The Casey Group - Newport Beach to Palm Springs - Real Estate Services Blog

Why housing demand defies real estate fundamentals

2012-02-13T11:23:00.000-08:00

Anyone with any cash in hand should be buying a house right now.That's what any real estate agent will tell you, obviously, but that's also what many investors now believe.Unfortunately, the potential home-buying public … isn't buying it.January's consumer confidence report found a drop in the number of Americans who plan to buy a home in the next six months. If, however, you take out the confidence issue, the fundamentals for buying are strong:Home prices nationally are down 33% from their bubble peak, according to the latest S&P/Case-Shiller report, mortgage rates are hovering near record lows, and housing supply, while falling, is still historically high. In other words, it's more of a buyer's market than it's ever been.And yet the home ownership rate continues to fall, and rental demand, occupancies and rates continue to rise."Federal plans to sell real estate owned properties to investors might provide some relief, but rental value growth is still likely to hit 3% this year and average rental yields may rise to around 5.5%," wrote Paul Diggle of Capital Economics, who believes the downturn in homeownership may still have further to run.Both Diggle and Standard and Poors' David Blitzer cite still tight credit as the major obstacle to housing demand. Rates are low, but to get those rates you need a significant down payment. The low down payment route, the FHA, has raised fees and premiums, which for some are a barrier to entry. A full third of the market is now all-cash."We have to get the demand up, we have to tighten the supply a little bit before we will see any shift in prices and we haven't seen that," said Blitzer in an interview on CNBC. But how do you tighten supply of foreclosed homes in neighborhoods that are so empty that the homes are deemed "unsellable?" Blitzer made an interesting observation:"Periodically in studies of urban renewal, people come up with arguments that, take such and such a neighborhood, level it, fence it off for the next fifteen years until we need the land and then come back in," said Blitzer. "That's in effect what's going to happen to some of these areas."

2012-01-31T13:56:00.000-08:00

The S&P/Case-Shiller 20-city composite home price index fell 0.7 percent month-over-month and 3.67 percent year-over-year in November.Economists were expecting a month-over-month decline of 0.5 percent and a year-over-year drop of 3.3 percent.Since October, 19 of 20 cities reported continued price declines. Only Phoenix saw prices climb."The trend is down and there are few, if any, signs in the numbers that a turning point is close at hand," said S&P's David Blitzer.Last month, we learned the October 20-city index fell 3.4% year-over-year.Below is data through November.

Read more: http://www.businessinsider.com/case-shiller-home-price-index-declines-367-from-a-year-ago-which-was-worse-than-expected-2012-1#ixzz1l4jX8vcC

U.S. Fed’s Beige Book Report indicated most Districts saw “more favourable conditions” at the end of the 2011

2012-01-11T13:00:00.000-08:00

The Fed’s Summary of Commentary on Current Economic Conditions, otherwise known as the Beige Book, compiled in preparation for the January 24-25, 2012 FOMC meeting characterized economic activity as having “expanded at a modest to moderate pace” from late November to the end of December and with all 12 Fed Districts noting some degree of improvement. This represents an upgrade from the last report in which the pace of growth was characterized as “slow to moderate” and one District reported a decline in activity. As well, the report itself noted that most Fed Districts highlighted “more favourable conditions than in reports from the late spring through early fall.”· Consumer spending activity was generally favourable as most Districts reported that sales during the holiday season were up noticeably for the year before (adjectives to describe the pace of sales included “brisk” and “robust”). New auto sales were reported to have picked up in most Districts, with one noting that the pace of sales was “the strongest in over two years.”· Manufacturing activity was reported to have continued its steady overall expansion, with most Districts noting further growth or improved conditions.· Residential real estate markets “held steady at very low levels.” Single-family home sales remain “sluggish” as extensive inventories of distressed properties weighed on prices. Rental markets, however, were noted to have tightened in some Districts spurring increases in multi-unit construction.· Commercial real estate markets remained soft but showed some signs of improvement in several Districts. A few Districts reported increased demand for commercial mortgages.· Bank lending activity “edged up overall” reflecting increased loan demand by businesses. Consumer lending was largely flat, although there were reports of rising auto loans. Credit quality was noted to have improved.· Hiring was reported as being “limited” in most sectors, which combined with “numerous active job seekers”, has continued to keep wage pressures at bay.· Overall inflationary pressures were noted to be “very limited” as the upward pressure from rising commodity and input prices eased substantially.The Beige Book’s anecdotal assessment of the US economy indicates that the general sentiment within the economy has improved along side the recent pickup in the activity data. In particular, the reports of solid consumer spending over the holiday season suggest some upside risk to expectations for a modest 0.2% gain in tomorrow’s December retail sales report. From a policy standpoint, the improved assessment on overall activity is encouraging, but the limited headway on the employment and housing fronts combined with subdued price pressures likely means that the Fed will be in no rush to pull back from its stimulative policy stance.

U.S. December payroll employment rose stronger than expected with the unemployment rate continuing to drop

2012-01-06T09:54:00.000-08:00

· December non-farm payroll employment rose a stronger than expected 200,000 following revised gains in November and October of 100,000 (was 120,000) and 112,000 (was 100,000), respectively.· The unemployment rate unexpectedly dropped to 8.5% from 8.7% in November, previously reported at 8.6%.· Government jobs fell 12,000 with private payrolls up 212,000 in the month following gains of 120,000 and 134,000 in November and October, respectively.· Indications of strengthening employment and a falling unemployment rate provide welcome news to the Fed; however, despite this month’s improvement, the unemployment rate still remains at a high level. To assure that this slack in labour markets continues to be absorbed, the central bank is expected to keep monetary conditions highly accommodative and may yet add further stimulus to the system.Payroll employment in December rose 200,000, which was above market expectations for a 155,000 gain following revised increases of 100,000 (was 120,000) and 112,000 (was 100,000) in November and October, respectively. Also providing indications of improving labour markets was the unemployment rate unexpectedly dropping to 8.5% from 8.7% in November. (Revised seasonal factors for the household survey data provide a smoother pattern for the unemployment rate that now shows it dropping from 9.0% to 8.9% to 8.7% over the period September to November, respectively. Previously reported numbers showed a pattern of 9.1%, 9.0%, and then a plummet to 8.6% over the same period.)The overall increase in payroll employment was once again restrained by declining government employment, which fell 12,000 in the month. Thus on a private-sector basis, employment was up 212,000 in December following gains of 120,000 in November and 134,000 in October.The increase in private employment reflected relatively broad-based gains. On the goods-producing side of the economy, 48,000 new jobs were created; while on the services side, employment rose 164,000. The increase in the former was led by gains in manufacturing of 23,000 and construction of 17,000. The increase in services was led by a 50,200 surge in transportation and warehousing along with a 27,900 jump in retail trade, thereby reflecting robust hiring for the Christmas sales period as it follows a 38,800 gain in November.The hours worked component of the report also indicated strength rising to 34.4 hours from 34.3 hours in November. Manufacturing not only showed rising jobs but also a longer workweek as it rose to 40.5 hours from 40.4 hours in November. The combination of rising employment and a longer workweek sent the index of aggregate weekly hours up a strong 0.5% that more than reversed the 0.2% drop in November. This implies solid momentum going into the first quarter of 2012.The index of average hourly earnings, the principal wage measure in the report, rose 0.2% in the month and 2.1% over the year. The annual rate is up from 1.9% in November 2011 and has not been above 2% since July 2011. On one level, this implies some inflation pressure as labour markets tighten although the rate of increase is still modest. As well, it has positive implications for income growth and thus should provide needed support to consumer spending going into 2012.The rise in employment and drop in the unemployment rate in December provide further evidence that the US economy picked up in the fourth quarter of last year, showing encouraging resilience to the effect of the ongoing European debt crisis and uncertainty about the path of future, domestic, fiscal consolidation. As well, the recent downward trajectory for initial jobless claims during the latter half of December is consistent with positive momentum being maintained early in 2012. With that said, the unemployment rate still remains historically high and serves as a reminder both of the modest pace recovery in labour markets to date and of the vulnerability of the US economy as a whole to a potential deterioration in financial market conditions should the European sovereign-debt problems significantly intensify. To encourage stronger momentum in labour markets, the Fed is expected to keep monetary policy highly accommodative, potentially even opting to further asset purchases should a further deterioration in European financial markets begin to weigh more heavily on US growth prospects.

U.S. housing starts increased much more than expected in November

2011-12-20T10:15:00.000-08:00

Privately owned housing starts in the US increased by 9.3% in November to an annualized pace of 685,000 units following a 2.9% decline in October to 627,000 (initially reported as 628,000). Market expectations had been for a much smaller increase to 635,000. Building permits also increased by 5.7% to 681,000 from 644,000 in October (initially reported as 653,000). This result followed a 9.3% increase last month. Today’s report leaves the pace of housing starts at its highest level since April 2010, when the Homebuyers Tax Credit deadline spurred construction. Prior to that, the previous high was in October 2008.The increase in housing starts in November was driven by 25.3% increase in multiple starts to 238,000 from 190,000 in October (initially reported as 198,000). This result more than offsets a 15.2% decline last month. Single starts also increased by a smaller 2.3% to 447,000 (from 437,000 in October, which was initially reported as 430,000). Large increases were seen in the Northeast (53.8% to 100,000) and the West (22.6% to 163,000), with a smaller increase seen in the South (4.1% to 332,000). The Midwest saw an 18.2% decline in the pace of starts, to 90,000.Permits for new housing units also increased in November by 5.7% to 681,000. As with starts, this increase was driven by the multiples component (13.9% to 246,000), although singles permits also increased (1.6% to 435,000). The Northeast and West saw increases in permits (32.8% and 21.4%, respectively), while the Midwest and South saw small declines (-1.9% and -2.6%).Today’s report is consistent with an improvement in fourth-quarter 2011 housing activity from the 615,000 average in the third quarter and the 577,000 average over the first half of this year. Permits are also significantly above the pace seen in the first three quarters. Combined with indications of increasing homebuilder confidence (the NAHB index rose to 21 in December, which is its highest level since May 2010), this suggests that U.S. housing construction activity may be taking a turn for the better. We expect the pace of housing starts to increase to 727,000 in 2012 and 922,000 in 2013.

Mortgage rates sunk to record lows again this week.

2011-12-16T15:10:00.000-08:00

The average rate on the 30-year fixed mortgage fell to 3.94%, matching the all-time low hit in early October, according to Freddie Mac's weekly mortgage rate survey. Meanwhile, 15-year fixed-rate loans hit a new record low of 3.21%, surpassing the record set on October 6.Five-year adjustable rate mortgages also plumbed new depths, hitting 2.86% for the week."We've been hanging around record lows for a few months now and we finally hit another one," said Keith Gumbinger of HSH Associates, a provider of mortgage data.Low-interest mortgages will be available at least through mid-2012, according to Freddie Mac's chief economist, Frank Nothaft.Where homes are affordableThe low rates can translate into big savings for home buyers. Five years ago, a home buyer would have been lucky to land a 5% rate on a 15-year loan. On a $200,000 mortgage, that would have meant the borrower would have paid $1,582 a month. Should a borrower land a 3.2% rate on a $200,000 loan now, the monthly mortgage payment would come to $1,400 -- a savings of $182 a month.Mortgage rates tend to closely track Treasury bond yields, which have also been very low lately. For the past three months, 10-year Treasury notes have often fallen below the 2% mark as bond investors steer clear of Europe and its debt woes and buy U.S. Treasuries instead.Parents helping kids buy homes"There's been a flight to quality out of Eurobonds and into Treasuries," said Gumbinger. On Thursday, the 10-year Treasury stood at 1.92%.The rock-bottom interest rates, combined with the lowest housing prices in years, have made home buying extremely affordable right now. Although most borrowers are looking to refinance existing loans rather than buy.10 cheap homes for sale by Uncle SamLast week, mortgage applications climbed 4.1%, driven by a surge of home buyers trying to refinance to record-low rates. According to the Mortgage Bankers Association's latest Market Composite Index, close to 80% of loan applications were to refinance existing loans.

Foreclosure Sales Slow for the Holidays, While Lenders Prepare for 2012

2011-12-13T11:10:00.000-08:00

It is not unusual to see foreclosures slow for the holidays, and the this year is no exception. Foreclosure starts were up slightly in Nevada and Washington, but the increases were insignificant given the recent declines in those states due to legislative changes and legal challenges. Foreclosure Sales rose only in Arizona, but that increase simply offset the drop seen in October and is still well below average monthly sales for the year there.Notice of Trustee Sale filings rose 34.7 percent from October to November in California. The increase came primarily from filings by Bank of America, up 52 percent, and Wells Fargo, up 23 percent. It is not unusual to see an increase in foreclosure sales each January, and these filings would be necessary in preparation for that. Sales to 3rd parties, typically investors, have increased significantly year-over-year. The largest increases we're seen in Arizona and Nevada at 101.6 and 79.9 percent respectively. Other states saw increases as well: California 29.4 percent and Washington at 6.7 percent.

Fannie Mae, banks halt foreclosures for the holidays

2011-12-09T11:20:00.001-08:00

Happy holidays struggling homeowners! Fannie Mae, Freddie Mac and several large mortgage lenders have pledged not to foreclose on delinquent borrowers during the Christmas season.For homeowners with loans through Fannie Mae (FNMA, Fortune 500) and Freddie Mac (FMCC, Fortune 500), the moratorium will run from Dec. 19 to Jan. 2. During this time, legal and administrative proceedings for evictions may continue, but families will be allowed to stay in their homes, Fannie said in a statement. "No family should have to give up their home during this holiday season," said Terry Edwards, an executive vice president for Fannie Mae.Among some of the major banks that offer mortgage loans, Chase (JPM, Fortune 500) Mortgage said it will not evict anyone between Dec. 22 and Jan. 2. Wells Fargo (WFC, Fortune 500) will also suspend evictions during that period, but will not shut down its eviction machinery entirely.The bank said it will observe the moratorium on foreclosed properties in its own portfolio but for loans it services for other lenders "foreclosure-related actions may still occur."Bank of America (BAC, Fortune 500) said that it would "avoid foreclosure sales or displacement of homeowners or tenants around the Thanksgiving and Christmas holidays."Why Fannie/Freddie execs get paid a lotHowever, that policy only applies to loans the bank itself owns. Like Wells Fargo, it will also honor the wishes of the owners of the loans it services, which could mean moving forward with certain foreclosures. A holiday halt on foreclosures by the major mortgage lenders could affect tens of thousands of homeowners. An average of 89,000 foreclosure auctions a month have been scheduled this year, according to RealtyTrac. Once a home has gone through that process, eviction is the next step. There could be a small handful of borrowers who might benefit permanently from the suspension, according to Daren Blomquist, a spokesman for RealtyTrac. Sometimes, albeit very rarely, a Christmas miracle will occur where a borrower finds the cash to get current on their mortgage again and keep their home. For the overwhelming majority of borrowers in default, however, "[i]t's a temporary reprieve, a symbolic gesture to help people out during the holidays," said Blomquist. Then, come the New Year, everyone gets back to business, including mortgage lenders

Home prices fall to 8-year lows! 2003 Prices starting to be seen.

2011-11-29T12:08:00.001-08:00

Home prices continued to sink in the third quarter, falling to levels not seen since early 2003.Home prices dropped 3.9% year-over-year during the three months ended Sept. 30, according to the S&P/Case-Shiller national home price index. On a quarterly basis, prices were slightly higher, squeezing out a 0.1% gain.One bright spot was that the declines have started to slow. During the second quarter, prices were down 5.8% year-over-year."Any chance for a sustained recovery will probably need a stronger economy," said David Blitzer, a spokesman for S&P.S&P/Case-Shiller's 20-City Composite Index, which tracks home prices in 20 major metropolitan areas, fell 3.6% year-over-year during September. The decline was much steeper than a consensus estimate from Briefing.com, which projected a 3% decline.Eighteen of the 20 metropolitan areas that the index tracks saw annual declines in home prices during the month. Meanwhile, Atlanta, Las Vegas and Phoenix posted record index lows.In Phoenix, home prices are almost back to their January 2000 levels, while in Atlanta and Las Vegas, prices have fallen even further below these levels.Only Detroit and Washington D.C. bucked the trend, with year-over-year increases of 3.7% and 1%, respectively. D.C. also posted a month-over-month gain in home prices. Only two other cities, New York and Portland, saw home-price gains between August and September, S&P said.The outlook: Even though other housing market metrics have improved lately, a backlog of foreclosures is expected to continue to weigh on home prices."We're not through the foreclosure crisis. There are a lot of foreclosures yet to happen and a large shadow supply of foreclosed homes the banks are holding," said Brad Hunter, chief economist for Metrostudy, a housing analytics company.After many months of decline, the number of foreclosures has started climbing again. If foreclosures start flooding the market, the pressure may not be enough to send prices spiraling downward but "it could prevent prices from rising again," said Hunter.Millions of homeowners owe more on their homes than they are worth, making them vulnerable to foreclosure.CoreLogic (CLGX), a provider of information, analytics and business services, reported Tuesday that 10.7 million residential property owners, or 22.1% of all homeowners, were underwater at the end of the third quarter. That's only a slight improvement from the 10.9 million properties (22.5%) in the second quarter.That much "negative equity" said Mark Fleming, chief economist with CoreLogic, "renders many borrowers vulnerable when economic shocks occur, such as job loss or illness. The nearly $700 billion mortgage debt overhang is holding back the recovery of the housing market and broader economy."

