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.