Residential shadow inventory is on the decline, falling in July to 1.6 million units and representing a supply of five months, a new report from CoreLogic shows.
One year ago, nationwide shadow inventory stood at 1.9 million units, marking a six-month supply. Shadow inventory is 22 percent lower than the peak reached in January 2010 of 2 million units -- or 8.4 months of supply.
CoreLogic calculates shadow inventory by taking into account the number of distressed properties not yet listed on the multiple listing services that are more than 90 days delinquent, in foreclosure, and real estate owned by lenders.
"The steady improvement in the shadow inventory is a positive development for the housing market," says Mark Fleming, chief economist for CoreLogic. "However, continued price declines, high levels of negative equity, and a sluggish labor market will keep the shadow supply elevated for an extended period of time."
Source: “Shadow Inventory Declines to 5-Month Supply: CoreLogic,” HousingWire (Sept. 27, 2011)
More Home Owners Become ‘Accidental Landlords’
More home owners who are unable to sell their home or afford to drop the price any more are opting to rent out their homes until the market improves. But some “accidental landlords” are now having regrets.
The number of formerly owned-occupied homes turned into rentals has soared in recent years, according to Harvard's Joint Center for Housing Studies. In 2009, nearly 25 percent of single-family detached rentals had been owner-occupied two years earlier.
But while home owners are turning their homes into rentals to generate cash flow, many say it’s not enough. They say the cash flow being generated from the property is hardly enough to cover expenses, and in some cases, they’re even losing money. Accidental landlords also say the role is time-consuming and can be stressful, as they have to worry about everything from finding tenants to handling any repairs.
Kathleen Longo, principal with Accredited Investors, advises any home owners considering renting their home to first "take a realistic look at what it really costs to maintain a property. You have to add a cushion for repair and maintenance."
Also, Joann Velde, housing manager for the City of Minneapolis, told the Minneapolis Star Tribune that landlords may be in such a hurry to generate cash flow that they do an inadequate job of screening tenants, which can result in greater problems later on.
Anne Healy in Minneapolis fell into the landlord role after she bought another property and was unable to sell her current home at the price she wanted. She had turned down two previous offers on the home and decided renting would be a better option. “We were in denial,” she told the Minneapolis Star Tribune. “We’ve learned the hard way.”
She says the tenants created so much wear-and-tear on the house that she had to restore the home room by room. She also said she had to hound the tenants to pay rent. A year later, she decided she had enough and put her home back on the market. She sold it for $50,000 less than an offer she had turned down last year.
Source: “Accidental Landlords on the Rise,” Minneapolis Star Tribune (Sept. 24, 2011)
The number of formerly owned-occupied homes turned into rentals has soared in recent years, according to Harvard's Joint Center for Housing Studies. In 2009, nearly 25 percent of single-family detached rentals had been owner-occupied two years earlier.
But while home owners are turning their homes into rentals to generate cash flow, many say it’s not enough. They say the cash flow being generated from the property is hardly enough to cover expenses, and in some cases, they’re even losing money. Accidental landlords also say the role is time-consuming and can be stressful, as they have to worry about everything from finding tenants to handling any repairs.
Kathleen Longo, principal with Accredited Investors, advises any home owners considering renting their home to first "take a realistic look at what it really costs to maintain a property. You have to add a cushion for repair and maintenance."
Also, Joann Velde, housing manager for the City of Minneapolis, told the Minneapolis Star Tribune that landlords may be in such a hurry to generate cash flow that they do an inadequate job of screening tenants, which can result in greater problems later on.
Anne Healy in Minneapolis fell into the landlord role after she bought another property and was unable to sell her current home at the price she wanted. She had turned down two previous offers on the home and decided renting would be a better option. “We were in denial,” she told the Minneapolis Star Tribune. “We’ve learned the hard way.”
She says the tenants created so much wear-and-tear on the house that she had to restore the home room by room. She also said she had to hound the tenants to pay rent. A year later, she decided she had enough and put her home back on the market. She sold it for $50,000 less than an offer she had turned down last year.