U.S. consumer confidence surges in November; existing home prices decline again in September

2011-11-29T08:18:00.001-08:00

The Conference Board’s measure of U.S. consumer confidence surged by 15.1 points to 56.0 points in November, which was its highest reading since July. Market expectations had been for a much smaller increase to 44. The jump in November comes after the measure fell 5.5 points to reach a two-year low of 40.9 in October (initially reported as 39.8). The labour market differential (those saying jobs are “plentiful” minus respondents saying jobs are “hard to get”) improved to its highest level since January 2009, moving to -36.3 from the prior month’s -43.3 (initially reported as -43.7.)The surge in consumer confidence in November reflected a significant improvement in both in the “expectations” and the “present situation” components. The expectations component rose to 67.8 from 50.0 in October, led by an improvement in the outlooks for business conditions and employment. The present situation index touched a six-month high, increasing to 38.3 from 27.1 in October as consumers’ appraisals of business conditions and the job market were more positive than the previous month. In terms of the latter, the “jobs hard to get” index fell 4.8 points to 46.5, which is its lowest level since January 2009, while the “jobs plentiful” index increased to 5.8 from 3.6, which is its best reading since May 2009. This resulted in the employment differential improving to -36.3 from the -43.3 reported in October.Despite the solid improvement reported today, the general air of uncertainty that lingers over the global economy continues to weigh on consumers’ appraisals of both current and future conditions, and consumer confidence is still hovering around levels that are historically associated with recessions. Despite this pessimistic view, however, retail sales proved to be stronger than expected in September and October, early anecdotal reports of record levels of sales over the Thanksgiving weekend, which is the unofficial start to the holiday shopping season, and indications that auto sales improved again in November provide hope that the momentum can be sustained until the end of 2011. We expect that the strong contribution to growth from the consumer will support a 3.0% increase in fourth-quarter 2011 GDP, representing an acceleration from the modest pace of growth seen so far this year.In a separate release this morning, the S&P/Case-Shiller 20-City Composite measure of U.S. house prices declined in September, with the seasonally adjusted index down 0.6% on a month-over-month basis. The decline was larger than market expectations for a 0.1% decrease and follows a downwardly revised 0.3% drop in September (previously reported as flat). The report noted that 14 of the 20 markets covered in the measure saw their annual growth rates improve, although only two markets (Detroit and Washington, D.C.) were in positive territory. The unadjusted index fell by 3.6% on a year-over-year basis in the month, which was a modest improvement from the unrevised 3.8% annual decline seen in August.

Home prices rise for 5th straight month

2011-11-14T19:42:00.001-08:00

Home prices continued a winning streak in August, the fifth straight month of price gains, but remain lower on a year-over-year basis.A gauge of home prices featuring 20 major cities, the S&P/Case Shiller index, reported Tuesday that prices rose 0.2% in August but were still down 3.8% year over year."Even though the [year-over-year] rates are improving, national home prices are still below where they were a year ago," said David Blitzer, a spokesman for S&P.Overall, the market is treading water and there doesn't seem to be any reason to suspect that's going to change soon."As long as the economy remains weak, foreclosures are still a problem and lending standards stay stringent, we're not going to see much movement in home prices," said Mike Larson, a real estate analyst for Weiss Research."You just haven't gotten yet the rocket fuel needed to send housing soaring again," he said.Among individual metro areas, Washington saw the biggest gain -- 1.6% in August. Detroit and Chicago were close behind at 1.4%. In the past 12 months, Washington prices have gone up 0.3%. In Detroit prices were up 2.4% since August 2010, more than any other area.The Atlanta metro area recorded the steepest decline, down 2.4% for the month. Year-over-year prices were off 6.3%. Minneapolis home prices recorded the worst 12-month drop of 8.5%.The home price report comes on the heels of changes in the Home Affordable Refinance Program (HARP) announced Monday by the Obama administration. The changes will enable many homeowners to refinance high-interest mortgages more easily, making their monthly payments more affordable. The plan should enable some to avoid default.Ed Mermelstein, a New York-based real estate attorney, broker and developer, doubts that the HARP changes will have much impact on home prices or sales."The economy and jobs have to come back. That's what's going to help the housing market," he said.Larson pointed out that even if they work as planned, HARP's main focus is helping existing homeowners stay in their homes; it won't spur new sales.Newport said he thinks that housing market weakness will continue improving.How to rescue the housing market: foreclosures"The key reason is that more distressed homes are coming onto the market and will be selling," he said. "That tends to drag home prices down."Fiserv, which provides real estate financial analytics to industry, is projecting a further home price decline of 3.6% through the end of June 2012.If that forecast comes true, it would mean home prices will plumb a new, post-bubble bottom over the next nine months, down 34% from the mid-2006 peak

New-home sales creep higher - CNN MONEY

2011-11-14T19:39:00.001-08:00

Sales of new homes, a benchmark indicator both for the housing market and the overall economy, rose slightly but remained slow in September.Sales reached a 313,000 annual rate in September, 5.7% more sales than the revised estimate for August, according to a monthly report from the Census Bureau released Wednesday. But sales were off 0.9% compared with 12 months earlier.New-home sales have been hovering around the 300,000 mark for many months, a shadow of the activity of the boom years, when monthly sales peaked at an annual rate of 1.4 million units.There were about 163,000 new homes on the market by the end of September. That represented a 6.2 month supply at the current rate of sale. The median sale price was $204,400

U.S. trade report shows stronger than expected export growth and smaller deficit

2011-11-10T11:08:00.001-08:00

The U.S. trade deficit in September narrowed to $43.1 billion and was smaller than market expectations for a $46 billion shortfall. August's deficit was revised to $44.9 billion from the initially reported $45.6 billion. Exports grew by 1.4% in September, while imports posted a slower 0.3% rise.Exports posted a strong gain in September following the revised 0.1% increase in August. The rise in exports was broadly based with capital goods and transportation equipment rising. Exports of autos and parts rose by 1.7% following the large swings in the prior two months and consumer goods, ex-autos, posted a 5.3% increase. Imports posted a very small increase following a mild decline in August and an unchanged reading in July. Gains in vehicles and parts, and industrial supplies offset declines in capital goods (ex-autos) and other merchandise. Imports of petroleum products inched up by 0.2% even as the average price for a barrel of oil dipped to $101.02 from $102.62 in August.Excluding the effect of prices, the real trade balance (in chained 2005 dollars) eased to -$45.4 billion from a revised -$46.3 billion in August. This reflected 1.4% jump in the volume of exports and a 0.3% rise in real imports. The volume of petroleum imports increased by 1.9% in September following a 4.0% rise in August and a 4.9% decline in July.Initial claims for unemployment insurance fell by 10,000 in the week ended November 5, 2011 to 390,000, which was lower than market expectations. The level in the previous week was revised to 400,000 from 397,000. The four-week moving average, which is a better indication of the trend in claims, was 400,000, the lowest since mid-April.The September data point to an upward revision to third-quarter 2011 GDP as the Bureau of Economic Analysis's assumption embedded in the GDP add-up was that the deficit widened by $2 billion in the month. U.S. real export growth was volatile during the course of the third quarter although on net increased at a healthy 8.0% annualized pact. Real import growth was slower and increased at a modest 1.7% annualized pace in the quarter. The volatility in global financial markets likely weighed on business and consumer sentiment, thereby limiting U.S. demand due to worries about the global growth outlook. Although these trade figures show that the trade component was stronger than originally thought, updated inventory numbers were weaker than assumed. Revisions to these two components of real GDP likely balanced each other out, and our monitoring suggests that little changed in the third-quarter real GDP growth rate of 2.5% reported as the advanced estimate. Economic growth proved to be stronger in the third quarter than the sluggish increase in the first half of the year, and labour market data, while still subpar, showed that employment gains continued into the final quarter of 2011. The improving trend in claims points to these modest employment gains continuing as the U.S. economy navigates through this period of high uncertainty.

2011-11-04T09:09:00.001-07:00

Payroll employment in October rose a modest 80,000, which was slightly below the 95,000 gain expected; however, upward revisions to job gains in September to 158,000 (103,000 previously) and in August to 104,000 (57,000 previously and initially reported as 0) imply stronger momentum in labour markets than previously indicated. The separate household survey indicated some greater than expected strength as well with the unemployment rate dropping to 9.0% from 9.1% in September. Expectations had been for this rate to remain unchanged.The overall increase in payroll employment continues to be restrained by declines in government employment, which dropped 24,000 in October. The implied 104,000 private-employment gain compares to a 191,000 increase in September (137,000 previously) and 72,000 gain in August (42,000). (Eliminating the effect of the Verizon strike implies employment gains of approximately 146,000 and 117,000 in September and August, respectively.)The increase in private employment largely reflected a 114,000 gain in service-producing jobs. Hiring was relatively broadly based led by increases in professional and business services (32,000), education and health services (28,000), and leisure and hospitality services (22,000). These gains helped offset a 10,000 drop in the goods-producing component, which largely reflected a 20,000 drop in construction employment that followed a 27,000 surge in September. Employment in manufacturing rose 5,000 in October.The hours worked component of the report was unchanged at 34.3 hours; although within manufacturing, it rose significantly to 40.5 hours from 40.3 hours. The gain in overall payroll employment allowed the index of aggregate weekly hours, which reflects the combined effect of both employment and hours, to rise 0.1% thus building further on the 0.5% jump in September. The level of this index is already up an annualized 1.6% relative to the third-quarter 2011 average, which bodes well for overall GDP growth continuing.The index of average hourly earnings, the principal wage measure in the report, was up 0.2% in the month and 1.8% in the past year. The annual rate is down from 1.9% in September.Today’s payroll employment report, which indicated continued job gains as we go into the fourth quarter, is encouraging. These gains, along with upward revisions to the previous two months, bode well for GDP growth in the current quarter to be maintained closer to the third-quarter rate of 2.5% rather than the average quarterly rate for the first half of this year of less than 1%. The pace of job creation, however, is still insufficient to put significant downward pressure on the unemployment rate from a current historically high 9.0%. This implies an economy still vulnerable to various shocks such as a further deterioration in the European sovereign-debt crisis. This vulnerability is expected to result in the Fed keeping monetary conditions highly accommodative. Any move up in the current fed funds range of 0% to 0.25% is not expected until 2013 with the central bank fully prepared to undertake additional asset purchases on any sign of growth faltering.

U.S. September consumer spending strengthens

2011-10-31T09:55:00.001-07:00

Personal consumer expenditure (PCE) in September rose an expected 0.6% following an unrevised 0.2% gain in August. On a volumes basis, spending bounced up to 0.5% after unchanged activity in August and a 0.5% gain in July. Growth in personal income was more disappointing rising only 0.1% in the month although this is up from a 0.1% decline in August. With spending rising faster than incomes, the savings rate in September dropped to 3.6% from 4.1% in August.The gain in September PCE was led by the durables component, which rose 2.2% in the month; however, the non-durables component also offered some support rising 1.1%. Spending on services was up a more modest 0.2%. More than half of the increase in non-durables was price related, likely gasoline price increases, as the volume of non-durables rose a more moderate 0.5%. In contrast, a number of durables prices seemingly fell in the month as the volume of sales for this component rose an even stronger 2.6%. The volume of spending on services rose a modest 0.1%.The core PCE price index showed less price pressure in the month remaining unchanged compared to expectations of a 0.1% rise although this followed an upwardly revised gain in August of 0.2% (originally reported as up 0.1%). Unchanged core prices in September allowed the year-over-year rate to hold steady at 1.6%.The September PCE data released this morning has already been reflected in the consumer spending component of the third-quarter 2011 GDP advance report released on Thursday. That report indicated a stronger than expected 2.4% annualized increase in real third-quarter consumer spending, which represented a strengthening from the disappointing 0.7% gain recorded in the second quarter of 2011. The new information contained in today’s report is that of the monthly pattern of activity during the third quarter. On this score, the data flagged a bounce back in growth at the end of that quarter. This bodes well for the realization of our current forecast of fourth-quarter 2011 consumer spending continuing to rise around 2.5%. This implies growth in consumer spending during the second half of this year of a percentage point higher relative to a disappointing first half. Despite the improvement, it is still indicative of a modest pace of activity that, if mirrored in the GDP growth, would imply only limited downward pressure on the unemployment rate. Thus the economic environment remains one in which the Fed keeps monetary conditions highly accommodative to try and instill greater momentum to the recovery.

It's Time to Buy That House - Wall Street Journal

2011-10-19T09:42:00.000-07:00

U.S. house prices have plunged by nearly a third since 2006, and homeownership rates are falling at the fastest pace since the Great Depression.The good news? Two key measures now suggest it's an excellent time to buy a house, either to live in for the long term or for investment income (but not for a quick flip). First, the nation's ratio of house prices to yearly rents is nearly restored to its prebubble average. Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.Two of the silliest mantras during the real-estate bubble were that a house is the best investment you will ever make and that a renter "throws money down the drain." Whether buying is a better deal than renting isn't a stagnant fact but a changing condition that depends on the relationship between prices and rents, the cost of financing and other factors.As a result, house payments are more affordable than they have been in decades. The National Association of Realtors Housing Affordability Index hit 183.7 in August, near its record high in data going back to 1970. The index's historic average is roughly 120. A reading of 100 would mean that a median-income family with a 20% down payment can afford a mortgage on a median-price home. So today's buyers can afford handsome houses—but prudent ones might opt for moderate houses with skimpy payments.For example, the median home in the greater Phoenix market, including houses, condos and co-ops, costs $121,700, according to Zillow.com. With a 20% down payment and a 4.12% mortgage rate, a buyer's monthly payment would be about $470. Rent for a comparable house would be more than $1,100 a month, according to data provided by Zillow.com.Of course, all of this assumes mortgages are available—no given now that lending standards have tightened. But long-term data on down payments and credit scores suggest conditions are more normal than many buyers think, according to Stan Humphries, chief economist at Zillow. "If you have good credit, a job and a down payment, you can get a mortgage," Mr. Humphries says. "There's more paperwork and scrutiny than five years ago, but things are pretty much like they were in the '80s and '90s."Not all housing markets are bargains. Mr. Humphries says Zillow has developed a new price/rent ratio that uses estimates for each individual property rather than city medians, to better reflect the choices facing typical buyers. A fresh look at the numbers suggests Detroit and Miami are plenty cheap for buyers, with price/rent ratios of 5.6 and 7.7, respectively. New York and San Francisco are more expensive, with ratios of 17.6 and 17.2, respectively. The median ratio for 169 markets is 10.7.For investors seeking income, one back-of-the-envelope way of seeing how these numbers stack up against yields for other assets is to divide 1 by the price/rent ratio, resulting in a rent "yield." The median market's rent yield is 9.3% and Detroit's is 17.9%.Investors would then subtract for taxes, insurance, upkeep and other expenses—costs that vary widely. But suppose total costs were 4% of the purchase price. That would still leave a 5.3% rent yield in the typical market. With the 10-year Treasury yield at 2.2% and the Standard & Poor's 500-stock index carrying a dividend yield of 2.1%, rents for residential housing in many markets look attractive.A few caveats are in order. First, not all transactions are average ones. Even in low-priced markets, buyers should shop carefully. Second, prices could fall further. Celia Chen, a senior director at Moody's Analytics, expects prices to drop 3% before bottoming early next year and rising slowly thereafter. "If the economy slips back into recession, however, we could easily see a 10% drop," Ms. Chen says.And property "flipping" can be dangerous even when prices are rising. That is because, absent a real-estate boom, house price gains simply aren't that exciting. Research by Yale economist Robert Shiller suggests houses more or less track the rate of inflation over long time periods.Houses aren't the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.—Jack Hough is a columnist at SmartMoney.com

U.S. September retail sales stronger than expected

2011-10-14T09:32:00.000-07:00

Retail spending in September surprised on the upside by rising 1.1% following a 0.3% gain August, which represented a significant upward revision from the unchanged activity previously estimated. A lion’s share of the September increase came from the motor vehicle and parts component where sales jumped 3.6% in the month. This followed a decline in August auto sales of 0.8% that represented even weaker activity relative to the 0.3% drop initially reported. Excluding the auto component, sales in September rose a solid, and greater than expected, 0.6% following an upwardly revised 0.5% gain in August (previously estimated as up 0.1%).The increase in retail sales was boosted by sales at gasoline stations rising 1.2% that was likely helped by higher gasoline prices boosting nominal receipts. The report also showed solid increases in a number of other components such as clothing stores (1.3%), furniture stores (1.1%), and department stores (1.1%). Some offset was provided by a 0.3% decline in sporting goods stores and a 0.1% drop in building material stores although both of these components recorded sizeable gains in August of 2.2% and 1.2%, respectively.The stronger than expected gain in September retail sales and upward revision to August suggest that annualized growth in consumer spending, on a volumes basis, was likely closer to 2% in the third quarter of 2011 rather than the 1.6% that we had previously assumed. This will represent a marked improvement from the 0.7% gain in the second quarter of the year and will provide confirmation that some of the weakness in household spending during the first half of this year was related to transitory factors, such as supply-chain problems limiting the availability of certain car lines and a spike in gasoline prices crimping disposable income outside of energy purchases. The upward trend in retail sales, on a monthly basis, during the third quarter bodes well for real consumer spending growth to strengthen further in the fourth quarter of 2011 to 2.5%.Despite this projected improvement in consumer spending in the second half of this year, the rate of increase remains extremely subdued thereby reflecting modest job gains, limiting income growth, and a still high unemployment rate weighing on confidence. To help generate greater strength in labour markets, the Fed has pledged to keep monetary policy highly accommodative with the fed funds expected to remain at low levels throughout 2013. As well, the Fed has started to implement ‘Operation Twist’ designed to keep interest rates low going out on the yield curve.

Foreclosure backlog deepens

2011-10-05T10:50:00.000-07:00

As the foreclosure backlog continues to build up, delinquent borrowers are spending even more time in their homes without making mortgage payments.

Once borrowers start missing payments, they spend an average of a year and nine months, or 611 days, in foreclosure before banks repossess their homes, according to LPS Mortgage Monitor. That's more than twice as long as three years ago, when the average was 251 days. Earlier his year, the average was 523 days.

"The number of defaults in the pipeline has been huge and we had more problem loans than ever before," said Herb Belcher, who supervises analytics for Lender Processing Services (LPS), which provides mortgage industry information and analytics to big banks.

With so many bad loans, servicers have had to prioritize which ones they can deal with and which ones to push aside.
Squatter nation: five years with no mortgage payment
"It's like your boat has all these holes in it and is taking in water. You have to plug up the worst holes first," said Belcher.

The bottlenecks are particularly severe in judicial states where the foreclosures are processed through the courts, he said. In non-judicial states, where trustees handle the cases, the average foreclosure is six months shorter.

