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  1. Trulia: Majority of Americans Don’t See Housing Recovery Until 2013-2014

    By on May 26, 2011

    Americans are increasingly pessimistic on a potential housing market recovery according to a new study from Trulia and RealtyTrac. The survey found that 54% of Americans believe there will be no housing recovery until 2014, and an additional 24% believe no recovery will occur until 2013.  Pete Flint, the co-founder of Trulia commented:

    “Most Americans, as our latest survey revealed, overestimated how quickly the housing market would bounce back, but when it does, it will likely be a long and gradual process. Looking at the recent double dips in home prices, I expect the rest of 2011 to be volatile for real estate. On the flip side, mortgage rates won’t stay low forever and even if home prices continue to fall for a bit, now is still a good time to enter the housing market. In my eyes, we have another 18 months until we start to see signs of price stability in the housing market.”

    Recovery times will obviously vary by market, with areas such as Arizona, California, Nevada, and Florida lagging behind other parts of the country due to their huge number of foreclosures.  Home prices are falling broadly, however, and have been doing so since the expiration of the home buyer tax credits last year.  Many markets that were less impacted by the first round of price declines such as Minneapolis and Seattle have seen prices fall precipitously over the past six months.

    Trulia also found that Americans believe that the government is not doing enough to prevent foreclosures.  45 percent express this viewpoint, while 32 percent say “too much” or the “right amount” is being done.  The rest didn’t know.  The government’s flagship program to stop foreclosures (the Home Affordable Modification Program) has not been very successful, and was repeatedly ripped by the watchdog responsible for overseeing the Troubled Asset Relief Program (TARP).  The watchdog said that the program’s goals were too opaque, and that HAMP failed to preserve homeownership and offered “false hope” to distressed homeowners.

    Another interesting aspect of the survey was the number of people who had first hand knowledge of someone with a distressed property.  An incredible thirty percent of respondents say they or someone they know has applied for a mortgage modification, been foreclosed, conducted a short sale, stopped paying their mortgage, or walked away from their home.  Surely this accounts for much of the (well-founded) pessimism surrounding the housing market.

    When do you think we will see a recovery?  Let me know in the comments section below.

    Category: Mortgage Rates

  2. Rental Costs Increasing as Homeownership Levels Plunge

    By on April 28, 2011

    There’s an article on Reuters by Mark Miller this morning “Housing Bust Squeezes Renters” that  details how an influx of renters is causing rental prices to skyrocket in many markets.

    Yesterday the Census Bureau released a report that showed that homeownership rates amongst Americans are at their lowest levels since 1998.  66.4% percent of Americans own their own homes, down from nearly 70% just a few years prior.  Assuming that all these people are not homeless or living in their cars, they inevitably turn into renters (or possibly move in with other family members or friends).  At the same time that the number of renters has increased, the supply of rental properties has diminished.  In 2003 there were 16.3 million renters compared to 12 million “affordable, available, and adequate” rental units.  In 2009, there were 18 million renters versus 11.6 million rental units.

    To make matters worse, real incomes for the middle class have been stagnant for the better part of the last decade, and unemployment is still very high at 8.8%.  Recent declines in the unemployment rate are attributable to declines in the work-force participation rate rather than widespread job creation.  Simply put, more and more people are falling off the Bureau of Labor Statistics’ radar, either because they got discouraged looking for jobs or ran out of unemployment.

    The resulting imbalance in supply and demand is driving up the costs of renting at a time when many cannot afford the increase.  The Reuters article cites a Harvard Study from the Joint Center for Housing Studies that showed that the number of renters paying more than half of their income in rent has hit record highs.  This problem is especially critical amongst low-income renters and seniors who are often on a fixed budget.  The problem will only be exacerbated as the baby boom generation ages.

    This problem is going to get worse in the coming months and years.  It is just one more ramification of the housing bubble, and it really adds insult to injury at a time when people can least afford it.  Are you a renter?  Have you seen your rents increase?  Let me know in the comments section below.

    Category: Mortgage Rates

  3. Homeownership Levels Continue to Plummet and Home Values Follow

    By on April 27, 2011

    This should come as no surprise in light of the foreclosure crisis and plummeting home values, but homeownership levels have dropped to levels not seen since 1998, according to reports from the Census Bureau (which I learned of via this HousingWire article by Jon Prior).

    Homeownership is down to 66.4%, down from 67.1% from the year prior.  High unemployment, tight credit, and foreclosure are largely to blame.  Many people who bought at the peak of the market and subsequently saw their home equity evaporate are hesitant to re-enter the housing market (if indeed they are able to).  It is the rare person that touches a hot stove twice.

    This situation is probably not getting better any time soon.  As of last summer, 25.5% of Americans had credit scores below 599, making them unlikely to be able to attain credit for a mortgage.  More than 25% of homeowners that have mortgages are underwater (owe more on their mortgage than their home is worth).  The further someone is underwater, the higher the likelihood that they end up defaulting on their loan (strategically or otherwise).  Foreclosures are down in the first quarter, but are likely to pick up as lenders and servicers resume foreclosures which were suspended due to the robo-signing mess.

