Will Rising Home Prices Slow Recovery?

The Housing Market Can’t Win For Losing

Home prices have been rising — the S&P/Case Shiller index showed an annual increase of 3.0 percent from last year; Phoenix, AZ showed a whopping 20 percent annual increase in average home prices.

Some experts have begun to express concern that home prices are being driven by investors snapping up good deals to turn them into rentals, which are offering a good return on investment. Paradoxically, as the investors drive home prices up, the anticipated returns on the investment property shrink — meaning the demand from investors will also drop.

Phoenix, with its 20 percent jump in average home prices, is a perfect example — droves of investors swooped in to take advantage of dramatically depressed prices last year, ultimately creating bidding wars and significantly shrinking inventories and driving the double digit price gains.

Nationally, the housing market recovery has been remarkably uneven — on the one hand there is Phoenix, gaining 20 percent, on the other there is Chicago, where the average home price dropped 1.5 percent from last year.

While the investors may be spurring the housing market recovery now, long term recovery will rest on the re-emergence of first-time home buyers. Home owners with steady incomes and long-term home ownership plans will support and stabilize not only the market, but also the neighborhoods where they buy.

Via CBS News, NBC News, US News, and the Chicago Business Journal.

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FHAs Annual Report Is In

Reserve Fund Is Low — Will the Treasury Need To Help?

Negative capital reserve does NOT indicate operating deficit

The U.S. Department of Housing issued its Annual Report to Congress on the financial status of the Federal Housing Administration’s Mutual Mortgage Insurance (MMI) Fund for the fiscal year 2012 last week. Most notably, the report reveals that the fund currently has a negative economic value of $16.3 billion. 

It is important to note that the fund’s negative value does not mean that the FHA is unable to pay insurance claims or is running a current operating budget.

FHA unlikely to petition Treasury support

Although the FHA could petition for a Treasury draw, the decision as to whether that’s necessary doesn’t rest on the projections outlined in the report, but on the President’s budget proposal, which will be released in February — even then, the final determination won’t be made until September of next year. The report’s estimate of this year’s deficit also does not include $11 billion of expected capital accumulation from the FHA’s current “book of business.” 

The FHA, which was created in 1934 to revive the country’s housing market after the Great Depression, has never had to call upon the Treasury for financial support.

Capital reserve fund down from 2011

The Congress mandates that the FHA’s capital reserve fund be no less than 2 percent of the FHA’s “insurance-in-force” — with $1.13 trillion of insurance-in-force for FY 2012, the current capital reserve fund ratio is about -1.44 percent, down from 0.24 percent in 2011 (when the fund had an economic value of $2.6 billion).

Fund predicted to be in the black within 2 years or less

The FHA predicts that — without any policy changes or other operating changes that might impact the FHA’s recovery — the fund will be positive in 2014 and reach the mandated ratio of 2.2 percent by 2017.

 

Read the FHA’s full report here.

 

New Home Sales Continue to Rise

Highest Sales Level In More Than 2 Years

Month to month improvement nearly 6%

The Census Bureau reports that sales of new single-family homes rose 5.7 percent from August 2012 to September. The seasonally adjusted annual rate in September was 389,000 — up from August’s 368,000. The new home sales rate in July of this year was 374,000 — a two-year high.

Annual increase more than 25%

September 2012 saw a 27.1 percent increase in new home sales over September of last year. The median sales price of a new home in September was $242,000 — up nearly 12 percent over the same time last year.

Housing market recovery seems solid

Bloomberg interviewed an economist with RBS Securities in Connecticut who said that

“All the things that were really holding back housing are finally starting to lift. It really is tough to find any bad signs here. Inventories are very, very lean. Assuming the economy remains on track, housing should continue to improve for the rest of the year and into 2013.”

Gathered from

·       Home Sales Rising to Two-Year High Spur U.S. Growth: Economy (Bloomberg)

·       New-home sales up 27 percent from a year ago (Inman News)

·       New home sales jump to two-year high (NBC Bottomline)

Mortgage Rates Expected To Creep Higher

Record Low Rates May Be Behind Us

Mortgage applications slow as rates rise

Mortgage applications fell in mid-October to their lowest level since August. At the same time, Zillow’s Mortgage Marketplace reported a slight increase in the rate for a 30-year fixed mortgage — up 2 basis points from 3.26 percent to 3.28 percent.

MBA sees Fed policy supporting slow rise in rates

The Mortgage Bankers Association (MBA) is predicting an average rate of 3.8 percent for 30-year fixed mortgages in the fourth quarter, rising to 3.9 percent in the first quarter of 2013 — with a steady, slow rise to land around 4.4 percent by the fourth quarter of 2013.  Jay Brinkmann, the MBA’s chief economist, thinks “continuing purchases of mortgage-backed securities through the Federal Reserve’s QE3 program will likely keep the 30-year fixed-rate mortgage below 4% through the middle of 2013.”