Source: “Accidental Landlords on the Rise,” Minneapolis Star Tribune (Sept. 24, 2011)
Big Savings for Buyers: Rates Reach New Record-Lows
For the second straight week, mortgage rates reached another milestone, with 30-year and 15-year fixed-rate mortgages hitting record lows again, Freddie Mac reports in its weekly mortgage market survey.
"Continued investor concerns over the state of the European debt markets kept U.S. Treasury bond yields low and allowed mortgage rates to ease once more this week,” says Frank Nothaft, Freddie Mac’s chief economist.
For example, home owners who refinanced at today’s 30-year fixed-mortgage rate could trim nearly $1,715 a year in interest payments on a $200,000 loan, Nothaft says.
Here’s a closer look at rates for the week ending Sept. 15.
•30-year fixed-rate mortgages: averaged 4.09 percent this week, down from last week’s previous record of 4.12 percent. Last year at this time, 30-year rates averaged 4.37 percent. •15-year fixed-rate mortgages: averaged 3.30 percent, dropping from last week’s record low of 3.33 percent. Last year at this time, 15-year rates averaged 3.82 percent. •5-year adjustable-rate mortgages: averaged 2.99 percent this week, up slightly from last week’s 2.96 percent average. A year ago at this time, the 5-year ARM averaged 3.55 percent. •1-year ARMs: averaged 2.81 percent, down from last week’s 2.84 percent average. A year ago, the 1-year ARM averaged 3.40 percent. By REALTOR® Magazine Daily News
"Continued investor concerns over the state of the European debt markets kept U.S. Treasury bond yields low and allowed mortgage rates to ease once more this week,” says Frank Nothaft, Freddie Mac’s chief economist.
For example, home owners who refinanced at today’s 30-year fixed-mortgage rate could trim nearly $1,715 a year in interest payments on a $200,000 loan, Nothaft says.
Here’s a closer look at rates for the week ending Sept. 15.
•30-year fixed-rate mortgages: averaged 4.09 percent this week, down from last week’s previous record of 4.12 percent. Last year at this time, 30-year rates averaged 4.37 percent. •15-year fixed-rate mortgages: averaged 3.30 percent, dropping from last week’s record low of 3.33 percent. Last year at this time, 15-year rates averaged 3.82 percent. •5-year adjustable-rate mortgages: averaged 2.99 percent this week, up slightly from last week’s 2.96 percent average. A year ago at this time, the 5-year ARM averaged 3.55 percent. •1-year ARMs: averaged 2.81 percent, down from last week’s 2.84 percent average. A year ago, the 1-year ARM averaged 3.40 percent. By REALTOR® Magazine Daily News
Higher Credit Scores, Larger Down Payments
Through June, single-family home loans bought by Freddie Mac boasted an average down payment of 29 percent and an average FICO credit score of 751. In 2007, average down payments were 23 percent and FICO scores averaged 707.
Federal Housing Administration loans, which tend to be a lure for buyers without large down payments, are also being issued to buyers with higher credit scores than in the past. From January through March, FHA loans went to borrowers with an average credit score of 704, up from 631 four years ago.
In an analysis recently done by Zillow of 3.6 million loan inquiries, it found that prospective borrowers getting the best loan rates had average down payments of 28 percent. Three years ago, prospective borrowers averaged down payments of less than 24 percent, according to Zillow.
"It used to be anybody with a pulse could get a home loan. Now you have to be an Olympic athlete," Guy Cecala of Inside Mortgage Finance, told USA Today. "The pendulum has swung too far."
Source: “Tight Standards Make Mortgages Tough to Get,” USA Today (Sept. 14, 2011)
Federal Housing Administration loans, which tend to be a lure for buyers without large down payments, are also being issued to buyers with higher credit scores than in the past. From January through March, FHA loans went to borrowers with an average credit score of 704, up from 631 four years ago.
In an analysis recently done by Zillow of 3.6 million loan inquiries, it found that prospective borrowers getting the best loan rates had average down payments of 28 percent. Three years ago, prospective borrowers averaged down payments of less than 24 percent, according to Zillow.
