The supply of newly-built homes for sales plummeted in April, a positive indicator for the South Orange County housing market as we head into the summer months.

It's no wonder that homebuilders are breaking new ground at the fastest clip in 2 years.

At the current sales pace, the nation's complete supply of new homes would be sold in just 5 month's time. That's more than double the pace of a year ago.

Also, as more good news, in terms of total housing units, the government reports that New Home Sales topped one half-million homes sold for the first time since May 2008.

It's a similar spike as within the Existing Home Sales data released earlier this week.

But before we declare the housing market "repaired in full", we have to consider a few of the reasons why home sales are charting so strongly.

The first reason is the federal homebuyer tax credit's April 30 expiration. In order to claim up to $8,000 in tax credits, home buyers must have been in mutual contract for a property before May 1. There is no doubt this contributed to a run-up in sales, especially among first-time home buyers.

The second reason is that mortgage rates have remained exceptionally low, defying expert predictions. Low rates don't sell homes, but they do make monthly payments easier to manage for households torn between renting or buying.

And, lastly, March and April's new home sales may have been buoyed by aggressive discounting on behalf of homebuilders. As compared to February 2010, April's average new home sale price was lower by 13 percent. That's a sharp drop in a short period of time.

For now, though, homes are selling, supplies are dropping, and buyer interest is high. It's no wonder builder confidence is soaring.

Sales of existing homes rose in April, buoyed by an expiring home buyer tax credit and exceptionally low mortgage rates.

As compared to March, April's Existing Home Sales rose by 410,000 units nationwide -- the second straight month of large gains. An "existing home" is a home resold by a prior owner (i.e. not new construction).

It's a solid report for housing overall, with rising sales suggesting that the real estate market's recovery is ongoing. However, the data presented a mixed message.

According to the National Association of Realtors®, although the number of homes sold ticked higher in April,  so did the supply of existing homes for sale, too.

Sellers are now listing homes faster than buyers can buy them.

After adding another 0.3 months of supply in April, resale home supply is nearly two full months larger than at November 2009's low-point. This put downward pressure on home prices.

Furthermore, because 49% of April's buyers were first-time buyers and the tax credit has since ended, we can expect that sellers will continue to outweigh buyers in the months ahead.

It presents an interesting opportunity for June's home buyers. Mortgage rates are still at their lowest levels of the year -- despite expert predictions to the contrary -- and homes remain affordable. Plus, in a lot of markets, home values have started to creep higher.

There's good values and good rates but neither should last long. For the next few weeks, real estate may be in its 2010 sweet spot.

If you were thinking of moving in September of this year or later, consider moving up your timeframe.

DataQuick’s homebuying stats for April are out, and they show a real estate market still on the mend with sales of all residences of 2,669 — that’s up 11.60% in a year and the best April in 3 years. Median selling price was $430,000 — up 13.2% in a year. Also …

Slice Price Yr. ago Sales Yr. ago Houses $505,000 +17.4% 1,704 +9.7% Condos $299,000 +16.6% 877 +18.7% New $629,500 +32.8% 88 -11.1% All O.C. $430,000 +13.2% 2,669 +11.6%

• $430,000 median selling price that is still 33% below June 2007’s peak of $645,000.
• The most recent median is 16% above the cyclical low hit in January 2009 at $370,000 — a current bottom that was -43% below the peak.
• Prices fell on a year-over-year basis from Sept. 2007 through August. (Worst at -31.5% in August 2008.)
• Single-family homes resell for 31% less than their peak pricing (June ‘07) while condos sell 36% below their peak in March 2006. Builder prices for new homes are 27% below their February ‘05 top.
• Single-family homes were 69% more expensive than condos in this period vs. 68% a year ago. From 1990-2008, the average house/condo gap was 57%.
• 2,669 residencessold in April vs. 1997-2006 monthly sales average of 4,304 per month.
• Builder’s new homes sales were 3% of all residences sold in the period vs. 4% a year ago. From 1990-2008, builders did 15% of the selling.

 

May 18th, 2010,  by Jon Lansner  of the Orange County Register

 

There is an interesting phenomenon going on, even while doom & gloom bloggers predict gigantic Tsunami’s of foreclosures heading our way. The following is excerpted from an article out of Texas this week.

“Every week, new home sellers are hitting the market, basing their initial asking prices on recent contracts, sales, and other active listings, and influencing active market prices.  And what does this have to do with foreclosures?  It provides a glimpse into housing market psychology.

Homeowner Henry down in Texas is underwater in his mortgage, or at a minimum, feels some personal economic strain.  He’s trying to determine if he’s in a walk-away situation or not, with his decision metrics at least partially based on his local housing market conditions.  As Henry starts to see active houses sell quickly, get multiple bids, and fetch a decent price, he starts to think – “Hey – maybe the market’s not so bad.  Things are starting to sell at a good price.  I’m going to hang on for another couple of months.  I don’t really want to move anyway, and if the market is improving, I can start to gain back some of that on-paper loss.”  Aggregating this behavior and market psychology yields fewer delinquencies and foreclosures in the short run.

Looking at delinquencies rates and housing market conditions in 2009, the peak in delinquencies were exactly correlated to the trough in home prices.  As the 2009 housing market strengthened and prices accelerated through the Spring, delinquencies fell simultaneously.

And speaking of Texas, Steve Brown of the Dallas Morning News published “Dallas-Fort Worth home foreclosure filings drop 12%” today in which he writes:  Home foreclosures have turned lower for next month’s forced sales.  The 4,861 Dallas-Fort Worth homes scheduled for foreclosure in May represent a 12 percent decline from year-earlier totals. And foreclosure filings are down 21 percent from the recent peak in March, Addison-based Foreclosure Listing Service said Thursday.  His article also provides some local data points of foreclosure rates by county in the Dallas Metro area. 

Home foreclosures have turned lower for next month’s forced sales. The 4,861 Dallas-Fort Worth homes scheduled for foreclosure in May represent a 12 percent decline from year-earlier totals.  And foreclosure filings are down 21 percent from the recent peak in March, Addison-based Foreclosure Listing Service said Thursday. 

Let’s take a look at active housing prices for these counties.  The two markets with the largest decline in foreclosure filings (a good thing) – Dallas and Tarrant County – have housing markets with median ask prices that hit an trough point in March (when foreclosure filings were higher) and are seeing an clear increase each week in the Prices of New Listings.” ( End of excerpt.)

This is a big reason why you shouldn’t be paying as much attention to dire warnings from doom & gloom bloggers, about huge waves of new foreclosures on the horizon.  As distressed homeowners – especially in the lowest price ranges - see their local markets improving, they are far more likely to hang in there, instead of giving up and going through a credit destroying foreclosure.

And because in some areas – such as my Orange County – the lower price ranges have actually increased in value by over 10% in the past 14 months, many who were considering a short sale can now actually have an equity sale, which has even stronger demand ( read higher prices.) from today’s throngs of willing buyers.  If you are a homeowner who thinks that you’re underwater, you just might have another think coming.

April 30th, 2010, · posted by Jeff Collins of the Orange County Register
 

A lot of last-minute homebuying decisions were made Friday as buyers rushed to qualify for a federal tax credit that expired that day.

Buyers needed to have a signed contracts in hand to get a credit of $8,000 for first-time buyers and $6,500 for repeat buyers. They also must close escrow by June 30.

“I think there’s definitely some last-minute scurrying around,” said Tustin agent Charles Folcke. “I’m sure that if some offers are accepted (this weekend), agents are going to backdate it.”

“Lots of quick decisions (were) made this week from our fabulous last-minute type of folks,” added Huntington Beach agent Vivian Young. “I’ve been showing property for lots of clients the entire month to quickly get them under contract before the month ends.”

Broker Steve Thomas of Altera Real Estate reported that the number of deals signed increased 6.2 percent from two weeks ago and 10 percent over the past month.

“Buyers are pushing their way into escrow, but I think the momentum will carry even after the expiration,” Thomas said.

Coto de Caza agent Bob Phillips spent part of Friday dashing from Santa Ana to Capistrano Beach, then to a listing agent’s office to get a signed contract to an East Coast bank in time for its approval.

His clients got outbid Thursday, after offering $11,000 over the asking price on a bank-owned home. His cell phone rang at 6 a.m. Friday with news that the top bidder got cold feet and backed out.

He had to drive to both clients’ work places to get their signatures, then dash over to the listing agent’s office for the bank’s approval.

“I am now going to drive to Dana Point to open the escrow before they close at 5 p.m.,” he said Friday. “It has been an exciting day.”

Several agents noted that buyers stopped looking at homes listed as short sales, or selling below what’s owed the bank, since lenders typically are pokey in responding to offers.

Thomas and others predicted that the $200,000 set aside for the California tax credit likely will be exhausted in a month, rather than in the seven months allotted for it.

“There is still a lot of confusion about the California tax credit, which will last about a minute,” Thomas said. “The first 17,500 lucky first-time home buyers win and everybody else is going to be upset.”

California homeowner defaults down 40%

April 20, 2010, by Jeff Collins, O. C. Register

 

More evidence surfaced today that home-loan defaults and foreclosures are receding from historic peaks seen a year ago. However, the pace of defaults and foreclosures remain high, especially in areas where lower-cost homes predominate.

MDA DataQuick reported that lenders filed 81,054 notices of default in California during the first quarter of 2010, down 4.2% from the previous quarter and down 40.2% from the first quarter of 2009.

DataQuick’s analysis shows that the greatest year-over-year declines occurred in areas with cheaper homes, with smaller declines occurred in pricier areas.

“We are seeing signs that the worst may be over in the hard-hit entry-level markets, while problems are slowly spreading to more expensive neighborhoods,” DataQuick President John Walsh said.

Notices of default are the first step in the process that can result in the sale of a home in a foreclosure auction.

California foreclosures also declined during the first quarter, DataQuick reported. Homeowners in the state lost 42,857 homes at foreclosure sales. That was down 16.1% from the previous quarter and down 1.7% from the first quarter of 2009. DataQuick’s report showed also:

 

• Statewide, the default rate was 9.3 notices for every 1,000 homes. That compares to a default rate of 10.5 notices in ZIP codes with median home prices below $500,000 and 4.5 notices in ZIP codes with medians above $500,000.
• Defaults fell nearly 43% from a year earlier in ZIP codes with median home prices of $500,000 and below. But they fell just 19% in ZIP codes above the $500,000 median level.
• Southern California defaults fell 44.4% to 44,581 in the first quarter. They were down by nearly half in the Inland Empire.
• Orange County defaults decreased 37.5% to 5,270 in the first quarter, the smallest percentage drop in Southern California. Foreclosures fell 7.5% in the first quarter to 1,985.
• In the San Francisco Bay Area, defaults fell 30.5% to 13,517 in the first quarter.
• Home loans were least likely to go into default in Marin, San Francisco and San Mateo counties. They were most likely to go into default in Merced, Stanislaus and San Joaquin counties.
• California homeowners getting default notices were behind on house payments by a median rate of 5 months. The median amount left unpaid was $14,066.
• Default rates were below 10% for the state’s most active lenders during the housing boom — Countrywide, World Savings, Washington Mutual, Wells Fargo and Bank of America. Those lenders, nonetheless originated the most loans that ended in default.
• Default rates for subprime lenders exceeded 65%.

