active duty

Possible compensation: The value of their home's equity at the time of foreclosure, plus $125,000. If they had negative equity in their home, they’ll still receive $125,000.

▪ Home owners who landed in foreclosure even though they were not in default

Possible compensation: They’ll receive $15,000 if they were able to get their homes back. If they lost their homes, they’ll receive $125,000 plus any equity from their homes.

▪ Home owners who experienced any errors or problems with loan modifications (such as being denied a loan modification by a lender or a lender acting too slow in processing an application)

Possible compensation: They may receive up to $15,000, plus any home equity.

Any other errors or abuses uncovered in the reviews, such as banks using the wrong interest rates on approving applications, will be determined on a case-by-case basis for possible compensation, the agencies said.

Source: “U.S. Sets Rules for Foreclosure Compensation,” The Wall Street Journal (June 21, 2012) and “Homeowners to Receive up to $125,000 for Foreclosure Abuses,” CNNMoney (June 21, 2012)

Inventory of For-Sale Homes Falls 20% From Year Ago

The number of homes on the market continues to become a shrinking pool. Inventory of for-sale single-family homes, condos, townhomes, and co-ops dropped 20 percent in May compared to year-ago levels, according to data from REALTOR.com of 146 markets.

Inventories in May declined in all but two -- Philadelphia and Shreveport-Bossier City, La. -- of the 146 markets tracked by Realtor.com.

While inventories were on the decline, the median national list price was on the rise, inching up 3.17 percent in May compared to May 2011.

“These key indicators continue to suggest that the housing market is steadily moving along a path of stabilization and gradual recovery,” Realtor.com notes.

12 Markets Where Inventories Have Dropped the Most California metro areas are seeing some of the largest drops in inventories of for-sale homes.

From May 2011 to May of this year, the following metro areas have posted the highest drops in the country with their housing inventories, with inventories falling 35 percent or more in the last year. Those metros are:

1.Oakland, Calif.: -56.60%
2.Fresno, Calif.: -48.76%
3.Bakersfield, Calif.: -48.59%
4.Phoenix-Mesa, Ariz.: -44.71%
5.Seattle-Bellevue-Everett, Wash.: -42.65%
6.San Jose, Calif.: -40.80%7.Tampa-St. Petersburg-Clearwater, Fla.: --39.76%
8.Stockton-Lodi, Calif.: -39.25%
9.Atlanta: -39.19%
10.San Francisco: -38.90%
11.Riverside-San Bernardino, Calif.: -37.43%
12.Sacramento: -35.92%
By Melissa Dittmann Tracey, REALTOR® Magazine Daily News

Shodow inventory dropped to lowest since 2008

Shadow inventory dropped nearly 15 percent year-over-year in April and is at about a four-month supply—reaching its lowest level in nearly three years, real estate data provider CoreLogic reports.

Shadow inventory, as defined by CoreLogic, refers to properties that are seriously delinquent by 90 days or more, in the foreclosure process, and properties that have completed the foreclosure process but not yet have been listed for sale.

CoreLogic reports that “the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been approximately offset by the equal volume of distressed (short and real estate owned) sales.”

In April, shadow inventory was at 1.5 million units compared to 1.8 million units in April of last year.

"Since peaking at 2.1 million units in January 2010, the shadow inventory has fallen by 28 percent,” Mark Fleming, CoreLogic’s chief economists, says. “The decline in the shadow inventory is a positive development because it removes some of the downward pressure on house prices.”

Serious delinquencies are the main driver of shadow inventory, CoreLogic notes. Serious delinquencies declined the most in the following cities:

•Arizona: -37%
•California: -28%•Nevada: -27.4%
•Michigan: -23.7%
•Minnesota: -18.1%
Source: CoreLogic

Shadow Inventory Drops to Lowest Level Since 2008, CoreLogic Reports

As of April 2012, 1.5 million homes are in shadow inventory, which is a 14.8 percent decrease from last year in April when the number of homes hiding in the shadows was 1.8 million, CoreLogic reported Thursday.

The current level of shadow inventory is at the lowest since October 2008 and represents a supply of four months compared to a supply of 6 months a year ago.

