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  1. Despite Record Low Rates, New Home Sales Fall, Experience Biggest Price Decline in Two Years

    By on September 26, 2011

    According to information released by HUD and the Census Bureau this morning, new home sales fell 2.3% in August to an annual rate of 295,000.  The average sale price of new homes was $246,000, and the median sales price of new homes was $209,100.  This represents a year-over-year decline of 7.7%, the largest year-over-year drop since 2009.

    The reasons for weak sales remain the same as they have been for the past two years: continuing high unemployment, tight credit and stricter underwriting standards, the relatively low cost of distressed properties, and a glut of homes for sale.

    Sadly, these same factors have been restraining the housing market for at least two years, and no effective steps have been taken to alleviate these problems.  There are so many discounted and distressed properties on the market that there is relatively little demand for new construction, and the pool of people that can even consider building a new home has been dramatically reduced by the economy.

    That this is occurring while mortgage rates are at 60 year lows does not inspire a lot of optimism for the housing market in the near future, especially as the winter approaches.

     

    Category: Mortgage Rates

  2. Mortgage Applications Down Despite Lowest Rates Since Last Fall

    By on June 1, 2011

    As with every Wednesday, let’s check out the Mortgage Bankers Association’s Weekly Mortgage Applications Survey.  The Market Composite Index, which tracks all applications, was down 4.0 percent from the week before.  The refinance index was down 5.7 percent, while the purchase index stayed at the same level from the week earlier.  This drop in activity comes despite rates that are at 2011 lows.  Said Michael Fratantoni, the MBA’s Vice President of Research and Economics:

    “Interest rates fell last week as incoming economic data was weaker than anticipated.  Despite this drop in rates, the number of refinance applications fell.  In fact, the last time mortgage rates were this low, refinance volume was more than twenty percent higher.  It is likely that many borrowers still cannot qualify to refinance given the lack of equity in their homes.”

    According to the MBA’s figures, the average rate on a 30-year fixed rate mortgage fell to 4.58 percent, down from 4.69 percent.  This is the lowest rates have been since November 2010.  Not only this, but home prices are now at post-recession lows, but all signs point to further decreases.  This (as well as difficulty qualifying for a mortgage coupled with unemployment) is likely keeping potential buyers on the sidelines as they wait for the market to bottom out.

    It is worth noting that application numbers don’t tell the whole story with regard to home sales, because cash sales (which obviously require no mortgage application) are not included.  Cash sales hit a record high of 35 percent of the market in March, a number which declined to 31 percent in April.  That this number is declining could be indicative that investors (who comprise most cash buyers) are now holding off on buying due to further price declines.  The takeaway here is that home sales are unlikely to turn around in the near future.

    Category: Mortgage Rates

  3. Falling SoCal Home Sales Sparks Fears of Lost Summer Buying Season

    1 By on May 16, 2011

    Foreclosures, declining home values, and lingering high unemployment is continuing to hurt the housing market in Southern California, much to the chagrin of realtors and builders for whom the spring buying season can be make or break.  An article from the Los Angeles Time last week by Alejandro Lazo stated that home sales in Southern California in April were down 9.2% from the year prior.  This is the lowest April number in three years, and 25.4% below the April average according to MDA DataQuick.  The median home value is down 1.8% year-over-year, falling to $280,000.

    Home prices have been declining since the expiration of the first time home buyer tax credit last year, and this is keeping many buyers on the sidelines.  Zillow recently predicted that the housing market would bottom out in 2012.  The fear of losing money is just one of the factors driving low demand for homes.  The difficulty in attaining credit also limits the number of people looking for homes.  Underwriting standards tightened in response to the housing collapse, and if the new qualified residential mortgage regulations come to pass, high down payment requirements will make it even more difficult for many to get a home.

    The economic situation in California does not indicated that the housing market will turn around anytime soon.  Across the country, about 28% of homeowners with mortgages owe more on their loan than their home is worth.  The numbers are a little higher in California, where nearly 1 in 3 homeowners is underwater.  California also saw some of the biggest run-ups in home value over the bubble years, which means that many of the people who are underwater are extremely far underwater.  Unemployment in California is still north of 12%, significantly higher than in the rest of the nation (which averages 9% unemployment).