"It used to be anybody with a pulse could get a home loan. Now you have to be an Olympic athlete," Guy Cecala of Inside Mortgage Finance, told USA Today. "The pendulum has swung too far."
Source: “Tight Standards Make Mortgages Tough to Get,” USA Today (Sept. 14, 2011)
Where Home Prices Have Dropped the Most
California cities have seen their home values drop by the largest percentage in the last five years, with some metro areas posting losses of up to 67 percent in that time period. California cities occupied six of the top 10 metro areas with the largest drops, according to a recent Zillow study based on its home-value estimates and Zillow Home Value Index.
Overall, "there will be many ups and downs in home values before this is over, and we continue to expect a true bottom in 2012, at the earliest,” says Stan Humphries, Zillow’s chief economist. “There are still hazards in the form of a full foreclosure pipeline, high negative equity, and fluctuations in demand."
The following are seven cities that have seen home values drop the most since the housing boom, according to Zillow:
1. Merced, Calif.July 2011 Zillow Home Value Index: $106,514Zillow Home Value Index 5 Years ago: $328,813Value difference (by percent): -67.6%
2. Modesto, Calif.July 2011 ZHVI: $128,777ZHVI 5 Years Ago: $352,599Value difference: -63.5%
3. Stockton, Calif.July 2011 ZHVI: $150,061ZHVI 5 Years Ago: $404,036Value difference: -62.9%
4. Las VegasJuly 2011 ZHVI: $117,084ZHVI 5 Years Ago: $303,656Value difference: -61.4%
5. Vallejo, Calif.July 2011 ZHVI: $190,521ZHVI 5 Years Ago: $468,071Value difference: -59.3%
6. Salinas, Calif.July 2011 ZHVI: $282,289ZHVI 5 Years Ago: $664,404Value difference: -57.5%
7. Daytona Beach, Fla.July 2011 ZHVI: $95,193ZHVI 5 Years Ago: $220,436Value difference: -56.8%
Mortgage Rates Dip, Reaching Another Record Low For the second time in a month, fixed and adjustable-rate mortgage rates set new record lows this week, Freddie Mac reports in its weekly mortgage market survey. The previous record lows were set Aug. 18.
Economic uncertainty and employment concerns are continuing to keep rates low, says Frank Nothaft, Freddie Mac’s chief economist.
Here’s a closer look at rates for the week ending Sept. 8.
•30-year fixed-rate mortgages: averaged 4.12 this week, down from last week’s 4.22 percent. The 30-year rates’ previous low was 4.15 percent, set on Aug. 18. •15-year fixed-rate mortgages: averaged 3.33 percent this week, down from last week’s 3.39 percent average. Its previous record low was 3.36 percent.•5-year adjustable-rate mortgages: averaged 2.96 percent, holding steady at the same record low it set last week. •1-year ARMs: averaged 2.84 percent this week, down from last week’s 2.89 percent average. Its previous record low was 2.86 percent.Despite the low rates, mortgage application volume remains low, dropping for the third straight week, the Mortgage Bankers Association reported this week. The volume of mortgage applications for purchase remained relatively flat this week at “extremely low levels, close to lows last seen in 1996,” says Mike Fratantoni, MBA’s vice president of Research and Economics. Refinance application volume was also down, dropping more than 35 percent below levels last year at this time.
Overall, "there will be many ups and downs in home values before this is over, and we continue to expect a true bottom in 2012, at the earliest,” says Stan Humphries, Zillow’s chief economist. “There are still hazards in the form of a full foreclosure pipeline, high negative equity, and fluctuations in demand."
