Home Prices | Mortgage Rates & Trends: Mortgage Blog

Mortgage Rates & Trends: Mortgage Blog

View the lowest rates we have to offer.

Read our RSS Feed Policy

Home Prices Continue to Fall, Still we Lack a Real Housing Policy
By Michael Kraus on January 31, 2012

The housing sector is not going to lead the economy out of the woods, not anytime soon:

Home prices are still falling, according to the S&P/Case-Shiller Home Price Index for November, released this morning. This, of course, is not really news for anyone who took economics 101 given the weak demand for homes and the massive supply of them on the market and in shadow inventory. Home prices are now off by about a third since the market peaked in 2006, and both the 10- and 20-city indices are close to breaking through their post-crisis lows.

The 10- and 20-city indices both fell 1.3% from October 2011 to November 2011 (all numbers cited are not seasonally adjusted). Year-over-year, the 10- and 20-city indices were down 3.6% and 3.7% respectively. The S&P/Case-Shiller index is a three month moving average that is two months delayed. Of the most recent report, David Blitzer, Chairman of the Index Committee remarked:

“Despite continued low interest rates and better real GDP growth in the fourth quarter, home prices continue to fall. Weakness was seen as 19 of 20 cities saw average home prices decline in November over October. The only positive for the month was Phoenix, one of the hardest hit in recent years. Annual rates were little better as 18 cities and both Composites were negative. Nationally, home prices are lower than a year ago. The 10-City Composite was down 3.6% and the 20-City was down 3.7% compared to November 2010. The trend is down and there are few, if any, signs in the numbers that a turning point is close at hand.

The crisis low for the 10-City Composite was April 2009; for the 20-City Composite the more recent low was March 2011. The 10-City Composite is now about 1.0% above its low, and the 20-City Composite is only 0.6% above its low. From their 2006 peaks, both Composites are down close to 33% through November.”

Year-over-year, home prices were down in 18 of 20 cities surveyed, with only Detroit (with 3.8% growth) and Washington, D.C. (with 0.5% growth) showing gains. On a month-over-month basis, only Phoenix showed an increase with a 0.6% gain from October to November.

Continue Reading…

Category: Mortgage Rates
Fannie Mae Predicts a Modest Economic Improvement in 2012
By Michael Kraus on January 17, 2012

Late last week, Fannie Mae released their Economics and Mortgage Market Analysis for 2012. Fannie economists note that the economy appeared to be gathering momentum toward the end of the year, and that consumer confidence appears to be rebounding. Fannie Mae Chief Economist Doug Duncan commented:

“We’re entering 2012 with decent momentum, especially on the employment side, which is fostering positive household and consumer behavior. Unfortunately, we expect this momentum to slow as we move through the first half of the year. 2012 will be replete with policy changes and challenges that involve the global economy, the domestic economy, and the housing sector. We expect the net effect will be a year of moderate growth edging away from the 2011 threat of a double dip.”

Fannie anticipates slow economic growth in the first half of 2012, with things picking up somewhat in the second half of the year. Real GDP growth is expected to hover around 2.0% for the first two quarters of the year, before rising to about 2.5% in the third and fourth quarters. Overall growth is expected to be around 2.3 percent for the year.

Fannie has downgraded the chances of the economy re-entering a recession from 50/50 to about one-third, and notes that the primary risk to the economy is the situation in Europe. Fannie notes with optimish that the ECB has helped to find a temporary solution to debt issues. I am nowhere near this optimistic, as I believe that recent events in Greece demonstrate that some euro countries’ debt burdens are fundamentally untenable.

On the employment front, Fannie notes that the labor market improved at the end of the year, with initial employment claims falling to some of the lowest levels seen since 2008 (although unemployment claims spiked last week). While unemployment is falling, I am not sure that the gains are very significant. The labor force participation rate is sitting near the lowest levels since the early 1980s. We need around +120,000 jobs per month to keep up with population growth. Until we start seeing months where 3oo-400,000 jobs are created, I will not believe we are out of the woods. I suspect that some of the gains in employment recently are largely illusory.