CoreLogic counts shadow inventory, also known as pending supply, by calculating the number of distressed properties that are seriously delinquent, in foreclosure, and held as real estate owned (REO) by servicers, but not currently listed on multiple listing services.

“Since peaking at 2.1 million units in January 2010, the shadow inventory has fallen by 28 percent. The decline in the shadow inventory is a positive development because it removes some of the downward pressure on house prices,” said Mark Fleming, chief economist for CoreLogic. “This is one of the reasons why some markets that were formerly identified as deeply distressed, like Arizona, California and Nevada, are now experiencing price increases.

Out of the 1.5 million properties counted as shadow inventory, most are in the seriously delinquent category. With 720,000 seriously delinquent properties, this represents a supply of two months. About 410,000 are in some stage of foreclosure, a supply of 1.1 months, and 390,000 are already in REO, also a supply of 1.1 months.

States with the highest decrease in serious delinquencies, which are the main driver of the shadow inventory, were Arizona (-37.0 percent), California (-28.0 percent), Nevada (-27.4 percent), Michigan (-23.7 percent) and Minnesota (-18.1 percent).

The actual dollar amount of shadow inventory as of April 2012 was $246 billion, down from $270 billion a year ago and a three-year low.

Foreclosed Home Owners Find a Way to Buy Again

Once-foreclosed home owners are slowly making a comeback in the housing market as some lenders give them a second chance at home ownership.

After defaulting on their home loans or doing a short sale on their previous homes in recent years, some home owners have found a way to buy again, Reuters News reports.

The Federal Housing Agency is the main way paving a comeback for these former home owners to buy again, according to Reuters’ interviews with lenders and real estate professionals. FHA loans can be an option for some who defaulted on their mortgage or did a short sale. FHA borrowers usually need a credit score of at least 620 and a 3.5 percent down payment, which are lower requirements than most conventional mortgages.

"These are not mainstream programs geared for mainstream borrowers," Greg McBride, senior financial analyst at Bankrate.com, told Reuters about former home owners using FHA-backed loans to get back into home ownership.

Still, home owners with mortgage defaults on their records often find its a long way to crawl back into the housing market. They must make big strides in boosting their credit scores after a foreclosure, short sale, or bankruptcy.

"Most of the loans that are getting done are for people who have really rebuilt their credit," rank Donnelly, president of the Mortgage Bankers Association of Metropolitan Washington, D.C., told Reuters. "They have to prove (to the lender that) it was something like a job loss that caused this and not chronic delinquency."

Lenders will take into consideration why the person lost their home previously, and they’re much more likely to try again on a borrower who lost their home due to a job loss than a borrower who walked away on their prior home even though they could still afford the mortgage payments.

Source: “Back from Foreclosure to Homeownership,” Reuters News (May 16, 2012)

REALTORS(R): Home Ownership Bigger Than Politics

REALTORS® heading up to Capitol Hill this week will be telling their members of Congress not to let real estate issues get caught up in election-year politics.

A case in point is long-term reauthorization of the National Flood Insurance Program, which expires in just two weeks. The bill is popular on a broad, bipartisan basis, with some three-quarters of the House passing the bill and most of the Senate passing a previous version of it. But because the bill is noncontroversial, it’s become a magnet for add-on provisions that could derail its consideration...

Consequently, REALTORS® will be asking their members to call for a vote on a "clean" bill on the Senate floor without delay. "This is something so simple that lawmakers can get done," said NAR Chief Lobbyist Jerry Giovaniello, who spoke before a packed room of REALTORS® Wednesday morning prior to their Hill visits at the 2012 NAR Midyear Legislative Meetings & Trade Expo.

Key real estate priorities, including the mortgage interest deduction, could come under the spotlight towards the end of the year as the Congressional session comes to a close and national elections are held. Lawmakers will be faced with expiration of the tax cuts enacted during the George W. Bush administration. The price tag for extending these cuts is some $4 trillion, which would put pressure on lawmakers to find offsets elsewhere. That would make cuts to real estate tax benefits — chief among them the MID — attractive, because they are among the biggest sources of cuts available to the government.

NAR Director of Tax Policy Linda Goold advised REALTORS® to resist calls by their members of Congress to find alternative cuts to the MID, because trading off the MID for cuts elsewhere is a false choice. "The MID has been in the tax code for as long as deductions have been in it," said Goold. "Home ownership is not a special interest."