    One area that has picked up is cash home sales.  There has been a steep increase in the sales of cash homes in California.  As of January, more than 31% of home sales were of the cash variety, as investors gobble up foreclosed and distressed properties in hopes of making quick profits.  The predominance of foreclosed property sales is yet one more factor weighing on home values in the Golden State, but this inventory must be cleared before the market can recover.  If you are in Southern California and are buying or selling a home, I’d like to hear your perspective.  Is the market really that bad?  Let me know in the comments section below.

    Category: Mortgage Rates

  4. New Home Sales Jump in March, Still Hovering Near All-time Lows

    By on April 25, 2011

    According to the Census Bureau and The Department of Housing and Urban Development, new home  sales jumped by 11.1% in March, rising to an annual pace of 300,000 homes, up from a pace of 250,000 in February.  The February mark was the record low since the beginning of this report in 1963.  Despite the increase, this is still 21.9% below the March 2010 pace of 384,000 homes sold.

    New home sales have declined for five straight years, and will likely continue to decline or stagnate until the market absorbs the massive supply of excess distressed and normal homes.  Earlier today we learned that distressed homes made up nearly half of all homes sold in March, so this process is currently taking place.  However, it will likely take years for the market to recover and for people to buy these homes.

    The months it would take to absorb the supply of new homes fell from 8.2 months in February to 7.3 months in March.  6 months is considered normal, and the all-time high was 12.1 months in January 2009.  The housing market still has a long way to go before it recovers.

    Category: Mortgage Rates

  5. Distressed Property Comprised Half of All March Home Sales

    By on April 25, 2011

    Distressed property sales rose to the second highest level in a year in March, according to a new Campbell/Inside Mortgage Finance report (which I learned of via a Calculated Risk blog post this morning).

    Nearly half of all home sales in March were distressed properties.  The Distressed Property Index rose to 48.6% in March.  The high for the year is 49.6% in January.  Per the report:

    “The HousingPulse DTI indicated that nearly half of the housing market is now distressed properties. This trend is likely to continue as a backlog of foreclosures and mortgage defaults make their way through the housing pipeline.”

    It is fairly stunning to learn that distressed properties make up this large of a percentage of home sales.  Distressed properties sell at a substantial discount versus “normal” home sales.  According to an MIT study last year, the average price reduction on a foreclosed property is 27%.  Rising distressed property sales will drive down the sales prices of normal homes that are forced to compete with the lower sale prices. Distressed properties also lower home appraisal values, to the point that several states are considering outlawing the use of distressed properties as comparable home sales in appraisals.  The large number of distressed properties sold will serve to put more downward pressure on home values.

    On the other hand, the housing market needs to clear a ton of excess inventory before it can bottom out and begin to heal.  It is good to see that some of these foreclosed homes are being sold.  Unfortunately, declining home values is a necessary part of this process.

    Category: Mortgage Rates

  6. Canadians: Possible Saviors For Distressed Housing Markets

    By on March 31, 2011

    canadian real estate investors, canadian home buyers

    Distressed housing markets can try looking north for help. With home prices low in the American Sun Belt and the Canadian dollar strong, Canadians might be doing more than sunbathing during spring vacations stateside.

    One in five Canadians would now consider purchasing real estate in the United States, reveals a survey from BMO Bank of Montreal. Lower prices for American homes and a strong Canadian dollar are boosting their interest in U.S. properties.

    Housing prices in the U.S. overall have dropped 30 percent from their peak four years ago, but prices where Canadian snowbirds traditionally visit have dropped even more. For instance, prices have dropped 44 percent in Tampa, Fla., 54 percent in Phoenix, 57 percent in Las Vegas, and 49 percent in Miami.

    “Now, with the American economy and employment gaining strength, home sales should pick up and put a floor under soft prices,” says Sal Guatieri, a senior economist at BMO Bank of Montreal. “We expect prices to rise over time as the overhang of unsold homes eases.” Continue Reading…

    Category: Housing Market

  7. Pending Home Sales Up Unexpectedly, NAR Reports

    By on March 28, 2011

    The number of pending home sales unexpectedly increased between January and February, a hopeful sign for a housing market recovery, according to the National Association of Realtors.

    Based on sales contracts signed in January, NAR’s pending home sales index rose 2.1 percent to 90.8 from 88.9 in January. Pending sales increased in all regions except the Northeast where severe winter weather might have been a factor. Economists surveyed by Bloomberg News predicted little change in pending home sales.

