Archive for the ‘ Home Prices ’ Category

Home Prices Continue to Climb as Year Winds Down

Home Prices Continue to Climb as Year Winds Down

BY: KRISTA FRANKS BROCK AND ASHLEY R. HARRIS

Despite the cooling temperatures, home prices continue to heat up across the country. The Federal Housing Finance Agency’s (FHFA’s) recently released Home Price Index posted an increase over the third quarter, a trend that has continued over the past nine quarters. The index, which incorporates sales data from Fannie Mae and Freddie Mac, rose 2 percent over the third quarter and 8.4 percent over the year.

LPS reported similar findings. National home prices rose 0.2 percent over the month in September, reaching $232,000 for the month, according to Lender Processing Services’ Home Price Index, which was released Monday. Year-over-year prices rose 9 percent in September, according to LPS.

At their current level, prices are about 14 percent below their peak reached in June 2006.

“Overall, the housing market experienced another strong quarter, but price appreciation in the latter part of the quarter was relatively subdued,” said Andrew Leventis, principal economist at FHFA.

FHFA’s calculations are somewhat lower than those calculated by Case Shiller. Released Tuesday—the same day as the FHFA HPI—Case Shiller reported a 3.2 percent quarterly increase and an 11.2 percent annual increase for the third quarter.

FHFA also measured prices on a seasonally-adjusted basis over the month, detecting a 0.3 percent increase over the month of September.

While the yearly price increase stands at 8.4 percent, when accounting for inflation, prices rose about 7.2 percent over the year, according to FHFA.

All 50 states and the District of Columbia experienced rising prices over the year in September, according toFHFA.

Nevada posted the steepest price increase over the year in September, according to FHFA—a 25 percent rise.

California (23 percent), Arizona (15 percent), Florida (12 percent), and Washington (12 percent) followed.

At the other end of the spectrum, Mississippi posted the smallest increase at 1 percent.

Wyoming, New Mexico, Connecticut, and Delaware all followed with price gains hovering just above 2 percent.

Of the nine Census divisions, prices rose most over the year in the Pacific division—19.2 percent.

No price decreases were reported over the year, but the smallest gain took place in the Middle Atlantic division—2.9 percent.

Over the month of September, the East South Central division posted the greatest price increase—a 1.9 percent gain.

The Middle Atlantic and Mountain divisions both posted 0.1 percent declines—the only declines over the month.

Two divisions reported no price change—the New England and the West North Central divisions.

Nevada and Connecticut posted the greatest price changes over the month—though in opposite directions.

Home prices in Nevada jumped 0.8 percent over the month, while prices in Connecticut fell 0.9 percent.

Two Southern states followed Nevada, tying for the second-greatest price increases over the month according to LPS—Georgia and South Carolina. Both states posted price gains of 0.7 percent in September.

Illinois and Florida both experienced 0.5 percent price increases, and Washington D.C. and Wisconsin both experienced 0.4 percent gains.

Rounding out the top 10, Arizona, Texas, and Indiana all posted 0.3 percent increases in home prices over the month, according to LPS.

Several Northeaster states joined Connecticut on the list of top 10 price declines in September. New Hampshire (-0.6 percent), Massachusetts (-0.5 percent), Pennsylvania (-0.4 percent), Vermont (-0.3 percent), and New Jersey (-0.2 percent) all fell in the ranks.

Colorado (-0.4 percent), Alaska (-0.3 percent), and Iowa (-0.2 percent) were the exceptions.

 

Bidding Wars Resume in Major Markets in October

Bidding Wars Resume in Major Markets in October

BY: TORY BARRINGER

Despite a softening market, competition among buyers remained fairly fierce in October, Redfin reported in its Real-Time Bidding Wars release for the month.

Last month, 55.9 percent of offers written by the Seattle-based brokerage’s agents faced competition from other buyers, a decline from 58.3 percent in September. Bidding wars have been on a downward slope since peaking at 79 percent in February.

October was also the third consecutive month to see a drop in competition compared to the same month last year, Redfin said.

Even with the decline, though, competition last month was higher than expected, given the effects of the government shutdown on consumer confidence.

“While many Americans paused their home-buying and selling plans during the shutdown, overall demand in October was more robust than expected, with home tours and offers rebounding once the government reopened,” said Redfin analyst Rachel Musiker. “This unexpectedly strong demand paired with dwindling inventory likely kept competition from falling even further in October.”

Out of the 22 markets reporting, Boston saw the biggest drop in competition, with 61.3 percent of offers facing bidding wars—down from 70.1 percent in September. San Diego, meanwhile, experienced the biggest increase in bidding wars, with 63.0 percent of offers competing against multiple bids compared to 56.1 percent the month prior.