Fannie Mae and Freddie Mac, which account for the majority of all mortgage lending these days, have been actively lobbying their industry partners -- the servicers and attorneys who handle the foreclosure process -- to either quickly get paperwork filed and push defaults through the system or put borrowers into a foreclosure prevention program, said Belcher.

The industry has gotten better at dealing with the deluge; it has hired staff and refined procedures to improve efficiency. But a return to more normal processing times will take time given the enormous backlog.

Fannie Mae ignored foreclosure abuses

There were more than 4 million homes either in foreclosure or 90 days or more late with payments in August. Many of the new delinquencies are actually repeats: About 75% of the borrowers who fell a month behind in payments in August had missed payments before and then caught up -- only to fall behind again.
On the plus side, the percentage of new seriously delinquent loans (90 days or more behind on payments) whose borrowers were up-to-date on payments just six months earlier has dropped to 1.4% from a peak of 2.9% in early 2009.
Many of those borrowers suffered through severe financial reversals, such as a job loss. Foreclosure and unemployment rates generally move in lockstep with each other.

U.S. September manufacturing sector grew faster than expected, and August construction spending unexpectedly rises

2011-10-04T12:11:00.000-07:00

The U.S. manufacturing sector expanded for the twenty-sixth consecutive month in September, with the pace of growth unexpectedly increasing as the ISM manufacturing index rose to 51.6 from to 50.6 in August. Market expectations had been for the measure to slip slightly to 50.5. The measure’s employment component rose 2.0 points to 53.8 thereby more than reversing the previous month’s decline. In terms of the components of the index in September, strength was most evident in production, which rose 2.6 points to 51.2, thereby returning to growth after slipping into contractionary territory in August for the first time since May 2009. Employment in manufacturing continued to increase as well, and the pace of growth picked up with the sub-index rising to 53.8 from 51.8 the previous month. The new orders sub-index held steady in contractionary territory at 49.6 while the supplier deliveries measure moved higher to 51.4 from 50.6 in August. Inflationary pressures increased for the first time since April as the prices paid component rose to 56.0 from 55.5 in August, which had represented its slowest pace of growth since November 2009.With the better than expected increase in the pace of growth in the manufacturing sector in September, the ISM index remained in expansionary territory for the twenty-sixth consecutive month and reached its highest level since June. The continued growth in the sector should help assuage some fears that the U.S. economy is drifting into another recession. As well, the increase in the ISM employment sub-index supports our view that payrolls will continue to expand, albeit modestly, and we expect that Friday’s payroll report will show private-sector employment grew by 65,000 in September.In a separate release this morning, U.S. construction spending rose 1.4% in August, beating expectations for a 0.2% monthly decrease and reversing the previous month’s 1.4% declined (initially reported as a 1.3% drop). The strength in the month was relatively broad-based as public-sector construction spending rose a solid 3.1%, and private-sector spending saw a more modest 0.4% increase. Total residential construction spending rose 0.9% while the non-residential sector saw a stronger 1.6% boost.

2011-09-21T19:02:00.000-07:00

Banks held about 476,000 homes that they repossessed from delinquent mortgage borrowers as of the end of July, according to Barclays Capital. That tally represents a 17 percent contraction from 574,000 REOs on the books just 10 months earlier, in September of 2010, just as the robo-signing scandal began grabbing headlines.At the same time, the research firm estimates there were 1.57 million home loans 90-plus days delinquent but not yet in foreclosure at the end of July of this year, and another 1.91 million already in the foreclosure process.Barclays says the rise in processing times has been driven almost entirely by the time that loans spend in delinquency and foreclosure. The average period that loans spend in REO has risen only modestly since 2007, suggesting that any lengthening in disposition timelines has been a function of weaker demand for homes than of processing delays, Barclays explained.While processing timeframes have been trending up since 2007 as a result of the industry’s modification efforts and the deluge of delinquent loans, the research firm notes that timelines increased even more dramatically once mortgage documentation issues were uncovered in late 2010.According to Barclays’ analysis, the average number of months a loan has spent in foreclosure has climbed from around 10 months just before October 2010 to more than 12 months today.The firm’s analysts point out that whether a loan is located in a judicial or non-judicial state has a “considerable impact” on the amount of time the loan is likely to remain in the foreclosure process. Still, even within the judicial state population, loans in certain areas are showing much longer processing delays.For example, Barclays’ research shows that among the judicial foreclosure states, New York, New Jersey, and Florida all display longer-than-average foreclosure delays, with defaulted borrowers in New York currently remaining in the foreclosure bucket for an average of around 17 months.Although most non-judicial states process foreclosures relatively quickly because servicers are not required to obtain court approval before re-possessing delinquent properties, Barclays says even here, there is significant variation in processing times.The company’s report points to Massachusetts and Washington, D.C. as exhibiting extended processing delays. In particular, subprime loans in Massachusetts currently remain in the foreclosure bucket for an average of over 10 months.Barclays also found that servicers are more likely to offer loan modifications in traditionally slow foreclosure states, and empirical evidence indicates that servicers are a little more generous in their loan modification terms in slow foreclosure states.The company says debt forgiveness modifications have historically been slightly more prevalent in states where the foreclosure timeline has extended.“We found that 4-5 percent of loan modifications executed in slow foreclosure states in 2011 have involved some level of principal forgiveness, compared with 2-3 percent in fast foreclosure states,” Barclays said in its report.Barclays notes that another external factor that has historically driven processing delays on delinquent loans has been the servicer managing the loan.The company’s analysis shows that Ocwen and Wells Fargo have experienced a much more modest rise in their processing times relative to other servicers, particularly when it comes to servicing subprime and Alt-A loans.Barclays says it is also notable that prior to 2008, there was very little difference in foreclosure processing times between servicers as fewer distressed loans needed to be serviced.“With the large number of borrowers that have become delinquent in the past few years, some servicers have likely been overwhelmed with the volume of problem loans they have had to manage,” according to the research firm’s analysts.Although timelines have significantly increased for all states and sectors, Barclays says some servicers appear to have implemented improvements to their foreclosure processes recently.Notably, loans serviced by Countrywide and Citigroup have recently shown a pickup in delinquency to foreclosure roll rates, according to Barclays.“Although there may be a lag in the timing of when different servicers and states start to see improvements in timeline rolls, we hope to see further improvements from other servicers in the coming months,” the research firm said.

U.S. existing home sales rise by more than expected in August but prices are still falling

2011-09-21T09:55:00.000-07:00

Existing home sales in the US jumped 7.7% in August to a six-month high of 5.03 million annualized units following the unrevised 3.5% decrease to 4.67 million in July. The increase in resale activity in August beat market expectations of a 1.7% increase in the pace of sales to an annualized 4.75 million units. The release indicated that home prices fell again in August, with the median existing home price down 5.1% on a year-over-year basis in the month, although this is a slight moderation in the pace of decline compared to the 6.0% annual decline seen in July.The rise in existing home sales in the month was seen in both the single-family, and condo and co-op components, with the monthly strength most evident in the former. Single-family home sales jumped 8.5% to 4.47 million annualized units in August, representing the fastest pace of sales since January. Sales of condos and co-ops rose a more modest 1.8% to 560,000 annualized units in the month. The pace of existing home sales increased across the country, led by an 18.3% jump in the West, while the South (5.4%), the Midwest (3.8%), and the Northeast (2.7%) saw modest gains.The national median sales price of existing homes fell 5.1% on a year-over-year basis in August, the ninth consecutive such decline, as distressed sales (foreclosures and short sales that generally sell at steep discounts) accounted for 31% of total sales, up from 29% in the prior month, but down from 34% in August 2010. The absolute number of existing homes available for sale fell for the second straight month, down 3.0% to 3.58 million units in August. At the current pace of sales, it would take 8.5 months to clear this inventory of unsold homes, down sharply from 9.5 months in July but still well above pre-recession levels of around five months.While the increase in existing home sales in August is a positive development, the flow of housing market data in general shows that, in the words of the Federal Reserve, there is “continued weakness in the housing sector” and overall activity “remains depressed.” Despite historically low mortgage interest rates and attractive home prices that have helped to make affordability conditions the “best in a generation,” housing demand remains constrained due to reportedly tight credit, persistently poor labour market conditions and heightened uncertainty that is weighing on consumer confidence while foreclosures have resulted in an ample supply. Fed Chairman Bernanke recently cited the weakness in the housing sector as a key reason “for the frustratingly slow pace of recovery,” and we expect that the Federal Open Market Committee will later today indicate its willingness to provide additional stimulus in an effort to support a sustained recovery in the residential real estate market.

U.S. trade report shows smaller than expected deficit

2011-09-08T10:32:00.000-07:00

The U.S. trade deficit in July totalled $44.8 billion, much smaller than market expectations for a $51.0 billion shortfall. June's deficit was revised to $51.6 billion from the initially reported $53.1 billion. The narrowing in the trade deficit in July reflected a 3.6% rise in exports with imports falling by 0.2%.

The improvement in the trade balance in July reflected a surprisingly large rise in exports with the sales of goods showing a $5.72 billion increase and services rising by 0.5 billion. Imports sagged slightly falling by $0.7 billion in the goods sector with services imports up marginally. Both imports and exports of vehicles and parts rose in July as the effects of the Japanese supply-chain disruptions eased. Imports of petroleum products fell 6.5% as the average price for a barrel of oil dipped to $104.27 from $106.00 in June. The rise in exports was broadly based with only consumer goods excluding autos posting a decline in the month.

Excluding the effect of prices, the real trade balance (in chained 2005 dollars) narrowed to -$45.3 billion from a revised -$50.3 billion in June. This reflected 4.9% jump in the volume of exports and a 0.2% dip in real imports.

In a separate report, initial claims for unemployment insurance rose by 2,000 in the week ended September 2, 2011 to 414,000, higher than market expectations for a 405,000 print and in line with RBC's 412,000 call. In the previous week, claims totalled 412,000, previously reported as 409,000. The four-week moving average, a better indication of the trend in claims, inched up for the third consecutive week to 414,750.

The July trade data suggest that global demand was solid heading into the period of financial market volatility with U.S. exports posting the first rise in three months. Imports, outside of oil, which fell because the price declined, also posted a 1.3% increase. These gains reflected the restarting of trade in the auto industry after the supply-chain disruptions curbed activity and echoed the increase in industrial production in the month. The heightened volatility in financial markets in August likely weighed on trade flows as businesses and consumers worried about the implications for global growth. The Fed, once again, provided reassurances that monetary policy will remain geared to promoting growth resulting in market interest rates falling to the lowest levels since the 2008-2009 financial market crisis and recession. This stimulative policy will help the economy shift back into a higher gear; however, a firming in the labour market is essential for this to happen. The initial claims data have been range bound and support the notion that conditions are not deteriorating further but at the same time providing little indication that the pace of hiring is picking up sufficiently to lower the unemployment rate. President Obama will present his Jobs package tonight in at speech at 7:00PM EST aimed as promoting hiring and putting the US economy on a stronger growth track.

U.S. July consumer spending shows strong gain

2011-08-29T08:09:00.000-07:00

Personal consumer expenditure (PCE) in July rose a stronger than expected 0.8% following a 0.1% drop in June, which was revised up from a previously estimated -0.2%. Expectations were for a rebound in activity although to a more modest 0.5% gain. Equally encouraging was the volume of PCE, which rose a solid 0.5% following steady activity in June.

Personal income was up as well in the month but by a more moderate 0.3% following an upwardly revised June increase of 0.2% (originally reported as 0.1%). With spending rising more quickly than income, the savings rate dropped to 5.0% from 5.5% in June.

The overall nominal increase in consumer spending of 0.8% was led by a 1.9% rise in durables reflecting the strength in motor vehicle sales in the month and more than reversing the 1.1% drop in June. The other components, however, showed solid gains in the month as well with non-durables up 0.7% following a 0.5% drop in June and services up 0.7% after a 0.1% rise in June. All of the gain in non-durables reflected price gains, likely gasoline prices, as the volume of sales for this component dropped 0.3% in the month. The volume of services still showed a solid increase yet by a slightly more moderate 0.5%. In contrast, the increase in the volume of durable sales was an even greater 2.0% suggesting some of the strength in motor vehicle sales reflected price discounting.

The core PCE price index rose an expected 0.2% in the month; however, the year-over-year rate of 1.6% was higher than the 1.4% expected, therein reflecting upward revisions to earlier months. The year-over-year rate has been steadily rising for the last four months from a recent trough in March of 1.0%.

The 0.5% monthly rise in the volume of PCE in July bodes well for consumer spending growth to rebound to an annualized 3% in the third quarter of 2011 following a minimal 0.4% gain in the second quarter. A pick-up in consumer spending is an important component, along with a rebound in auto production, that is expected to send overall GDP growth back up to a rate slightly less than 3% for the second half of this year relative to a pace of less than 1% that prevailed during the first two quarters of 2011. To help sustain this rebound in growth, the Fed committed at the last Federal Open Market Committee meeting to keep official rates highly accommodative until the middle of 2013. As well, comments by Fed Chairman Bernanke last Friday also alluded to the need for additional fiscal stimulus. The central bank chief indicated such was not necessarily in contradiction of an eventual elimination of the fiscal deficit in the medium term thus trying to address a major impediment for further action by Congress. In the absence of this fiscal support, however, if growth continues to surprise on the downside, Bernanke made it clear that further monetary support could be provided although actual measures, such as additional asset purchases, were not enumerated.

Mortgage rates have hit a record low, making homes even more affordable for prospective buyers.

2011-08-28T11:10:00.000-07:00

Mortgage rates have hit a record low, making homes even more affordable for prospective buyers.

According to mortgage backer Freddie Mac's Primary Mortgage Market Survey, the average 30-year fixed rate loan fell to 4.15% this week -- its lowest level in more than 50 years. Previously, the record low was 4.17%, which was set the week of Nov. 11, 2010. Last week, the 30-year rate was 4.32%.

The average for the 15-year fixed-rate mortgage was 3.36% this week, down from 3.5% last week.

"The Federal Reserve's policy statement last week and ongoing market concerns over the European debt market carried momentum into this week allowing all mortgage products in our survey to reach all-time record lows," said Frank Nothaft, vice president and chief economist at Freddie Mac.

The rock-bottom rates have made it even more enticing for those who are looking to buy a home to act now.

Housing affordability -- the percentage of homes sold during a quarter that are within the reach of people earning the median family income -- had already been trending near record levels before mortgage rates started to plunge, according to a report from the National Association of Home Builders (NAHB) and Wells Fargo released Thursday. The organization said that when a family spends 28% or less of its gross income on housing expenses it qualifies as affordable.
Yet, despite the extremely favorable conditions, most housing markets remain depressed.
"At a time when homeownership is within reach of more households than it has been for more than two decades and interest rates are at historically low levels, the sluggish economy and the extremely tight credit conditions confronting home buyers and builders remain significant obstacles to many potential home sales," said Bob Nielsen, NAHB's chairman and a home builder from Reno, Nev.
Sales of existing homes fell month-over-month in July, according to the National Association of Realtors (NAR), although they're up from 12 months earlier. Meanwhile, new home sales have been crawling along at about a quarter of what they were during the housing boom
While mortgage rates will probably head lower, any further rate declines would probably be small, according to Ken Johnson, a professor of real estate at Florida International University.
Rates closely track yields on U.S. Treasury bonds, which have also plummeted this week. The 10-year note hit a record low on Thursday, falling below 2% to 1.99%.
"The banks would fall into a liquidity trap [if rates go much lower]," he said. "If they can't make money lending, they'll stop."
25 Best Places for Affordable Homes
For now though, each tenth of a percentage point that a mortgage rate drops results in a savings of about $6 a month for every $100,000 borrowed. The monthly bill for homeowners getting $200,000 mortgages this week would be about $20 less than if their mortgages were issued last week. Over the course of a 15- or 30-year mortgage, that can result in considerable amount of savings.
According to NAHB, even before interest rates started diving, about 72.6% of all homes that were purchased during the three months ended June 30 were affordable to an American family earning the median income of $64,200.
Best Places: Best home deals in top 10 place
In some markets, such as Youngstown, Ohio, the most affordable major market in the nation, nearly 94% of all homes sold last quarter could be bought by families earning the area median income of about $55,000.
Syracuse, NY, at an index of 92.6%. Indianapolis at 91.6% and Dayton, Ohio at 90.7% were also very favorable markets for home buyers.
The least affordable market was New York City, where the median price of homes sold during the quarter was $424,000 and where only a quarter of homes sold during the quarter were affordable to those earning the median area income of $67,400.
Three other least-affordable markets were all in California: San Francisco at 27.5%, Santa Ana at 40.5% and Los Angeles at 41.6%.
NAHB and Wells Fargo's data underlines the stark contrast between expensive coastal markets, where most of the least affordable markets lie, and the heartland, where the most affordable cities are.
"I think prices are turning around," he said, "especially in middle America, but the turnaround will be very slow. "
The record-low mortgage rates, combined with increasing affordability in some markets, could be the catalyst needed for some home buyers who were sitting on the fence to stop renting and put some money on the table.
"It's silly not to buy right now -- if you can," said Johnson

July sales and price report

2011-08-18T11:25:00.001-07:00

LOS ANGELES (Aug. 15) – California home sales fell in July but were up from the previous year, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.

Closed escrow sales of existing, single-family detached homes in California dropped 4.1 percent to a seasonally adjusted 458,440 units in July, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. July home sales were up 4.5 percent from the 438,850 units sold in July 2010. The statewide sales figure represents what would be the total number of homes sold during 2011 if sales maintained the July pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

“Although July sales improved over last year, they were somewhat weaker than expected, given current prices and mortgage rates,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Economic uncertainty and recent developments in financial markets have caused hesitation among buyers, the effects of which we may see in the coming months. We must see sustained job and income gains along with an increase in consumer confidence before we can expect to see consistent improvement in the housing market,” Appleton-Young added.

The statewide median price of an existing, single-family detached home sold in California dipped 0.3 percent in July to $294,230 from a revised $295,210 in June. July’s median price was down 7.6 percent from the $318,550 recorded in July 2010.