In the housing sector, Fannie notes that there has been some improvement of late. Home prices are still falling, but the rate of decrease has slowed. Foreclosures are down from 2010, but a lot of that is most likely due to increased regulatory and judicial scrutiny on foreclosure. Mortgage rates are predicted to stay low, possibly increasing to just over 4% by the end of 2012. I believe is is worth noting that it is unknowable what will happen in Europe in the near future, but I could easily see a situation where Greece undergoes a disorderly default, which could prompt the Fed to undertake another round of quantitative easing, possibly driving 30 year rates into the mid-3s. On the other hand, if Europe gets its act together, we could see rates in the mid 4s by the end of the year.

Category: Mortgage Rates
Real Home Prices Fall to 2001 Levels
By Michael Kraus on January 3, 2012

According to the S&P/Case-Shiller Home Price Index, home values were down again across the country in October. The 10-city index fell 1.1% from September, while the 20-city index was down 1.2% from the month prior. Both indices were down annually, with the 10-city and 20-city index falling 3.0% and 3.4% respectively. In absolute terms, both indices are approximately at the same levels as they were in 2003.

In a new post on his Housingviews blog, David Blitzer, the Chairman of the Index Committee for S&P, says that home prices have actually dipped even further than that. When adjusted for inflation, home prices are now actually at 2001 levels, and “when allowing for a dip in home prices in the 1990s when inflation rose faster than houses, we’re almost back to 1989″.

It seems unlikely that home prices have stopped their skid, and we are probably due for even further correction over the next couple of years. There is still a lot of uncertainty surrounding the economy, which has depressed the rate of household formation and kept a lot of potential home buyers on the sidelines. The lack of demand for houses, coupled with the large overhang of housing supply suggests that we could see prices fall even further. For those looking to buy or sell a home, the real question is “when are we going to see prices bottom out”?

As with all real estate matters, this answer is intensely local. Many markets have seen the rate of home price declines slow, and some stronger markets will likely bottom out sometime toward the end of 2012 or the beginning of 2013. Other markets are probably years away from seeing prices bottom out, however. In areas where development was most intense during the bubble years (places in Nevada, Florida, and Arizona, among others) we are unlikely to see home prices stop declining for quite a few years. These areas will continue to be plagued by an imbalance of supply and demand for some time to come.

Category: Mortgage Rates
Housing Market Yet to Bottom Out, Home Prices Continue Fall in October
By Michael Kraus on December 27, 2011

Home prices fell again in October, according to the newest S&P/Case Shiller Home Price Index. The 10-city composite fell 1.1% from September while the 20-city index fell 1.2% over the same time frame. The 10-city index is now down 3.0% from October 2010, while the 20-city index is down 3.4% from last year. Both indices are hovering around the same place they were in 2003. The S&P/Case Shiller Home Price Index is a three month average that is two months delayed.

David Blitzer, Chairman of the Index Committee commented:

“There was weakness in the monthly statistics, as 19 of the cities posted price declines in October over September. Eleven of the cities and both composites fell by 1.0% or more during the month. And even though some of the annual rates are improving, 18 cities and both Composites are still negative. Nationally, home prices are still below where they were a year ago. The 10-City Composite is down 3.0% and the 20-City is down 3.4% compared to October 2010.

“In the October data, the only good news is some improvement in the annual rates of change in home prices, with 14 of 20 cities and both Composites seeing their annual rates of change improve. The crisis low for the 10-City Composite was back in April 2009; whereas it was a more recent March 2011 for the 20-City Composite. The 10-City Composite is about 2.4% above its relative low, and the 20-City Composite is about 1.9%.

The only cities that saw year-over-year price improvements were Washington, D.C. (+1.3%) and Detroit (+2.5%). The cities seeing the biggest year-over-year losses were Atlanta (-11.7%), Las Vegas (-8.5%), and Minneapolis (-8.4%).