There also were signs that lenders were being more accommodating in seeking alternatives to foreclosure, either by modifying loans or by allowing the home to be sold for less than was owed on the mortgage. For example, the foreclosure process averaged 7.5 months in the first quarter, compared to 6.8 months a year earlier, DataQuick reported.

Below is the latest Orange County Market Report from my friend Steven Thomas, the President of Altera Real Estate. Steven’s reports are cited and discussed in most of Southern California’s media, as an authoritative source of local real estate information. I have slightly altered his report to make it a bit easier to read, but the context and content remains true to Steven’s report.

“The Orange County Market Report – This Market is Taxing!

Talk to an Orange County buyer, especially a first time home buyer, and you will quickly find that the real estate market is simply crazy. 

Let’s first establish that there are two different markets - below $1 million, HOT, and above $1 million, COLD. The below $1 million market accounts for 77% of the total active inventory, and 94% of demand. The lower the range, the hotter the market.  Most buyers new to the market have already formed an incorrect idea of the real estate market. They think that the market is plagued with desperate sellers waiting for a buyer to finally write an offer to purchase at a major discount and an incredible “deal” for the buyer. Instead, new, fresh inventory is scarce and buyers find that they are competing for anything half way decent that hits the market. Properties that are priced well and in good condition, garner tremendous attention and procure multiple offers.

Writing a purchase offer at the list price only to lose to three other buyers that brought in offers above the list price is common. Sales prices above list prices are common. First time home buyers losing out on properties to investors with larger down payments is common. The reality is that if a buyer is looking to bargain and negotiate, they are better off attending the local weekend swap meet. Remember, values of homes have already dropped significantly, 35% or more. Some economists have argued that values have dropped below where they should be today, which is often the case in real estate downturns. So, homes are already heavily discounted from where they were a few years ago.

Home affordability has returned to the Orange County real estate market. Interest rates are still at historical lows. Throw in buyer income tax credits and we have all of the ingredients for a major seller’s market. Buyers entering the fray in today’s market get a real quick dose of reality and, if they really want to buy, sharpen their pencils real fast. In the lower ranges and in hotter areas, homes are starting to sell for more than the last comparable sale. The only thing that is keeping values from taking off like they did before is the distressed inventory.

Housing Demand: Demand has not seen these levels since the beginning of August 2005.
Demand, the number of new pending sales over the prior month, increased by 126 homes over the prior two weeks and now totals 3,748, a 3% increase and the height thus far in 2010. Last year’s height in demand was reached in June at 3,652 pending sales. Demand is 195 pending sales stronger than last year at this time and 1,374 stronger than two years ago. It seems as if demand is beginning to hit a plateau, so we will have to watch and see if that trend continues over the coming weeks.

Developing Trends: The active listing inventory has continued to gradually increase after bottoming at the beginning of the year. Over the past two weeks, the inventory has increased by 266 homes to 9,177. We started the year at 7,165 listings and so, have added 2,012 homes to the active inventory thus far. Last year, the inventory continued to drop from mid-March to the New Year. Towards the end of last year, the drop was probably more in line with the cyclical drop in the inventory that starts in September until the end of the year.

Customarily, during the beginning of the year and into the Spring market, more and more homeowners place their homes on the market in anticipation of the strongest time of the year to sell. In the Spring market in 2006 and 2007, homeowners often tested the market and attempted to obtain values above the current fair market value. There were a ton of overpriced listings that remained on the market and which were not successful in selling - EVER.

Instead, they just clogged the inventory and it methodically grew, reaching a height in August 2007 of just shy of 18,000 listings. In 2008 and 2009, homeowners no longer tested the market and the discretionary ( “equity”.) seller disappeared. During the second half of 2009, the Orange County active listing inventory continued to shed homes and not as many new, fresh homes were placed on the market. REALTORS® in the trenches were complaining of a lack of inventory and nothing “fresh” to show their buyers.

We still hear that there is a lack of inventory, but behind the scenes, the active inventory is slowly but surely nudging upward, in every price range. It remains to be seen if the trend in an increase in the active inventory continues. Will the equity homeowner return or will more and more homeowners place their toe in the water, testing the market? We will have to wait and see. There are currently 1,384 fewer homes on the market today than just one year ago and 6,379 fewer than two years ago.

Expected Market Time: The lower the range, the lower the expected market time.
The expected market time for all of Orange County is currently at 2.45 months, a slight drop from 2.46 months two weeks ago. For homes priced below $500,000, the expected market time is 1.63 months, a deep seller’s market. For homes priced between $500,000 and $1 million, the expected market time is 2.84 months, still a seller’s market. For homes priced above $1 million, the expected market time is 9.44 months, the higher the range, the slower the market. For homes priced above $4 million, the expected market time is 38.44 months, or over 3 years.

Distressed Inventory: Again, not much has changed in the distressed inventory.
The number of active distressed homes on the market,  short sales and foreclosures combined, decreased by 33 homes to 2,781 and represent 30.3% of the active inventory. Last year at this time, there were 4,006 distressed homes on the market, representing 37.9% of the active inventory.  The number of foreclosures within the active listing inventory decreased by two homes in the past two weeks from 418 to 416. Yes, that is correct. With all of the talk of foreclosures there are only 416 on the market in all of Orange County. The expected market time for foreclosures is 1.01 months.

Short sales are a different story; there are plenty of short sales in Orange County. Short sales are where a homeowner attempts to sell a home for less than the total outstanding loans against the home, which requires the lender (or lenders in many cases) to approve the short sale, indicating their willingness to take less than the full payoff of a loan. Most short sales are not as  fast as their name would suggest, and, on average, take months to close. The number of short sales within the active listing inventory decreased by 31 and now total 2,365. The expected market time for short sales is 1.61 months, also a HOT seller’s market. Everybody’s looking for a deal, so foreclosures and short sales tend to fly off of the market.

The Most Absurd Tax Credit EVER? 

I am still scratching my head trying to understand why California approved $100 million towards a first time homebuyer tax credit. These are for transactions that close escrow on or after May 1, 2010. The $10,000 credit is spread out over three years. So, when will the $100 million run out? For every buyer, the state is counting $5,700 against the $100 million. That equates to 17,543 first time home buyers. Based upon the current wave of first time home buyer activity, the credit is forecasted to last less than two weeks. And, if there are buyers who are supposed to close at the end of this month – to take advantage of the $8000 Federal Tax Credit - and are looking to delay closing until after May 1st, the credit may end even sooner.”  ( End of Steven’s report.)

Like the former “Cash for Clunkers” program for automobiles, there will likely be a mad scramble for those credits – and a lot of disappointed buyers.

 

Mortgage markets improved last week for the second week in a row.  And, also for the second week in a row, rates were down on "safe haven" buying -- just not for the same safe haven reasons as before.

If you'll remember, safe haven buying is when investors sense market risk, then move money toward less risky investments.

Well, because the U.S. government backs the bonds of Fannie Mae and Freddie Mac, mortgage bonds tend to fit the "less risky" description and as Iceland's volcanoes shut down air traffic in Europe, mortgage bonds benefited.

That was early in the week.

Then, on Friday, when the SEC announced fraud charges against Goldman Sachs, a second wave of bond buying began as Wall Street fled the stock market. Mortgage rates fell a second time and the improvement carried through the market's weekly close.

Conforming and FHA rates are as low as they've been since March.

This week, there's not much data due until Thursday, but even Thursday's releases won't make a huge impact on rates.

1. Initial Jobless Claims : Important vis-a-vis broader employment figures. A strong number could push rates up.
2. Existing Home Sales : Housing remains a key part of the economy. Strong sales are expected because of the tax credit.
3. Producer Price Index : A "Cost of Living" index of business. A weak reading is expected because inflation is low.

Then, Friday, New Home Sales is released.

The bigger risk to home buyers this week than data is the reversal of the safe haven buying patterns that have kept mortgage rates down over the past 10 days.  Keep an eye on the markets and your loan officer on speed dial.  Markets can -- and do -- change quickly. 

You'll want to time your lock accordingly.

Foreclosure filings rose close to 20 percent nationwide last month versus February, according to foreclosure-tracking firm RealtyTrac.com, and for the 13th straight month, total filings topped 300,000.

In addition, bank repossessions reached an all-time, quarterly record. Through the first three months of 2010, banks reclaimed more than 257,000 homes.

Nonetheless, 4 states dominated foreclosure activity nationwide.

California, Florida, Arizona and Georgia accounted for more than half of all bank repossessions. It's a disproportionate distribution of foreclosures. Together, the 4 states represent just 23 percent of the overall U.S. population.

The RealtyTrac report revealed some other interesting statistics, too.

• Foreclosure activity was up in 40 out of 50 states last month
• Bank repossessions rose 9 percent versus the same quarter last year
• For the 13th straight quarter, Nevada topped the state foreclosure rate

Regardless of where you're buying, short sales, foreclosures, and REO are making a profound impact on pricing and product. Distressed homes are 35 percent of the overall resale market.

There's excellent value in foreclosures out there if you know where to look, but keep these points in mind:

1. Buying short sales homes can take 120 days to close or more. Be flexible.
2. Foreclosures aren’t always listed for sale publicly. Some inventory is privately-held.
3. Bank-owned homes are frequently sold "as is". There may be defects that render the homes mortgage-ineligible.

The short sale/REO market is very different from the traditional "existing home" market.  Therefore, if you have an interest in buying such a property, be sure to talk with an experienced real estate agent first.  I have been selling properties like these for over 33 years, and would be honored to share my expertise with you.  Give me a call or shoot me an email - and let's talk about real estate!

 

Mortgage markets improved last week to the delight of rate shoppers.

Against a sparse economic calendar, Wall Street turned its attention to geopolitics in Greece and the Eurozone.  It didn't like what it saw. Safe haven buying buoyed mortgage bond markets last week as pricing recaptured two-thirds of its monumental losses from the week prior.

Despite last week's surge, however, conforming and FHA mortgage rates remain near their worst levels of the year and appear poised to increase throughout the summer months.

The U.S. economy is improving. From last week:

• Pending Home Sales posted a strong monthly improvement
• Wholesale Trade data pointed to higher consumer spending ahead
• Inflationary threats on the economy are receding, according to the Fed

Furthermore, continuing jobless claims were down again.