“Despite the uncertain outlook, interest rates are at near-record lows, and home prices are favorable,” said C.A.R. President Beth L. Peerce. “Well-qualified, motivated buyers who expect to own their home for more than a few years should carefully study their options now.”

Other aspects of C.A.R.’s resale housing report for July 2011 include:

The Unsold Inventory Index for existing, single-family detached homes was 5.5 months in July, up from 5.0 months in June, but essentially unchanged from July 2010’s 5.6-month supply. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
Thirty-year fixed-mortgage interest rates averaged 4.55 percent during July 2011, virtually unchanged from 4.56 percent in July 2010, according to Freddie Mac. Adjustable-mortgage interest rates averaged 2.97 percent in July 2011, compared with 3.73 percent in July 2010.
The median number of days it took to sell a single-family home was 52.1 days in July 2011, compared with 42.4 days for the same period a year ago.
View Unsold Inventory by price point.
Note: The County MLS median price and sales data in the tables are generated from a survey of more than 90 associations of REALTORS® throughout the state, and represent statistics of existing single-family detached homes only. County sales data are not adjusted to account for seasonal factors that can influence home sales. Movements in sales prices should not be interpreted as changes in the cost of a standard home. Median prices can be influenced by changes in cost, as well as changes in the characteristics and the size of homes sold. Due to the low sales volume in some areas, median price changes in June may exhibit unusual fluctuation.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Mortgages rates keep falling: 30-year nears record low

2011-08-12T10:30:00.000-07:00

Just when it seemed mortgage rates weren't going to get any lower, they started testing new lows.

In the tumultuous days following Standard & Poor's debt downgrades, rates on 30-year fixed mortgages fell to 4.32%, down from 4.39% last week and closed in on a record low of 4.17% set last November, according to Freddie Mac's Primary Mortgage Market Survey.

Rates on 15-year fixed mortgages set a new record for the second week in a row, falling to 3.5%, down from 3.54% last week.

"It's a crazy time," said Doug Lebda, the CEO of online lending exchange LendingTree. "I'd say rates can't get much lower, but I was saying that last week, too."

The savings for borrowers who lock in rock-bottom rates over the length of a mortgage loan can be sizable. Take, for example, a borrower with a $200,000, 30-year loan. If their mortgage carries a 4.32% rate their monthly payment is just $992 and they make total interest payments of $157,153. However, if the rate on their 30-year fixed mortgage is 5% (ordinarily considered a low rate), they'd pay $1,074 a month and $29,357 more in interest over the 30-year period.

The low rates are sparking a rash of refinancing activity, according to the Mortgage Bankers Association. Last week, total mortgage borrowing, most of it refinancings, jumped nearly 22%. This week's activity could be even higher, according to Greg McBride, chief economist for Bankrate.com.

"Rates have been below 5.5% for two years," he said. "For most people who have refinanced or purchased since then, there's little benefit to refinancing. But when rates drop below 4.5%, then it's worth looking into."
Rates could go even lower
Treasury yields near all-time lows

Rates could drop even lower, according to Keith Gumbinger of HSH Associates, a provider of loan information.

"Low Treasury interest rates are still not being fully passed through to mortgage borrowers," he said.

While mortgage rates do not move in lockstep with Treasury yields, they are closely correlated. The yield on the 10-year bond plunged to 2.24% Thursday from 2.56% at the end of last week.

The difference between the 30-year fixed mortgage rate and the 10-year Treasury yield is usually about 1.6 to 1.7 percentage points, so a bond rate of 2.24% should mean that mortgage rates should be at 3.84% to 3.94%.

"That argues that mortgage rates could go lower," said Gumbinger. "Will the spread shrink again, though? That's hard to say."

One reason to question a further drop: S&P's downgrade of the credit ratings of Fannie Mae and Freddie Mac. The downgrade could make borrowing more expensive for the two mortgage giants, which represent, along with FHA loans, close to 90% of mortgage lending these days. And those costs may get passed along to borrowers.

Another factor is that investors in mortgage securities backed by Fannie/Freddie may stop buying mortgages if the yields fall much further. The low rates would provide too puny a return.

Investors may also balk, according to Gumbinger, because the attractive rates give borrowers less incentive to prepay their mortgages. That means investors would get stuck with a low rate of return on their investment for a long time.

To compensate for that risk, according to Gumbinger, investors may demand greater yields and keep mortgage rates a little higher, even though they are already very low indeed.

ForSalebyOwner.com Founder Uses Agent to Sell Home

2011-08-11T09:53:00.001-07:00

DAILY REAL ESTATE NEWS | TUESDAY, AUGUST 09, 2011
The founder of a popular for-sale by owner Web site used a real estate broker to help sell his 2,000-square-foot, two-bedroom New York apartment after it lingered on the market for six months. Colby Sambrotto, the founder and former chief operating officer of ForSalebyOwner.com, tried to sell the property himself by listing it online and through classified ads, but after six months of it sitting on the market, he sought the help of a real estate broker.

Broker Jesse Buckler told Sambrotto the condo was priced too low and wasn’t attracting the right buyer for the condo.

"At first he wouldn't let me increase the price," Buckler said. "I told him I know what I am doing—the market is picking up."

The condo soon attracted multiple offers and ended up closing recently for $150,000 more than the original asking price.

Source: “DIY Guru Gets Broker Help,” The Wall Street Journal (Aug. 3, 2011)

Home prices dip 4.5%

2011-07-27T12:22:00.000-07:00

May home prices in 20 major cities dipped 4.5% from one year ago, marking a continued decline in the already battered housing market.
The S&P/Case-Shiller report posted declines in both its 20-city composite and its 10-city index, which declined 3.6% year-over-year.

But housing did show some signs of life in May. Home prices ticked higher for the second consecutive month following an eight-month slide.
In May the 20-city index gained 1% compared with a month earlier, while the 10-city index rose 1.1% month-over-month.
David Blitzer, a spokesman for S&P, was cautious in detailing the index gains.
"While the monthly data were encouraging, most [metro areas] and both composites fared poorly in annual terms," he said.
Prices are also still off more than 32% from their highs, set in July, 2006 and hover at about the same level they were in mid-2003.
According to Mike Larson, a housing market analyst for Weiss Research, the market is going nowhere fast.
"I like to picture it as a sailing ship caught in the doldrums," he said. "You're no longer being swept away by a hurricane but you're not moving much either."

Blitzer attributed much of the home price increase for May to seasonal effects. Spring is the hottest time of year for home buying and the added demand usually drives prices higher.
Taking those seasonal factors into account, the 20-city index was flat and the 10-city showed a gain of just 0.1%.
Sixteen metro areas recorded non-seasonally adjusted month-over-month gains in May. The biggest winner was Boston, where prices jumped 2.7%, followed by Minneapolis at 2.6% and Washington at 2.4%. The nation's capital was the only place to record a gain over the past 12 months, up 1.3%.
Three cities declined month-over-month, led by Detroit with a 2.8% drop, Las Vegas, with a 0.9% decline, and Tampa, where prices fell 0.6%. The biggest loser over the past 12 months was Minneapolis, where prices fell 11.7%.
Case and Shiller's takes
The positive aspects of the report has caused Robert Shiller, the Yale economist who, with his colleague, Karl Case, devised the index, to soften -- a little -- what had been an alarmingly pessimistic prediction for the housing market.
He had warned back in February that home prices could drop another 10% to 25% over the next few years.
"The recent data lowers the probability of that scenario a little bit, but I still worry about it," he said.
His colleague, Karl Case, was more positive.

"There is a big difference between bouncing along a downward drift and bouncing along a rocky bottom," he said. "The fact that prices in a repeat sales index and using a three month moving average actually went up, seems to me, says something important."
Case, however, also mentioned several negative factors having impact on the housing market right now or that will in the near future.
"First, it is difficult for home buyers to qualify for a mortgage," he said.. "Second, Fannie Mae and Freddie Mac will lower the size of conforming mortgages on Oct. 1. Finally, consumer sentiment is still poor."
Shiller also brought up the weak labor market. An unemployment rate of 9.2% in June acts as a strong headwind for housing.

U.S. housing starts surge past expectations in June

2011-07-22T09:55:00.000-07:00

Privately owned housing starts in the US jumped 14.6% in June to an annualized pace of 629,000 units following May’s downwardly revised reading of 549,000 (previously reported 560,000). The level of housing starts in June represents the fastest past of new home construction since January and was well above market expectations for an increase in the level of starts to 575,000. Building permits rose as well, increasing by 2.5% to an annualized 624,000 units. The rise in permits was above market expectations for a 2.3% decline and represented the highest level of permits since last December.

The strength in housing starts in May was seen in both the single and multi-unit components. Single-unit housing starts jumped 9.4% to 453,000 annualized units, the fastest pace of starts since November 2010. The relatively volatile multiple-unit starts component rose a more robust 30.4% to 176,000 annualized units, fully reversing the declines seen in the last two months. Strength was broad based as both single-unit and multiple-unit starts in all regions posted increases in June. Increases were led by the Northeast (35.1%) and Midwest (25.3%), while the South (10.6%) and West (5.4%) posted moderate, but still solid, gains.

Permits for new housing units rose 2.5% from the unrevised 609,000 annualized units seen in May to an annualized 624,000 in June. The increase in June mainly reflected a strong rise in applications for multiple-unit residences (6.9%) although single-unit permits also eked out a slight increase in the month (0.2%). Permits increased in the South (5.5%), Midwest (5.2%), and West (1.4%) while permits declined in the Northeast (-10.1%).

Even with the stronger than expected increase in June, new home construction in the US remains in a holding pattern, effectively trending sideways within the relatively tight range between 500,000 and 650,000 annualized units since the beginning of 2009. We continue to see subdued demand for new homes as the result of strong price competition from the high volume of distressed existing homes available for sale in the market. This in turn is weighing heavily on homebuilder confidence, which despite the modest pickup reported yesterday, remains severely depressed. The recent increase in permits is somewhat positive; however, it still implies a generally depressed level of new home construction going forward, and we expect that there will not a material break from the recent range-bound trend in the near term.

Partial Release of Lien for Short Sales

2011-07-07T12:59:00.000-07:00

With many people facing financial difficulties, distressed homeowners are trying to sell their homes for less than the loan balance. This is called a Short Sale.

Sometimes, during Short Sale transactions, there may not be enough funds in escrow accounts to pay our recorded state tax lien in full. If this happens, we may be able to assist the taxpayer with a Partial Release of Lien.

A Partial Release of Lien releases a specific piece of property from a recorded state tax lien. However, it does not release the lien in its entirety. The lien remains in effect against the taxpayer and continues to encumber other property the taxpayer owns or acquires in the future.

To expedite a Partial Release of Lien request due to a Short Sale, the following documents are required:

Letter of explanation detailing the request.
Estimated closing statement.
Current preliminary title report that includes the legal description of the property.
Current appraisal.
Documentation to substantiate all lien payoffs through escrow.
Lender’s Short Sale Approval.
Additional documents may be required.
The above documents should be sent by the escrow or title representative handling the Short Sale transaction and sent via overnight mail to:

ATTN: LIEN RESOLUTION UNIT – MAIL STOP A317
FRANCHISE TAX BOARD
SACRAMENTO, CA 95827

During the evaluation process we will:

Review the reason and substantiation for the request.
Verify that the property is being sold at, or near fair market value.
Determine that industry standard fees/commissions are charged.
Confirm that only senior lien holders and/or judgment creditors are paid.
We recognize the urgency to process a Partial Release of Lien request as quickly as possible. But they can take up to 21 working days due to increased requests.

Secrets to getting a mortgage with so-so credit

2011-07-06T11:51:00.000-07:00

Getting a mortgage can be tough these days -- even people with near-perfect credit have been rejected for loans. But for some lucky borrowers, things aren't as bad as the doom-and-gloom crowd says.

At a recent press conference, Federal Reserve Chairman Ben Bernanke said lending standards for mortgages have tightened so considerably that "the bottom third of people who might have qualified for a prime mortgage in terms of, say, FICO scores a few years ago -- cannot qualify today."

Indeed, roughly one-in-four mortgage applicants was denied in 2010, up from about 18% in 2003, according to data from the Federal Financial Institutions Examination Council. And those are just the ones that apply -- many discouraged potential borrowers don't even bother to apply anymore.

Yet, there is money to lend. Bob Ryan, the acting commissioner for the U.S. Department of Housing and Urban Development, or HUD, recently said that mortgage money "is flowing, it's stable, it's tightened from the boom years, but it's there."
And many of those potential home buyers sitting on the sidelines may just have a shot at it -- as long as they take a few crucial steps. "The belief is that you can't get a mortgage at all -- but you can," Keith Gumbinger, of the mortgage information provider HSH Associates.

What you need for traditional mortgages

Most of the major mortgage underwriters have only returned to the more prudent standards of the days before the housing bubble. Now, according to Tuck Bradford, a branch manager with lender Mortgage Master, borrowers usually must meet four criteria in order to get a mortgage backed by Fannie Mae (FNMA, Fortune 500) or Freddie Mac (FMCC, Fortune 500), the two government-run mortgage giants:

The ability to make a 20% down payment, plus closing costs. A good credit score. Borrowers usually need a minimum credit score of 620. Enough income to afford payments. The general rule of thumb: no more than 28% of your gross income should go toward housing costs.

A loan-to-value ratio of 80%. Lenders want the home value to far exceed the mortgage balance because if a borrower defaults, the bank sells the home to recoup the loss.
In today's market, however, even having all four of these factors in place doesn't always guarantee that you will get a loan.

Steve Habetz, a loan officer in Westport, Conn. had a client who was seeking to refinance but he had a single blemish scarring an otherwise spotless credit report. The client had a couple million dollars in assets, high income, ample home equity -- and a strong credit score of 700. "This guy was a Boy Scout when it came to paying debts," said Habetz. "He had never been late." Yet, Habetz couldn't get him a mortgage. The problem: an investment property the client had owned and tried to unload but couldn't (thanks to the housing bust). He eventually resorted to a short sale -- a deal in which the proceeds of the sale are insufficient to pay the amount owed on the mortgage and the bank agrees to forgive the losses.

Not only did the short sale lop 100 points or so off his credit score, but it also resulted in an automatic rejection of his refinance application. "It's maddening," said Habetz. "Other than that one detail, he's very low risk. Because he had the short sale, he's out of the box for two years."

Increase your odds of landing a loan

But, for every client like Habertz's who gets rejected, there are those who have been much luckier at landing mortgage loans. And typically, they have turned to the Federal Housing Administration for help. "The FHA is just about as free and easy as it was in the go-go days," said Gumbinger.

Squatter Nation: 5 years without a mortgage payment

Standards for these loans, insured by the FHA and issued by regular mortgage lenders, are flexible and aimed at making mortgage borrowing easier, especially for working-class Americans.

For years, the FHA had no minimum credit score requirement at all. Now though, it requires a minimum of 580 to qualify for a 3.5%-down loan and 500 for a 10%-down mortgage.

In practice, however, some banks will impose higher standards, according to Scott Sheldon, a loan officer with First California Mortgage in Sonoma County, Calif.
"We FHA lenders have to protect ourselves and we've been going with a 640 minimum for a 3.5% mortgage," he said.

How one high-risk borrower got lucky

Sheldon had one client who seemed like an impossible case. The client was buying a home in Healdsburg, California, the heart of Sonoma's wine country. His credit score was just over 600, he was paying alimony and child support and he only had enough money for a small down payment. And there was one additional tiny problem: He had just emerged from bankruptcy in April 2009.
In other ways, he was low-risk borrower. He grossed $10,000 a month, ample enough to satisfy debt-to-income guidelines on the $315,000 home he was buying, and he was able to document a stable work history.
The client knew he had to raise his credit score above the 600 level in order to improve his chances. So he paid a credit repair service, Lexington Law, about $500 to find and correct errors in his records. That helped boost his score above 640.

How foreclosure impacts your credit score

The client got the loan and closed on a home a couple weeks ago. The bankruptcy made it tough -- but not impossible.
As Melanie Roussell, a spokeswoman for the FHA explained, the agency is willing to overlook a blemish on a credit report -- even a big one -- if other factors are favorable.
In today's unforgiving housing market, that's music to a borrower's ears.

How Long Will Negative Equity Last???

2011-06-20T13:55:00.000-07:00

Summary

 CoreLogic estimates that the typical U.S. homeowner who is in a negative equity position will not experience positive equity until late 2015 to early 2016.

 In some depressed markets, the typical borrower in negative equity may not experience positive equity until 2020 or later.

 For the foreseeable future, decline in negative equity is driven slightly more by amortization than by home price appreciation trends.

The decline in home prices and the rise in negative equity have been well documented.

CoreLogic research indicates that more than 11.3 million, or 24 percent, of all residential properties with mortgages, had negative equity at the end of the fourth quarter of 2009. A borrower is in negative equity if he or she owes more on the mortgage than the home is worth.

Given that the largest home price declines have already occurred and negative equity is not expected to continue to increase significantly, the question going forward is: how long will these borrowers will remain underwater?” To answer that question, future home values and unpaid principal balances were projected for a selected set of Core Based Statistical Areas (CBSAs) to gauge how long it will take for the average underwater borrower to return to positive equity.

Figure 1 above projects the amount of negative equity using CoreLogic short-term forecasts and a baseline view of long-term price trends nationally through 2020. It also takes into account the amortization assumptions described below for ten markets. For the typical underwater borrower in the U.S. it will take until late 2015 or early 2016 for negative equity to disappear.

In certain markets, it will take another five to 10 years or even longer to return to positive equity. For example, Detroit is not projected to recover even by 2020, because of its depressed economy. In markets with low shares of negative equity, the recovery time will still be long because the few borrowers that are upside down are deeply in negative equity and these are typically not high appreciation markets. Although house price appreciation will, over time, offset negative equity, amortization (the paying down of loan balances) will in most cases be a more significant remedy to negative equity.