At the end of the day, the housing market is still dealing with the same fundamental issue it has been dealing with for more than three years: a fundamental imbalance in the supply of houses and the demand for them. The lack of demand is caused by trepidation about continuing price declines, lack of consumer confidence, unemployment. and a low rate of household formation due to unemployment. The supply of homes is bloated primarily due to over-building during the bubble years and foreclosure.

The problem is that all these factors create a vicious cycle that continues to drag down home values. The lack of any sort of cohesive housing policy from the White House and our Congress is not helping matters.

While the rate of home price declines is slowing, I don’t think most markets have hit bottom yet. I fear that we still have a ways to go before we start seeing real improvements.

Category: Mortgage Rates
RadarLogic: Home Prices Fell 2.0% From September to October
By Michael Kraus on December 23, 2011

Yesterday RadarLogic published its RPX Monthly Housing Report for the month of October. The found that homes prices were down 5.4% from October 2010, and 2.0% from September 2011. This is the largest month-over-month decline in three years. According to the report, there may be some seasonal factors at play here:

“During the past two years, the RPX Composite price has dropped rapidly from August through October, temporarily stabilized in November, then dropped rapidly again in December and January. If this pattern repeats this season, the RPX Composite will decline another five percent or so through early February, 2012. From there, we expect it to stabilize temporarily before beginning its seasonal assent during the spring buying season.”

Next Tuesday, the S&P/Case-Shiller Home Price Index for October will be released. RadarLogic anticipates that this report will show a month-over-month decline, which I think is a pretty safe assumption.

The same factors that have been causing home prices to fall for the past couple of years are still plaguing the housing market. There is an acute lack of demand for housing in many markets as a result of unemployment, lack of consumer confidence and job security, and a low rate of household formation. There is an overhang of homes both on the market and in shadow inventory as a result of foreclosure and overbuilding during the bubble years. This is a simplification of the situation, but as long as this imbalance in supply and demand exists, home prices will continue to fall on average. With real estate being local, some markets are in better shape than others, and some places will begin to see improvements in the housing market before others.

Category: Mortgage Rates
Fannie Mae: Housing Will Experience a “Subdued Recovery” in 2012.
1 By Michael Kraus on December 20, 2011

Today Fannie Mae released it Economics and Mortgage Market Analysis for December. Fannie Mae economist Doug Duncan noted that “fourth-quarter economic activity seem[s] to indicate we will end 2011 on a positive note…however, the U.S. economy continues to face many obstacles, and we expect momentum to slow going into 2012″.

As with everybody else, Fannie’s predictions for 2012 are muddled due to the ongoing European debt crisis. Despite efforts by European authorities to formulate some sort of plan to deal with the problems, a solution has remained elusive, and the specter of sovereign defaults in Europe looms over the markets. Duncan noted that “the global economic recovery appears to be losing steam. We now expect that the Euro Zone has slipped into a recession in the current quarter that will likely last through the first half of 2012″.

Another complicating factor is the uncertainty surrounding U.S. fiscal policy. The ongoing payroll tax extension battle in Congress is emblematic of this. Our elected officials are not very good at compromise, and the direction of U.S. fiscal policy is cloudy to say the least. Duncan notes that “fiscal contraction at all levels of government, including the scheduled increase in payroll taxes and reduction in unemployment benefits, will restrain growth”.

As to housing, Fannie says that there are signs that low mortgage rates are spurring demand, and recent housing numbers (residential home construction and homebuilder confidence) have improved significantly (although by many measures home prices are still falling). Regardless of recent improvements, Fannie predicts a “subdued recovery” for housing in 2012, muted by low household formation and an uncertain job market.

Interestingly, Fannie “do[es] not anticipate that the Fed will engage in another round of quantitative easing” unless the European debt crisis gets worse, in which case the Fed could buy mortgage backed securities in an effort to drive down mortgage rates. Personally, I think it is likely that the situation in Europe will get worse, and that the Fed will engage in QE3.

