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  1. Home Prices Continue to Fall, Still we Lack a Real Housing Policy

    By 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.

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    Category: Mortgage Rates

  2. Shadow Inventory of 400,000+ Homes Weighs on Florida Home Prices

    By on April 4, 2011

    Kimberly Miller of the Palm Beach Post wrote an article over the weekend that should give pause to anyone who owns a home or is otherwise involved in real estate in Florida.

    A National Association of Realtors (NAR) report recently found that there are over 440,000 unsold homes that have yet to come to market in Florida.  This is by far the largest shadow inventory in the nation, with nearly twice as many homes as California, which has the second highest amount.  These properties, mostly foreclosed, distressed, or bank owned properties will likely weigh on home prices in Florida for years to come.

    Florida was one of the states that was hardest hit by the real estate bubble, as over-development was rampant from 2000-2007.  Now home prices have collapsed, and homeowners are suffering.  About 25% of the nation’s foreclosures are located in Florida.  1 in 7 homes are in foreclosure, and 1 in 5 homeowners with mortgages are delinquent on their payments.  A shocking 47% of Florida homes are underwater (the home is worth less than is owed on the mortgage) according to a report from CoreLogic.

    The backlog is due to confusion over the state of foreclosures stemming from the robo-signing crisis and a large amount of foreclosure cases bogging down the Florida court system.  As judges increasingly question the tactics of banks and foreclosure attorneys, the backlog will likely grow (barring a foreclosure settlement, which seems far off right now).

    With credit increasingly difficult to come by, it is unclear to me who is going to absorb the excess inventory of homes in Florida (and many of the other hard-hit states).  As long as supply is outstripping demand, home prices in Florida will continue to fall, with deleterious effects on Florida’s economy.

    Category: Mortgage Rates

  3. Today’s Mortgage Rates for Wednesday, February 9, 2011

    By on February 9, 2011

    It is Wednesday and the week is almost half over.  Take a couple of minutes out of your morning to check out the low mortgage rates being offered at Total Mortgage today.  Although rates have risen pretty consistently this winter, there is still time to save money on your home purchase or mortgage refinance.  Call us today at 877-868-2503 and see what one of our certified, licensed mortgage professionals can do for you.

    On this day in 1964, the original G.I. Joe toy was introduced.

    News Roundup:

    CoreLogic reported that home prices fell again in December, for the fifth straight month.

    Christopher Whalen warns that withdrawing government support from the housing market before private investors are ready to pick up the slack could have disastrous ramifications.

    An S&P study found that principal reductions were more effective at preventing re-defaults than loan modifications.

    Our Rates:


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    Category: Mortgage Rates

  4. Majority of Repossessed Homes Yet to Hit Market

    By on January 31, 2011

    Pretty interesting report from data provider RealtyTrac via this Housing Wire article by Jon Prior.  Rick Sharga, Senior VP at RealtyTrac, said that major lenders now own about one million repossessed homes, of which only about 30% have made it to market.

    There were a record number of foreclosures in 2010 (about 3.8 million) and a record number of repossessions (about 1 million).  We hit these records despite the fact that major lenders put moratoriums on foreclosures in the fourth quarter of 2011 in response to the robo-signing crisis.  Since that time, lenders have resumed foreclosures, and many believe that we are on pace to see record number of foreclosures and repossessions again in 2011.  Additionally, there are another 5 million households that are delinquent on their mortgages that have yet to enter foreclosure.  According to JP Morgan, eight million repossessed homes will need to be sold over the next 5 years.

    This already massive supply of shadow inventory will assuredly increase, and will be an albatross around the neck of the housing market for some time to come.  It almost guarantees that downward pressure on home prices will continue for the foreseeable future.  It is also concerning that so many people presently have little or no equity in their homes (almost 25% of homeowners with mortgages have 0-5% home equity).  If home prices continue to decline, many of these borrowers will find themselves underwater.  Being underwater greatly increases the chances that a particular loan will end up defaulting.

    The one thing that I can see altering this equation is the increasing push back against major lenders.  Lawsuits and judicial orders in Maryland, Massachusetts, Nevada, and Utah have banks scrambling to prove they have standing to foreclose on loans that were securitized. Investors in mortgage backed-securities are also starting to push back  against banks, such as this suit against Bank of America and Countrywide alleging “massive fraud” against the plaintiffs.