International economy impacted rates more than expected

According to Brinkmann, factors economists normally expect to drive interest rates, such as inflation, were less significant than other factors —

“it was uncertainty in European economies and actions taken by the Federal Reserve that moved rates so low this year.”

Gathered from

Foreclosures Hit a 5-Year Low

Filings Down 16% Year-Over-Year

 

Lowest foreclosure activity level since 2007

RealtyTrac recently reported that September’s foreclosure filings (just over 180,000) were the fewest monthly filings recorded since July 2007.

Month to month

Total foreclosure filings fell 7 percent from August 2012 to September 2012 — the second consecutive month of declining filings.

Foreclosure starts also down

Foreclosure starts (homes entering the foreclosure process) dropped from the prior month by 12 percent and from September of 2011 by 15 percent. August 2012 was also down from the previous month, the first drop in monthly foreclosure starts after three consecutive months of increases.

State by state, the news is either very good or very bad

The national decrease in foreclosure activity was driven mainly by declining activity in the non-judicial states (states where foreclosure proceedings do not go through the courts). Nevada, Oregon and Utah — all non-judicial states — saw foreclosure activity rate drops of more than 60 percent. Of the 24 non-judicial states, 20 saw a decline in foreclosure activity.

Judicial states, however, are not faring as well. In 14 of the 26 judicial states, foreclosure activity increased year-over-year. New Jersey saw a 130 percent increase in activity in the third quarter, New York experienced a 53 percent increase, and activity in Pennsylvania, Connecticut and Illinois jumped 31 to 36 percent.

For more on recent foreclosure activity, read RealtyTrac’s complete report here.

Housing a Bright Spot In Economic Recovery

Federal Reserve Releases Latest Beige Book

Not the facts, Ma’am

The Federal Reserve’s Beige Book is updated eight times a year, two weeks before the Fed’s policymaking meetings in Washington, DC.

Interestingly, there are no numbers or statistics cited in the Beige Book — staffers at each of the 12 regional banks gather information via phone, email and questionnaires from experts and business leaders to summarize commentary and opinion regarding the state of consumer spending, manufacturing, real estate and other regionally significant economic sectors such as tourism and farming. (from How the Fed compiles the Beige Book, at a glance in Businessweek)

Modest economic growth

Since the last Beige Book update, the Fed is reporting modest growth in all but two of the 12 districts — the New York District reported level activity, while Kansas City noted some slowing down.

USA Today points to how “ordinary” the economic recovery, a relief after dire predictions about how the country would recover from a recession:

Six years after the housing bubble peaked, the beige book paints a picture of a recovery led by the classically cyclical factors of improving housing markets, better car sales and stronger credit quality.

(From Analysis: Hopeful signs in ever-halting recovery)

Housing market leading the way

According to the Fed’s report, the housing market is showing “widespread improvement.” Home sales are up in all 12 financial districts, even “substantially” higher in some areas. Home prices are reported to be “steady to increasing, with declining inventories” putting upward pressure on prices in five districts (Boston, Atlanta, Minneapolis, Dallas and San Francisco).

 “New home construction and sales were more mixed but still mostly improved,” with increases in construction and/or new home sales seen in the Atlanta, Chicago, St. Louis, Kansas City, Dallas and San Francisco Districts.

 Read the Summary of Commentary on Current Economic Conditions by Federal Reserve District from the Federal Reserve here.

 

 

6 Straight Months of Rising Home Prices

Year-Over-Year Home Prices Continue To Improve

 

Prices increasing both year-over-year and month-over-month

CoreLogic — one of the largest real estate data sources in the country — posted its latest Home Price Index Report recently, showing a 4.6 percent rise in national home prices from August 2011 to August 2012. That’s the largest annual increase in home prices in more than six years. From July, August home prices showed a 0.3 percent increase.

Biggest price gains are in Arizona, Idaho and Utah

CoreLogic analyzes the data both including and excluding “distressed sales,” which it defines as “short sales and real estate owned (REO) transactions.” Arizona, Idaho and Utah were all in the top five states in annual home price appreciation, both with and without distressed sales.

·        Arizona tops the list of largest price gain both with and without distressed sales — showing an 18.2% increase in price across all sales and a 13% price increase when distressed sales are excluded.

·        Utah home prices went up 8.9% across the board and 10% when distressed sales are excluded

·        Idaho saw home prices increase 10.4% annually when looking at all sales, and 8.6% when distressed sales were excluded

States with falling prices include Rhode Island, New Jersey and Alabama

When distressed sales were factored out of the analysis, only three states posted a drop in home prices from August 2011 to August 2012 — Rhode Island, New Jersey and Alabama.