For the most competitive areas, interested buyers still have to adopt aggressive tactics, including offering all cash. Mia Simon, a Redfin agent operating in Silicon Valley, tells a story of a bidder vying for a home priced just above $1.4 million:

“There were only three other offers, but they were all above $1.8 million. Although my client’s offer was not the highest overall, it was the highest of the all-cash offers,” Simon said.

“Today’s Silicon Valley home buyers realize that they long missed out on the bottom of the market, but many believe that home prices will rise even more in 2014, so they will do whatever it takes to get a home under contract before the spring,” she added.

At the same time, the less competitive markets are seeing a shift in the buyer/seller dynamic. For example, in Washington, D.C.—where 44.0 percent of Redfin offers went against other bids in October—sellers are working harder to gain attention.

“I’ve recently received a few phone calls from agents whose listings I have shown to my clients,” said agent Philip Gvinter, who works in the nation’s capital. “They’re trying to gauge my clients’ interest in the home, and some simply ask what it will take to get my client to write an offer. It’s been more than a year and a half since I’ve received a call like that.”

Report: Delinquency Rate Continues to Plunge

Report: Delinquency Rate Continues to Plunge

11/13/2013 BY: ASHLEY R. HARRIS

Homeowners are working harder to make timely mortgage payments, according recent data from TransUnion. The mortgage delinquency rate dropped 23.3 percent in the past year, ending Q3 2013 at 4.09 percent. Last year it stood at 5.33 percent. The mortgage delinquency rate also dropped on a quarterly basis, down 5.3 percent from 4.32 percent in Q2 2013, the seventh straight quarterly decline.

Around the United States, most states experienced a decline in their mortgage delinquency rate between Q3 2012 and Q3 2013. California, Arizona, Nevada, Colorado, and Utah experienced more than 30 percent declines in their mortgage delinquency rate. Three states—California, Florida, and Nevada—had double-digit percentage drops in the last quarter.

TransUnion cultivated the data from anonymized credit data from virtually every credit-active consumer in the United States. TransUnion’s forecast is based on various economic assumptions, such as gross state product, consumer sentiment, unemployment rates, real personal income, and real estate values. The forecast would change if there are unanticipated shocks to the economy affecting recovery in the housing market or if home prices begin to depreciate once again.

“This isn’t a sample data set,” said Tim Martin, group VP of U.S. Housing for TransUnion’s financial services business unit.

“We looked at all 52 million installment-based mortgages in the U.S. and the trend is clear—the percentage of borrowers willing and able to make their mortgage payments continues to improve,” Martin continued. “The overall delinquency rate is still high relative to ‘normal,’ but a 23 percent year over year improvement is great news for homeowners and their lenders.”

The credit agency recorded 52.31 million mortgage accounts as of Q3 2013, down from 54.23 million in Q3 2012. This variable was as high as 63.14 million in Q3 2008 prior to the housing crisis.

Viewed one quarter in arrears (to ensure all accounts are included in the data), new account originations increased to 2.34 million in Q2 2013, up from 2.09 million in Q2 2012. This is a major increase from just two years ago when there were 1.32 million new account originations in Q2 2010.

“New mortgage originations showed good growth through the second quarter of this year, largely the result of increased refinance transactions driven by low rates and increasing home prices,” Martin said. “However, mortgage rates started to increase right around Memorial Day, and when the data come out next quarter, we expect it to show that new originations are decreasing as a result.”

TransUnion’s latest mortgage report also found that the non-prime population (those consumers with a VantageScore credit score lower than 700) continues to represent a smaller portion of all mortgage loans, more than 50 percent lower than was observed in 2007. Non-prime borrowers constituted 5.82 percent of all new mortgage originations in Q2 2013. In Q2 2008, non-prime borrowers represented 12.69 percent of the total.

TransUnion is forecasting that the downward consumer delinquency trend will continue in the final three months of 2013. The delinquency rate will likely be just under 4 percent at the end of the year.

“New originations will be down and non-prime borrowers will start to re-emerge,” Martin said. “At this point we believe delinquency rates will continue to decline.”

Long Liquidation Times Ramp Up Loss Severities Despite Rising Prices

Long Liquidation Times Ramp Up Loss Severities Despite Rising Prices

11/12/2013 BY: KRISTA FRANKS BROCK

While home prices have risen 14 percent nationally since their trough a few years ago, Fitch Ratings points out in a recent report that loss severities on residential mortgage-backed securities (RMBS) have improved only “modestly.”

Loss severities improved just 5 percent over the past year, according to Fitch’s report, titled “U.S. RMBS: Why Aren’t Loss Severities Improving Faster?” The primary reason for the slow improvement, the ratings agency concluded, is prolonged liquidation timelines, which “reached an all-time high in third-quarter 2013 and increased at a faster rate in 2013 than in any prior year.”