    These lawsuits could apply pincer-like pressure to the flanks of the banks, and that pressure could potentially prompt major lenders to make some sort of widespread concessions such as mortgage modifications or principal writedowns in order to escape larger liabilities relating to securitization and foreclosure processes.  I don’t know what the realistic chances are that something like this will happen, but it is worth noting that it is in the realm of possibility.

    Barring this possibility, I think we are going to be talking about shadow inventory and price declines for quite a while.

    Category: Mortgage Rates

  5. Increasing Housing Inventory Points to Home Price Declines in ’11

    1 By on November 22, 2010

    For months I have discussed declining home values in this space.  It has been my contention that the housing market will be unable to stage a recovery until home values bottom out and the excess supply of homes is absorbed.

    Simply put, there is a severe lack of demand for homes due to the poor economy (as well as the first time homebuyer tax credit, which accelerated many home sales into the Spring months).  At the same time there is an abundance of homes (both on the market and in shadow inventory).  Due to this, home prices are declining, and are likely to decline more in 2011 (estimates of impending home price declines vary, but many people seem to be saying that we will see prices fall about 5 percent in the coming year).  On average, home prices are down about 20-25 percent off their 2006 peak.

    There is a new report from CoreLogic out this morning that illuminates just how much extra housing inventory there is.  The report says that the total amount of unsold homes numbers 6.3 million.  This is broken down into 2.1 million homes that are in “shadow inventory”, and 4.2 million homes in “visible inventory”.  Shadow inventory consists of bank-owned homes that are not yet listed as well as homes with mortgages that are seriously delinquent (90+ days).  Visible supply is everything else.  Visible inventory has been stable for the last year, but shadow inventory has increased by about 10 percent from last year.

    At the current pace of sales, it would take 23 months to clear the total (visible + shadow) supply from the market as of August.  This is up from 17 months of supply in August 2009.  A normal market has about 6 months of supply.  Continued declines in home values are almost assured for 2011, and frankly, unless something is done about this problem, 2012 isn’t looking so hot either.

    Category: Mortgage Rates

  6. $460b Shadow Inventory Will Depress Home Prices For Years To Come

    By on September 27, 2010

    Just a quick post on a topic I’ve discussed in the past: shadow inventory.  This topic is especially pertinent because of the negative effect it is having and will continue to have on housing prices.

    Shadow inventory is roughly defined as distressed or real estate owned (REO) property that has not yet made it to the market.  Lenders may be holding these homes back from the market to protect homes or just because they are backlogged.  Estimates of the amount of shadow inventory diverge greatly because there is no real good way to track it, but most people say it is at least a few million houses.

    Now we have additional information about the amount of shadow inventory there is from an article by Jacob Gaffney on Housingwire.com.  The article cites research from Standard and Poor’s that says there is approximately $460 billion worth of shadow inventory in the United States.  S&P estimates it will take 40 months for the market to absorb this shadow inventory at our current pace.

    The amount of shadow inventory appears to be growing as more and more mortgages become delinquent and go into foreclosure.  If another round of price declines hits the housing market (as I expect will occur), we could potentially see the amount of shadow inventory increase even further.

    This large supply of excess inventory has the potential to drive housing prices downward for years to come.  What do you think should be done with the shadow inventory?  Should some of it be demolished?  Turned into rental housing?  Let me know in the comments section below.

    Category: Mortgage Rates

  7. 4 Million More Foreclosures Could Be Coming

    By on August 26, 2010

    Just waiting on that other shoe

    There is an intriguing article today by Jacob Gaffney at Housingwire.com regarding new attempts to measure shadow inventory.

    A brief synopsis of the housing market shows that there could be big troubles ahead.  Currently there is a 12.5 month supply of excess homes (under normal market conditions the supply is usually under 6 months).  Foreclosures are increasing, and REO inventory is mounting.  At the same time demand for homes has cratered since the expiration of the first time home buyer tax credit.  As pretty much everybody knows, lots of supply + very little demand = bad times for prices.  To make matters worse, unemployment is still running north of 9.5 percent, and shows no real signs of improvement.

    Many people fear that as prices fall, many more homeowners will lose equity in their homes and end up being underwater on their mortgages.  When people owe more money on their mortgage than their house is worth, they are far, far more likely to end up defaulting on the mortgage.  A drastic decline in prices could lead to a whole new wave of foreclosures.  I have seen estimates that say prices will decline anywhere from 5-20 percent over the next year to three years (there is a lot of disagreement and fuzzy math here, but the overall consensus is that home prices will fall).