·        Rhode Island home prices decreased 1.7% excluding distressed sales — when distressed sales are included, RI home prices showed an annual 2.6% drop

·        New Jersey saw a 1.4% drop in annual prices both with and without including distressed sales

·        Alabama showed home prices falling just 0.2% if distressed sales are factored out — even including distressed sales, at 0.7% Alabama showed almost the smallest drop in home prices in the country

Continued home price gains in September

According to the report, CoreLogic is predicting a seventh month of annual home price increases in September of 5 percent, albeit with a small drop month-to-month from August of 0.3 percent:

The CoreLogic Pending HPI indicates that September 2012 home prices, including distressed sales, are expected to rise by 5 percent on a year-over-year basis from September 2011 and fall by 0.3 percent on a month-over-month basis from August 2012 as the summer buying season closes out. Excluding distressed sales, September 2012 house prices are poised to rise 6.3 percent year-over-year from September 2011 and by 0.6 percent month-over-month from August 2012.

 

 

For the complete CoreLogic Home Price Index Report, click here (PDF).

6 Straight Months of Rising Home Prices

p class="MsoNormal" style="margin: 0in 0in 0pt"> Year-Over-Year Home Prices Continue To Improve

 

 

Prices increasing both year-over-year and month-over-month

CoreLogic — one of the largest real estate data sources in the country — posted its latest Home Price Index Report recently, showing a 4.6 percent rise in national home prices from August 2011 to August 2012. That’s the largest annual increase in home prices in more than six years. From July, August home prices showed a 0.3 percent increase.

Biggest price gains are in Arizona, Idaho and Utah

CoreLogic analyzes the data both including and excluding “distressed sales,” which it defines as “short sales and real estate owned (REO) transactions.” Arizona, Idaho and Utah were all in the top five states in annual home price appreciation, both with and without distressed sales.

·        Arizona tops the list of largest price gain both with and without distressed sales — showing an 18.2% increase in price across all sales and a 13% price increase when distressed sales are excluded.

·        Utah home prices went up 8.9% across the board and 10% when distressed sales are excluded

·        Idaho saw home prices increase 10.4% annually when looking at all sales, and 8.6% when distressed sales were excluded

States with falling prices include Rhode Island, New Jersey and Alabama

When distressed sales were factored out of the analysis, only three states posted a drop in home prices from August 2011 to August 2012 — Rhode Island, New Jersey and Alabama.

·        Rhode Island home prices decreased 1.7% excluding distressed sales — when distressed sales are included, RI home prices showed an annual 2.6% drop

·        New Jersey saw a 1.4% drop in annual prices both with and without including distressed sales

·        Alabama showed home prices falling just 0.2% if distressed sales are factored out — even including distressed sales, at 0.7% Alabama showed almost the smallest drop in home prices in the country

Continued home price gains in September

According to the report, CoreLogic is predicting a seventh month of annual home price increases in September of 5 percent, albeit with a small drop month-to-month from August of 0.3 percent:

The CoreLogic Pending HPI indicates that September 2012 home prices, including distressed sales, are expected to rise by 5 percent on a year-over-year basis from September 2011 and fall by 0.3 percent on a month-over-month basis from August 2012 as the summer buying season closes out. Excluding distressed sales, September 2012 house prices are poised to rise 6.3 percent year-over-year from September 2011 and by 0.6 percent month-over-month from August 2012.

 

 

For the complete CoreLogic Home Price Index Report, click here (PDF).

Protect Your Nest Egg

Protecting your home’s value is always a top priority, and the Mortgage Interest Tax Deduction is an important part of making homeownership a good investment. A resolution is pending in the House of Representatives to keep the deduction in its current form. Americans overwhelmingly oppose any action by Congress to scale back or eliminate the deduction. The consequences could be devastating for homeowners, the housing market and the nation’s economy. To learn more about this issue, go to http://www.protecthomeownership.com.
 

If you need a dedicated expert in Real Estate to help with this or anything related to lowering the cost of homeownership, call today. Let’s talk.

 

Source: National Association of Home Builders

Underwater Becomes An Official Word

Merriam-Webster Has Added The Word To Its Newest Edition

 Earlier this month, Merriam-Webster, publisher of the Collegiate Dictionary, announced the list of new entries it’s adding this year.

Photo via Huffington Post.

 In addition to the new meaning of “underwater” included this year, the new entries (and their definitions as written by Merriam-Webster) include:

  • underwater — adj (1672) … 3: having, relating to, or being a mortgage loan for which more is owed than the property securing the loan is worth
  • man cave — n (1992): a room or space (as in a basement) designed according to the taste of the man of the house to be used as his personal area for hobbies and leisure activities
  • bucket list — n (2006): a list of things that one has not done before but wants to do before dying
  • game changer — n (1993): a newly introduced element or factor that changes an existing situation or activity in a significant way
  • toxic — adj (1664) … 4: relating to or being an asset that has lost so much value that it cannot be sold on the market

 In other words: “Adding a man cave is on my bucket list, but right now my home is so underwater it’s nearly toxic; until there’s a real game changer in the market, I’m stuck watching TV in the den.”

 For a slideshow of more of the new words, such as “aha moment,” “flexitarian,” and “earworm,” check out this post on Huffington Post.

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