    The increase is a hopeful sign but is not proof of a housing market recovery. Because so many homes sales involve foreclosed properties, increasing home sales may not lead to lower home values in the short term.

    The index, which reflects contracts and not closings which normally occur one or two months after buyers sign the sales contract, is still 8.2 percent below 98.9 recorded in February 2010 when the first-time home buyer’s tax credit was still available. Last month, the index fell from 91.5 to 88.9, meaning home sales could be choppy in the future. Continue Reading…

    Category: Housing Market

  8. Tough Mortgage Lending Criteria Hurting Home Sales

    By on March 25, 2011

    mortgage guidelines, home loan requirementsGetting a mortgage is becoming more difficult for many potential home buyers. That’s one of the reasons why investors are starting to dominate purchases of short sales and bank-owned properties, concludes a survey of real estate agents.

    Investors, typically using cash to buy homes, accounted for 23.5 percent of home purchases in February, an increase from 19.9% percent in just two months, reports the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. Cash purchases of homes set a record, reaching 33.7 percent of purchases in February.

    “We are seeing investors come back into the market. One investor told me that one house he wanted came on Wednesday p.m. and had 9 offers by Thursday a.m.,” stated New Jersey real agent participating in survey.

    Mortgage application requirements may get even tougher later this year and next year as the government withdraws its support for the housing market and tougher regulations implements new regulations. For instance, the conforming loan limit for jumbo mortgages in high-cost is scheduled to retreat from $729,750 to $625,000 on Sept. 30 and new regulations will require lenders to keep a stake in riskier, or non-qualified, mortgages. Those changes will probably mean higher mortgage rates and tough qualification requirements for many borrowers. Continue Reading…

    Category: Purchase

  9. Retiring Baby Boomers Will Prompt A Home Remodeling Explosion

    1 By on March 24, 2011

    Baby boomers have changed everything they’ve touched by their sheer numbers. Now they will create a home remodeling explosion as they sell their older homes and retire, predicts a study from the Joint Center for Housing Studies at Harvard University.

    The oldest baby boomers will be turning 65 this year, the first of the group that will reach retirement age in the next 20 years, and the younger home buyers moving into their homes will want to renovate, upgrade and repair the dwellings, baby boomer homes, fha 203k home renovation loans, home salespredicts the report, “Housing Turnover by Older Owners: Implications for Home Improvement Spending as Baby Boomers Age into Retirement.”

    Home buyers can use the FHA 203(k) home renovation loan to finance home purchases and renovations with one loan. The home appraisal is based on the home values after renovation is completed, allowing larger valuations which helps home buyers qualify for home loans.

    Home owners over 55 accounted for about a third of all home sellers between 1997 and 2007 and that figure has been trending up and will continue to increase, predict the report’s authors, George Masnick, Abbe Will and Kermit Baker. Continue Reading…

    Category: Housing Market

  10. Home Prices Have Over-Corrected In Many States, Experts Say

    By on March 21, 2011

    Home prices have over-corrected in over half of all states based on per capita income, say economists at PMI Mortgage Insurance.

    Using 1995 as a benchmark, PMI calculates that 35 states have home prices below what they should be (based on disposable incomes), and are very affordable.

    Home prices in some states, such home prices, home values, housing marketsas Michigan, outpaced incomes in the real estate bubble, but have since significantly over-corrected, PMI says in its latest Housing Mortgage Market Review. Those states also include Alabama, Georgia, Idaho, Illinois, Missouri, Montana, Nevada, New Mexico, and West Virginia.

    That doesn’t mean home values will rebound immediately. They could fall even more before recovering.

    Home prices in other states, namely Indiana, Arkansas, Kentucky, Kansas, Iowa, Mississippi, Nebraska, Ohio, Oklahoma, South Dakota, Texas and Wyoming, are far too low even though they had no bubble. Home prices in those areas should recover as jobs return.

    New York and California home prices remain too high relative to incomes. Desirable living conditions and limited space could support higher home values, or home prices could fall even more. Others states in this group include Alaska, California, Hawaii, Massachusetts, New Jersey, New Hampshire, Oregon, South Carolina, as well as Washington DC. Continue Reading…

    Category: Housing Market

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