In fact, 32 percent of seriously delinquent homeowners have not made a payment on their mortgage in more than four years. This is up drastically from 7 percent at the start of last year, according to Fitch. About 40 percent of the mortgages that have been seriously delinquent for the past four years are legacy Countrywide loans now serviced by Bank of America, Fitch says.

The average liquidation timeline is 32 months, as of the third quarter of this year, the ratings agency’s study showed. Fitch says this is twice as long as the 2008 average.

Several events have led to increasing liquidation timelines over the past few years. Fitch names the introduction of the Home Affordable Modification Program (HAMP) and the investigation and national foreclosure lawsuit that led many servicers to halt their foreclosure processes as two major contributors.

Amid this environment, the rate of seriously delinquent loans transitioning into foreclosure reached an all-time low, according to Fitch’s records. Meanwhile, loan modification rates approached an all-time high.

While timelines are raising loss severities, short sales, which have risen from 20 percent of liquidations in 2009 to 60 percent currently, are lowering loss severities.

In fact, short sales on homes with subprime loans incur loss severities about 20 percent lower than loss severities incurred on REO sales, according to Fitch.

For now, Fitch does not expect any declines in loss severities, but moving forward, the agency expects lower loss severities on currently performing loans that fall delinquent.

“Lower mark-to-market loan to values, greater amortization, and improved timelines due to more manageable numbers of distressed properties should lead to meaningfully lower severities for loans that liquidate two to three years in the future,” Fitch said.

“On average, performing loans have stronger credit characteristics, including lower current loan-to-value ratios and shorter remaining terms,” Fitch added.

New Report Finds Home Price Gains Follow Party Lines

New Report Finds Home Price Gains Follow Party Lines

BY: KRISTA FRANKS BROCK

While home price gains continue to exceed historical norms at a national level, the latest asking price report from Trulia reveals marked differences in price gains between “red” and “blue” metros.

Asking prices rose 12.5 percent year-over-year in October blue metros and 11.1 percent in red metros, according to the Trulia Price Monitor which observed the 100 largest metro areas and the nation, breaking them into categories based on the 2012 presidential election.

“Home prices are skyrocketing in many of America’s bluest metros, like Oakland and Detroit,” said Jed Kolko, chief economist for Trulia, also noting that, “The home-price rebound has bypassed most of America’s reddest metros.”

“But Red America shouldn’t turn green with envy at Blue America’s recovery: housing remains much more affordable in red metros than blue metros, and unemployment is lower, too,” Kolko said.

In general, blue metros suffered more from the housing crisis than red metros, according to Trulia.

“The uneven housing and economic recoveries in America across red and blue metros could aggravate political partisanship,” according to Trulia.

In particular, representatives from blue metros will face pressure to reduce unemployment and make homeownership more attainable, according to Trulia.

Annual price changes in the top five reddest metros range from 2.2 percent in Knoxville, Tennessee, to 12 percent in Fort Worth, Texas. Fort Worth was the only one of the reddest metros to post a double-digit price gain over the year in October.

On the other hand, four of the top five bluest metros posted double-digit price gains over the year in October with the highest gain in Detroit at 24.5 percent, and the lowest in New York at 7.3 percent.

As mortgage rates increase, housing inventory increases, and investor activity subsides, prices gains will continue to slow, according to Trulia.

October’s 0.6 percent monthly price gain is the second-lowest price increase in seven months, according to the Trulia Price Monitor.

The annual price increase in October was 11.7 percent.

On the other hand, rents are rising at a slower pace with a 2.7 percent annual gain in October, according to the Trulia Rent Monitor.

San Francisco posted the highest year-over-year rent increase at 10.1 percent, and its median rent price for a 2-bedroom unit now tops the charts, even exceeding New York.

The median rent price for a 2-bedroom unit in San Francisco is $3,250.

GSEs to Return Another $39B to Taxpayers

GSEs to Return Another $39B to Taxpayers

11/08/2013 BY: TORY BARRINGER

In the midst of an ongoing political debate surrounding their future, Fannie Mae and Freddie Mac continue to see strong profits. Both GSEs put out their earnings reports Thursday, showing elevated numbers as they continue to benefit from an improving housing market.

According to its quarterly report, Fannie Mae brought in $8.7 billion in profits in the third quarter, marking the seventh consecutive quarter of gains. The same time last year, the mortgage giant reported a comparatively small net income of $2.6 billion.

Fannie Mae attributed its third-quarter wins to continued positive developments in home prices, which brought a reduction in the company’s loan loss reserves. Numbers also saw a boost from compensatory obligations stemming from a settlement with Bank of America early in the year.