Good news for the economy is generally bad news for mortgage rates. Last week, that wasn't the case because of Wall Street's want for "safe" assets right now.  This includes mortgage bonds and is helping to keep consumer rates low. When the safe haven buying eases, rates should climb.

Meanwhile, this week, the calendar is back-heavy. 

There's no real data until Wednesday's Consumer Price Index, and then there's a flurry of new releases through Friday's market close including Retail Sales, Consumer Confidence and Housing Starts. 

Strength in these issues should push mortgage rates back up.

If you're floating or shopping a loan right now, be wary of market volatility. Rates have been jumpy since April 1 and mortgage rates are changing quickly. This week, locking in before Wednesday may be your safest, near-term rate locking strategy.

 

Mortgage markets improved yesterday after the Federal Reserve released its March 16, 2010 meeting minutes. It's good news for home buyers and rate shoppers -- rates could have just as easily gone the other way.

The Fed Minutes is a detailed recap of the debate and discussion that shapes the nation's monetary policy. The notes are dense; it takes 3 weeks to compile them for publication.

As compared to the more well-known, post-meeting press release, the Fed Minutes are extremely lengthy. For example:

• March 16 press release : 451 words
• March 16 meeting minutes : 6,152 words

If the press release is the executive summary, the Fed Minutes are the novel.

The extra words matter.The minutes recount what the Fed did, how the Fed did it, and what the Fed plans to do next. And, in the minutes, Wall Street looks for clues. 

This is why the report is important to every rate shopper in the country.

When the Federal Reserve publishes the minutes from its meetings, it leave clues about the groups next policy-making steps.  For example, in March's Fed Minutes, it's clear that the Fed's concern about inflation is hugely diminished and that's a major plus for the mortgage bond market.

Inflation causes mortgage rates to rise. The absence of inflation, therefore, helps them to fall.  This improves home affordability, among other things.

Similarly, the Fed Minutes note that real estate sales may have been worse throughout the winter months if not for low mortgage rates and the sense among Americans that home prices were troughing. We may infer, therefore, that rising rates may suppress home sales later this year.

Markets are always looking for clues from inside the Fed and the last meeting's minute signal that the economy is on its way up.  If you're looking for a bargain in the housing market, your window to act may be closing.

 

As expected, the Pending Home Sales shot higher in February, boosted by the federal home buyer tax credit's April 30 deadline.

Versus the month prior, February's index rose 8 percent but remains well off the highs set last October.

For today's home buyers and seller, the Pending Home Sales Index is an important measurement. This is because a "pending home" is a property that is under contract to sell, but not yet closed.

According to the National Association of Realtors®, 80% of homes under contract close within 60 days, historically. Therefore, a higher Pending Sales figure in February projects that April's Existing Home Sales will be higher, too.

If you're a home buyer today, no doubt you've noticed the extra market activity.

On right-priced homes, multiple offer situations are more common; sales prices are settling closer to listing price; Days on market is falling. These are the signs of a buyer-heavy market.  It drives home supplies down and home prices up.

It's a good time to be a seller, in other words.  Especially as buyer activity looks poised to peak.

When the home buyer credit faced its last expiration in November 2009, we saw a pattern of buyers rushing to beat the deadline.  There's no reason to expect that won't happen again. And as it does, Pending Home Sales should continue to climb. Average home sale prices should rise.

Home buyers may find it smart to go under contract sooner rather than later. Pending Home Sales is a warning shot.  Higher home sales figures are ahead.

 

Mortgage markets performed terribly last week as losses piled up day by day.  It marked the second straight week of sell-offs.

Pricing was influenced on several fronts including better-than-expected economic data, the end of the Federal Reserve's mortgage buyback program, and a short trading week.

Mortgage rates rose to their highest levels since late-December last week.

The data from the most anticipated story from last week -- the jobs report -- included a few good-for-the-economy surprises.

1. Although payrolls fell 22,000 short of expectations in March, they were boosted by +62,000 in net revisions from January and February
2. "Temporary Employment" -- a leading jobs indicator -- is up 313,000 in the last 6 months
3. The average work-week and factory overtime both rose in March -- a sign that hiring should increase soon

In general, what's good for the economy is bad for mortgage rates and that's one reason why rates spiked Friday. Employment is a keystone in the economic recovery and mortgage markets reacted accordingly.

This week is short on data but there's a lot to move the markets.

For one, the Federal Reserve has called an emergency meeting to review its Discount Rate policy.  The meeting is called for today, Monday April 5, at 11:30 AM ET.  It's unknown exactly what the meeting will cover, but if new monetary policy is made, expect that mortgage rates will be influenced.

Also worth watching this week are the technical trading patterns present in the mortgage-backed bond market.

Unlike fundamental trading in which markets move on data and projections, technical trading is how markets move based on patterns over time. The two methods co-exist on Wall Street but, occasionally, technical forces can be pronounced, leading markets to lurch up or down.  This week may be one of those times. 

Mortgage pricing is far below its 200-day moving average, resting slightly north of a key support level. If pricing worsens this week and bonds fall below the support level, mortgage rates could easily tack on quarter-percents or more per day until the market refinds its balance.

Overall, it's a week you don't want your rate to be floating. Sure, rates could improve, but there's a lot more room for them to worsen.

 

In its 12-month home price forecast issued Wednesday, Veros Real Estate Solutions said it had “continued bad news for Florida.” Markets in the Sunshine State claimed the top five spots on the collateral valuation company’s list of areas where prices are expected to drop the most over the next year.

The Deltona-Daytona Beach-Ormond Beach market has the farthest to fall when it comes to price depreciation. There, Veros projects prices will plunge another 10 percent between now and March 2011.

In Palm Bay-Melbourne-Titusville, the forecast is a decline of 8.9 percent. Naples-Marco Island will likely see prices drop another 8.8 percent, Veros says. The company expects Orlando-Kissimmee to suffer price depreciations of 8.7 percent over the next year. And Port St. Lucie-Fort Pierce is projected to see a decline of 8.6 percent.

Eric Fox, Veros’ VP of statistical and economic modeling, said, “Florida remains ground zero for the weakest home price forecasts in the U.S. although extreme declines of 20 or 25 percent are no longer expected since strong price corrections have already occurred.”

One of the other big bust states – California – shows more promise, according to Veros’ analysis. The Golden State is home to three of the five markets the company expects to post the strongest price gains over the next 12 months.

Veros projects home prices in the San Diego-Carlsbad-San Marcos market to increase by 3.4 percent between now and March 2011. In Los Angeles-Long Beach-Santa Ana, the company forecasts a rise of 3.1 percent, and San Francisco-Oakland-Fremont is expected to see price gains of 3.0 percent.

“More of California’s coastal areas are showing modest signs of appreciation,” Fox said, noting that Los Angeles and San Francisco were not among the top five for price gains in the company’s study last quarter, but have edged their way up the ranks over the past three months.

Two Texas metro areas also made the “strongest markets” list, with prices in Houston-Sugarland-Baytown expected to see gains of 3.0 percent over the next year, and prices in Amarillo forecast to increase 2.7 percent.

“The Great Plains region including Texas remains steady,” Fox said.

Addressing the overall picture, Fox added, “Although there are no overwhelmingly strong appreciating forecasts among the larger metropolitan areas, the depreciating forecasts are noticeably milder than a year ago.”

Veros says it anticipates “gradual improvement” of property value trends in key markets over the next 12 months.

The company’s predictions are based on its analysis of more than 900 counties, nearly 300 metro areas, and almost 14,000 zip codes, encompassing such critical factors as interest, unemployment, and inflation rates; housing inventory levels; and economic and geographic trends.

From DSNews.com,  April 1, 2010,  by Carrie Bay

Note from Bob Phillips: Meanwhile, in Orange County, California, the median price has climbed by more than 10% over the past 14 months. With currently low inventory of available houses, continued historically low interest rates, an $8,000 Federal tax credit still available, AND a new $10,000 California tax credit, there is NO reason to expect that 2010 won’t be just like 2009.  This is probably the most affordable houses in Orange County, California have been in the past decade.

 

A surprisingly strong rebound in California's real estate market helped lift a key home price index for the eighth month in a row.

That's good news for people who plan to sell their homes this spring. Prices are now up almost 4 percent from the bottom in May 2009, but still almost 30 percent below the May 2006 peak.

Prices rose 0.3 percent from December to January on a seasonally adjusted basis, according to the Standard & Poor's/Case-Shiller 20-city home price index released Tuesday. Prices increased in 12 cities in the index.

The biggest monthly gain was in Los Angeles, where prices rose 1.8 percent from December. And real estate agents say there's a distinct sense the worst of the downturn is over.

Buyers are "seeing that prices are creeping up," said Tony Middleton, a real estate agent with ZIP Realty who concentrates on the San Fernando Valley. "They're losing bids on homes and they have to bid again."

Prices in San Diego, meanwhile, rose by almost 0.9 percent. Phoenix had the third-largest gain at 0.8 percent.

Compared with the same month last year, the 20-city index was off just 0.7 percent from last year at a reading of 146.32. That was the smallest decline in almost three years and in line with analysts' expectations, according to Thomson Reuters.

Rising home prices also could boost consumer optimism. For most Americans, their home is their largest asset, so as values climb from the depths of the housing bust, homeowners feel wealthier and more comfortable spending. And, for homeowners who owe more on their mortgages than their properties are worth, rising prices rebuild equity.

Consumer confidence rebounded in March after a February plunge, according to a survey released Tuesday. The Conference Board's Consumer Confidence Index rose to 52.5 in March, recovering about half of the nearly 11 points it lost in February.

Still, shoppers remain cautious and there are signs that last year's housing rebound won't last. Home sales sank during the winter, and government incentives that have propped up the market are ending.

Another reason for the positive news is simply that the Case-Shiller index measures a three-month average of home prices. So January's report included November's strong home sales.

However, bargain-hunting homebuyers continue to pack open houses in California, often facing off with investors for foreclosed homes.

"We're seeing multiple offers in most of the markets here in the San Francisco Bay area," said David Kerr, an agent with ZipRealty in Oakland, Calif. "People are getting off the fence."

In February, bank-owned properties made up 44 percent of all resales in the state, according to MDA DataQuick. In Southern California, they accounted for more than half of resales.

With such high demand, supply is dwindling, driving prices higher.

Meanwhile, the state's unemployment rate has flat-lined of late, and that's made buyers more comfortable about purchasing a home than they were just six months ago, said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California.

California home sales will likely get a boost in coming months thanks to a new serving of government stimulus.

Last week, state lawmakers enacted a tax credit of up to $10,000 for homebuyers that kicks in May 1. The state allotted $100 million for first-time buyers and another $100 million to anyone who buys a newly built home. California had a round of tax credits last year that proved to be popular; that program ended in July.

The latest incentive picks up where a federal first-time homebuyer tax credit of up to $8,000 is scheduled to leave off when it expires at the end of April. Should the Obama administration extend the federal tax break, that could give homebuyers in California even more reasons to buy.