    Continue Reading…

    Category: Mortgage Rates

  8. Altos Research: Home Values Will Continue to Decline in 2010

    By on July 30, 2010

    I’m starting to feel like a broken record regarding home values, but it is a slow news day, so here goes:  a report from Altos Research via REO Insider’s Jon Prior states that home prices will continue to decline in 2010, and will start 2011 at lower levels than they were in 2009.

    According to Altos Research, the main driver for the price decline will be the excess housing supply that is currently on the market as well as the shadow inventory of distressed and REO property that is yet to hit the market.  Price declines will vary depending upon the market, the amount of housing supply in that given market, as well as demand in a given area.

    There are a variety of estimates of the total amount of shadow inventory.  Depending upon which research firm you choose to believe, there could be anywhere from 4-7 million homes that constitute the shadow inventory.  Almost everyone is saying it will take several years to clear the inventory, which indicates we are in for a prolonged period of recovery.

    Altos emphasized that the conditions will vary with locality, and that some regions may see a relatively quick recovery, while other places, such as California, Arizona, and Florida will take much longer to recover.

    Category: Mortgage Rates

  9. Housing Market on Pace For 3 Million Foreclosures in 2010

    By on July 19, 2010

    According to RealtyTrac’s Mid-Year 2010 U.S. Foreclosure Market Report, 1.65 million properties received foreclosure filings in 2010. This represents a 5 percent decrease from the prior 6 months, but an 8 percent increase over the first half of 2009.  One in 78 mortgaged homes in the United States received a foreclosure notice, a truly mind-boggling number.

    While the number of homes entering the foreclosure process dropped, actual repossessions increased significantly.  James Saccacio, CEO of RealtyTrac said:  “The second quarter was a tale of two trends.  The pace of properties entering foreclosure slowed as lenders pre-empted or delayed foreclosure proceedings on delinquent properties with more aggressive short sale and loan modification initiatives. Meanwhile the pace of properties completing the foreclosure process through bank repossession quickened as lenders cleared out a backlog of distressed inventory delayed by foreclosure prevention efforts in 2009.”

    If we were to maintain the current pace, more than 3 million properties would be foreclosed in 2010, and over 1 million homes will be seized by lenders.  By any measure, this is a lot of homes, many of which are going to find their way onto the market at a steeply reduced price, putting downward pressure on non-distressed home sales.  It appears that any effect that the Home Affordable Modification Program (HAMP) might have on foreclosures was relatively minimal.  Many HAMP mortgages are going back into foreclosure after a period of modification.

    Many people who may have been able to take advantage of low mortgages rates to reduce their mortgage payments by refinancing have been unable to do so because decreased home equity made many borrowers ineligible for refinancing.

    In a nutshell, it is going to take the housing market quite some time to work through the large inventory of cheap homes that is going to hit the market.  It is going to take the housing market quite some time to recover.

    What do you think?  Let us know in the comments section below.

    Category: General

  10. Shadow Inventory Has Peaked in Some Markets, Still Rising in Others

    By on June 22, 2010

    On a fairly slow news day, it may be worth taking a look at a few things that are a little older today.  A recent report from Standard & Poors shows some interesting developments in the realm of shadow housing inventory.

    Shadow inventory has been a hot topic over the past year or so, and with good reason.  Shadow inventory represents houses that are likely to enter into foreclosure and eventually be real-estate owned, which have not yet hit the market.  We saw this morning that there is a 8.3 month supply of homes on the market right now.  If we were to add in the shadow inventory, the supply would likely be much, much higher.  This oversupply of houses will ultimately drive down housing prices.

    One of the issues with shadow inventory is that nobody really knows how much of it there is, and everyone seems to define it slightly differently.  S&P defines it as “properties that are 90 days or more delinquent on mortgage payments, in foreclosure, or real estate owned (REO) that haven’t yet hit the market”.

    I have seen estimates of the total shadow inventory of homes in the United States that range from 2 to 7 million homes, so there is obviously a lot of guesswork going on here.

    S&P says that the shadow inventory is such that it would take about 3 years for the housing market to absorb it.  However, S&P found that the amount of shadow inventory varies substantially from region to region, and that it will have differing effects on housing prices in different areas.  Some of the areas with the largest shadow inventory will likely surprise you.

    S&P estimates that shadow inventory would take 103 months to be absorbed at the current pace, while Phoenix only has 16 months of excess supply.  I definitely recommend clicking through on the link to see the full report, it is a very interesting analysis of the relationship between shadow inventory and expected home price trends in major metropolitan areas.

    Category: General

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