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Trulia: Majority of Americans Don’t See Housing Recovery Until 2013-2014
By Michael Kraus 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
Economists Predict Home Prices Bottom in 2012, 1.4% Decline in 2011
By Michael Kraus on March 22, 2011

This morning Nick Timiraos of the Wall Street Journal has an article about housing prices. The prospects for recovery do not look good for 2011, if you believe a survey of 111 economists and housing experts by data provider MacroMarkets LLC (MacroMarkets was co-founded by Robert Schiller, who also helped establish the S&P/Case-Shiller Home Price Index). According to the article, most economists do not expect to see a recovery this year. National home prices are expected to fall 1.4% percent on average through 2011.

As of last June, economists predicted that housing would gain 1.3% in 2011. Frankly, this prediction seemed laughable then, and it seems no more justifiable in retrospect. Quite simply, there is little demand for houses, and a massive overhang of housing inventory. The market was temporarily buoyed by the first time home buyer tax credits, and predictably cratered when the stimulus was withdrawn. The situation has only deteriorated since last year.

Unemployment remains distressingly high, at 8.9%. Although it is down from 9.8% in December, most of the decline is owed to diminishing workforce participation rather than massive job creation. Although we are no longer losing massive numbers of jobs, we are not seeing particularly meaningful job creation at this time. The lack of jobs helps to ensure that demand for homes will remain low for the near future.

In addition, the amount excess housing inventory continues to grow. According to a Housingwire article by Christine Ricciardi, Capital Economics believes there are 5.3 million homes in shadow inventory in the United States. There were a record number of foreclosures in 2010, a number that is likely to be surpassed in 2011. We should expect to see the number of unsold homes in this country grow, further depressing home values.

Basic economics would lead us to believe that home prices will continue to fall. What is most distressing about this is that 23.1% of U.S. homeowners with mortgages are underwater. Additionally, 5.4 percent of homeowners have less than 5% equity in their homes. Further price declines could push these homeowners closer and closer to default, which would further increase the inventory of unsold homes. Barring a sudden massive turnaround in the employment sector, or some other unforeseen event, housing is not likely to recover any time soon.

Category: Mortgage Rates
Jobless Claims Hit Lowest Point Since 2008
By Michael Kraus on November 24, 2010

For once I get to report some news that appears, at least on its face, to be good: last week jobless claims hit their lowest points since July of 2008.

A report released by the Department of Labor todays shows that jobless claims fell by 34,000 to 407,000 last week. This is better than the expected number of 435,000. The four week moving average for jobless claims fell by 7,500 to 436,000. This is the lowest point for the 4 week moving average since summer of 2008.

Unemployment is still very, very high (U-3 unemployment is at 9.6 percent and broader measures of unemployment are at 17.0 percent), and the current pace of job creation would not put a dent in these figures until sometime next decade given current rates of population growth. I also don’t know how much of this is indicative of seasonal hiring. That said, this is still a positive sign that the labor market may be picking up steam.

It is a fairly obvious statement, but the housing market simply will not improve until the excess supply of housing is absorbed, and that will not happen until the jobless situation improves. Hopefully that will happen sooner rather than later, and possibly we are seeing the beginnings of that trend right now.

Category: Mortgage Rates
Bernanke: Jobs Gains “Insufficient” to Lower Unemployment
1 By Michael Kraus on August 2, 2010

What an odd way to frame a picture.

Ben Bernanke, Chairman of the Federal Reserve, spoke today to the Southern Legislative Conference, and warned that although the economy continues to grow moderately, there are many hurdles to continued recovery. He said: “Today, the financial crisis appears to be mostly behind us, and the economy seems to have stabilized and is expanding again. But we have a considerable way to go to achieve a full recovery in our economy, and many Americans are still grappling with unemployment, foreclosure and lost savings”.

Continue Reading…

Category: Mortgage Rates
Mortgage Rates Could Be Affected By Data Released This Week
2 By Staff on July 26, 2010

In the upcoming week a lot of data is coming out that could affect the housing market and the mortgage industry. Later today, information about new home sales is set to be released. It will be interesting to see how the expiration of the first-time homebuyer tax credit affected new home sales in June.

On Tuesday, the S&P Case-Shiller Home Price Index is going to be released. This is probably the most important indicator of home prices nationwide. Later on in the day, data on consumer confidence will be released. Both the Home Price Index and information on consumer confidence could play a big role in the direction mortgage rates move. Continue Reading…

Category: General
Private Employers Added Payroll in May
By Michael Kraus on June 3, 2010

ADP published its monthly National Employment Report today, and the numbers showed that the private sector added to payrolls for the fourth consecutive month. The report indicated that private payrolls expanded by 55,000 jobs in May, and the number of private jobs added in April was revised from 32,000 to 65,000.

Unlike the Bureau of Labor Statistics’ nonfarm payroll report, the ADP report does not factor in government jobs. For this reason, the report stated “it is reasonable to expect that Friday’s figure for nonfarm total employment reported by the BLS will be considerably stronger than today’s estimate for nonfarm private employment in the ADP Report”.

The report continued “The slow pace of improvement from February through May is consistent with the pause in the decline of initial unemployment claims that occurred during the winter months”. That the ADP report is showing gains is important, because it means that the private sector is increasing hiring, not just the government. While the government often hires people for the sake of providing jobs to people, the private sector will not add payroll unless it makes economic sense. The expansion in payrolls would seem to indicate that the economy is in fact pulling out of the recession, albeit slowly.