Still, there remain pockets of weakness. Sales of homes priced above $500,000 are sluggish. And despite rising prices, more than one-third of all homeowners with a mortgage still owe more on their loans than their homes are worth, according to First American CoreLogic.

Among the cities showing monthly price declines in January, the biggest drop was in Portland, Ore., where prices fell 1.8 percent from December. Chicago and Seattle saw declines of 1.7 percent, while prices in Atlanta fell 1.5 percent.

LOS ANGELES — Courtesy of Huffingtonpost.com, 3-30-2010 - ALAN ZIBEL AND ALEX VEIGA

Standard & Poors released its Case-Shiller Index Wednesday. The report shows that, on a seasonally-adjusted basis, between December and January, home prices rose in more than half of the index's tracked markets.

The strength of this month's Case-Shiller report, however, should be put in context.

For one, the report is on a 2-month delay; it's showing data from January, before the start of the Spring Buying Season and before the rush to beat the tax credit. Anecdotally, buyer interest has been strong since, leading to the types of multiple offer situations that drive home prices northward.

In other words, home values may be even higher than what's reflected in the January Case-Shiller data above.

Furthermore, the Case-Shiller Index measures home values in just 20 cities nationwide and they're not even the 20 biggest cities. Houston, Philadelphia, San Antonio and San Jose are specifically excluded from the report and each ranks among the country's 10 most populous areas.

Despite its flaws, though, the Case-Shiller Index remains important. Much like the government's Home Price Index, the private-sector report helps to finger broad housing trends and housing is still considered a keystone in the U.S. economic recovery.

Even if it IS two months slow.

I'll have the Orange County version of this report in a few minutes.....please stay tuned.

Starting Monday, April 5, 2010, getting an FHA mortgage will be more expensive for borrowers.

In new guidelines set forth earlier this year, the FHA announced plans to raise additional revenue and reduce the overall risk of its mortgage portfolio. 

The changes include the following:

1. Increase Upfront Mortgage Insurance Premiums from 1.75% to 2.25% for everyone
2. A plan to reduce seller concessions from 6 percent to 3 percent
3. An increase in minimum downpayment for FICOs 580 or lower

For your own loan, to avoid being subject to higher loan costs, make sure to have your FHA Case Number assigned prior to Monday, April 5, 2010.  That means you'll want to give a full mortgage application before the weekend so your lender can register your loan in time for the deadline.

But don't leave your application to the last minute.

Friday is Good Friday so most banks will be closed. Your true FHA deadline, therefore, is Thursday April 1.

Also worth noting is that the FHA isn't done with its changes.

In its policy statement, the group also announced its plans to petition Congress to raise monthly mortgage insurance premiums.  The FHA's formal request, in summary:

1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It's merely a request. And in the event that Congress does approves it, the FHA reserves the right to change its projections.  Either way, it means higher costs for consumers. 

The best plan, therefore, is to get your FHA mortgage into underwriting ahead of the switches because borrowing money will be harder, and more costly.

 

Economists at IHS Global Insight and PNC Financial conclude that Orange County homes were priced 5.6% too low in 2009’s fourth quarter.

Comparing local house-sale prices to historical real estate and economic trends, IHS-PNC estimates that Orange County homes were undervalued for the 7th consecutive quarter after being overvalued for the previous 20 quarters.

The latest 5.6% undervaluation — on par with the likes of Louisville, Ky.; Jefferson City, Mo.; Fairbanks and Abeline, Texas — was a roughly equal to the previous 5.5% in Q3. The current wave of Orange County undervaluation peaked at 11.4% in Q4 of 2008.

Also  in the IHS report …

• For historical memory sake, Orange County overvaluation peaked at 33% in 2006’s Q2.
• Atlantic City, N.J., was the most overvalued nationally (33% too high) in Q4 2009.
• One reason the undervaluation is shrinking locally is the rising price of homes sold. By IHS-PNC math, O.C. home pricing was up 6.4% in a year as 2009 ended — 3rd biggest gain among the 330 regions tracked nationwide.
• The D.C. region had the largest Q4 price gain (+10.5%) while Las Vegas had the biggest loss (-19.4%).
• The report concludes: “Two years of relentless house price depreciation finally ended in the summer of 2009. The second half of 2009 saw minimal changes in home prices, signaling stabilization at long last, if not yet recovery. … We ended 2009 with no extremely overvalued metros, a sharp contrast to 2005 when 52 metro areas were judged to be extremely overvalued.”

March 22nd, 2010, originally posted by Jon Lansner in the O.C. Register

For the 22 business days ending March 8 –

DataQuick

’s latest homebuying report — Orange County saw …

For the 22 business days ending March 8 Slice Price Yr. ago Sales Yr. ago Houses $500,000 +13.6% 1,559 -4.1% Condos $288,750 +11.5% 812 +15.7% New $523,500 +6.5% 101 +26.3% All O.C. $420,000 +10.5% 2,472 +2.7%

• $420,000 median selling price that is +10.5% vs. a year ago and -35% below June 2007’s peak of $645,000.
• The most recent median is 14% above the cyclical low hit in January 2009 at $370,000 — a current bottom that was -43% below the peak.
• Prices fell on a year-over-year basis from Sept. 2007 through August. (Worst at -31.5% in August 2008.)
• Single-family homes resell for 32% less than their peak pricing (June ‘07) while condos sell 39% below their peak in March 2006. Builder prices for new homes are 39% below their February ‘05 top.
• Single-family homes were 73% more expensive than condos in this period vs. 70% a year ago. From 1990-2008, the average house/condo gap was 57%.
• In this most recent period, O.C. shoppers bought 2,472 residences — that is +2.7% vs. year-ago buying activity. (From 1997-2006, monthly sales averaged 4,304 per month.)
• Builder’s new homes sales were 4% of all residences sold in the period vs. 3% a year ago. From 1990-2008, builders did 15% of the selling.

How did your neighborhood fare? Check our ZIP-by-ZIP data HERE!

March 26th, 2010 · from Jon Lansner, of the O.C. Register

Home values fell again in January, according to the Federal Home Finance Agency's Home Price Index. Values were reported down 0.6 percent, on average.

We say "on average" because the Home Price Index is a national report. It doesn't capture the essence of a local market , or even a city market.

The most granular that the monthly Home Price Index gets is regional and January's report shows that:

• Values in the Mountain states rose 2.0%
• Values in the Pacific states were flat
• Values in the East North Central states fell 1.8%

It's hardly helpful for home buyers entering the market, or home sellers trying to properly price a home.  Furthermore, because the Home Price Index reports on a 2-month delay, its data fails to reflect the current market conditions.

Versus January -- the period from which HPI data is collected -- mortgage rates are lower, buyer activity is up, and the federal home buyer tax credit is closer to expiring.  These each can have an impact on housing.

Ultimately, national real estate data like the Home Price Index is best suited for lenders and policy-makers.  National data helps to identify trends that shape formal policy, but it doesn't help you, specifically. 

Since peaking in April 2007, the Home Price Index is off 13.2 percent.

The California legislature on Monday passed AB 183, providing $200 million for home buyer tax credits. The Governor is expected to sign the bill into law this week. C.A.R. supported this important legislation since its inception.  Part of a package of four bills passed at the request of the Governor, AB 183 is designed to help stimulate the economy and create jobs.  It allocates $100 million for qualified first-time home buyers who purchase existing homes and $100 million for purchasers of new, or previously unoccupied, homes.

 The eligible taxpayer who closes escrow on a qualified principal residence between May 1, 2010 and December, 31, 2010, or who closes escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credit.

 This credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years. Under AB 183 purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (i.e. repay it to the state).

 $10,000 represents 5% of a $200,000 purchase price, so that means just about any property purchased in Orange County. Like the “Cash for clunkers” program, however, the $200 million will probably get used up pretty fast.

 

 

Orange County Market Report – Demand Springs Forward.

Here is the latest market report from my friend Steven Thomas, of Altera Real Estate:

Orange County is taking “Spring Forward” to a whole new level with an increase in demand for the first time in six weeks.

Demand, the number of new pending sales over the prior month, increased by 216 homes over the prior two weeks and now totals 3,270, the highest level thus far in 2010. Demand is 600 pending sales stronger than last year at this time and 1,187 stronger than two years ago. After looking at developing trends, I had been wondering whether or not demand was going to surge or if it would ignore cyclical market fundamentals. It would not have been the first time that this downturn ignored the conventional Southern California housing cycle.

Call it a coincidence, but now that the cool temperatures, clouds and rain have subsided, the Orange County housing market is revving its engine. There are a ton of buyers in the marketplace right now according to REALTORS® in the trenches.

The current problem is surprisingly a LACK OF INVENTORY. The expected market time for all homes priced below $1 million is 2.23 months, a deep seller’s market with a very low inventory. These homes represent 78% of the active inventory and 94% of demand. But, for homes priced above $1 million, there is NOT a lack of inventory. Collectively, this range represents 22% of the active inventory but only 6% of demand. The expected market time is 8.99 months, a buyer’s market.

The inventory has dropped significantly in every range. With the exception of homes priced below $250,000, demand is much stronger in every range. There just are not enough homes on the market in the lower ranges where demand is so incredibly hot. For the lowest range, less than $250,000, the inventory is down 43%, but demand is only off by 10%. It is no wonder that there are multiple offers and homes selling for above their asking prices in the lower ranges. More inventory would actually be welcomed with open arms by both buyers and their REALTORS®.

The “jumbo” market between $750,000 and $4 million has actually improved tremendously. Their expected market time has dropped significantly as well. For example, homes priced between $1 million and $1.5 million dropped from an expected market time last year of 16.21 months to 6.55 months today. 6.55 months may be a buyer’s market, but it is not frozen. Anytime the expected market time is above 10 months, double digits, there is just too much inventory and very little demand.

Currently, only homes above $2 million have expected market times that are double digits. They represent 10% of the current active inventory, but only 2% of demand. The current market is much different than just one year ago. Just ask all of the buyers who are having trouble purchasing because of a lack in inventory.

How do the rest of the numbers look? The active inventory increased over the past two weeks by 330 homes, or 4%, to 8,776. The active inventory last year was at 11,606, 2,830 additional homes compared to today. Two years ago it was at 15,617, 6,841 additional homes. The overall expected market time for all of Orange County dropped from 2.77 two weeks ago to 2.68 months today. The total pending count, which includes homes that have been pending for months, increased from 6,869 two weeks ago to 7,049 today. That is the highest level since I started tracking total pending sales back in September of 2006.

This is primarily due to the mind-boggling number of short sales that are waiting for lender approval (short sales are homes where the outstanding loans exceed the market value of the home and are subject to the lender[s] agreeing to take less in order to close the sale). 4,250 of the 7,049 total pending sales are short sales, 60%. Yet, only 40% of current demand is made up of short sales. On average, short sales just do not close as fast. Instead, they clog the system and buyers are left on the edge of their seats wondering when they will ever be able to move into their new home.