One of NAR's consumer priorities, extending mortgage cancellation relief, also expires at the end of the year, so REALTORS® will be asking lawmakers to co-sponsor legislation to keep that benefit going. It exempts households that have had their mortgage modified or sold their home in a short sale from having to pay tax on any debt forgiven by the lender.

Other priorities during this week's Hill visits include getting more liquidity into commercial markets by raising a lending cap on some credit unions and creating a covered bond market, passing reforms to keep the FHA financially healthy, and getting lawmakers to write letters to prevent regulators from making it harder for creditworthy households to get reasonably priced mortgage financing.

— Robert Freedman, REALTOR® Magazine

Shadow Inventory: 46 Months to Clear Distressed Housing Supply

It will take 46 months to clear the market’s supply of distressed homes, or the shadow inventory, according to estimates from Standard & Poor’s Rating Services based on first-quarter 2012 data.

 The agency’s latest estimate came in one month shy of the liquidation timeline determined in the fourth quarter of 2011.

While national residential mortgage liquidation rates appeared stable over the first three months of this year, these rates varied widely between local markets, which prevented any significant reduction in S&P’s months-to-clear estimate, the agency explained in its report.
Regional variations in how quickly servicers can clear the backlog of nonperforming loans are primarily due to differences in foreclosure procedures, judicial vs. non-judicial.
As of first-quarter 2012, S&P says its months-to-clear estimate in judicial states was almost 2.5x as long as non-judicial states.
S&P includes in the shadow inventory all outstanding properties on which the mortgage payments are 90 or more days delinquent, properties in foreclosure, and properties that are REO. The agency also includes 70 percent of the loans that became current, or “cured,” from 90-day delinquency within the past 12 months because S&P says these loans are more likely to re-default.
S&P’s calculation of the months to clear the shadow inventory is the ratio of the total volume of distressed loans to the six-month moving average of liquidations. Although S&P’s analysis of the shadow inventory uses only non-agency loan data, the agency’s analysts believe the months-to-clear is similarly high for the market as a whole.
The volume of these distressed U.S. non-agency residential mortgages—which excludes loans from government sponsored entities, such as Fannie Mae and Freddie Mac—remained extremely high at $354 billion in the first quarter, according to S&P. The agency does note, however, that the industry’s distress volume has declined in each quarter since mid-2010.
To put the shadows into perspective, S&P says this latest number, which is based on the original balances of the loans, represents slightly less than one-third of the outstanding non-agency residential mortgage-backed securities (RMBS) market in the United States.
The New York City metropolitan statistical area (MSA) has the highest months-to-clear in the nation, at 202 months.
S&P also reported that the U.S. monthly first default rate fell to 0.67 percent in March 2012, the lowest level since May 2007. The first default rate is the percentage of loans that became 90-plus-days delinquent in that month for the first time, as a percent of all loans that have never before been at least 90 days or more past due.
This means that properties are entering the shadow inventory at a slower rate. S&P says with this improvement, the speed at which servicers can liquidate or cure nonperforming loans will determine the size of the shadow inventory going forward.
Default rates have been falling since first-quarter 2009 and the average national liquidation rate has stabilized, according to S&P—both factors that bode well for getting a handle on the magnitude of the industry’s shadow inventory and its inevitable impact.

Double-Digit Price Increases Coming Soon?

Home buyers and sellers need to get ready to pounce. Hard-hit housing markets are on the road to recovery and expected to see major price gains soon.

Some of the hardest-hit markets during the housing crisis — plagued by soaring foreclosures and plummeting home prices — are expected to post some of the biggest gains through 2013, according to a report released this week by Fiserv.

"Some markets may have overshot to the downside, and people are jumping in to try to catch the bottom," says David Stiff, Fiserv’s chief economist. Fiserv recently projected that nationwide housing prices will gain 4 percent a year over the next five years.

San Jose-Sunnyvale-Santa Clara, CA Metropolitan Statistical Area
Forecast change: second quarter, 2011 – second quarter, 2012 -1.2%
Forecast change: second quarter, 2012 – second quarter, 2013 +1.2%

Market fundamentals
Median Family Income
(Fourth quarter 2011) $99,500
Median Home Price
(Fourth quarter 2011) $514,000
Change in Home Prices
(From fourth quarter 2010 thru fourth quarter 2011) -2.6%
Worst 1-Year Home Price Change
(1980-2011) -31.2%

Home Prices to Rise 4% Per Year?