Meanwhile, profits shot up to $30.5 billion at Freddie Mac, though most of that came from tax benefits. Pre-tax income was $6.5 billion compared to $4.9 billion last year. It was the eighth straight quarter of positive earnings and the second most profitable quarter in the company’s history, Freddie Mac said.

While the quarter’s figures look encouraging for two companies that not long ago relied on a taxpayer-funded bailout to get by, they noted that current growth levels are supported largely by abnormally high home price appreciation, making such gains unsustainable over the long run as prices moderate.

Still, the companies’ earnings this quarter will allow them to make substantial payments to the Treasury in December—$8.6 billion from Fannie Mae and $30.4 billion from Freddie Mac—bringing them closer to having “repaid” the money they’ve drawn to stay afloat. However, the nature of the government’s agreement with the GSEs means their dividend payments don’t reduce prior draws.

Together, the two companies will have paid back about $185 billion to Treasury as of December, nearly equaling the $188 billion they took following the economic crash.

Despite the third-quarter reports, policymakers will likely keep on in their plans to reform the secondary market, many of which involve the eventual phasing out of the two GSEs. For now, though, taxpayers are that much closer to seeing their bailout money fully repaid.

Despite Bankruptcy, Detroit’s Housing Market Thrives

Despite Bankruptcy, Detroit’s Housing Market Thrives

11/04/2013 BY: KRISTA FRANKS BROCK

The city that previously made national headlines for its failing economy and bankruptcy filing is now in the spotlight for its rapidly rebounding housing market. Detroit topped two lists of highest-performing housing markets in the past week—one from Realtor.com and one from Clear Capital.

Last week, Realtor.com named the city the top turnaround town in its quarterly “Turnaround Towns Report” based on median list price, inventory, and median age of inventory.

Monday, Clear Capital ranked Detroit at the top of its Home Data Index Market Report for October, based on its quarterly price growth.

“Once the poster child for America’s ailing auto industry, Detroit has turned around its housing markets,” Realtor.com stated. “Instead of sinking when the city of Detroit had just filed for bankruptcy, its housing markets took on a quiet resurgence.”

Home prices in the Motor City fell 4.8 percent over the third quarter but leapt 44.3 percent for the 12 months ending in September, according to Realtor.com’s report.

Clear Capital observes home prices on a rolling quarter and revealed a 7.8 percent home price increase in Detroit over the three-month period ending in October, accompanied by a 31.6 percent annual increase.

Realtor.com also revealed falling inventory and inventory age in the bankrupt city. Detroit’s housing inventory in the third quarter of this year was 24.5 percent below inventory levels in the third quarter of last year.

The median age of inventory in Detroit’s housing market declined 22.9 percent over the same period, according to Realtor.com.

Clear Capital analysts are quick to point out that “[r]elatively small price gains will more heavily influence

percentage gains in Detroit than in higher priced markets.”

Detroit’s median home price is currently $120,000, a little more than half the national median home price, which stands at $210,000, according to Clear Capital.

Looking to the root of Detroit’s sudden housing market turnaround, Clear Capital points to declining REO saturation, while Realtor.com emphasizes investor activity.

While Detroit continues to rank No. 1 in the nation for REO saturation with a current rate of 29.9 percent, Clear Capital says this ratio is down significantly from 64.6 percent in 2009—a 34.7 percentage point decline.

When asked what is driving Detroit’s strong housing recovery, Realtor.com President Errol Samuelson responded, however, that investors have “made a notable play in Detroit.”

“We’ve seen reports of significant international investment in Detroit over the past several months, and before the bankruptcy, so these are sophisticated investors—willing to take bigger risks and move quickly in markets that have not yet stabilized,” Samuelson said.

Rapid price gains often lead to bubble fears, but both Samuelson and Alex Villacorta, VP of research and analytics at Clear Capital, concur Detroit is not headed for a bubble.

“While it has seen more than 30 percent growth over the year, the market would need to see another 262 percent growth to hit peak prices,” Villacorta explained.

Villacorta says Detroit home prices have fallen in line with its pre-2006 historical trends. “Following 2006, prices fell nearly 77 percent, so what we’re seeing is a response to a severe price correction,” he said.

Both economists also point to Detroit’s still-struggling economy, which may tamper improvement in the housing market moving forward.

The bankrupt city still stands on shaky legs, suffering with unemployment above 9 percent and median incomes at “nearly half of national median incomes,” according to Clear Capital.

“Another factor to watch is how the city of Detroit manages its fiscal recovery over the next several months,” Samuelson said, pointing to the city council’s past recovery plan rejections, most recently the Barclays loan. “Uncertainty around recovery plans could cause investor sentiment to wane,” he warned.

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