The number of active distressed homes on the market, all short sales and foreclosures combined, increased by 26 homes to 2,795 and now represent 31.8% of the inventory. Last year at this time, there were 4,673 distressed homes on the market, representing 40.3% of the active inventory.

The number of foreclosures within the active listing inventory dropped by two homes in the past two weeks, from 396 to 394. The expected market time for foreclosures is an astonishing 1.05 months, a deep seller’s market. Foreclosures are flying off of the market. The number of short sales within the active listing inventory increased by 28, and now total 2,401. The expected market time for short sales is 1.86 months, also a deep seller’s market.

With the return of Southern California sunshine and temperatures in the 70’s, Orange County demand is back on the rise.

End of Steven’s report.

CNNMoney.com recently published its 2010 forecast and projections for home prices in the country's largest metro markets. 

Listed as "Top 25" and also comprehensively by state, CNNMoney.com's home price forecasts puts Santa Rosa, California at the top of 2010's home appreciation list and Hanford, California at its bottom.

The 10 cities projected for highest home appreciation in 2010 are:

1. Santa Rosa, CA : +6.0%
2. Cheyenne, WY : +4.7%
3. Kennewick, WA : +4.6%
4. Merced, CA : +4.4%
5. Bremerton, WA : +4.2%
6. Fairbanks, AK : +4.2%
7. Corvallis, OR : +4.1%
8. Tacoma, WA : +3.9%
9. Anchorage, AK : +3.8%
10. Bend, OR : +3.3%

The Pacific Northwest is the region most heavily-represented among price gainers. The Southeast and Middle Atlantic are most represented on the under-perform list.

However, just because a city's homes are expected to appreciate (or depreciate) in 2010, that doesn't mean that every home within its limits will follow suit.  Real estate cannot be grouped on a city level like CNNMoney.com tries to. There will always be areas in demand within city limits in which prices rise, just as there will be out-of-demand areas in which prices fall.

Real estate data can't be grouped by city or even by ZIP code, really.

Real estate is more local than that.

When we say "real estate is local",  it means that every street in every town has a distinct set of traits that drives its home values. Homes that are one block closer to the train; or, homes that are facing north; or, homes that are made of brick. Each of these characteristics can affect a home's desirability which, in turn, can affects its sales price.

National surveys can't capture "essence" like this. They only report on the aggregate.

For local real estate data, look to established, publicly available websites and to active, local real estate agents.  Both will have data and insight that can help you.  National surveys often make for good headlines, but do little to help homebuyers find good value.

Mortgage markets closed unchanged last week, but that's not say mortgage rates were calm. Monday through Wednesday, rates improved steadily before a swift, late-week sell-off unwound the gains.

Mortgage rates have been very low for a very long time -- against the expectations of most market experts.  The speed of the Thursday-Friday reversal may signal that markets are preparing for change.

One key story from last week was the Federal Open Market Committee's scheduled Tuesday meeting. Upon adjournment, the Fed voted 9-1 to hold the Fed Funds rate in its current target range near 0.000% and reiterated its plan to keep rates low for "an extended period of time". 

Kansas Fed President Thomas Hoenig was the lone dissenting vote.

For rate shoppers , take note. 

The Fed specifically mentioned that the its $1.25 trillion mortgage buyback program will end, as planned, March 31, 2010.  This could force rates higher over the next two weeks because, according to the Fed, the existence of a buyback program forced rates lower by 1 percentage point in 2009.

When the program ends, it's expected that markets will give back some of that 1 percent, leading to higher mortgage rates for conventional and FHA borrowers.

This week, in addition to the buyback program's looming end-date, there's several other potential influences on mortgage rates:

1. The Existing Home Sales data for February is released Tuesday, along with the Home Price Index
2. The New Home Sales data for February is released Wednesday
3. Consumer Confidence data hits Friday

Strength in any -- or all three -- of these reports should put pressure on mortgage rates to rise.

But there's one wildcard this week and that's the aforementioned Kansas Fed President Hoenig's scheduled speech Wednesday morning. Typically, Fed members stay on message when making public appearances, but Hoenig is expected to talk about why rates should be higher, and what the Fed needs to do to prepare the economy for late-2010 and beyond.

His words could lead Wall Street to rethink its position on the mortgage bond market and that could cause rates to spike Wednesday afternoon.

Mortgage rates remain volatile and are still relatively low. If you're unsure of whether now is a good time to lock in, consider that there's a lot more room for rates to rise than to fall right now. Especially with momentum shifting for the worse.

Homes are more affordable across the nation as the housing market emerges from a slow winter season with mortgage rates still near 5 percent.

Soft housing and low rates are an excellent combination for home buyers but whereas home values rise with a gradual pace, mortgage rates change in an instant.  It's something worth watching.

Each 0.25% increase to conventional or FHA rates adds approximately $16 per month for each $100,000 borrowed. Mortgage rate volatility can change your household budget.

If you're trying to gauge whether rates will be rising or falling, one keyword for which to listen is "inflation". Mortgage rates are highly responsive to inflation.

By definition, inflation is when a currency loses its value; when what used to cost $2.00 now costs $2.15. As consumers, we perceive inflation as goods becoming more expensive.  However, it's not that goods are more expensive, per se. It's that the dollars used to buy them are worth less.

This is a big deal to mortgage rates because mortgage bonds are denominated, bought, and sold in U.S. dollars.  As the dollar loses value to inflation, therefore, so does the value of every mortgage bond in existence. When bonds lose their value, investors don't want them and bond prices fall.  Mortgage rates move opposite of bond prices.

Prices down, rates up.

In today's market, the relationship between inflation and mortgage rates is helping home buyers. The Cost of Living made its smallest annual gain in 6 years last month and the Fed has repeatedly said that inflation will stay low for some time. The combination is driving investors to buy mortgage bonds which, in turn, suppresses rates.

So long as it lasts, the cost of homeownership will remain relatively low. Combined with the expiring tax credit, the timing to buy a home may be as good as it gets.

According to foreclosure-tracking firm RealtyTrac, foreclosure filings topped 300,000 for the 12th straight month last month as 1 in every 418 U.S. homes received a foreclosure filing.

It's a small improvement from January and a just 6 percent increase over February 2009.

On a per-capita basis, foreclosure density varied by state:

• Nevada : 1 foreclosure filing per 102 homes
• Florida : 1 foreclosure filing per 163 homes
• Arizona : 1 foreclosure filing per 163 homes
• California : 1 foreclosure filing per 195 homes

Also, as in January 2010, foreclosures across the country were concentrated. 10 states beat the national Foreclosure Per Capita average; 40 states fell below. Like everything else is real estate, it seems, foreclosures are local.

For today's home buyers, foreclosures represent an interesting opportunity. 

Homes bought in various stages of foreclosure are often less expensive than other, non-foreclosure homes. It's one reason why distressed home sales account for 38 percent of all resales. However, less expensive doesn't always mean less costly.  A foreclosed home may be in various stages of disrepair and they're often sold as-is, as policy.

Buying new or used can be cheaper than buying broken-down.

Therefore, if you're in the market for a bank-owned home, make sure you know what you're buying before you sign a contract. Have qualified professionals review and inspect the property, as needed. Damage to pipes or the property's structure, for example, may not be so obvious on a walk-though and you'll want to know about it before you buy.

Also, foreclosed homes are federal tax credit-eligible. Buyers must be under contract by April 30, 2010 and closed by June 30, 2010.

In November, Congress extended and expanded the First-Time Home Buyer Tax Credit program to include a subset of "move-up" buyers -- homeowners that have owned and lived in their home for 5 of the last 8 years.

The credit ranges up to $8,000 per buyer. There's now just 7 weeks left to take advantage.

To be eligible, home buyers must be under contract for a new home no later than April 30, 2010, and must be closed no later than June 30, 2010.

In addition to meeting the deadline dates, there's a basic set of requirements to be tax credit-eligible:

• You can't purchase the home from a parent, spouse, or child
• You can't purchase the home from an entity in which the seller is a majority owner
• You can't acquire the home by gift or inheritance
• Each buyer in the purchase must meet eligibility requirements

There's other criteria, too.

For one, the sales price on the subject property cannot exceed $800,000. Homes sold for more than $800,000 are ineligible for the tax credit. Furthermore, households earning more than $125,000 as single-filers, or $225,500 for joint-filers, are ineligible.

You can read the complete eligibility requirements at the IRS website, or, you may just find it simpler to speak with your accountant about it. There are some nuances in qualifying for and claiming the tax credit on your returns and getting a professional's opinion is always wise.

And lastly, don't forget that government's tax credit program is a true tax credit. It's not a tax deduction.  This means that a tax filer whose "normal" tax liability is $3,500 and who is eligible for $8,000 in credit will receive a $4,500 refund from the U.S. Treasury.

If you're currently in the House Hunt, mark your calendar for April 30, 2010. It's 7 weeks away and you can be sure that as the date gets closer, buyer traffic is going to increase.  You may find sellers more willing to negotiate today than several weeks from now.

Mortgage markets improved last week as economic reports painted a less-than-stellar portrait of the U.S. economy and concerns of a looming monetary policy change eased. Mortgage pricing improved dramatically, despite a late-Friday retreat.

Mortgage rates are now at their lowest levels since early-February.

Last week was heavy on negative data:

• Consumer Confidence posted 16% short of expectations
• New Home Sales posted 13% short of expectations
• Initial Jobless Claims were higher than expected

In addition, both the Case-Shiller and Home Price Indices showed a slight pullback in the housing sector.

The impact of these statistics was muted, however. This is because Fed Chairman Ben Bernanke gave his semi-annual outlook to Congress and markets focused more on the chairman verbiage than hard data, looking for clues about the future of Fed policy.

Bernanke stayed on message -- the Fed Funds Rate will stay low for an extended period of time.

Mortgage rates were also helped by a strengthening U.S. dollar and demand for U.S.-denominated bonds. When demand for mortgage-backed bonds is strong, mortgage rates fall.

This week, mortgage rates will jockey around Friday's Non-Farm Payrolls report.

Jobs are playing a large role in mortgage bond trading and markets expect that 30,000 jobs were lost in February.  If the actual figure is better than 30,000 jobs lost, mortgage rates will rise. If it's worse, rates will rise.

Other important data this week include Personal Consumption Expenditures -- the Fed's preferred inflation gauge -- plus the Fed's Beige Book release.  Mortgage rates remain in flux so float with caution.

Mortgage rates look good today, but by Friday, they could be much, much worse.