Over the next 10 years, the average loan balance will decrease by an annual rate of 3.3%; meanwhile home price are expected to increase at a 3% annual rate over the next decade. Of the ten markets studied, the Washington-Arlington-Alexandria CBSA is expected to reach positive equity by 2015; Atlanta-Sandy Springs-Marietta, Dallas-Plano-Irving and Riverside San Bernardino-Ontario are projected for 2016; Boston-Quincy by 2017; and Cape Coral-Fort Myers, Pittsburgh, Las Vegas-Paradise and Lancaster, PA by 2020.

It is estimated that Detroit will not reach positive equity until after 2020.
Alternative scenarios – using higher and lower long-term price appreciations and alternative speeds for the recovery in home prices to the long-term average – were also considered. Assuming a 5% nominal price appreciation nationally (which would be much higher than historical appreciation, given today’s low inflation environment), the early markets will approach positive equity by 2013 and the majority will be positive equity by 2017.

Assuming 1.5% nominal price appreciation, which would be fairly low relative to history, the earliest markets will not reach positive equity until 2017. When alternative scenarios of how long it takes home prices to revert to the long-term average were tested, they had a moderate impact, but not as large as the absolute level of home price appreciation or amortization assumptions.

Analysis and Methodology

A geographically diverse group of metropolitan CBSAs was selected and a forecast of home prices using the CoreLogic repeat sales home price index (HPI) was produced. The shortterm forecasted home prices are driven by supply/demand factors such as interest rateinduced affordability, the unemployment rate, price-to-rent ratios, month’s supply and foreclosure activity. The long-term home price forecast utilizes a mean reversion-based approach on over 30 years of data for the national market which is then is adjusted for each market based on the long-term relationship between the CBSA and national price trends. In the analysis, a 3% nominal annual national long-term price projection was used given that home prices in the selected CBSAs exceeded inflation by 1% over the last 30 years and the consensus inflation forecast is about 2.0%.

In addition, historical trends in the largest statelevel house price busts were utilized to determine how quickly previous home price recoveries ensued and reverted back to the long-term trend. We then applied the forecast for each market to the average value for all negative equity properties to produce a forecast of future values.

The same analysis was applied to a typical underwater borrower nationally. To forecast future unpaid principal balances, an amortization schedule for a typical five-yearold loan with a fixed-rate mortgage of 6% was used. This is the typical loan in the CoreLogic LoanPerformance database of over 40 million active loans nationwide. Many of the markets that are most upside down in Nevada, Arizona, California and Florida heavily used alternative adjustable mortgage structures, but given the wide variety of the structures and payment options, it is difficult to determine what their amortization schedules are. However, the majority of payment option ARMs’ (among the most popular “affordability” products) interest-only period ended within five years of origination and many of these loans have already, or soon will,
become fully amortizing at a faster pace than a typical 30-year fixed-rate mortgage because the principal must be paid over the remaining period of the original 30-year term.

Foreclosures fall for 8th straight month

2011-06-20T13:47:00.000-07:00

(CNNMoney) -- Foreclosure filings experienced their eighth straight month of declines, according to RealtyTrac.

In May, filings fell 33% from a year earlier and 2% month-over-month, according to the online marketplace of foreclosed properties. The number of homes that were repossessed (referred to as REOs or real estate-owned properties) in May also declined to 66,879, down 3.8% from April and 29% year-over-year, the firm said.

The huge year-over-year drop in foreclosures doesn't necessarily mean the housing market is staging a recovery, however.

James Saccacio, the CEO of RealtyTrac, says the declines are likely due to lingering effects of the "robo-signing" scandal, which broke last September, when it was discovered that banks were playing fast and loose with foreclosure documents.
In some cases, it was found that banks brought foreclosure proceedings upon homeowners when they had no standing to do so. Sloppy paperwork sometimes made it impossible to tell which entity was the rightful owner of the mortgage notes.
To help fix the mess, foreclosure proceedings were temporarily suspended. Even though the suspension has since been lifted, the pace of foreclosures remains significantly slower as banks more thoroughly review each case to ensure they are being handled legally and properly.

Walk away from your mortgage? Get 'ruthless'
"Foreclosure processing delays continue to mask the true face of the foreclosure situation," said Saccacio. "Lenders are somewhat unevenly pushing batches of bad loans through foreclosure as they overhaul their paperwork and documentation procedures."

There's another factor at play, as well. The banks can't sell the homes they've already seized so they aren't as incentivized to repossess more homes.
"[There's] weak demand from buyers, making it tough for lenders to unload their REO inventory," said Saccacio. "Even at a significantly lower level than a year ago, the new supply of REOs exceeds the amount being sold each month."
The banks don't want to take on the expense of maintaining the homes -- property taxes, heating costs, repairs and insurance -- if they can't sell them quickly.
Selling off the inventory of repossessed homes is crucial to the housing market, said Jim Gillespie, CEO of Coldwell Banker. Sold at steep discounts, REOs compete with new homes for buyers and have severely depressed new home sales.

"That's a critical element for the economic recovery," said Gillespie. "If new homes were selling anywhere close to their levels of five years ago, it would add a full point to the GDP."

The steepest drops in filings have come from judicial states, ones in which the courts are involved in repossessions. In these states, where foreclosure proceedings are subject to the scrutiny of the courts, it appears banks are taking special care to make sure they've stamped out the last vestiges of the robo-signing issues.
Nevada, where most cases are handled outside of court, continued to be foreclosure central. One of every 103 households received a notice of some kind in May. However, that was an improvement of 23% compared with May 2010. Arizona, with one filing for every 210 households, and California, one for every 259, were second and third.

The judicial state of Florida, where the housing market is no better, has seen a much greater drop-off in filings over the past year, down 62%. It now has the eighth highest foreclosure rate, of one filing for every 461 households. A year ago, it was in the top four, along with the other "Sand States."

Home improvements that pay off

2011-06-13T10:54:00.000-07:00

The temptation is strong: Clean up the yard, declutter the house, and put it on the market without spending time and money sprucing the place up for sale. This is especially the case if you anticipate losing money on the sale.

Some real estate agents recommend you do little if anything to get your home ready for sale. This could work if you price the listing to look like a bargain. However, most buyers in today's market are nervous and picky. They aren't in a hurry and they want a house that's move-in ready.

An agent who is looking for a fast sale might steer his or her clients away from doing any fix-up work. It takes a lot of time and coordination, not to mention money, to get a home properly prepared for sale in today's market. Some agents don't want to take on the effort, or haven't the vision to see the home's potential. This could cost you on the sale.

One agent told his clients that they needn't do anything to get their house ready for sale. True, the house had inherent charm and good bones. But, the seller's furniture was much too big to show the rooms off to advantage. The dogs had damaged the hardwood floor and the beautiful garden was overgrown.

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The house didn't sell until the sellers found another agent who recommended a laundry list of items to take care of before selling, including moving most of the seller's furniture out and having the house staged.

Unfortunately, market values declined between the first and second times the home was listed. Even though the house sold quickly with multiple offers the second time it was listed, it sold for less than it would have if it had showed well the first time it hit the market.

HOUSE HUNTING TIP: Choose an agent to work with who has experience helping sellers prepare their homes for the market. Ask an agent you're thinking about hiring for references. Call past sellers and ask them how effectively the agent helped them get their home sold and whether they made back the money they invested getting the home ready for sale.

A good agent should be able to supply you with a list of tradespeople who can help you paint, change outdated floor coverings and light fixtures, etc., at reasonable prices. And your agent ought to be able to provide access to the home for the people you select to help with the fix-up if you are out of town or at work.

Ideally, you should work with your agent who will help you prioritize the things that should be done to bring about a timely sale. For example, an outdated kitchen can usually be improved considerably by painting, changing light fixtures, refinishing or replacing a worn floor, and changing cabinet pulls.

It might make sense to change extremely old appliances and counters. However, it's not a good idea to gut the kitchen and completely remodel it for sale. You won't get that money back when you sell. The aim is to make cost-effective improvements that make your home appealing to the broadest number of buyers possible.

Painting is the least expensive improvement you can make that is likely to return more than you invest, provided you select the right colors. One seller repainted the exterior of his home before he selected a real estate agent. He painted it the same dowdy colors that adorned the house for decades. The first thing the buyers wanted to change was the exterior paint color.

Home clearance sale coming from 'desperate' sellers

2011-06-03T20:11:00.000-07:00

(CNNMoney) -- Home prices are already a third off their highs, but this summer could bring the real discounts.
Buyers are still cautious, and anxious sellers will have to price aggressively to get them off the fence.

That could result in a "summer clearance sale," predicts Pete Flint, CEO of Trulia, the real estate web site.
"We don't imagine a stampede of buyers, like outside of Macy's on Black Friday," he said. "We see this more akin to January sales where retailers are trying to get rid of stock before it gets stale."
Several factors, he said, will lead to blow-out prices:

Accelerating price drops: Home prices have already reached their lowest level since the housing bubble burst, and are now at 2002 levels. Sellers will feel the pressure to make deals before their homes lose even more value.

Bloated inventory: There are boatloads of homes on the market, more than eight months worth at the current rate of sales. Many are distressed properties -- short sales and bank repossessions. Such homes are selling at discounts up to 50%.

Tight credit: Some homebuyers still can't obtain mortgages, limiting demand.

Unemployment: While the job picture has brightened, unemployment is still around 9%. People without jobs don't buy homes, obviously, but high unemployment also rattles working people. Lacking the confidence that their jobs are secure, they may not look to buy.
These forces could all come to a head this summer, according to Flint, because of the cyclical nature of homebuying. Buying takes off in spring as many young families hope to make their moves before the new school year.
"By the end of the homebuying season, sellers will become increasingly desperate," said Flint.
10 Cities where houses are already dirt cheap
Adding to already swollen inventories will be a flood of new distressed properties poised to hit the market.
"By the summer, most of the 'robo-signing' delays will be over and more distressed properties will be on the market," said Celia Chen of Moody's analytics.
Many banks had slowed foreclosure proceedings until they made sure that paperwork was in order. That put hundreds of thousands of homes into foreclosure limbo: Borrowers were no longer making payments in many cases, but were allowed to remain living in the homes.
There's little urgency for buyers to act in this stagnant market because no one expects prices to turnaround, according to Ken Johnson, a real estate professor at Florida International University and co-author of a new study on whether it's better to buy or rent. Realizing that home prices will likely get even better, buyers can wait for even better deals.
"If people think we're at the bottom of the market, they'll act," he said.
Housing markets: best recovery bets
All the experts, however, are telling buyers that prices will continue to erode all through 2011. Even after that, no one is predicting outsized price gains.
"There will be a lousy housing market for another year or two," said Michael Larson, a housing analyst for Weiss Research.
Even if we're at or near the bottom, buyers are unlikely to see prices rise much if they wait.
"I myself continue to rent," said Johnson. "I know that even if I don't buy for a year, it's no big deal. Who cares if I miss the bottom if prices only go up a couple of points or so?"

Housing Construction in California Rises in April, CBIA Announces

2011-06-01T19:45:00.000-07:00

SACRAMENTO – Total housing starts in California, as measured by the number of building permits issued, rose 2 percent in April, the California Building Industry Association announced today.

According to statistics compiled by the Construction Industry Research Board (CIRB), permits were pulled for 3,474 total housing units in April, up 2 percent from the same month a year ago but down 23 percent from March. Permits for single-family homes totaled 1,978, down 16 percent from April 2010 but up 10 percent from the previous month, while multifamily permits totaled 1,496, up 43 percent from a year ago but down 45 percent from March.

For the first four months of the year, permits were pulled for 13,250 total units, down 4 percent when compared to the first four months of 2010 when 13,784 permits were issued. Permits for single-family homes were down 22 percent while permits for multifamily units were up 26 percent.

“While it wasn’t a huge increase, it’s nice to see a slight improvement over last year,” said Mike Winn, CBIA’s President and CEO. “We are closing the gap compared with last year in year-to-date figures as well, and we hope to see continued increases in the summer months.”

Winn noted that CIRB is now projecting 51,000 total permits will be pulled in 2011, up from 2010’s total of 44,762 permits, but still down from 2008’s total of 64,962.

“It appears we will experience another year of modest improvement, but it’s an improvement nonetheless,” said Winn. “As housing has historically been a prolific job and economic generator, we urge local government officials to work with builders on reducing and delaying the collection of impact fees to help make projects more financially feasible so that we can help in our state’s economic recovery by putting more people back to work. We would also urge our state lawmakers to ‘do no harm’ and thoroughly examine any legislation that might harm our industry’s still-fragile recovery.”

###

The California Building Industry Association is a statewide trade association representing thousands of homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. More information is available on the Association's Web site, www.cbia.org.

The Construction Industry Research Board (CIRB) is a nonprofit research center established in 1974 to provide statistical information on the California building and construction industry. More information is available on the CIRB Web site, www.cirbdata.com.

U.S. new home sales much stronger than expected in April to reach a four-month high

2011-05-24T08:31:00.001-07:00

New home sales in the US rose 7.3% to 323,000 annualized units in April, beating market expectations for only a slight increase to 305,000 units. The gain builds on the solid 8.3% increase to 301,000 annualized units (initially reported as 300,000) recorded in March that followed the slowest pace of sales since record keeping began in 1963 at 278,000 in February (previously reported as 270,000 units). The improved pace of sales combined with another decline in the number of new homes available for sale to reduce the months’ supply of unsold new homes to 6.5 from 7.2 in March (revised from the previously reported 7.3).

The strength in new home sales was broadly based, with the West (15.1%), Northeast (7.7%), Midwest (4.9%), and South (4.3%) all posting solid gains in April.

The number of new homes available for sale declined 2.8% to 175,000 in April, marking the forty-ninth consecutive month in which inventories decreased. The 175,000 level is the lowest number of new homes available for sale on record for the series dating back to 1963. At the current pace of sales, it would take 6.5 months to clear this inventory of new homes, down from 7.2 in March. This represents the lowest months’ supply since April 2010 and is within range of the series’ long-term average of 6.1.

While today’s reported increases in new home sales and continued decline in inventories are encouraging news for the rebalancing of the housing market, new homes have taken on a reduced importance in residential real estate in the last two years, and they now make up only a 7% share of total sales (compared to the pre-recession average of 17%). As a result, while new home sales are a timelier indicator than existing sales (new home sales are counted at signing whereas resales are counted at closing), the latter are currently considered a more important indicator of housing market conditions and will likely continue to be until the supply overhang in the market, due to the glut of foreclosed properties available for sale at a steep discount, is absorbed.

Housing crisis: A sign that the worst is over

2011-05-23T14:18:00.000-07:00

NEW YORK (CNNMoney)

The mortgage delinquency picture is getting brighter, according to an industry report released Thursday, with falling delinquency rates indicating the housing crisis may be at the beginning of its end.
A quarterly release from the Mortgage Bankers Association revealed that mortgage payment problems eased during the first three months of 2011 for every category of default.

The rate of loans past due, unadjusted for seasonal factors, decreased 1.17 percentage points to 7.79% from 8.96% during the last quarter of 2010. It was down 1.59 points year-over-year..
"These numbers point to a mortgage market on the mend," said Jay Brinkmann, MBA's chief economist. "Foreclosure starts are at the lowest level since the end of 2008 and had the second largest drop ever. The percentage of loans somewhere in foreclosure is down from last quarter's record high and also had one of the largest drops we have ever seen."
He noted the improved performance of loans issued during the years 2005 through 2007, many of which were of the toxic, subprime variety. Those were the mortgages that, he said, "drove the market collapse." They still accounted for 65% of all delinquencies last quarter, even though they represent just 31% of loans outstanding.

Those loans are performing better now, mostly because many of the worst loans have already been purged from the system through foreclosure, and the remaining ones are now past the age when mortgages usually default.
That, combined with the much stricter underwriting standards for newer mortgages, has improved overall credit quality, and delinquencies should continue to drop.
Coming soon: a mortgage you can understand
Even in their improved numbers, the delinquency statistics may be overstating the problem, according to Brinkmann.
He said massive problems in local markets may dominate national data, obscuring the positive trends happening elsewhere. Florida, for example, accounted for nearly a quarter of all homes in foreclosure during the quarter and 23% of loans there are in some stage of delinquency.
"The state has more homes in foreclosure than 22 states have loans," said Brinkmann. "That's why I don't put too much stock in the national numbers. The problem states have too much impact on them."
The overall national decline comes despite continuing delays in processing foreclosures stemming from the "robo-signing" scandal in which banks were accused of mishandling legal paperwork.
As a result, foreclosures take longer to work through the system, so they show up in delinquency rates quarter after quarter. In New York, for example, the average length of time between a first missed payment and the final bank repossession is now more than two years.
In Florida, according to Brinkmann, many attorneys no longer handle foreclosure cases; the banks are having trouble finding attorneys to foreclose. If they can work through this problem, delinquency rates could decline faster.
Foreclosures crush home prices
Meanwhile, the nation's continued, albeit slow-motion, economic recovery is also providing some relief. There's a close correlation between unemployment and mortgage payment problems. Not only are people with jobs more able to make their mortgage payments than unemployed borrowers, but hiring itself boosts consumer confidence and, ultimately, housing markets.
"People with jobs feel they're less likely to lose them [when they see other people being hired]," said Brinkmann.
That makes them more likely to form new households and buy homes. Some of those homes they buy are in foreclosure, which clears those properties out of delinquency reports such as this one.
The light at the end of the foreclosure crisis tunnel may still be some distance off, but at least it's visible again after years of doom and gloom

Home sellers are financing buyers with poor credit!

2011-05-16T15:43:00.000-07:00

Sue and Douglas Reed knew no bank would give them a mortgage - not with a bankruptcy and two foreclosures fresh in their credit history.

They turned to Hilarie Walters, whose childhood home on 15 acres in Marshall, Mich., had been on the market since 2009. The unemployed single mother of twins agreed in December to sell the property to the Reeds for $105,000. She also consented to a risky payment plan that in effect makes her the couple's mortgage lender.

Financing provided by home sellers, popular in the 1980s when mortgage rates reached 18 percent, is making a comeback in markets such as Michigan that have been hit hard by foreclosures and where tightening lending standards and years of economic distress have drained the pool of creditworthy buyers. For a small but growing number of people, it's the only way to get a deal done.