The construction industry continued to be one of the hardest hit in terms of employment. Construction payrolls decreased by 41,000 jobs in May, following a decline in April of 42,000 jobs. This speaks to the continuing weakness in the housing market, which is lagging behind the rest of the economy despite very low mortgage rates.

The ADP report is a precursor for tomorrow’s nonfarm payroll report, which economists are projecting to be quite large. There is a very interesting piece by James Bianco on the excellent blog The Big Picture that discusses the wide array of economist predictions for the report, which range from +100,000 jobs to +750,000 jobs.

The May payroll number is going to be very significant. Where do you think it will come in? Let us know in the comments section below.

Category: Mortgage Rates
Retail Sales Indicate Broadening Recovery
By Michael Kraus on April 14, 2010

Encouraging economic reports that came out this week suggest that the consumer-driven economic recovery is both gaining traction and broadening.

This morning’s retail sales report showed that sales increased 1.6 percent in March, the third consecutive monthly increase. The gains outpaced the predicted increase of 1.2 percent.

The increases were spread across many industries, as auto sales, general merchandise, home furnishing, clothing, and building suppliers all reported strong gains.

Federal Reserve Chairman Ben Bernanke remarked “On balance, the incoming data suggest that growth in private final demand will be sufficient to promote a moderate economic recovery in coming quarters“. Bernanke warned that hurdles remain to a full recovery: “Significant restraints on the pace of the recovery remain, including weakness in both residential and nonresidential construction and the poor fiscal condition of many state and local governments“. Federal Reserve economists expect growth of 2.8-3.5 percent in 2010.

The consumer price report that came out this morning showed a .1 percent rise in March. Prices have remained stable, the annual increase was the smallest in six years at 1.1 percent.

Despite the good economic reports, analysts warn that unemployment and stagnant wages could hold back spending in the coming months, and that expectations for further recovery and growth should be tempered. Bernanke commented that “moderation in inflation has been broadly based”. The Fed Chief remains concerned about the record federal deficit, saying that “addressing the country’s fiscal problems will require difficult choices“.

The last piece of encouraging economic news that emerged yesterday was that the trade deficit grew in February. This is a good sign that the economy is improving as demand for imported goods is growing and retailers are forced to replenish inventories. This is consistent with a broadening economic recovery.

Most economists are predicting that mortgage rates will increase as the economy improves. It is not too late to lock in a low mortgage rate, however. Call us today at 877-868-2503 to see what one of our mortgage experts can do for you.

Category: Mortgage Rates
Housing Prices Rise in January
By Michael Kraus on March 30, 2010

Housing prices rose unexpectedly in January. The S&P/Case-Shiller Housing Index posted a slight seasonally-adjusted 0.3% increase in January. This is the eighth consecutive increase for the index which measures home prices in 20 major U.S. metropolitan areas. The increase demonstrates a increasing stability in housing prices. The index is down almost 1% annually. Housing prices are off about 30% from their high in mid-2006.

Half full or half empty?

David Blitzer of Standard and Poor’s described the report as “mixed”, adding that “The rebound in housing prices seen last fall is fading”. Other housing indices have shown declines in December and January, and some economists are predicting the Case-Shiller index will also show losses soon. New and existing home sales have been trending downward for several months.

Bargain-priced foreclosures are one of the primary factors suppressing housing prices. Despite their mixed effectiveness to this point, I am somewhat hopeful that the Obama loan modification programs introduced last week will alleviate some of the downward pressure on prices.

There is some promising economic news today, as consumer confidence is rebounding as Americans believe the labor market is beginning to improve. Although confidence is still low, it surpassed the forecasts of most economists.

According to the report, increasing numbers of Americans believe incomes will rise and jobs will be more plentiful in the coming months. While the labor market and European debt problems will be a concern through the remainder of 2010, I am guardedly optimistic that the recovery will proceed slowly throughout the course of the year.

What is your take on the latest economic figures? Do they presage a broader recovery, or are they a calm before the storm? Join the discussion below.

Category: Mortgage Rates
Loan Modification Can Harm Credit Scores
4 By Michael Kraus on March 19, 2010

The Obama administration’s loan modification program, HAMP (Home Affordable Modification Program) has been criticized for being too confusing, taking too long to complete, not enrolling enough distressed homeowners, not making enough permanent modifications, and just generally being ineffective (the program was designed to help millions, but only 170,000 homeowners have completed the modification process as of February).

Now the critics can add one more item to that list: applying for loan modification can reduce credit scores by as many as 100 points. This can make it more difficult to get another loan, or find a new job. The worst part is that many homeowners are not informed of possible credit damage when they apply for modification. Foreclosure would have a more dire effect on a borrower’s credit, but critics say that penalizing loan modification adds insult to injury.

Unsurprisingly, the credit industry supports the penalty, on the basis that other lenders need to know a potential borrower is having financial difficulties. They also say that over time credit scores will gradually increase as long as people keep up with their payments. This, of course, is little consolation to borrowers who need to use their credit now.

The Obama Administration says that the credit penalty is a better outcome than foreclosure. In an AP story, Treasury Department Spokeswoman Meg Reilly said foreclosure: “brings far more serious financial consequences for borrowers and their families”.

Government efforts to stabilize the housing market and mitigate the number of foreclosures have been admirable, but thus far have fallen short of their goals. The good news is that more and more lenders are enrolling in and ramping up the modification efforts. Hopefully these efforts will take a broader effect and help bring about a more widespread recovery.

What do you think about loan modification efforts thus-far? Are they appropriate and will they bring about necessary changes? Join the discussion below.

Category: Mortgage Rates