This, from Jon Lansner, in today’s Orange County Register:

For the 22 business days ending February 5 – freshest numbers from DataQuick — our region-by-region analysis of homebuying shows Orange County slices up geographically speaking this way …

• DataQuick identified 570 homes selling in Orange County’s north-inland ZIP codes in this most recent period, +12% from a year ago. Median selling price? $450,000 in these 23 ZIPs. This most recent median price change was +8.4% vs. a year ago.
• Mid-county ZIPs — median selling price $352,500 – had 630 sales, -12% from a year ago. In these 24 ZIPs, the freshets median price change was +4.9% vs. a year ago.
• Combined, total homes sales in ZIPs in the north and mid-section of Orange County were -2.2% vs. a year ago as homebuying in the rest of the county ran +31.3% vs. 12 months earlier.
• North/mid-county homes accounted for 57% of residences sold in the most recent period vs. 64% a year ago.
• 325 homes sold in beach cities’ 17 ZIP codes in the most recent period, +16% from a year ago. Median selling price? $722,500 in these 17 ZIPs. Newest median price change was +4.9% vs. a year ago.
• South inland ZIPs — median selling price $493,250 – had 578 sales, +41% from a year ago. In these 19 ZIPs, the latest median price change was +16.7% vs. a year ago. ( This is the area where I’ve done most of my business, for the past 33+ years.)
• All told, countywide sales were +8% vs. a year ago. The median selling price was +15% in the past year.

End of Jon’s article.

I can feel the hubbub of activity, and see the multiple offers on properties, but it feels good to see it in print.

Earlier this week, the private-sector Case-Shiller Index showed home prices slightly lower between November and December.  Thursday, the public-sector Home Price Index showed the same.

Publishing on a 2-month lag, the Federal Home Finance Agency said home prices fell by 1.6 percent nationally in December.  And that's an average, of course.  Some regions performed well in December as compared to November, others didn't.

• Values in the Middle Atlantic states improved slightly
• Values in New England were essentially unchanged
• Values in the Mountain states sagged, down 3.5%

These aren't just footnotes. They're an important piece toward understanding what national real estate statistics really mean. In short, "national statistics" are just a compilation of a bunch of local statistics.

For example, if we dig deeper into the FHFA Home Price Index 70-page report, we find that cities like Terre Haute, IN, Buffalo, NY, Amarillo, TX all posted year-over-year home price gains even though the national data just state it. The gains in these cities were offset by losses in other cities nationwide.

Furthermore, it's a sure bet that those same cities, you could find neighborhoods that are thriving, and others that are not.  Just because the city shows higher home values overall, it won't necessarily be the case for every home in the city.

Every street in every neighborhood of every town in America has its own "local real estate market" and, in the end, that's what should be most important to today's buyers and sellers.  National data helps identify trends and shape government policy but, to the layperson, it's somewhat irrelevant.

So, when you need to know whether your home is gaining or losing value, you can't look at the national data.  You have to look at your block -- what's selling and not selling -- and start your valuations from there.

The housing recovery showed particular weakness in the New Homes Sales category last month -- good news for homebuyers around the country.

A "new home" is a home for which there's no previous owner.

New Home Sales fell 11 percent from the month prior and posted the fewest units sold in a month since 1963 -- the year the government first started tracking New Home Sales data.

Right now, there are roughly 234,000 new homes for sale nationwide and, at the current sales pace, it would take 9.1 months to sell them all. This is nearly 2 months longer than at October 2009's pace.

The reasons for the spike in supply are varied:

• The original home buyer tax credit expired in November
• Weather conditions were awful in most of the country in January
• Weak employment and consumer confidence continue to hinder big ticket sales

Now, these might be less-than-optimal developments for the economy as a whole, but for buyers of new homes, it's a welcome turn of events. Home prices are based on supply and demand, after all.

As a result, this season's home buyers may be treated to "free" upgrades from home builders, plus seller concessions and lower sales prices overall.

It's all a matter of timing, of course.  New Home Sales reports on a 1-month lag so it's not necessarily reflective of the current, post-Super Bowl home buying season.  And from market to market, sales activity varies.

That said, mortgage rates remain low, home prices are steady, and the federal tax credit gives two more months to go under contract. It's a favorable time to buy a new OR a resale home.

Using data compiled in December, Standard & Poors released its Case-Shiller Index Tuesday.  The report shows home prices down just 2.5% on an annual basis, a figure much lower than the 8.7% annual drop reported after Q3.

According to Case-Shiller representatives, the housing market is "in better shape than it was this time last year", but some of the summer's momentum has been lost. 15 of 20 tracked markets declined in value between November and December 2009.

Meanwhile, it's interesting to note the 5 markets that didn't decline -- Detroit, Los Angeles/Orange County, Las Vegas, Phoenix and San Diego.  Each of these metro regions were among the hardest hit nationwide when home prices first broke.  Now, they're leading the pack in price recovery.

 For some real estate investors, that's a positive signal.  But we also have to consider the Case-Shiller Index's flaws because they're big ones.

As examples: 

1. Case-Shiller data is reported on a 2-month lag
2. The Case-Shiller sample set includes just 20 U.S. cities
3. There's no "national real estate market" -- real estate is local

That said, the Case-Shiller Index is still important. As the most widely-used private sector housing index, Case-Shiller helps to identify broader housing trends and many people believe housing is a key element in the economic recovery.

If the markets that led the housing decline will lead the housing resurgence, December's data shows that full recovery is right around the corner.

 

Mortgage markets had a terrible, holiday-shortened week last week as Wall Street responded to worse-than-expected inflation data and action from the Federal Reserve.  Mortgage bonds sold off with force, causing mortgage rates to rise for the second week in a row.

Last week was a bad week to float a mortgage, to say the least. Rates rose by the largest margin in any week since late-2009.

The two biggest stories from last week both came from the Federal Reserve.  The first was the release of the FOMC January meeting minutes which showed more confidence in the U.S. economy than Wall Street expected, and the second was the Fed's surprise announcement to raise the nation's Discount Rate to 0.75%. Both sparked risk-taking on Wall Street and bonds sold-off as a result. 

Now, the Fed Funds Rate won't climb anytime soon and neither will Prime Rate, but the Fed has sent a clear message to the markets -- The Era of Loose Monetary Policy is over.

This week, there's a lot of economic data set for release.

• Tuesday : Case-Shiller Home Price Index, Consumer Confidence
• Wednesday : New Home Sales
• Thursday : FHFA Home Price Index, Initial Jobless Claims
• Friday : Existing Home Sales, Personal Consumption Expenditures

With markets already on edge, any better-than-expected results should be bad for mortgage rates.

After last week's performance, conforming mortgage rates have now unwound most their January gains.  If you're waiting for the right time to lock, it may have been 2 weeks ago. Consider locking in this week to protect against any further deterioration in price.

Here's an article from this morning's Los Angeles Times:

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Short sales grow as a cheaper alternative to foreclosure

 

Banks’ resistance to the tricky transactions is softening as the number of distressed properties increases.

 

By Alejandro Lazo,  The Los Angeles Times,   February 17, 2010 | 8:26 p.m.

 

Nineteen months ago, the recession took Bob Walker's job. Then, creditors lined up to take the three-bedroom hilltop home that the computer consultant shared with his wife, Stephanie, a playwright still looking for her first break.

Avoiding the stigma and financial fallout of foreclosure became an obsession for the Walkers. They talked to the banks, found multiple jobs, put their Silver Lake house on the market and tried to stitch together a plan to repay their debts. Finally, they turned to a short sale, chronicled in a popular blog: Love in the Time of Foreclosure.

"We really thought that, worst-case scenario, we will sell the house and break even," Stephanie Walker said. "But it didn't work. We went into great losses."

In a short sale the lender lets a homeowner unload a house for less than what is owed on the mortgage. The transaction recognizes that the home isn't worth what the owner paid for it after more than two years of falling real estate values.

Such deals are appealing to struggling homeowners because they escape weighty house debts -- but they don't get away unscathed. Their credit scores will be damaged, perhaps less severely than in foreclosure, but still badly enough to limit for years their ability to borrow money. There may be tax consequences. And any money invested through down payments and renovations will be lost.

Lenders, which can withhold approval of a short sale if they don't like the price, have resisted such sales because they are difficult to execute, particularly when multiple creditors and other parties are involved. And short sales lock in losses that might be reduced if the sale is delayed until the market improves.

But that resistance is softening. With more Americans losing jobs and missing mortgage payments, banks and investors increasingly are agreeing to short sales as a less costly alternative to foreclosure.

Short sales approved by Fannie Mae and Freddie Mac, which own 57% of U.S. mortgages, nearly quadrupled in the first nine months of 2009 compared with the same period in 2008. At the nation's largest mortgage servicers, short sales soared 165% to 74,513 in the first nine months of 2009 from the year-earlier period.

Short sales are still few compared with foreclosures, but policymakers are looking at such sales to shrink the number of bank-owned homes on the market.

Late last year, the Obama administration added incentives to get short sales done if a borrower is unable to qualify for a modified mortgage as part of the government's $75-billion effort to help troubled homeowners. Starting in April, the government will pay incentives to lenders and borrowers when a sale is completed.

Many economists view short sales as a way to address a problem that mortgage relief hasn't fixed: properties that are "under water," carrying more debt than the home is worth.

"Making short sales easier would go a long way to freeing up the market," said Richard Green, director of the Lusk Center for Real Estate. "Right now, if people are under water on their house, they are really stuck."

Short sales remain difficult. Uncertainty over home prices makes properties hard to value, lenders are understaffed and multiple loans on a home can trip up negotiations among creditors.

The Walkers faced some of these challenges. The couple paid $799,000 for their home in 2006, taking out loans from Countrywide Financial Corp. and National City Corp.

They spent most of their savings and ran up big credit card balances to redo their kitchen and landscaping. Even with her husband's $240,000 yearly salary, they were stretched thin making combined mortgage payments of $5,000 a month, Stephanie Walker said.

When Bob Walker's consulting contract was canceled, the couple fell behind on their house payments. They found jobs but their income suffered.

They listed the home for $875,000 but found no buyers. A foreclosure notice arrived. They were offered a three-month payment reduction from Bank of America but couldn't afford it. A short sale looked attractive.

One factor motivating banks to go along with short sales is that foreclosures typically cost more. Foreclosed properties often sit vacant, susceptible to damage from neglect or vandals. A study by Amherst Securities Group found that prime loans took an average loss of 45% in a foreclosure as opposed to 35% in a short sale.

"The bank or the investor is going to lose money on a short sale or a foreclosure," said J.K. Huey, senior vice president of Wells Fargo Home Mortgage. "You don't lose as much if you sell the property when it is occupied."

Representatives of Wells Fargo & Co., JPMorgan Chase & Co. and Bank of America Corp. said their companies had assigned more employees to handle short sales. But the sheer volume of requests has made it difficult to keep up.