"This is the American dream, and we're going for it no matter what," said Sue Reed, 56, who sells snacks from a trailer at estate auctions and going-out-of-business sales. "We'll either make it or it will break us."

Michigan, where unemployment is 10.3 percent, leads the nation with about 1,600 home listings advertising seller financing, according to Trulia Inc., a San Francisco real estate information company. It is followed by Florida, Ohio, California, Wisconsin, Minnesota and Texas.

Last year, 52,991 U.S. homes were purchased with various forms of owner financing, up 56 percent from 2008, said Realtors Property Resource LLC, a subsidiary of the National Association of Realtors, citing data collected from county record offices. Such deals accounted for 1.5 percent of all transactions in 2010.

"Anytime the market is in this much trouble, people have to find ways to get it to function," said Dennis Capozza, a professor of finance at the University of Michigan in Ann Arbor. Capozza has direct experience with seller financing: He purchased a friend's foreclosed home a couple years ago and allowed him to buy it back in installments.

Home sales, weighed down by a 9 percent national jobless rate and tight credit, have languished even as 30-year mortgage rates remain below 5 percent. Loans insured by the Federal Housing Administration carried an average FICO score of 703 in March, compared with 629 two years earlier, highlighting that lenders are requiring stronger credit histories. FICO scores range from 300, the least creditworthy, to 850 for the best borrowers.

"The market is locked up because there's no financing," said Gordon Albrecht, executive vice president of FCI Lender Services Inc., an Anaheim Hills firm that oversees mortgages for private investors. "This is moving houses."

Market data provided by Bloomberg News

Existing-Home Sales Rise in Most States in First Quarter; Metro Area Prices Mixed

2011-05-13T14:09:00.000-07:00

Existing-home sales continued to recover in the first quarter with gains recorded in 49 states and the District of Columbia, while 22 percent of the available metropolitan areas saw prices rise from a year ago, according to the latest survey by the National Association of Realtors®.

Total state existing-home sales, including single-family and condo, rose 8.3 percent to a seasonally adjusted annual rate1 of 5.14 million in the first quarter from 4.75 million in the fourth quarter, and are only 0.8 percent below a 5.18 million pace during the same period in 2010.

Also in the first quarter, the median existing single-family home price rose in 34 out of 153 metropolitan statistical areas2 (MSAs) from the first quarter of 2010, including four with double-digit increases; one was unchanged and 118 areas showed price declines.

Lawrence Yun, NAR chief economist, said home prices are all over the map. “The reading of quarterly price data can be volatile because they are based on the types of homes that are sold during the quarter. When buyers principally purchase distressed properties in a given market, the recorded prices will be very low, which is what we’re seeing now in much of the country,” he said. “Annual price data provides a better guide about the direction of the market in those areas.”

The national median existing single-family home price was $158,700 in the first quarter, down 4.6 percent from $166,400 in the first quarter of 2010. The median is where half sold for more and half sold for less. Distressed homes,3 typically sold at a discount of about 20 percent, accounted for 39 percent of first quarter sales, up from 36 percent a year earlier.

To clarify, Yun said lower priced homes have seen the best sales performance. “The biggest sales increase has been in the lower price ranges, which are popular with investors and cash buyers,” he said. “The preponderance of sales activity at the lower end is bringing down the median price, so what we’re seeing is the result of a change in the composition of home sales.”

Although sales are slightly below a year ago, the volume of homes sold for $100,000 or less in the first quarter was 8.9 percent higher than the first quarter of 2010, creating a downward skew on the overall median price. The share of all-cash home purchases rose to 33 percent in the first quarter from 27 percent in the first quarter of 2010.

Investors accounted for 21 percent of first quarter transactions, up from 18 percent a year ago, while first-time buyers purchased 32 percent of homes, down from 42 percent in the first quarter of 2010 when a tax credit was in place. Repeat buyers accounted for a 47 percent market share in the first quarter, up from 40 percent a year earlier.

“The rising sales trend in nearly all states is a part of the healing process to clear off inventory. Sales need to rise before prices can firm up,” Yun added.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said strong sales of distressed homes are exactly what the market needs. “The good news is foreclosures, which account for two-thirds of all distressed homes sold, are selling very quickly,” he said. “Short sales still take far too long to get lender approval, but it appears the inventory of distressed property is peaking and will be gradually declining next year. This means the market should slowly return to balance. We are encouraged that recent home buyers are having exceptionally low default rates.”

According to Freddie Mac, the national commitment rate on a 30-year conventional fixed-rate mortgage averaged 4.85 percent in the first quarter, up from a record low 4.41 percent in the fourth quarter, but below the 5.00 percent average in the first quarter of 2010.

In the condo sector, metro area condominium and cooperative prices – covering changes in 53 metro areas – showed the national median existing-condo price was $152,900 in the first quarter, down 10.4 percent from the first quarter of 2010. Eleven metros showed increases in the median condo price from a year ago, one was unchanged and 41 areas had declines.

Regionally, existing-home sales in the Northeast increased 0.8 percent in the first quarter to a level of 800,000 but are 7.3 percent below the first quarter of 2010. The median existing single-family home price in the Northeast declined 5.0 percent to $234,100 in the first quarter from a year ago.

Existing-home sales in the Midwest rose 7.9 percent in the first quarter to a pace of 1.09 million but are 5.0 percent below a year ago. The median existing single-family home price in the Midwest fell 5.3 percent to $124,400 in the first quarter from the same period in 2010.

In the South, existing-home sales increased 8.5 percent in the first quarter to an annual rate of 1.96 million and are 2.8 percent higher than the first quarter of 2010. The median existing single-family home price in the South slipped 0.6 percent to $141,800 in the first quarter from a year earlier.

Existing-home sales in the West jumped 13.5 percent in the first quarter to a level of 1.29 million and are 2.1 percent above a year ago. The median existing single-family home price in the West fell 4.7 percent to $197,400 in the first quarter from the first quarter of 2010.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

# # #

NOTE: Data tables for both metro area home prices and state existing-home sales are posted at: www.realtor.org/research/research/metroprice. For areas not covered in the tables, please contact the local association of Realtors®.

There often are differences between NAR’s data and locally reported data because of differences in methodology, which may include the geographic coverage area, housing types, and Census benchmarking used in NAR’s model. More importantly, there is a parallel between the percentage changes over time that is typically seen even when using different methodologies.

1The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing. NAR began tracking the state sales series in 1981.

Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.

2Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. A list of counties included in MSA definitions is available at: www.census.gov/population/estimates/metro-city/0312msa.txt.

Regional median home prices include rural areas and samples of many smaller metros that are not included in this report; the regional percentage changes do not necessarily parallel changes in the larger metro areas. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Quarter-to-quarter comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.

NAR began tracking of metropolitan area median single-family home prices in 1979; the metro area condo price series dates back to 1989.

Because there is a concentration of condos in high-cost metro areas, the national median condo price generally is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional areas will be included in the condo price report.

3Distressed sales, first-time buyers, investors and all-cash transactions are from a survey for the Realtors® Confidence Index.

Second quarter metro area home price and state resale data will be released August 10 at 10:00 a.m. EDT

Remodeling Market Index Reaches Highest Level in Four Years

2011-05-05T20:52:00.000-07:00

April 28, 2011 - According to the National Association of Home Builders' (NAHB) Remodeling Market Index (RMI), the remodeling market is heading into recovery with an increase to 46.5 in the first quarter of 2011 from 41.5 in the fourth quarter of 2010. This marks the highest level for the RMI since the fourth quarter of 2006. An RMI below 50, however, indicates that still more remodelers report market activity is lower (compared to the prior quarter) than report it is higher.

The overall RMI combines ratings of current remodeling activity with indicators of future activity like calls for bids. Current market conditions for the first quarter of 2011 rose to 46.1 from 43.3 in the previous quarter. Future market indicators climbed to 46.8 from 39.7 in the previous quarter.

"Remodelers report a jump in activity so far this year and have been receiving more calls for work and appointments," said NAHB Remodelers Chairman Bob Peterson, CGR, CAPS, CGP, a remodeler from Ft. Collins, Colo. "However, many home owners are still slow to commit to remodeling due to feeling uncertain about the economic recovery and difficulty obtaining loans."

Regional break downs for current remodeling market conditions showed growth in all but one area: Northeast 46.1 (from 38.8 in the fourth quarter), South 46.1 (from 45.8), and West 46.1 (from 39.7). Only the Midwest experienced a decline to 47.1 (from 54.3).

All current remodeling market indicators increased: major additions to 50.3 (from 48.6 in the fourth quarter), minor additions to 48.0 (from 43.9), and maintenance and repair to 39.5 (from 37.0). Future market indicators also improved across the board: calls for bids rose to 53.1 (from 47.2), appointments for proposals to 52.4 (from 43.1), backlog of remodeling jobs to 49.7 (from 42.6), and amount of work committed for the next three months to 32.1 (from 25.9).

In an additional special question remodelers reported the top reasons prospective customers are holding back from remodeling their homes:

Customers think it is hard to get financing (90 percent of remodeler respondents)Customers have lost equity in their homes (81 percent)Customers are uncertain about their future economic situation (74 percent)Reluctance to invest in home when not sure home will hold its value (67 percent)Negative media stories making customers more cautious (62 percent)Inaccurate appraisals are making financing more difficult (54 percent)

"Home remodeling continues to slowly increase and continued growth through the year is expected." said NAHB Chief Economist David Crowe. "The fact that some indicators are breaking 50 means remodelers are seeing improving activity in their markets. While credit scarcity and economic uncertainty continue to weigh down remodeling, signs of increasing consumer interest are promising."

Pending Home Sales Rise Again in March

2011-04-29T06:43:00.000-07:00

March saw another increase in pending home sales, with contract activity rising unevenly in six of the past nine months, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, rose 5.1 percent to 94.1 in March from a downwardly revised 89.5 in February. The index is 11.4 percent below 106.2 in March 2010; however, activity was at elevated levels in March and April of 2010 to meet the contract deadline for the home buyer tax credit.

The data reflects contracts but not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said home sales activity has shown an uneven but notable improvement. “Since reaching a cyclical bottom last June, pending home sales have posted an overall gain of 24 percent and demonstrate the market is recovering on its own,” he said. “The index means modest near-term gains in existing-home sales are likely, which would be even stronger if tight mortgage lending criteria returned to normal, safe standards.”

The PHSI in the Northeast fell 3.2 percent to 63.4 in March and is 18.4 percent below March 2010. In the Midwest the index rose 3.0 percent in March to 83.5 but is 16.6 percent below a year ago. Pending home sales in the South jumped 10.3 percent to an index of 110.2 but are 10.5 percent below March 2010. In the West the index increased 3.1 percent to 103.7 but is 4.1 percent below a year ago.

“Based on the current uptrend with very favorable affordability conditions, rising apartment rents and ongoing job creation, existing-home sales should rise around 5 to 10 percent this year with sales growth of lower priced homes likely to outperform high-end homes. That means the price trend will reflect more homes sold in the lower price ranges,” Yun said.

“The good news is that recent home buyers are staying well within budget, leading to exceptionally low loan default rates among home buyers over the past two years,” Yun added.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

# # #

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.

The Conference Board Consumer Confidence Index® Increases Slightly

2011-04-27T18:51:00.000-07:00

26 April, 2011

The Conference Board Consumer Confidence Index®, which had decreased in March, improved in April. The Index now stands at 65.4 (1985=100), up from 63.8 in March. The Present Situation Index increased to 39.6 from 37.5. The Expectations Index rose to 82.6 from 81.3.

The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by The Nielsen Company, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for April’s preliminary results was April 14, 2011.

Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumer confidence, which had declined sharply in March, posted a modest gain in April. Consumers’ short-term outlook improved slightly, suggesting that the uncertainty expressed last month is easing. Inflation expectations, which had spiked, retreated somewhat in April. Although confidence remains weak, consumers’ assessment of current conditions gained ground for the seventh straight month, a sign that the economic recovery continues.”

Consumers’ appraisal of present-day conditions, although mixed, improved in April. Those stating conditions are “good” decreased slightly to 14.8 percent from 15.0 percent. Those stating business conditions are “bad” also declined slightly to 36.4 percent from 36.6 percent. Consumers’ assessment of the labor market was more favorable than last month. Those saying jobs are “hard to get” declined to 41.8 percent from 44.4 percent, while those stating jobs are “plentiful” increased to 5.2 percent from 4.6 percent.

Consumers’ short-term outlook, which had soured in March, improved moderately in April. While those expecting business conditions to improve over the next six months declined to 18.8 percent from 20.8 percent, those anticipating business conditions to worsen decreased to 14.2 percent from 15.5 percent. Consumers were mixed about the labor market outlook for the next six months. Those expecting more jobs in the months ahead declined to 17.5 percent from 19.6 percent, while those anticipating fewer jobs declined to 19.0 percent from 20.5 percent. The proportion of consumers expecting an increase in their incomes improved to 16.7 percent from 15.2 percent.

U.S. new home sales stronger than expected in March

2011-04-25T14:47:00.000-07:00

New home sales in the US jumped 11.1% to 300,000 annualized units in March, beating market expectations for an increase to 280,000 units. While this represents a solid monthly gain, it follows the slowest pace of sales since recordkeeping began in 1963 at 270,000 annualized units in February (initially reported as 250,000 units) and represents the seventh-slowest pace of sales on record. The improved pace of sales, combined with a decline in the number of homes available for sale, pushed the months’ supply of unsold new homes down to 7.3 from 8.2 in February.
The strength in new home sales was seen in smaller regions, with the Northeast (66.7%), West (25.9%), and Midwest (12.9%) all posting large gains in March. The South region, where sales outnumbered those of the other regions combined, provided some offset by edging marginally lower (-0.6%).
The absolute number of new homes for sale declined 1.1% to 183,000 in March, marking the fourteenth consecutive month in which inventories either held steady or decreased. The 183,000 level is the lowest number of new homes available for sale since August 1967. The drop in months’ supply moves it closer to the series’ long-term average of 6.1, and further below the recent peak of 12.1 seen in January 2009.
While new home sales are generally considered a more timely indicator of housing market conditions than existing sales (given that the former are counted earlier in the sales process than the latter), the persistence of market imbalances stemming from the flood of foreclosed properties onto the resale market that allow steep discounts to be had by homebuyers have reduced the market share of new homes (to 6% of total sales from a long-term average of 17%). With that said, today’s reported double-digit increase in sales and the continued decline in inventories are positive news and provide more evidence that the housing market is beginning to take some tentative steps toward recovery.

Mortgage denied: Sometimes, for no good reason

2011-04-21T07:59:00.000-07:00

Getting a mortgage just keeps getting tougher, and many homebuyers are getting rejected for loans they could easily afford.

The issue: Tighter standards from Fannie Mae and Freddie Mac, the government entities that back mortgages made by banks.

Banks are reluctant to make loans without the Fannie and Freddie guarantee, and loans backed by them account for just about every mortgage written these days.

In 2009, the agencies lifted the minimum credit score that borrowers must have from 580 to 620. That's probably for the best.

But they've pushed through a host of other requirements as well, and that means real estate deals don't get done, even for some relatively low-risk borrowers.

"You can have one Fannie/Freddie guideline you violate and that gets you rejected," said Alan Rosenbaum of GuardHill Financial.

A quarter of all mortgage loan applicants get denied for loans, according to the Federal Reserve. Many other potential homebuyers never even try to get loans, said Jerry Howard, president of the National Association of Home Builders.

"The pendulum has swung too far in the other direction," Howard said. "This overreaction is retarding the housing market recovery." (Homes: What a million bucks buys)

Here are some of the reasons that banks must turn down borrowers for mortgages:

Too few of the condos in your association have been sold
For Fannie/Freddie lenders to approve a mortgage to finance purchase of a condo, a large majority of the units -- 70% -- have to be already sold or under contract to individuals. Before 2009, the threshold was 51%.

If more than 30% are still owned by the company that built the complex or sponsored its conversion from rental units, the mortgage will be denied, no matter how qualified the buyer is.

Vulture investors flipping their way to big profits
The reasoning is that condo developments where the builders or sponsors still own a large share of the units are more likely to get into financial difficulty. If the builder or sponsor runs out of funds before it can sell off the units, it may stop paying the common charges and property taxes.

Struggling sponsors have also lost unsold units to creditors, which resold them off at bargain basement prices. That jeopardizes the values of all the condo units, sending borrowers underwater and making them more likely to default.

The agencies also refuse to fund condo loans if buildings face some pending legal liability, if more than 15% of owners are behind on homeowner dues or if more than 10% of units are owned by a single entity.

Your debt is too high
Fannie and Freddie have also increased their emphasis on income relative to debt.

If someone's total debt payments exceed 45% of income, the mortgage will be denied. In 2009, the limit was 55%.

Using that as a hard and fast rule can penalize very qualified buyers, ones who should be able to meet their debt obligations.

Take, for example, a couple that wants to buy a second home as a rental. Two mortgage payments could easily push them past the 45% threshold, even though they'll have rental income and home equity.

The 45% rule can also hurt small business owners who have had a couple of bad years. Their incomes may be down relative to their debt, but they may have plenty of cash to keep from defaulting on a mortgage.

The wait after foreclosure is extended to seven years from five
Some borrowers lost homes to foreclosure but then diligently rebuilt their financial health. Despite high credit scores, ample assets and income and steady employment, lenders are not allowed to finance their Fannie/Freddie mortgages if their foreclosures happened any time within the past seven years.

Before spring last year, the wait time was five years.

Missed payments on credit card debt
Fannie and Freddie also have gotten stricter in how they factor in missed payments on credit cards, auto loans and other debts in which the balances do not have to be paid off every month.

They used to be okay with a missed payment or two. Now, one missed payment will hit your debt-to-income ratio, because banks will add 5% of your outstanding loan balance to the debt part of the calculation.

That would be an extra $1,000 on a $20,000 student loan balance, for example.

Where to go
"Portfolio lenders will look at the entire credit history and see a blemish and say, 'This has no impact on credit worthiness,'" said Rosenbaum.