Category: Mortgage Rates
Foreclosures Fell in November, but New Wave of Repossessions Coming in Early 2012
By Michael Kraus on December 15, 2011

Mixed news on the foreclosure front today: this morning RealtyTrac published its U.S. Foreclosure Market Report for November 2011. They found that foreclosures declined 3% from October to November, and that foreclosures were down 14% from November 2010 to November 2011. All told, a little over 224,000 foreclosure filings (default notices, scheduled auctions, and bank repossessions) were reported in November. James Saccacio, co-founder of RealtyTrac commented:

“Despite a seasonal slowdown similar to what we’ve seen in each of the past four years, Novembers’ numbers suggest a new set of incoming foreclosure waves, many of which may roll into the market as REOs or short sales sometime early next year”.

“Scheduled foreclosure auctions reached a nine-month high in November, corresponding to a recent surge in default notices that began back in August. Many of the new defaults that started the foreclosure process over the past few months are now being scheduled for public foreclosure auction”.

The states with the highest foreclosure rates remain Nevada, California, and Arizona. For the 59th month in a row, Nevada has the top foreclosure rate in the country. This comes despite a tough new anti-foreclosure law in Nevada which makes it a felony for a lender, servicer, or trustee to make false representations or claims over a title. California, Michigan, Illionois, Georgia, and Florida had the highest total number of foreclosures.

While foreclosure rates are elevated across the country, their concentration in Nevada, California, Arizona, Florida, Michigan, Georgia, and Illiniois is going to make a housing recovery in these states very prolonged.

It is this coming wave of foreclosures, and their concentration in a few states that makes me doubt reports that home prices are likely to stabilize in the coming year. It is entirely possible that home prices will stabilize in many states, but the afforementioned hard hit states are likely to continue to see home values fall, and this will negatively impact the national average.

Another thing to keep an eye on is the mounting pressure on banks to reform their foreclosure practices. Recently the attorneys general for California and Nevada announced a joint investigation into alleged mortgage fraud. Nevada recently began pursuing criminal charges against several robo-signers in that state. Massachusetts announced its own lawsuit against major lenders and the Mortgage Electronic Registration System (MERS) earlier in the month. The AGs for Delaware and New York are also working jointly to investigate mortgage origination, securitization, and foreclosure practices. I could see a scenario where these criminal and civil lawsuits force the big banks to put a halt on foreclosures. It is also possible that these lawsuits’ impact will be felt later in the year, and that this new wave of foreclosures will be allowed to manifest itself.

Category: Mortgage Rates
Clear Capital: Home Prices Seen Stabilizing
By Michael Kraus on December 12, 2011

Late last week Clear Capital published its December 2011 Home Data Index Market Report. Clear Capital found that quarter-over-quarter home prices were mostly stable, increasing by 0.3%. The pace of growth slowed from the prior quarter, when home prices were up 0.6%. Year-over-year, home prices were down 2.2% from November 2010, which is somewhat better than the y-o-y loss in October (-2.8%), but is still the 14th consecutive month with year-over-year declines.

Dr. Alex Villacorta, the Director of Research and Analytics at Clear Capital commented:

“The overall market stability in this month’s report gives me hope that housing markets are settling after a very turbulent two years. With only a once percent drop in national home prices since January and virtually no change in prices over the last six months, strong evidence suggest the big swings that many market participants are accustomed to could become a thing of the past.

Although many of the nation’s major markets are experiencing no significant movement in prices, there are still several micro markets that are under-performing the overall market due to high levels of REO saturation. As lien holders continue to process their foreclosures and the flow of REOs continues to come to market, it will be critical for industry participants to ensure they understand the micro economic nature of specific markets”.

By and large, home prices were relatively stable in most of the country, quarter-over-quarter. In the northeast, prices rose by 0.5%, prices rose 0.2% in the south, and by 1.2% in the midwest. The only region where prices fell was in the west, which saw a 0.8% q-o-q decline.

Notably, REO saturation was close to 25% in November, meaning that about one quarter of sales were REO. This is one of the primary reasons that home prices are still falling, and the main reason that I don’t think that we have seen the end of declining prices.