The following are seven cities that have seen home values drop the most since the housing boom, according to Zillow:
1. Merced, Calif.July 2011 Zillow Home Value Index: $106,514Zillow Home Value Index 5 Years ago: $328,813Value difference (by percent): -67.6%
2. Modesto, Calif.July 2011 ZHVI: $128,777ZHVI 5 Years Ago: $352,599Value difference: -63.5%
3. Stockton, Calif.July 2011 ZHVI: $150,061ZHVI 5 Years Ago: $404,036Value difference: -62.9%
4. Las VegasJuly 2011 ZHVI: $117,084ZHVI 5 Years Ago: $303,656Value difference: -61.4%
5. Vallejo, Calif.July 2011 ZHVI: $190,521ZHVI 5 Years Ago: $468,071Value difference: -59.3%
6. Salinas, Calif.July 2011 ZHVI: $282,289ZHVI 5 Years Ago: $664,404Value difference: -57.5%
7. Daytona Beach, Fla.July 2011 ZHVI: $95,193ZHVI 5 Years Ago: $220,436Value difference: -56.8%
Mortgage Rates Dip, Reaching Another Record Low For the second time in a month, fixed and adjustable-rate mortgage rates set new record lows this week, Freddie Mac reports in its weekly mortgage market survey. The previous record lows were set Aug. 18.
Economic uncertainty and employment concerns are continuing to keep rates low, says Frank Nothaft, Freddie Mac’s chief economist.
Here’s a closer look at rates for the week ending Sept. 8.
•30-year fixed-rate mortgages: averaged 4.12 this week, down from last week’s 4.22 percent. The 30-year rates’ previous low was 4.15 percent, set on Aug. 18. •15-year fixed-rate mortgages: averaged 3.33 percent this week, down from last week’s 3.39 percent average. Its previous record low was 3.36 percent.•5-year adjustable-rate mortgages: averaged 2.96 percent, holding steady at the same record low it set last week. •1-year ARMs: averaged 2.84 percent this week, down from last week’s 2.89 percent average. Its previous record low was 2.86 percent.Despite the low rates, mortgage application volume remains low, dropping for the third straight week, the Mortgage Bankers Association reported this week. The volume of mortgage applications for purchase remained relatively flat this week at “extremely low levels, close to lows last seen in 1996,” says Mike Fratantoni, MBA’s vice president of Research and Economics. Refinance application volume was also down, dropping more than 35 percent below levels last year at this time.
THE SMART WAY TO LOOK AT HOME IMPROVEMENTS
What home improvements really pay off when the time comes to sell your house?That’s an important question for any homeowner contemplating moving or remodeling. And the only possible answer is a somewhat complicated one.That answer starts with the fact that really major improvements – room additions, total replacements of kitchens and baths, etc., -- rarely pay off fully in the near term. It ends with the fact that small and relatively inexpensive changes can pay off in a big way in making your home attractive to buyers if your decision is to move now. It’s a simple fact, consistently confirmed across America over a very long period of time, that even the most appropriate major improvements are unlikely to return their full cost if a house is sold within two or three years.Does that mean that major home improvements are always a bad idea? Absolutely not. It does mean, though, that if your present house falls seriously short of meeting your family’s needs you need to think twice – and think carefully – before deciding to undertake a major renovation. Viewed strictly in investment terms, major improvements rarely make as much sense as selling your present home and buying one that’s carefully selected to provide you with what you want.Even if you have a special and strong attachment to the house you’re in and feel certain that you could be happy in it for a long time if only it had more bedrooms and baths, for example, there are a few basic rules that you ought to keep in mind.Probably the most basic rule of all, in this regard, is the one that says you should never –unless you absolutely don’t care at all about eventual resale value – improve a house to the point where its desired sales price would be more than 20 percent higher than the most expensive of the other houses in the immediate neighborhood.Try to raise the value of your house too high, that is, and surrounding properties will pull it down.Here are some other rules worth remembering:Never rearrange the interior of your house in a way that reduces the total number of bedrooms to less than three.Never add a third bathroom to a two-bath house unless you don’t care about ever recouping your investment.Swimming pools rarely return what you spend to install them. Ditto for sun rooms – and finished basements.If you decide to do what’s usually the smart thing and move rather than improve, it’s often the smaller, relatively inexpensive improvements that turn out to be most worth doing. The cost of replacing a discolored toilet bow, making sure all the windows work or getting rid of dead trees and shrubs in trivial compared with adding a bathroom, but such things can have a big and very positive impact on prospective buyers. A good broker can help you decide which expenditures make sense and which don’t, and can save you a lot of money in the process.
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