They may offer rates and terms competitive with agency loans but if there are serious risk factors, loans can be more expensive, according to Bob Moulton, a mortgage broker with Americana Mortgage on Long Island.

"It's a tough environment," he said "For people like the self-employed, mortgages can get pricey."

He recently arranged a mortgage for a private businessman through a savings bank. His client paid a rate of 7.9%, about three points higher than the average 30-year fixed. The rate is only good for three years, after which it resets and can rise by as much as two points annually and go as high as 13.9%.

U.S. housing starts rose in March

2011-04-19T07:45:00.001-07:00

Privately-owned housing starts in the US rose 7.2% in March to an annualized pace of 549,000 units, retracing some of February’s upwardly revised 18.5% decline to 512,000 (previously reported 479,000). The rise in construction activity in March was slightly above market expectations for an increase to 520,000 annualized units. Building permits posted a solid increase as well, rising 11.2% to an annualized 594,000 units to trounce market expectations of a more modest 1.1% increase.

A solid pickup in housing starts in March was seen in both the single and multiple-unit components. Starts in the relatively stable singles component rose 7.7% to 422,000 annualized units, while the more volatile multiple-unit starts saw a 5.8% rise to 127,000 annualized units. New home construction surged in the Midwest (32.3%) and West (27.6%) while the Northeast had a more modest gain (5.4%). The South, the largest region, provided some offset, with starts falling 3.3%.

Permits for new housing units jumped 11.2% to an annualized 594,000 in March, the first monthly increase and the highest level of permits since December 2010. The gain in March reflected increased applications for both single-unit (5.7%) and multiple-unit residences (25.2%) and was evident across all regions.

Today’s report once again indicates that both starts and permits continue to hold within the fairly tight range between 500,000 and 650,000 annualized units that has been seen since the beginning of 2009. Monthly volatility in these data series’ has been fairly significant during this period as the result of one off factors such as: tax credits, changes in state building codes, and adverse weather, but the underlying trend has been largely sideways, echoing last week’s Beige Book that noted which residential real estate remains “little changed from low levels.” The increase in building permits in consistent with our expectation for housing starts to show a modest pickup in the near term, with our forecast calling for new home construction to rise to a 683,000 annualized pace by the end of 2011, although this still represents less than half of the pre-recession level. As a result, we continue to expect that the Fed will keep monetary conditions very accommodative throughout 2011 in an effort to help support improving housing market conditions.

>U.S. March CPI shows another large monthly increase

2011-04-15T12:52:00.000-07:00

U.S. March CPI shows another large monthly increase

Overall inflation continues to kick out sizeable monthly increases rising a solid, although expected, 0.5% in March, thereby matching a similar-sized increase in February. Most of the upward pressure came from energy prices, which rose 3.5% in the month although there was another surprisingly large 0.8% increase in food prices. We had expected some moderation in this component with some weather-related problems in February expected to be reversed as was evident in yesterday’s March PPI report. In the event, this component showed an even stronger gain relative to the 0.6% increase recorded in February with pressure relatively broadly based. This pressure offset core, or ex-food and energy, prices rising a weaker than expected 0.1% in the month. Expectations had been for a 0.2% rise. The strong overall gain sent the year-over-year rate up to 2.7% from 2.1% in February and a recent low in November 2010 of 1.1%. The modest monthly gain in core prices did not prevent a rise in the annual rate on this basis although the increase was relatively slight rising to 1.2% from 1.1% in February.

The modest gain in core prices was helped by declines in apparel prices (0.5%) and household furnishings (0.1%). These declines provided some offset from another large increase in new vehicle prices, which rose 0.7% after a 1.0% gain in February. Airline fares also rose a robust 1.9% reflecting rising fuel costs.

Today’s March CPI report is showing the effect of rising commodity prices with the annual rate of inflation rising to 2.7% from 2.1% in February. On a core basis, however, inflation remains quiescent rising only 1.2% during the past year. A still high unemployment rate, despite recent declines, is seemingly helping to restrain price increases outside of the energy and food components. The latest Beige Book report released earlier this week indicated that retailers were meeting more resistance than manufacturers in passing through cost increases. The persistence of this low core inflation provides scope for the Fed to focus on strengthening the pace of the expansion by maintaining the current highly stimulative monetary conditions. Although the Fed may start allowing debt to fall off its balance sheet as it matures in the second half of this year, we are not assuming any increase in Fed funds from its current range of 0% to 0.25% until 2012.

U.S. industrial production rises more than expected in March

U.S. industrial production (IP) posted a stronger than expected 0.8% increase in March, building on the upwardly revised 0.1% gain (previously reported as flat) in February. Market expectations were for a 0.6% increase in March IP. With the increase in production, the capacity utilization rate climbed to 77.4% in March from 76.9% (revised from 77.0%) in February.

The rise in IP in March reflected broad-based improvement, with manufacturing, utilities, and mining output all improving. Manufacturing production rose 0.7% in March following 0.6% and 0.8% increases in February and January, respectively. Production of motor vehicles and parts managed to climb 3.0% in March following a 4.6% increase in February. Going forward, April motor vehicle production numbers will likely be watched closely to gauge any potentially negative effect from supply-chain disruptions associated with the earthquake in Japan . Utilities output rebounded 1.7% in March following a 3.6% plunge in February and a 2.3% drop in January’s while mining output climbed 0.6% following a 0.3% increase in February.

With the increase in March, IP rose an annualized 6.0% in the first quarter of 2011 as a whole, suggesting some acceleration in growth following the 3.2% increase in the fourth quarter of 2010. With that said, indicators from other areas of the economy are suggesting a moderation in the pace of overall growth in the first quarter of the year as consumer spending likely slowed to about half of its 4.0% fourth-quarter 2010 increase, and bad weather evident early in the quarter appears to have weighed on construction activity. The stronger than expected rise in IP in March provides further evidence that some offset to this weakness will likely be provided by a stronger build in inventories; however, our monitoring suggests that this will not prevent GDP growth from slowing to a 2.0% rate in the first quarter of 2011 (below our 2.8% forecast) from 3.1% in the fourth quarter of last year. While the capacity utilization rate has retraced much of its decline during the recession, we expect that the persistence of economic slack in other areas of the economy, evident in the still elevated unemployment rate, continues to suggest that the underlying inflation backdrop will remain subdued going forward. As a result, we expect that the Fed will keep its policy rate in the currently highly stimulative 0.00% to 0.25% range into 2012.

2011-03-28T07:01:00.000-07:00

Personal consumer expenditure (PCE) rose 0.7% in February 2011 following an upwardly revised 0.3% (previously reported as 0.2%) in January. The increase in February was above market expectations for a 0.5% gain. On a volumes basis, PCE was up 0.3% in the month following a flat reading (previously -0.1%) in January.

Personal incomes rose 0.3% in February, slightly below market expectations for a 0.4% gain. With spending growth outpacing income growth in the month, the savings rate slipped to 5.8% in February from 6.1% in January.

The increase in overall spending in February reflected increases in all major spending categories. Spending on durable goods rose 1.6% in February following a 0.3% increase in January, reflecting an earlier reported 6.4% gain in unit vehicle sales in the month. Spending on non-durables increased by 1.4% following 1.0% and 0.6% increases in January and December, respectively; however, as was the case in January and December, increased spending in the non-durable component in February largely reflected the effect of rising gasoline prices in the month.

Spending on services rose 0.2% in February, following a flat reading in January and December’s 0.3% increase. In volume terms, spending rose 0.3% in February following an upwardly revised flat reading in January (previously -0.1%) but a downwardly revised 0.1% (previously 0.3%) increase in December.

Personal income rose 0.3% in February following an upwardly revised 1.2% surge in January (previously 1.0%). The jump at the start of the year largely reflected the implementation of payroll tax cuts announced in December. Disposable incomes rose 0.3% in February as well, following a 0.8% jump in January. With spending growth outpacing income growth in the month, the savings rate slipped to 5.8% in February from 6.1% in January.

On the inflation front, the core PCE measure rose 0.2% in February, which was in line with market expectations. The year-over-year rate of increase inched up, although to a still-subdued 0.9% from 0.8% in January.

The increase in the volume of PCE in February marks the ninth increase in 10 months thereby suggesting that the underlying trend in the data remains positive; however, the downward revision to December growth and the only modest upward revision in January suggest less momentum early in 2011 than initially expected. Today’s report is consistent with continued growth in PCE in the first quarter of 2011, although it appears that the pace of increase could be closer to 2.0% than our 2.8% forecast following a 4.0% increase in the fourth quarter of 2010. This suggests that overall GDP growth could come in below 3% in the first quarter of 2011, which would be below our 3.4% forecast.

The boost to incomes from the payroll tax cuts implemented in January and our expectation that labour markets will continue to improve suggest that PCE will bounce-back going forward, and we continue to expect overall GDP growth to improve in 2011 as a whole from the 2.9% increase recorded in 2010; however, this will still be sufficient to put only modest downward pressure on the unemployment rate in the near term. With unemployment forecasted to remain stubbornly high and the inflation backdrop remaining subdued, we continue to expect that the Fed will leave the fed funds target in its current 0% to 0.25% range into 2012.

California pending home sales, distressed sales rise in February

2011-03-25T07:27:00.000-07:00

LOS ANGELES (March 21) – Pending home sales rose in February, as did the share of distressed properties sold, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.

Pending home sales:

Pending home sales in California increased in February, according to C.A.R.’s Pending Home Sales Index (PHSI)*. The index was 112.1 in February, rising 20.6 percent from January’s revised index of 93.0, based on contracts signed in February. The index was down 1.6 percent from February 2010, when the presence of housing tax credits played a strong role in home sales. Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.

“The increase in pending sales is typical for this time of year, as we usually see a seasonal improvement in the spring,” said C.A.R. President Beth L. Peerce.

Distressed housing market data:

The total share of all distressed property types sold statewide increased in February to 56 percent, up from 54 percent in January and up from 55 percent in February 2010.

Non-distressed sales made up the remaining share at 44 percent in February, down from 46 percent in January and down from 45 percent in February 2010.

Of the distressed properties sold statewide, the total share of REO (real estate-owned) sales was 33 percent in February, up from 32 percent in December, but was down from 36 percent in February 2010.

The statewide share of short sales increased to 23 percent in February, up from 22 percent in January and up from 19 percent in February 2010.

The median price of homes sold in the state differed dramatically depending on the property type, with non-distressed properties selling for much higher prices than short sales and foreclosures.

The statewide median price of non-distressed properties sold in February was $370,000, $95,000 or 34.5 percent higher than the short sale median price of $275,000 recorded in February, and $170,100 or 85.1 percent higher than the February REO median price of $199,900.

*Note: C.A.R.’s pending sales information is generated from a survey of more than 70 associations of REALTORS® and MLSs throughout the state. Pending home sales are forward-looking indicators of future home sales activity, offering solid information on future changes in the direction of the market. A sale is listed as pending after a seller has accepted a sales contract on a property. The majority of pending home sales usually becomes closed sales transactions one to two months later.

The year 2008 was used as the benchmark for the Pending Homes Sales Index. An index of 100 is equal to the average level of contract activity during 2008.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

U.S. fourth-quarter 2010 GDP growth revised higher

2011-03-25T07:13:00.000-07:00

The third, or final, estimate of U.S. fourth-quarter 2010 GDP growth was revised up to an annualized 3.1% from the previous, or second, estimate of 2.8%. Thus, this third estimate represents a greater strengthening in growth relative to increases of 2.6% and 1.7% in the third and second quarters of 2010, respectively. Market expectations had been for fourth-quarter growth to be revised to 3.0%. The final estimate of fourth-quarter consumer spending growth was revised down marginally to 4.0% from the 4.1% previously estimated, yet this still represents robust spending in this key area of expenditure. Market expectations were for the final estimate of consumer spending to be unchanged from the second estimate.
As expected, a greater build in inventories was a key source of the upward revisions and, on its own, could account for all of the additional 0.3 percentage point (pp) increase to overall growth. Less expected was an upward revision to growth in spending on equipment and software to 7.7% from the 5.5% previously estimated, however. This contributed to boosting annualized GDP growth by 0.2 pp and helped offset the modest downward revision to growth in consumer spending and exports (revised to 8.6% from 9.6%, previously).
Annualized fourth-quarter growth in the core PCE deflator, the key inflation measure in the GDP report, was revised marginally lower to 0.4% from 0.5% previously.
Pre-tax corporate profits were up 2.3% in the fourth quarter, which is up from a 1.6% gain in the third quarter.
While the upward revision to the fourth-quarter 2010 GDP growth was largely concentrated in the notoriously volatile inventory component, there was also an encouraging upward revision to spending on equipment and software. As well, the report indicated healthy increases in consumer spending at 4.0% and final sales to domestic buyers at 3.2% (upwardly revised from 3.1%). Looking ahead to the first quarter of 2011, early indicators are consistent with our expectation that growth in consumer spending slowed to a 2.8% pace from the surge in the fourth quarter of 2010; however, this will likely be offset by a rebound in inventory investment that, we expect, will result in the overall GDP growth rate in the quarter likely matching its the fourth-quarter 2010 increase. While we expect GDP growth to improve to a 3.4% rate for 2011 as a whole following a 2.9% increase in 2010, it will take sustained above-trend growth for a number of years to bring the economy back closer to full employment. As a result, we do not expect the Fed to be in any rush to withdraw monetary stimulus in the near term. We continue to expect the current very accommodative range of fed funds of 0% to 0.25% to be maintained into 2012.

C.A.R. Short Sale Lender Satisfaction Survey - Around 50% chance of short sale going through in California.

2011-03-09T18:43:00.000-08:00

LOS ANGELES (March 8) – Fewer than three of five short sales close in California, illustrating the complexity and difficulty of navigating lenders’ and servicers’ short sale procedures, according to a Short Sale Lender Satisfaction Survey conducted by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). The survey gauges REALTORS®’ experience in working with short sale transactions – transactions in which the lender or lenders agree to accept less than the mortgage amount owed by the current homeowner.

“It’s disappointing that less than three in five short sales close, despite every effort by the REALTOR®, home seller and potential home buyer,” said C.A.R. President Beth L. Peerce. “Many underwater homeowners who have been hit by the recent economic crisis can no longer afford to stay in their home and just need to sell their home as expeditiously as possible are unable to largely because of the complex and cumbersome short sale process,” she said.

Of the REALTORS® surveyed, 94 percent participated in a short sale transaction during 2010, demonstrating the surplus of short sale listings in today’s real estate environment.

The most frequent problems REALTORS® cited in working with lenders and servicers during the short sale process include unresponsiveness, onerous procedures, and long processing delays.

Nearly three-fourths (70 percent) of REALTORS® said that closing their most recent short sale transaction with a lender or servicer was “difficult” or “extremely difficult,” while only 10 percent said it was “easy” or “extremely easy.”

“The lack of standardization, long approval process, and lack of lender approvals are hampering what should be a 45-day short sale process,” said Peerce. “Instead we’re hearing the typical response time for lenders is at least 60 days, and in many instances, their response time exceeds 6 months.”

More than half (63 percent) of REALTORS® said that lenders took more than 60 days to return a written response of the approval or disapproval of the short sale agreement submitted. Only 4 percent said they received a written response in less than 14 days.

Additionally, 44 percent of REALTORS® said that lenders took more than five business days to return any form of communication to REALTORS®. Only 14 percent said lenders responded “within one business day.”

“The survey results show that the short sale system is clearly flawed and must be standardized and streamlined to reduce the inventory of foreclosures,” said Peerce. “Increasing the number of successful short sale transactions is one important way we can help California families avoid foreclosure and move our economy closer to recovery,” she added.

Further illustrating faulty communication problems, 64 percent of REALTORS® were “not satisfied” or “not at all satisfied” with the timeliness of lenders’ response to their inquiries, while only 22 percent said they were “satisfied” or “extremely satisfied.”

Moreover, nearly three-fourths (74 percent) of REALTORS® were “not satisfied” or “not at all satisfied” with the amount of time it took to hear whether a transaction was approved or disapproved, while 16 percent said they were “satisfied” or “extremely satisfied.”

In overall satisfaction with the lender they worked with, 67 percent of REALTORS® were “not satisfied” or “not at all satisfied,” while 19 percent were “satisfied” or “extremely satisfied.”

C.A.R.’s Short Sale Lender Satisfaction Survey was conducted during the last two weeks of December 2010 to gauge REALTORS®’ experience in working with lenders or servicers of short sales, bank-owned properties (REOs), and foreclosures. The survey was delivered to 20,000 REALTORS®, with 2,150 responding to the survey.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Pending home sales remain 20.6% above the cyclical low last June

2011-03-07T11:40:00.000-08:00

Pending home sales eased moderately in January for the second straight month, but remain 20.6 percent above the cyclical low last June, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator, declined 2.8 percent to 88.9 based on contracts signed in January from a downwardly revised 91.5 in December. The index is 1.5 percent below the 90.3 level in January 2010 when a tax credit stimulus was in place. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, points to the broader trend. “The housing market is healing with sales fluctuating at times, depending on the flow of distressed properties coming on the market,” he said.

“While home buyers over the past two years have been exceptionally successful with historically low default rates, there is still an elevated level of shadow inventory of distressed homes from past lending mistakes that need to go through the system,” Yun said. “We should not expect the recovery to be in a straight upward path – it will zig-zag at times.”

The pace of January existing-home sales, 5.36 million, is slightly higher than NAR’s annual forecast for 2011. If contract activity stays on its present course, there should be an 8 percent increase in total existing-home sales this year.

“The broad fundamentals for a housing recovery are developing,” Yun said. “Job growth, high housing affordability and rising apartment rent are conducive to bringing more buyers into the market. Some buyers may be looking to real estate as a hedge against potential future inflation.”

The PHSI in the Northeast declined 2.4 percent to 73.5 in January and is 3.0 percent below January 2010. In the Midwest the index fell 7.3 percent in January to 78.0 and is 3.2 percent below a year ago. Pending home sales in the South rose 1.4 percent to an index of 97.7 but are 0.4 percent below January 2010. In the West the index fell 5.2 percent to 98.7 and is 0.9 percent below a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

# # #

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.