Have home prices finally hit bottom? Many analysts think so. According to the latest forecast by Fiserv, the market watcher sees a big boost to home prices on the horizon, projecting that home prices will rise nearly 4 percent per year for the next five years.

The real estate markets expected to see the biggest increases in home prices will likely be those hardest hit the last few years by foreclosures, such as in Phoenix and Las Vegas, and areas where prices have fallen the most, according to Fiserv’s forecast.

Housings rising affordability mixed with falling inventories of for-sale homes are the main factors driving the expected price increases, according to Fiserv.

Initially, investors are expected to help drive most of this price increase, and then followed by first-time and trade-up buyers as they re-emerge in bigger numbers to the market.

Source: “U.S. Home Prices Could Rise 4% a Year, Forecast Says,” USA Today (May 8. 2012

What Foreclosure Wave? False Alarm?

Many housing experts for months have been warning a foreclosure wave would soon flood several markets throughout the country. But was it all a false alarm?

Recent surveys have shown that foreclosure sales have dropped to their lowest point in more than two years. And while according to March data, 8 percent more homes did enter the foreclosure process from the previous month, that number is down more than 30 percent from a year ago, according to Lender Processing Services.

CNBC real estate reporter Diana Olick notes that it could be another delay in the foreclosure system “as banks try to modify more loans to meet some of the terms of the [$25 billion] servicing settlement. The foreclosure sales decline also appears to be exclusively in private and portfolio loans, which again points to the settlement.”

Meanwhile, banks are increasing their number of short-sale transactions, and some surveys have shown that short sales are actually now outpacing foreclosure sales — the first time that's ever occurred.

“Lenders are increasingly recognizing that short sales may be a better alternative for them than foreclosure,” RealtyTrac’s Daren Blomquist told CNBC. “This trend began in markets with stronger demand and where the distressed inventory tends to be newer homes (Phoenix, Los Angeles, Las Vegas), but the trend appears to be spreading to other markets like Atlanta and Detroit.”

Source: “Flood of Foreclosures Still Fails to Materialize,” CNBC (May 2, 2012)

5 Ways to Sell a Home Faster, For More Money

24/7 Wall St. recently asked real estate experts and several real estate organizations to weigh in on how sellers can get their house sold at the best price and in the shortest amount of time.

Here’s what they had to say as some of the best ways to get the “sold” sign out this spring:

1.Pay attention to “curb appeal”: First impressions are critical, and homes with inviting landscapes and exteriors tend to sell better, agents say. Pay attention that the driveway is in good condition, lawn well-kept, and the house looks freshly painted.
2.Set the right price: Real estate professionals know how to set the price and prepare a home for sale. Agents use comparable sales of homes sold in the last 60 days to help set the most realistic price for the sales price of a home. By setting a realistic price from the beginning, sellers should be reminded that this will prevent having to drop the price of the home several times before getting it sold and having it linger on the market. If no recent comps are available, some experts recommended sellers get an appraisal, which will also offer a realistic price that the bank may be willing to take when a buyer tries to qualify for financing the home.
3.Talk about energy efficiency: Many buyers don’t fully understand “green” homes but they understand savings. Sellers should point out any features in their homes — such as energy-efficient windows or appliances — that could save buyers money with utility costs.
4.Give the home Web appeal: Good photographs make a home stand-out online and help lure more potential buyers to the front door. Realtor.com says that more than 6,300 photos are viewed per minute on listings posted at its site.
5.Make it move-in ready: Fix any needed repairs, such as water stains, creaky doors, and windows that don’t shut. Flaws in the home — even if relatively minor — can distract buyers, and should be fixed before the home is even listed. Some agents recommend that sellers get a home inspection prior to putting the home up for sale, which can help sellers be proactive in identifying any potential problems that could potentially derail a sale later on. Once a problem is uncovered, sellers are obligated to disclose it or fix it.

Low-ball Offers a Thing of the Past?