    Home prices have been falling since the expiration of the first time home buyer tax credit last year.  Prices are now down more than 30% according to the S&P/Case-Shiller Home Price Index, and are likely to surpass the 2009 lows soon (if they haven’t already, the Case-Shiller report is a delayed by two months), confirming the housing double dip.  Home prices are falling largely as a result of the massive supply of unsold houses (in visible as well as shadow inventory) and the lack of demand for them.  This lack of demand stems from high unemployment, low credit scores, tight credit, stricter underwriting, and a general sense of fear over our economic prospects.

    We built houses during the bubble to accommodate homeownership rates close to 70%.  Now that number is falling and is likely to fall further.  This leaves a large gap between the number of available houses, and the number of people who wish to buy them.  Some percentage of these houses will ultimately be turned into rental properties, but that alone will not solve our excess supply issue.  Barring a massive influx of qualified home buyers or some miraculous economic turnaround, we should expect home prices to continue to fall.

    Category: Mortgage Rates

  4. Do You Know If You Have A Fixed-Rate Or Adjustable-Rate Mortgage?

    By on September 2, 2010

    Homeowners are smarter about their mortgages than in the past. Only 8 percent said they don’t know if they had a fixed-rate mortgage, an adjustable-rate mortgage or a more unusual type of loan, reported a poll commissioned by BankRate. If that sounds bad, consider that two years ago 26 percent of borrowers said they didn’t know what type of mortgage they had. In 2007 an incredible 34 percent said they didn’t know if they had a fixed-rate or an adjustable-rate mortgage.  Compare fixed mortgage here.

    Fixed-Rate Or Adjustable-Rate Mortgage?Homeowners also typically have no regrets about buying their home despite the increasing number of foreclosures and drop in housing values. Only 9 percent of homeowners in the poll said they regret buying their current home, compared to 90 percent who had no regrets.

    Of those who had regrets, 31 percent said they felt unhappy because they could not sell their home, and 22 percent said they couldn’t afford their monthly mortgage payments. Others said they were unhappy because their home’s value had dropped, or they didn’t like their home’s location, or because of other reasons, according to the poll done by Princeton Survey Research Associates.

    Blacks were far more likely to feel sorry about buying their home and were more likely to report difficulty meeting monthly mortgage payments. They were also slightly more likely to have an adjustable-rate mortgage or an option ARM.

    Not surprisingly, fixed-rate mortgages have become more popular, the survey indicates. Almost 80 percent of homeowners said they have fixed-rate mortgages, compared to about 65 percent in 2008. Wealthy homeowners were more likely to have fixed-rate mortgages. Roughly 85 percent of households with income of more than $75,000 opted for a fixed-rate, compared to 70 percent of households with income under $30,000.

    A survey by Fannie Mae earlier this year agreed that people generally see homeownership as a good choice. The Fannie Mae survey found that about two-thirds of Americans want to own a home, despite the economic slowdown and decline in home prices. Safety and quality schools were top reasons for wanting to buy a home.

    “Despite the recent downturn in the housing sector, Americans continue to value homeownership and think about their homes in ways that go much deeper than the financial investment,” said Mike Williams, president and CEO, Fannie Mae.

    The public is more cautious, however. For instance, almost a quarter of renters said were postponing buying a home despite low mortgage rates.

    Category: Fixed Rate Mortgages

  5. Today’s Housing Market: Rent vs. Own

    By on July 30, 2010

    Now That's American!

    As American as baseball and apple pie, realizing the American dream has always been associated with homeownership. In the second quarter of 2010, however, the number of homeowners realizing the American dream has dipped to the lowest level since 1999. According to a recent report by the U.S. Census Bureau, the rate of homeownership in the United States was just under 67 percent for the second quarter of 2010. According to the same report for the first quarter of the year, the homeownership rate was just over 67 percent. Unfortunately, homeownership figures continue to decline.

    The S&P/Case-Shiller Home Price Indices, the leading measure for the housing market in the United States, reported Tuesday that home prices actually rose in May by 1.3 percent when compared to April. If home prices continue to rise, then it seems inevitable that the homeownership rate in the third quarter will continue to decline, forcing millions of Americans to rent rather than own.

    The current housing price increases are sort of Catch 22. As housing prices and home values increase, the housing market heals. However, the rise in housing prices, coupled with the uncertainty surrounding the unemployment rate while our economy remains relatively unstable, will force prospective homeowners to remain as renters, preventing further healing within the housing market.

    There is no disputing the fact that houses are no longer the investment vehicle they once were during the most-recent housing boom that resulted in today’s housing crisis. While homeowners used their properties as personal piggy banks, the economic collapse materialized. As unemployment rates continued to soar, combined with a drastic decline in property values, homeowners began to lose their homes in droves.

    With millions of foreclosure properties remaining empty across the country, housing prices are on the rise nonetheless. While historically low mortgage rates remain in place as housing prices continue to rise, the time for prospective homeowners to realize the American dream may be passing.

    One of two things needs to happen in order for the housing market to fully mend. Housing prices need to either level off or decline again, thus allowing potential homeowners to delve into homeownership, or the federal government needs to offset the housing price increases by offering further support to potential homeowners in the form of additional tax credits as an incentive to purchase homes. It clearly worked before. When the latest tax credits expired, purchases immediately began to decline to a virtual standstill.

    When rates finally do begin to rise, it will be interesting to see where the housing market turns.

    Robert Hyder

    Category: Mortgage Rate Trends and Analysis

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