"I wouldn't call it overwhelmed," said Matt Vernon, the executive in charge of short sales and bank-owned properties for Bank of America Home Loans. "But the volume has certainly stressed our current process."

Then there's the problem of second mortgages, which have proved to be a thorny impediment to the housing recovery. The loans were widespread during the boom years as people tapped rising equity or financed a down payment.

Of the 1.2 million U.S. properties in foreclosure, about 34%, or 403,670, have a second loan, according to RealtyTrac.    In California, with 280,023 properties in foreclosure, about 46%, or 128,800, have a second loan.

"Those junior liens make short sales much more difficult and they make modification much more difficult," said Michael LaCour-Little, a finance professor at Cal State Fullerton who has studied the issue. The different banks "often have no incentive to cooperate."

Sally Quinn's second mortgage has complicated her short-sale attempts.

She is facing foreclosure on a Glendora town house that she bought as an investment property. Quinn said she has tried to arrange a short sale four times through her lenders, Bank of America and JPMorgan. Buyers, tired of waiting months for an answer from the banks, walked away on three occasions, and the banks rejected an offer from a fourth as too low, she said. She lined up a fifth buyer, she said, but B of A balked.

"It all came crashing down," she said.

The Walkers also found the short-sale process to be emotionally wrenching. Weighed down with debt and fearful they would be pursued by the bank that held their second mortgage, they filed for bankruptcy protection last summer.

In her blog, Stephanie Walker wrote that the struggle helped them focus on what was important: their love for each other.
Last month, Walker retired the blog to focus on her next project, a baby due in July, posting: "I don't want my life to be forever tied to our foreclosure story. It's just time for me to move on."

alejandro.lazo@latimes.com

 

Many of us local Realtors think that the next couple of years will be a huge time for short sales.  If you have any questions about short sales, either see my website - http://BobPhillips.net - give me a call, ( 949-643-2100.) or shoot me an email at BobPhillipsRE@gmail.com

 

 

Sometimes, headlines for housing can be misleading and this week gave us a terrific example.

On Wednesday, the Commerce Department released its Housing Starts data for January 2010. The data showed starts at a 6-month high.

A “Housing Start” is a privately-owned home on which construction has started.

Headlines on the Housing Starts story included:

• U.S. Housing Starts Hit 6-Month High (Reuters)
• U.S. Economy Receives Home Building Boost (Shepparton)
• Housing Starts Post Sharp Rebound (ABC)

Based to the headlines, the housing market looks poised for rapid growth through the Spring Market.

The real story, though, is that although Housing Starts increased by close to 3 percent last month, the growth is mostly attributed to buildings with 5 or more units.  This includes apartments and condominiums -- a sector of the housing market that's notoriously volatile.

If we isolate Housing Starts for single-family homes only, we see that starts grew by just 7,000 units last month and have failed to break a range since June 2009.  January's tally is slightly below the 8-month average.

Perhaps more interesting than the Housing Starts, though, is the Commerce Department's accompanying data for Housing Permits. After a 5-month plateau that ended in November, Housing Permits posted multi-year highs for the second straight month.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

One reason permits are up is that home builders want to capitalize on the federal homebuyer tax credit's dwindling time frame.  Sales are expected to spike in March and April and more homes will come online to deal with that demand.  Home buyers should shop carefully, but with an eye on the clock.

As the tax credit's April 30, 2010 deadline approaches, competition for homes may be fierce.

Mortgage markets worsened last week on general profit-taking in the U.S. bond market, combined with talk of a coordinated rescue effort for Greece and its debt burden. Mortgage-backed bonds sold off, causing conventional and FHA mortgage rates to rise.

There wasn't much hard data on which to trade last week, either, so momentum took markets farther than they otherwise might have moved on their own.  It marked the first time in 5 weeks that rates rose for rate shoppers.

This week, data returns. Expect mortgage market movement.

Some of the week's more important releases include:

1. Housing Starts and Building Permits (Wednesday)
2. The release of the last month's FOMC Minutes (Wednesday)
3. Business and consumer inflation figures (Thursday and Friday)

Inclement weather may have impacted last month's Housing Starts reading so pay closer attention to Building Permits.  Permits precede actual construction and can be more indicative of economic optimism. If permit readings are strong, it should be a negative for mortgage rates.

The same is true for the FOMC Minutes. 

Last month's FOMC post-meeting press-release was decidedly middle-of-the-road, but the statement is just a summary of the Fed's 2-day meeting, boiled down to a few paragraphs.  Wednesday's release of the FOMC Minutes will reveal the deeper discussions among members of the Fed.  Wall Street will mine it for clues about the future of the economy.

If Wall Street senses optimism coming from the Fed -- again -- mortgage rates should rise.

And, lastly, keep an eye on Thursday and Friday's inflation data.  Inflation is bad for mortgage rates so a higher-than-expected reading should spark a bond market sell-off.

Since mid-December, mortgage rates have moved within a tight range and there's little reason for rates will break this range this week. However, we are near the top of the channel. If you know you're going to need a rate locked soon, it's probably best to do early in the week.

How Many "Toxic" Loans are Really Coming to Market?

Written by: Blanche Evans - Feb 12, 2010 4:30:00 AM

 The housing crash will resume early this year, according to a Bloomberg.com story published recently.  

 Quoting analysts at Amherst Securities, the reporter wrote that 7 million properties “likely to be seized by lenders have yet to hit the market” creating a “huge shadow inventory” of homes. That could have a disastrous effect on inventories, 1.35 years worth, if not another home was added to the market. High inventories would collapse prices, knocking another 8% off homeowner equity, with a domino effect on the struggling economy.

 The analysts told Bloomberg that the shadow inventory is likely to only be reduced by about 1 million homes through “cures” such as homeowners getting their loans refinanced, finding jobs, selling their homes before seizure, etc.

 But the foreclosure threat, while very real, could be way overblown.

 Foreclosures could have a much higher cure rate, due to increased government homebuyer incentives. The first-time homebuyer tax credit, which has now been extended to April 2010 and also includes a new program for qualified move-up buyers.  

 Add to that, inventories are diminishing. Existing home inventories have been reduced from a glut of over 11 months on hand, to about 7.8-month supply in September, down from 9.3-months on hand in August. Six months on hand is widely considered to be a balanced market.

 Lawrence Yun, chief economist for the National Association of REALTORS® predicts that the tax incentives will invite as many as 2.3 to 2.4 million first-time homebuyers to the market this year, which should help to stabilize prices.

 First-time homebuyers were 47% of the market in 2009, according to the National Association of REALTORS® 2009 Profile of Home Buyers and Sellers, up sharply from 41% in 2008’s survey

 Next, foreclosures aren’t pandemic. Four states accounted for 52% of foreclosure activity in October - California, Florida, Illinois and Michigan, according to RealtyTrac. Some of the hardest hit states are showing significant reductions in foreclosure filings. Nevada is down 26% from the previous month, California down 1%, and Florida down 6%. 

 Last, foreclosures appear to be declining as job losses bottom.

 According to RealtyTrac® chief executive James J. Saccacio, the number of foreclosures declined for three months in a row through October 2009, but filings are up nearly 19% from October 2008. 

 “However, the fundamental forces driving foreclosure activity in this housing downturn — high-risk mortgages, negative equity, and unemployment — continue to loom over any nascent recovery,” said Saccacio in a statement. “And despite all the efforts and resources directed at helping homeowners avoid foreclosure, we continue to see foreclosure activity levels that are substantially higher than a year ago.”

 And that’s why shadow inventory remains worrisome. Explains Rick Sharga, senior vice president of RealtyTrac Inc., “Essentially, the 7 million ‘shadow inventory’ number consists of all the properties currently in foreclosure (about 1.2 million), all the loans that are delinquent (about 5.5 million), and some of the REOs (about 900,000 in our database).” However, he says, “it appears that the analyst is working on the assumption that 100% of everything that's delinquent or in default will ultimately go back to the banks as REOs. That's never happened, and is unlikely to happen this time.”

A more likely scenario, says Sharga, is that many of the loans that are only modestly delinquent will be cured or re-financed. “Of the loans that go into foreclosure, probably 50-60% will either be sold at foreclosure sale or taken back by the banks,” forecasts Sharga.

 In addition, Sharga says that 20% of that number is already on the market, and are therefore not “shadow” inventory.

 So what’s the real number of shadow inventories? “The only shadow inventory we can really be certain of is that which has already been repossessed by the banks, and isn’t yet listed for sale,” explains Sharga. “We estimate between 400,000 and 500,000 such properties. Everything else is pure speculation.”

 The worst case? “If you were to assume that 50% of loans in all stages of delinquency would enter foreclosure and that 50% of those (as well as 50% of the homes currently in foreclosure) would ultimately wind up as REOs, and add these to the current off-market REOs, that would give you potentially 3.7 million homes in the pipeline.

 “If 20% of those are currently listed, you come down to 2.96 million properties. Given processing timelines, which range from 3 weeks to 600+ days, and other delays in the system, predicting when these homes become REOs and hit the market is virtually impossible right now.

 “And it doesn’t factor in two other important variables: how many loans are yet likely to go into default during this cycle, and how rapidly will buying activity increase? At the end of the day, we’re not looking at 7 million properties that are likely to flood the market all at once; but we will have several million properties go through foreclosure over the next 3 years and ultimately keep market prices from recovering as quickly as everyone would like.”

 That could mean a long, slow recovery through 2013, predicts Sharga, rather than another precipitous drop in home prices. The foreclosure pipeline will continue to be slow, but what will hold the finger in the dyke is sheer volume, accounting and strategy. 

 “Even with the current slowdown, foreclosure activity is running at 6 times what it was four years ago, and REO activity at 10 times,” says Sharga. “Secondly, there are financial reasons to slow down foreclosures and subsequent resales.

 “When the “mark to market” accounting rules were relaxed last year, it meant that lenders didn’t need to write down the value of their real estate assets until the assets were re-sold. This allows lenders to repossess properties at full loan value (on their books) and defer the losses for months or even quarters. Finally, now that we’ve reached “critical mass” – a point where releasing all of the REOs onto the market would probably drive prices down – lenders realize that it’s a better strategy to gradually release the properties back onto the market, and may even benefit from a small bounce in prices which will minimize some of their losses.”

 Actually, the housing market in many areas such as California, could use more inventory, so lenders would do well to release some foreclosures for resale. In some recovering areas of Southern California, for example, there is less than one month’s inventory for sale on hand.

 Says Walt Molony, spokesperson for the NAR, “At the end of Sept. we were showing 3,630,000 homes on the market, down 7.5% from Aug. and 15.0% below a year earlier.  That works out to a 7.8-month supply.

“Census is showing a 251,000 new home inventory, down 3.8% from August and 36.5% below a year ago.  That represents a 7.5-month supply, so it's headed in the right direction.”  ( End of article.)