Daily Real Estate News | Tuesday, April 24, 2012
Last year, 10 percent of REALTORS® complained about receiving low-ball offers on listed homes — offers usually submitted by the buyer for 25 percent or more below the list price, according to a National Association of REALTORS® survey of its members. But that number has dropped drastically.

According to a survey this March of 4,500 agents and brokers, no REALTORS® complained about low-ball offers. The main problem nowadays: The sudden drop in inventory of for-sale homes has led to fewer homes available to sell.

For home buyers who still think they have a chance of hitting it lucky with a low-ball offer, they’re finding in many markets that their offers are more often being rejected or countered closer to the original asking price, the Los Angeles Times reports.

West Neal with Prudential Olympia in Olympia, Wash., recalls a buyer who came in recently with an offer of $150,000 for a home listed at $250,000. Eventually, they negotiated a final sales price of $230,000, but it took a lot of negotiating on the agents’ parts to get the buyer higher.

"Low-ball offers are down a lot because we're seeing more homes come on the market that are more realistically priced," Neal told the Los Angeles Times.

Source: “Low-ball Offers Decline in Some Housing Markets,” Los Angeles Times (April 22, 2012)

Home prices close to bottoming, to rise in 2013

WASHINGTON (Reuters) - The relentless decline in home prices is nearing an end and prices should rise for the first time in seven years in 2013, but a possible new wave of foreclosures could threaten the recovery, according a Reuters poll of economists.

The median forecast of 24 economists polled by Reuters was for the S&P/Case-Shiller 20-city home price index to end the year unchanged. That was the same finding back in January for this house price gauge, which covers 20 cities.

"We are expecting a gradual improvement, but if we get a big wave of new foreclosures coming to the market, price declines could be even greater," said Yelena Shulyatyeva, an economist at BNP Paribas in New York.

The survey forecast the S&P/Case-Shiller home price index rising 2.0 percent next year, up from 1.5 percent in the January survey.

The housing market's collapse pushed the economy into its longest and deepest recession since the 1930s. Historically, housing has led the economy out of recession, but it has been the weakest link in the recovery that started in mid-2009.

While residential construction accounts for a mere 2.3 percent of gross domestic product, home prices have an oversized reach in the economy, influencing a wide range of consumption decisions by households.

House prices have so far fallen about 32 percent from their peak at the end of 2005, and an estimated 11 million Americans now owe more on their homes than they are worth.

A resulting tide of foreclosures has held back the housing market's recovery.

The survey predicted about 1.5 million foreclosed properties will come on to the market this year. While there is no comparison for this figure, most analysts believe the foreclosure wave has either peaked or is close to topping out.

Given that foreclosures and the accompanying fear of further price declines are the main obstacles to any housing market recovery, few analysts say that further purchases of mortgage backed securities by the Federal Reserve will help.

Fed officials meet on April 24 and 25 to debate whether further steps are needed to drive borrowing costs lower to spur stronger economic growth.

Mortgage rates are already near record lows and house affordability is the best in history.

"The problem with the housing market is not necessarily that mortgages are expensive," said Millan Mulraine, a senior macro Strategist at TD Securities in New York.

"It's more the expectation that prices may continue to fall and cause a lot of potential buyers to sit on the sidelines to wait for more attractive entry points. I don't think there is lot more mileage to be achieved from MBS purchases."

Further MBS purchases by the U.S. central bank, however, could help keep mortgage rates low as the economy's recovery gains momentum.

The survey forecast the 30-year mortgage rate averaging 4.00 percent in 2012, down from 4.15 percent in the January poll.

Although job growth slowed in March, the labor market is expected to continue strengthening this year.

That should help to lift home sales. Sales of previously owned homes are expected to register an annualized 4.70 million unit annual pace in both the second and third quarters of this year before topping at 4.80 million units in the fourth quarter.

That compares to a rate of 4.60 million units and 4.70 million units in the second and third quarter respectively in the January survey.

"This gradual healing is encouraging, but we must tread carefully as the housing market is still far from a robust recovery," Michelle Meyer, an economist at Bank of America Merrill Lynch in New York.

7 Metros Where List Prices Soared Last Month

Daily Real Estate News Wednesday, April 18, 2012 Nationwide median list
prices rose more than 5 percent in March compared to February, according to
Realtor.com housing data of 146 markets. The median list price nationally is now
$189,900.