Fundamentally, there is still too much housing supply and too little housing demand. High unemployment and uncertainty is inhibiting household formation, which depresses demand for housing. Additionally, there is still $700 billion worth of negative equity in the real estate market, and this negative equity needs to be cleared for the market to heal. Whether it is cleared through foreclosure, principal write-downs, or some other mechanism, this must happen. In the meantime, foreclosures and REO will continue to trickle onto the market, adding to the excess supply.

I suspect that we will continue to see home prices fall through the winter, and I doubt they will stabilize nationwide until 2013.

Category: Mortgage Rates
Fannie Mae: Sentiment on Housing Market Slowly Improving, but Still Negative
By Michael Kraus on December 7, 2011

Fannie Mae’s Monthly National Housing Survey for the month of November was published this morning. They found that consumer sentiment has improved slightly over the “deeply negative housing market sentiment witnessed this summer”. So while sentiment is improving, our understanding is tempered by the knowledge that it would have been hard for consumer sentiment to be more negative, and it really had no where to go but up.

Doug Duncan, VP and chief economist of Fannie Mae commented:

“Though their home price expectations have become slightly positive, consumers remain concerned about the direction of the economy and continue to view their household finances as being relatively flat. Most Americans expect no improvement in their personal financial situation in the next 12 months and will likely remain wary about undertaking the significant financial obligation with homeownership until their view of the their income, expenses, and job security heads in a more positive direction”.

The survey found that on average, respondents expect home prices to rise 0.2% over the next twelve months, showing a marked improvement from the prior three months when respondents forecast home prices declines. The number of people who expect home prices to rise in the next year is up slightly, from 19 percent to 22 percent, while the number that believe prices will fall dropped from 23 percent to 22 percent.

Despite the expectation of price increases, Americans remain bearish on the housing market. The number of people saying that it is a good time to buy or sell a house remained essentially the same, with 68 percent of people saying now is a good time to buy, and only 10 percent saying now is a good time to sell.

When looking at the economy as a whole, only 16 percent of people believe that the economy is on the right track, a figure which is unchanged from the previous three months. Those that say the economy is on the wrong track fell slightly, from 77 percent to 75 percent.

Clearly, there is still a lot of improvement that has to occur before Americans believe the economy and the housing market are healing.

Category: Mortgage Rates
CoreLogic: Home Prices Fall in October as Glut of Unsold Homes Weighs on Market
By Michael Kraus on December 6, 2011

This morning CoreLogic released its October Home Price Index. CoreLogic found that October home prices declined 1.3 percent from September, and that home prices were down 3.9 percent from October 2010. Mark Fleming, the chief economist for CoreLogic remarked:

“Home prices continue to decline in response to the weak demand for housing. While many housing statistics are basically moving sideways, prices continue to correct for a supply and demand imbalance. Looking forward, our forecasts indicate flat growth through 2013″.

The states seeing the highest year-over-year price appreciation in October were West Virginia (+4.8%), South Dakota (+3.1%), New York (+3.0%), Washington D.C. (+2.4%), and Alaska (+2.1%). The states seeing the largest year-over-year declines were Nevada (-12.1%), Illinois (-9.4%), Arizona (-8.1%), Minnesota (-7.9%), and Georgia (-7.3%).

The same factors that have plagued the housing market for the last three years are still putting downward pressure on home prices. There is a glut of unsold homes due to foreclosure and over-building during the bubble years, and there is little demand for homes due to continuing high unemployment, lack of certainty surrounding the economy, weak household formation, and falling home values.

All of these factors are inter-related, and are causing a self-reinforcing spiral of foreclosure and falling home prices. Foreclosed properties drag down the value of neighboring properties, and as prices fall, homeowners are more and more likely to have negative home equity. Negative equity strongly correlates with foreclosure, which reinforces price declines, and causes more foreclosures. Presently 10.7 million home owners with mortgages are underwater, but just as crucially 2.4 million homeowners have less than 5 percent home equity. It is these homeowners with near-negative equity that are most likely to go underwater and fall victim to foreclosure.

At some point home prices will bottom out, but I don’t think we are there quite yet.

Category: Mortgage Rates