 

Blanche Evans is CEO of Evans Emedia, Inc. and publisher of The Evans Ezine. As an award-winning journalist, Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and twice recognized as one of the industry's most "Notables."  

Notes from me:

Most of the negative rumors you may have seen or heard lately are a distortion of the same data that RealtyTrac, and other compilers of distressed information have provided above, but which Doom & Gloom Bubble Bloggers ( DGBB.) "conveniently" spin or distort the reality portion of the info, cited above, in order to employ their scare tactics that real estate in the United States is going to go further into “heck” in a hand basket.

As reported above, by experts, who are actually compiling, and analyzing the foreclosure information, and which have a much more complete and realistic picture of the forthcoming situation.  That realism, however, won't help the DGBB's sell subscriptions to their disciples, so they "conveniently" leave those “little” tidbits out of their incessant blogs about impending tsunamis of foreclosures, with preposterous predictions of a forthcoming additional "crash" of 30-60% lower real estate values.

In Southern California, where I have been practicing real estate for over 33 years, that alleged tsunami is more likely going to be a trickle of additional distressed listings - just like it was in 2009 - that will be quickly absorbed by a tsunami of ready, willing, and able buyers - just like it was in 2009. 

That's another dose of reality that the DGBB's choose to ignore, while they spew their misinformation.

 

 

 

Consumer Sentiment has been on the rise since last February and it’s something to which home buyers should pay attention. 

The affordability of your next home may hinge on consumer confidence.

As the economy recovers from a near-the-brink recession, many of the elements of a full recovery are in place.  Business investment is returning, household spending is expanding, and financial systems are gaining strength. 

Consumer confidence is at a 2-year high.

What’s missing from the recovery, though, is jobs growth.  Another net 20,000 jobs were lost in January. Data like that hinders economic growth.

That said, twenty-thousand jobs lost is a much better figure than the several hundred thousand that were shed per month throughout early-2009, but it’s still a net negative number.  Not only does household income drop when Americans lose jobs but so does the average American’s confidence in his or her own economic future.

This is one reason why jobs growth is so closely watched by Wall Street — jobs are linked to higher confidence levels which, in turn, is believed to spur consumer spending.

Consumer spending represents 70% of the U.S. economy.

As confidence rises, it could be good news for the economy, but bad news for home buyers. More spending expands the economy and, all things equal, that leads mortgage rates higher. 

Same for home prices. More confidence means more buyers which, in turn, squeezes the supply-and-demand curve in favor of sellers.

Later this morning, the University of Michigan will release its February Consumer Sentiment survey. If the reading is higher-than-expected, prepare for mortgage rates to rise and home affordability to worsen.

 

The mortgage lending landscape changes a lot.  Rates and guidelines are in constant flux, and it creates preparedness challenges for buyers that aren't paying in cash.

The loan you get today won't always be the loan you get tomorrow.

Because of how frequently bank rules are changing, it can be hard for laypersons to distinguish between mortgage fact and fiction of "what's coming next".

Recently, we saw this with respect to FHA home loans.

January 20, 2010, the FHA issued a press release with new lending guidelines.  Specifically, it announced 3 changes that will be effective starting April 5, 2010:

1. Upfront mortgage insurance premiums increase from 1.75% to 2.25%
2. Allowable seller concession reduced from 6% to 3%
3. FICO scores of 580 or lower are subject to a minimum 10% downpayment

But, also in its official statement, the FHA announced it would ask Congress for permission to raise monthly mortgage insurance premiums.  This is where the rumors started.

Nestled on page 348 of the Budget of the United States Government, Fiscal Year 2011, in a section titled Special Topics, there is a 1-paragraph notation that details the FHA's petition. 

1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It's merely a request. And in the event that Congress does approves it, that doesn't mean that FHA has to stand by its initial projections.

Truth is, about the only thing we know about the future of FHA lending is that, come April 5, 2010, borrowing money is going to be tougher, and mortgage expensive. These are the facts as we know them today.

Homebuyers should plan accordingly.

The economy's improving but lending standards are not. Nationally, banks are making mortgage approvals harder to come by.

Underwriting guidelines are tightening.

The data comes from the Federal Reserve's quarterly survey to its member banks.  The Fed asks senior bank loan officers around the country to report on "prime" residential mortgage guidelines over the most recent 3 months and whether they've tightened.

For the period October-December 2009:

• Roughly 1 in 4 banks said guidelines tightened
• Roughly 3 in 4 banks said guidelines were "basically unchanged"

Just 2 of 53 banks said its guidelines had loosened.

Combine the Fed's survey with recent underwriting updates from the FHA and generally tougher standards for conventional loans and it's clear that lenders are much more cautious about their loans than they were, say, in 2007.

Today's home buyers and would-be refinancers face a bevy of new borrowing hurdles including:

• Higher minimum FICO scores
• Larger downpayment requirements for purchases
• Larger equity positions for refinances
• Lower debt-to-income ratios

So, if you're on the fence about whether now is a good time to buy a home, or make that refi, consider acting sooner rather than later.  It doesn't necessarily matter that mortgage rates are low, or that there's an up-to-$8,000 home purchase tax credit for households that qualify.  With each passing quarter, fewer and fewer applicants are eligible to take advantage.

 

Mortgage markets improved last week on domestic jobs data and international banking concerns. The news triggered buying in the bond market and, as a result, conventional, FHA and VA mortgage rates improved for the 4th consecutive week.

Mortgage rates are now at a 6-week low but probably shouldn't be.  It underscores just how important global events can be to U.S. mortgage markets.

For example, corporate earnings continue to improve and key elements of the economy are strengthening.  Even the Federal Reserve acknowledges this.  In most circumstances, that would be a boon for the stock markets and bond markets would suffer, including mortgage bonds.

Last week, that wasn't the case.

Early in the week, as (1) China tightened its monetary policy, (2) Greece did little to quell lingering default fears, and (3) Spain raised its deficit forecasts, global investors sought to reduce their collective risk exposure. For safety of principal, many sold some of their more aggressive positions and moved the cash proceeds into the U.S. bond market -- which includes mortgage bonds. 

On Wall Street, this type of trading pattern is called a "flight-to-quality".  Because mortgage bonds are backed by U.S. government entities, the debt is considered to be ultra-safe.  Last week's extra demand for bonds helped to push prices up and mortgage rates down.

And that was before Friday's weak jobs report. Although the Unemployment Rate fell to 9.7%, the government reported a net loss of 98,000 jobs last month and this, too, helped mortgage rates tick lower.

This week, we'll hope for momentum to continue.

There's very little domestic news to move rates this week so keep an eye on the global market for similar stories like what we saw last week.  Or, if you're not sure what to look for, just give me a call or send me an email and I'll be happy to watch the markets and mortgage rates for you.

Here's an article from today's Rismedia.com:

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By Jim Gallagher

RISMEDIA, ( Rismedia.com ) February 6, 2010—(MCT)—If you have a good job and good credit, the next few months might be a good time to go house hunting. Fence-sitters take the risk that Congress may let a rich tax credit expire, and that interest rates may rise. Buyers and sellers should consider the following factors as they consider jumping into the housing market.

First, mortgage rates are blissfully low, and that may not last. The rate on a 30-year mortgage averaged 5% last week, according to Freddie Mac. Rates are low in part because the Federal Reserve has been buying up about $3 trillion in mortgage-backed securities and mortgage agency debt. The aim is to hold down interest rates and keep mortgages available. But the Fed is slowly removing that financial crutch as the economy improves. It has no plans to buy any more past March 30, 2010. The likely result is an uptick in rates. Meanwhile, the recovering economy by itself should raise rates as the year goes on. Economists at the Mortgage Bankers Association expect to see a 6.1% rate by year end. Such a rise would add about $104 to the monthly payment on a $150,000 mortgage

Second, the home buyer tax credit expires on April 30, 2010 and no one knows if Congress will renew it a second time. Expect a clash between the real estate lobby and fiscal conservatives worried about the $1.35 trillion federal deficit. To qualify for the credit, you must sign a purchase contract by April 30, 2010 and close by July 1, 2010. First-time buyers get up to $8,000. “First-time” is defined as someone who hasn’t owned a home in three years. Move-up buyers get up to $6,500 when they purchase a new primary residence. To get the credit, you have to have lived in the old home for at least five out of the last eight years. The credits start phasing out at $125,000 in adjusted gross income for singles and $225,000 for joint filers.

Third, there are indications that home prices are near a bottom in some areas and may actually be rising a bit. That statement is dicey, because conditions vary by neighborhood and the data can be tricky.          ( Note from Bob Phillips: In my area - Orange County, California - the median price hit bottom 12 months ago, and is now 8-10% higher.)

Things might look different if you’re a seller though. Do you want to put your house on the market near the bottom of a price cycle? Homeowners who have a choice in the matter—those who can still pay their mortgages—are largely saying no. Inventories of homes for sale are down about 10% from this time last year, and 30% from the mid-decade peak of the housing boom, says Kevin Cottrell, chief economist at Kelsey Cottrell Realty Group. On the other hand, if you’re planning to move up to something grander, you might find a bigger bargain when you buy. And that $6,500 tax credit could swing a close decision.

The number of home sales peaked in many areas October and November, as buyers raced the expiration date of the original first-time home buyer’s credit. Congress later extended and expanded it. That rush satisfied some pent-up demand, but real estate agents are hoping for another rush around this spring. “People will wait to the very last second,” said Mike Travaglini, a vice president of Coldwell Banker Gundaker’s office in south St. Louis County.

Mortgage lenders have been tightening credit standards, which means fewer eligible buyers, says John Frank, president of Paramount Mortgage in Creve Coeur. Mo. “It’s getting tighter and tighter,” he said.

Lenders are insisting on credit scores of 640 to 660 for loans sold to Fannie Mae, Freddie Mac and 620 for FHA guaranteed loans. Those standards are higher than the federal agencies themselves insist on. FHA—which guarantees loans for people with low down-payments—has been raising its own insurance charges to borrowers and demanding higher premiums from people with poor credit scores.

(c) 2010, St. Louis Post-Dispatch.

Distributed by McClatchy-Tribune Information Services, and RisMedia.

( End of article.)

 

 

As mortgage lenders tighten approval standards nationwide, the importance of a good credit score is rising.  Credit scores not only make the difference between a mortgage approval and mortgage turn-down, but they also play a large role in determining your actual mortgage note rate.

In this 3-minute video, the NBC Today Show talks about 7 ways that homebuyers ruin their credit -- often by accident.  Some of the highlighted mistakes include:

• Closing open credit cards
• Making appliance buys on credit prior to closing
• Asking creditors to lower credit balances prior to closing

In general, a 740 FICO will insulate a borrower from the higher costs and/or rates associated with low credit scores.  Below 740, though, every 20 points adds to the damage.  Watch the video and apply what you can to your own situation.  The more you know, the more you can save.