In fact, nearly all of the 146 metro areas saw median list prices rise or hold
steady month-over-month except for five metros (Columbia, Mo.;
Melbourne-Titusville-Palm Bay, Fla.; Minneapolis-St. Paul, Minn.; Fort
Collins-Loveland, Colo.; and Reading, Pa.).
The areas seeing some of the largest month-over-month increases in median list
prices are:
1. San Francisco
Month-over-month increase: 6.10%
Median list price: $649,000
2. Washington, D.C.-Md.-Va.-W.Va.
Month-over-month increase: 5.92%
Median list price: $270,000
3. San Jose, Calif.
Month-over-month increase: 5.57%
Median list price: $495,000
4. Oakland, Calif.
Month-over-month increase: 5.04%
Median list price: $336,120
5. Seattle-Bellevue-Everett, Wash.
Month-over-month increase: 4.97%
Median list price: $314,900
6. Toledo, Ohio
Month-over-month increase: 4.90%
Median list price: $104,900
7. New Haven-Bridgeport-Stamford-Danbury-Waterbury, Conn.
Month-over-month increase: 4.29%
Median list price: $365,000
The metro areas that have seen the largest jumps in median list prices over the year
include Phoenix-Mesa, Ariz. (a 23.45% increase in list prices compared to March
this year to March 2011); Miami (a 22.27% increase), and Boise City, Idaho (a
19.73 percent increase), the Realtor.com data shows.

Fading 'Fear Factor' Among Home Buyers?

Daily Real Estate News Monday, April 16, 2012 The real estate market is
thawing this spring. Following five years of dismal sales and falling prices,
the housing market is starting to see a turnaround, according to housing
surveys, agent reports, and economists.

Home Buyers are returning to take advantage of record housing affordability while
investors are buying up foreclosures in bulk at bargain prices.

"The biggest challenge that we've had over the past four years is fear — fear that
the economy is collapsing, that property values are collapsing, that the world
is coming to an end," Mark Prather, a broker at ERA Buy America Real Estate in
La Palma, Calif., told the Associated Press. "The fear factor is all but
gone."

The signs are already there: Home sales prices are starting to edge up, even in
hard-hit housing areas like Phoenix and Miami. Also, banks are issuing more
mortgages. JPMorgan Chase recently reported an uptick in loan applications
recently by 33 percent, and the bank said that it issued 6 percent more
mortgages from January through March than last year. Wells Fargo reported an 84
percent increase in loan applications and the issuing of 54 percent more
mortgages in the last year.

Still, the housing market has some ways to go, with a surge of foreclosures expected to
soon hit the market and the unemployment rate still high in many parts of the
country.

"This gradual healing is encouraging, but we must tread carefully as the housing
market is still far from a robust recovery," Michelle Meyer, an economist at
Bank of America Merrill Lynch, told Reuters News.

Source: “US home-buying season finally signaling a recovery,” The Associated Press (April 15, 2012) and “Close to Bottoming, Home Prices May Rise in 2013,” Reuters (April 12, 2012)

Home Ownership Makes Tax Time Less Taxing

With the April 17 tax deadline less than a week away, your clients still have
time to take advantage of the valuable tax benefits home ownership affords. The
National Association of REALTORS®' consumer site, HouseLogic.com, can help.

“Our government encourages home ownership because it benefits families, communities,
and our nation’s economy; home ownership is an investment in our collective
futures,” said NAR President Moe Veissi, broker-owner of Veissi & Associates
Inc., in Miami. “HouseLogic.com helps home owners identify the benefits that
will save them money today and plan ahead for future savings, as well.”

HouseLogic.com provides tips and tools for home owners, and devotes an entire section of its
site to tax incentives for the home. NAR members can check out A Home Owner’s
Guide to Taxes to find helpful articles they can pass along to their clients,
such as 10 Easy Mistakes Home Owners Make on their Taxes, 12 Tough Questions
(and Answers) About Home Office Deductions, and 6 Deduction Traps and How to
Avoid Them that provide consumers with a wealth of information to ensure they
get the maximum return to which they’re entitled.

Tax benefits that encourage home ownership include the mortgage interest deduction,
deductions for property taxes, and tax credits for energy-efficient remodeling
projects and heating and cooling systems.

For more information on tax deductions and preparation as well as articles you can
add to your blog or Web site, visit www.houselogic.com.
Source: NAR

Did High Gas Prices Fuel the Housing Crisis?

High gasoline prices provided the trigger that burst the [housing] bubble,” says
JunJie Wu, an Oregon State economist and one of the authors of a new study that
blames high gas prices as the main culprit for the housing crisis that started
in 2007.
“The theory recognizes the role of subprime mortgages and lax lending practices as
inflating the housing bubble,” Wu says, but adds that a spike in gas prices was
the “trigger.”
The new study, conducted by economists at University of California, Berkeley, and
Oregon State University, attempts to pinpoint the cause of the housing crisis.
The researchers say that while the housing market is blamed on initiating the
2007 financial crisis, researchers have found little consensus on what actually
caused the housing crisis in the first place.
The researchers offer rising gas prices as the main culprit, noting that oil prices
more than doubled between late 2006 and 2008 to $4.15 per gallon.
“The real estate mantra is ‘location, location, location,’” Wu says. “If you find
yourself in a location that is far from work and transportation costs rise
suddenly, that location can lower the value of your house.”
The researchers note that mortgage default rates were highest in commuter areas.
Also, they say that low-income households and suburban homes located away from
business centers were the most vulnerable in the housing crunch.
So will the recent rises in gas prices slow the recovery? Yes, say the researchers,
“especially for communities tied to high transportation costs,” Wu says.
Source: “Some Economists Say High Gas Prices Triggered Housing Crisis,”
RISMedia (April 8, 2012)

Rents Continue to Climb, Make Buying Even Better

As demand increases, rents continue to rise, increasing 5 percent over the past
12 months. Meanwhile, the asking prices for homes fell 0.7 percent in that time,
according to a new report released Thursday by Trulia Inc.
“Buying a home is more affordable than renting now in almost every part of the United
States,” says Jed Kolko, Trulia’s chief economist.
The national vacancy rate for apartments during the first quarter fell to its lowest
point since late 2001, according to a report by Reis Inc. Cities that have the
lowest number of available rental units are seeing some of the largest increases
in rents.
"A lot of people who were owners lost their homes in the bust in these places,"
Kolko says. As such, many of these former home owners have turned to renting,
which has been ramping up demand and driving up rents across the country.
Nationally, the median rent was $1,350 a month in March — up from $1,285 a year ago,
according to Trulia.
Rents have risen the most the last year in markets such as Sarasota, Fla. (12.9
percent); Miami (12.1 percent), San Francisco (11.1 percent), Middlesex County,
Mass. (10.6 percent), and Edison, N.J. (10.5 percent), according to Trulia.
Source: “Rents Keep Rising as Home Prices Stagnate,” CNNMoney (April 5, 2012)

Bidding Wars Are Back, Agents Say

Some real estate markets are reporting that home buyers are having to pay more
than asking price to get the home they desire, as the supply of for-sale homes
has shrunk, Bloomberg News reports.
Bidding wars were a common part of real estate in 2006. But when the market turned from
a “seller’s market” to “buyer’s market,” more sellers started seeing lowball
bids than high bids. Now times are slowly changing, and bidding wars are being
reported in several markets, such as in Seattle, Boston, Silicon Valley,
Miami, and Washington, D.C., Bloomberg reports.
The inventory of homes for-sale is near a six-year low. Mixed with the low
inventory, the job market has been improving and buyers are being lured to the
record level of affordability in the housing market. Existing-home sales and
pending home sales are up more than 8 percent compared to a year earlier, the
National Association of REALTORS® recently reported. Trulia Inc. also reported
that falling home values and low mortgage rates have made home buying a better
deal than renting in 98 of the 100 largest metro areas.
“The housing crash is finally giving way to recovery in an increasing number of
markets across the country,” Mark Zandi, chief economist for Moody’s Analytics,
told Blommberg. “The decline in unsold listings and vacant homes and the
increase in rents presage better times ahead for single-family housing.”
Source: “Bidding Wars Erupt as Supply of Available Homes Shrink,
” Bloomberg News (March 31, 2012)