Each February, NAR Research conducts a normal review of PHSI seasonal adjustment factors and fine-tunes monthly data for the past three years; revisions are posted in the Research area of Realtor.org.

Hopes surge as job growth rises sharply!

2011-03-05T10:25:00.000-08:00

The U.S. economy finally seems to be reaching 'escape velocity,' one economist says. The nation gained 192,000 jobs in February, and unemployment fell below 9% for the first time in nearly two years.

Economists say the recession ended in June 2009, but average Americans might look back on February 2011 as the point when the country finally turned the corner.

The Labor Department said the economy added 192,000 new jobs last month, a sharp increase that helped trim the unemployment rate to 8.9% — the first time it has been below 9% in nearly two years.

The nation's economy finally appears to be reaching "escape velocity," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi in New York. He pointed out that Friday's solid jobs report followed encouraging data on auto sales, chain store revenue and other economic barometers.

The missing piece has been the large-scale hiring needed to repair the severe damage to the job market from the deep recession, and that appears to be underway.

"It's no longer appropriate to call this a jobless recovery," Rupkey said.

In a separate report released Friday, the California economy added just 12,500 new jobs in January and the state's unemployment rate dipped to 12.4% from 12.5%. That report lagged a month behind, however, and the job market was weak across the country in January because of severe weather.

But although the nation's job engine appears to be revving, rising oil prices could apply the brakes. Volatility in that market, sparked by turmoil in the Middle East and North Africa, continues to spook many on Wall Street. A jump in the price of oil Friday to a 2½-year high led to an 88.32-point drop in the Dow Jones index.

Rising oil prices are raising the specter of inflation, which is stirring concern that central banks might tighten interest rates and stunt the global recovery. What's more, higher prices at the gasoline pump could dampen consumer demand for other goods, economists warned.

"Gas is going up. Food prices have jumped again. You're sitting there with your unemployment check and everything is so expensive," said Karen Flynn, 62, of Santa Clara, an unemployed high school teacher. "The minute you get in your car, it's costing you money."

Nigel Gault, chief U.S. economist for IHS Global Insight, noted that the February jobs report and much of the recent positive data don't reflect the surge in gas prices. But he said the economy's positive momentum "suggests the oil shock may dampen things a little bit but not derail the recovery."

The unemployment rate has plunged nearly 1 percentage point in three months — it was 9.8% in November — for the biggest such drop since 1983. That is helping spread optimism about the recovery.

Atlas Machine and Supply Inc. in Louisville, Ky., has hired a dozen workers in the last year as factories have ramped up production.

"Things are improving, there's no question about that," said Rich Gimmel, president of the company, which produces machinery for steel mills and other manufacturers and has 200 employees. "We've seen an increase in demand."

But Gimmel said that the rising prices of oil and other commodities pose a hurdle and that businesses need to see more positive economic signs before they start hiring at full speed.

Private-sector hiring drove February's increase. The nation added 222,000 new private-sector jobs, with gains in manufacturing, construction and several service areas, including healthcare. The government workforce shrank by 30,000 in February, driven mostly by cuts by states and municipalities.

Friday's report was a marked improvement over the 63,000 new jobs added in January.

Gault cautioned that February's job numbers probably reflected some hiring that employers had delayed during January's rough weather. In January and February, the economy added about 128,000 new jobs a month, a rate that isn't yet enough to make a huge dent in unemployment, Gault said.

There's still a long way to go. A broader measure of unemployment, which includes people working part-time because they couldn't find full-time jobs and workers who have given up looking for jobs, stood at 15.9% in February. Still, that was down from 16.1% in January and 17% in November.

Anthony Chan, chief economist at J.P. Morgan Private Wealth Management in New York, said there was still a lot of room for improvement in the labor market. For example, he noted average hourly earnings were up just 1 cent last month to $22.87. Higher wages fuel consumer spending.

Such indicators show the job creation engine isn't yet "hitting on all cylinders," he said.

Investors also were troubled by the negligible rise in earnings. They worried that stagnant income levels in the face of rising gasoline prices could cause Americans to scale back their spending in other areas.

"You've got several things all at once in the worry zone," said Robert W. Bissell, president of Wells Capital Management in Los Angeles.

Still, February's job growth was the largest monthly increase since May, when the effects of the Obama administration's massive stimulus package were at their peak and the government was hiring thousands of temporary census workers.

Improved job growth is good news for President Obama, who said Friday that the nation needed to "keep building on that momentum." And the Obama administration used the news to warn against deep spending cuts being pushed by congressional Republicans.

Noting that there was still more economic work to be done, top White House economic advisor Austan Goolsbee said the administration would seek to "find ways to reduce spending, but not at the expense of derailing progress in the job market."

Ben S. Bernanke, chairman of the Federal Reserve, told lawmakers this week that there was "increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold."

Initial claims for unemployment insurance fell last week to 368,000, the lowest level in nearly three years, the Labor Department reported. Large retailers reported sales were up 4.2% in February compared with the same month last year.

The Fed projects the economy will grow 3.5% to 4% this year.

Unrest in the Middle East looms as a potential problem for the recovery. A sustained rise in prices for oil and other commodities would threaten the recovery, Bernanke said.

But, Bernanke added, he did not expect the rise in oil prices caused by the Middle East turmoil to last.

U.S. existing home sales unexpectedly increased to an eight-month high in January

2011-02-23T11:06:00.000-08:00

U.S. existing home sales rose 2.7% in January 2011 to 5.36 million annualized units, building on the 12.5% increase to 5.22 million annualized units seen in December 2010 (previously reported as 5.28 million). The increase comes as a surprise as market expectations were for sales to decline to 5.20 million in the month. On a more negative note, home prices declined 3.7% on a year-over-year basis in January, the largest annual decline since November 2009, as distressed home sales once again increased in market share.

The rise in existing home sales in January was the third consecutive monthly increase and the fifth in the last six months. Both main components posted gains in January, with sales of single-family homes up 2.4% in the month while sales of condos and co-ops rose a stronger 4.7%. The improvement was reasonably broad-based, with gains seen in the West (7.9%), South (3.6%) and Midwest (1.8%), while the pace of sales in the Northeast, the smallest of the regions, declined by 4.6%.

The median price of existing homes dropped 3.7% on a year-over-year basis, as distressed sales (which typically sell at a steep discount) rose to a 37% market share in January from 36% of total sales in December. In terms of inventories (which do not include houses in foreclosure or already foreclosed homes that have not yet been listed), the absolute number of homes available for sale fell for a fifth straight month, dropping 5.1% to 3.38 million units. This decline in inventories combined with the increased pace of sales resulted in the months’ supply of unsold homes on the market dropping to 7.6 in January from 8.2 in the previous month, the lowest level seen since January 2010 but still above the long-term average of 6.3.

While there is definite evidence of an upward trend in resale activity, the current pace of home sales remains well below the more ‘normal’ rate of 6 million annualized units and concerns about a sustained recovery in the housing market persist. The downward pressure on prices highlights the sizable supply overhang that has resulted from the flood of foreclosures into the market, and, with estimates suggesting that 27% of mortgaged single-family homes were under water as of the end of 2010, supply-side factors are not likely to improve drastically this year. On the demand side, today’s report noted that “buyers have been constrained by unnecessarily tight credit,” which, combined with the elevated unemployment rate, is limiting households’ ability to take advantage of highly favourable housing affordability therefore resulting in weak overall demand. These market imbalances are likely to persist in the near term, thereby likely restricting the pace of resale activity as well as new home construction. As a result, we continue to expect that residential investment will make only a very small contribution to economic growth in 2011.

U.S. February consumer confidence unexpectedly rose to a three-year high

2011-02-22T11:04:00.000-08:00

The Conference Board’s measure of U.S. consumer confidence jumped 5.6 points in February 2011 to 70.4 from a downwardly revised 64.8 level in January (the index’s methodology was changed and the data revised retrospectively to show 65.6 in January following the initially reported increase to 60.6). Market expectations were for a slight retracement in the index to 64.9. The labour market differential (those saying jobs are “plentiful” less respondents saying jobs are “hard to get”) posted its best reading since July 2010, by improving to -40.8 from the prior month’s -42.4 (previously reported as -40.8).

The better than expected rise in consumer confidence in February reflected improvements in both in the “expectations” and the “present situation” components. The expectations component was the main contributor to the gain, rising to 95.1 from 87.3 in January, and led by an improvement in the outlooks for business conditions and employment. The sub-index now stands at its highest level since December 2006. The present situation index posted a more moderate gain, increasing to 33.4 from 31.1 in January. Consumers’ appraisal of job market was more positive than last month, with the “jobs hard to get” index declining to 45.7 from 47.0 in January, and the “jobs plentiful” index increased to 4.9 from 4.6. These numbers resulted in the employment differential improving to -40.8 from -42.4 in January, which was the best reading in this measure since July 2010.

With today’s unexpected jump, consumer confidence in the US is at a post-recession high. With that said, this gauge of consumer attitudes still remains well below the pre-recession peak of 111.9 as seen in July 2007. Weak labour market conditions continue to weigh on confidence, with the reported labour market differential remaining in deep deficit. As well, given that a large portion of Americans have their wealth tied to their homes, depressed and falling home prices are putting significant pressure on household finances and influencing overall consumer views. The persistently elevated unemployment rate and lack of a sustained housing market rebound are among the main reasons why we expect that the Fed will not make any changes to its monetary policy stance in the near term.

In a separate release this morning, December’s S&P/Case-Shiller 20-City Composite measure of U.S. house prices fell for the sixth straight month, although dropping by a slightly smaller than expected 0.4% on a seasonally-adjusted basis from November (market expectations were for a 0.5% decline). The monthly decline brings the measure within one percentage point of the recessionary low seen in May 2009. On a year-over-year basis, the pace of decline in the unadjusted index accelerated for the third straight month, by falling 2.4% compared to the 1.6% drop seen in November. The decrease was the largest 12-month decline since December 2009 when the index fell 3.1%.

Bright spot for mortgages: Missed payments ease

2011-02-19T17:12:00.001-08:00

Mortgage delinquency rates among U.S. homeowners have fallen to their lowest levels in a few years, according to a report Thursday from the nation's mortgage bankers.

The quarterly National Delinquency Survey from the Mortgage Bankers Association (MBA) reported that the rate of mortgage borrowers at least one payment past due or whose homes have been repossessed by their banks declined 0.22 point to 13.56% at the end of December, their lowest level since late 2008.

Loans one payment past due were at 8.22%, down considerably from the 9.13% mark at the end of the third quarter and the lowest rate since the end of 2007, the beginning of the recession, the bankers said.

That, according to Michael Fratantoni, vice president of research and economics for the MBA, was very welcome news.

"I think we've turned the corner as concerned with loans 30 days late," he said. "It indicates that the economy has improved."
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A second factor in the improvement is that mortgage underwriting has gotten so much stricter over the past few years, in the wake of the housing market collapse, that many of the loans most likely to fail have already done so.

The most dangerous years for mortgages are the third and fourth years, when delinquency rates peak, according to Fratantoni. The crop of mortgages entering into those dangerous years should not default as much because borrowers were so well qualified.

Another positive element in the report was that the percentage of seriously delinquent borrowers -- those 90 days or more late and considered very likely to lose their homes to foreclosure -- dropped precipitously over the last three quarters of the year, to 3.63% from 5.02% at the end of March 2010.

That should translate into far fewer borrowers losing their homes to foreclosure in the future.

Improvement in the economy, if it continues, should usher in a period of lower delinquency rates, according to Jay Brinkmann, the MBA's chief economist. The quarter's positive news was tied to the increase in hiring last year, when the private sector added about 1.2 million jobs.
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"You need a paycheck to make a mortgage payment," Brinkmann said.

The biggest negative in the report was that the percentage of loans in foreclosure inventory hit an all-time high. These are loans in which the banks start to reacquire properties by scheduling auction sales.

Mortgages can exit this process by having the loan modified, the property sold through a short sale or transferred voluntarily to the bank, or sold at auction.

The MBA attributed the rise of loans in foreclosure inventory to the robo-signing issues that began to emerge in September. Banks deliberately slowed or suspended the foreclosure process, keeping them from exiting the category. That was especially true for states in which courts are involved in the process.
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The delinquency rate was headed in the right direction even without adjusting for seasonal factors. Historically, the fourth quarter, explained Brinkmann, usually sees a jump in missed payments.

"In the fourth quarter, the first heating bill arrives and homeowners choose keeping the place warm," he said. "They make up the payments later."

This time, even the non-seasonably adjusted total past due rate dropped, from from 9.39% during the third quarter to 8.93% in the fourth. Brinkmann traced the gain the the improvement in the overall economy.

Of the states, Mississippi had the highest overall delinquency rate, with 13.3% of loans in some state of default. Nevada, at 12%, and Georgia, at 11.89%, also were very hard hit.

Florida, where the courts have substantially slowed the foreclosure process, has the highest percentage of loans in foreclosure inventory with 14.18% awaiting some kind of resolution. Nevada, at 10.06%, was second, and New Jersey, at 7.23%, was third.

Home Price Stabilization Seen in Most Metro Areas during Fourth Quarter, Sales Up

2011-02-16T16:45:00.000-08:00

Home sales rebounded in 49 states during the fourth quarter with 78 markets – just over half of the available metropolitan areas – experiencing price gains from a year ago, while most of the rest saw price weakness, according to the latest survey by the National Association of REALTORS®.

Total state existing-home sales, including single-family and condo, jumped 15.4 percent to a seasonally adjusted annual rate1 of 4.80 million in the fourth quarter from 4.16 million in the third quarter, but were 19.5 percent below a surge to an unsustainable cyclical peak of 5.97 million in the fourth quarter of 2009, which was driven by the initial deadline for the first-time buyer tax credit.

In the fourth quarter, the median existing single-family home price rose in 78 out of 152 metropolitan statistical areas2 (MSAs) from the fourth quarter of 2009, including 10 with double-digit increases; three were unchanged and 71 areas had price declines. In the fourth quarter of 2009 a total of 67 MSAs experienced annual price gains.

The national median existing single-family price was $170,600 in the fourth quarter, up 0.2 percent from $170,300 in the fourth quarter of 2009. The median is where half sold for more and half sold for less. Distressed homes, typically sold at a discount of 10 to 15 percent, accounted for 34 percent of fourth quarter sales, little changed from 32 percent a year earlier.

Lawrence Yun, NAR chief economist, is encouraged by the trend. “Home sales clearly recovered in the latter part of 2010 and are helping to absorb the inventory, including many distressed properties. Even with foreclosures continuing to enter the inventory pipeline, they’ve been selling well and housing supplies have trended down,” he said. “A recovery to normalcy requires steady trimming of the inventories.”

Yun added, “An improving housing market and job growth will go hand in hand. The housing recovery will mean faster job growth.” He projects about 150,000 to 200,000 jobs will be added to the economy this year from an anticipated 300,000 additional home sales in 2011.

Yun further noted, “Better than expected sales and/or strengthening in home values can have an even bigger job impact as consumer spending would naturally rise from a housing wealth recovery affecting a vast number of American families.”

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said a very favorable affordability environment is a huge factor in the recovery. “Although job growth has been relatively modest and credit is tight, you can’t underestimate the impact of historically high housing affordability conditions,” he said.

“Mortgage interest rates recently hit record lows, median family income has edged up and prices in most areas have been stable following the correction from the housing boom. For people with good credit and long term plans, it’s hard to imagine a better opportunity than what we see today,” Phipps said. “Unfortunately the flow of credit is unnecessarily tight and is constraining the pace of the housing and job growth recoveries.”

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was a record low 4.41 percent in the fourth quarter, down from 4.45 percent in the third quarter; it was 4.92 percent in the third quarter of 2009.

“The healthier local housing markets are also experiencing favorable local employment conditions,” Yun said. Job growth is a major factor in price appreciation in metro areas such as the Washington, D.C., region, where the median existing single-family home price of $331,100 in the fourth quarter is 8.1 percent higher than a year ago; the Boston-Cambridge-Quincy area, at $346,300, up 4.2 percent; and Austin-Round Rock, Texas, at $190,300, up 4.1 percent.

Smaller metro areas sometimes see larger swings in price measurement depending on the types of properties that are sold in a given period. In such markets, full year price data can provide additional context.

In the condo sector, metro area condominium and cooperative prices – covering changes in 57 metro areas – showed the national median existing-condo price was $164,200 in the fourth quarter, which is 6.4 percent below the fourth quarter of 2009. Twenty-two metros showed increases in the median condo price from a year ago and 35 areas had declines; only 11 metros saw annual price gains in fourth quarter of 2009.

“Consumers in the hard hit regions of Nevada, Arizona and Florida were able to scoop up condos at absolute bargain basement prices,” Yun said. Median condo/co-op prices in affected metro areas include Las Vegas-Paradise at $60,700, Phoenix-Mesa-Scottsdale with a fourth quarter median of $68,900, and Miami-Fort Lauderdale-Miami Beach at $81,900.

Regionally, the median existing single-family home price in the Northeast increased 2.3 percent to $240,400 in the fourth quarter from a year earlier. Existing-home sales in the Northeast rose 15.0 percent in the fourth quarter to a level of 797,000 but are 22.8 percent below the surge in the fourth quarter of 2009.

In the Midwest, the median existing single-family home price rose 0.5 percent to $139,200 in the fourth quarter from the same period in 2009. Existing-home sales in the Midwest jumped 18.3 percent in the fourth quarter to a pace of 1.02 million but are 25.4 percent below the cyclical peak one year ago.

In the South, the median existing single-family home price edged up 0.3 percent to $152,400 in the fourth quarter from the fourth quarter of 2009. Existing-home sales in the region rose 11.4 percent in the fourth quarter to an annual rate of 1.82 million but remain 17.8 percent below the surge in the fourth quarter of last year.

The median existing single-family home price in the West declined 2.9 percent to $214,400 in the fourth quarter from a year ago. Existing-home sales in the West jumped 19.9 percent in the fourth quarter to a level of 1.17 million but are 14.2 percent below the cyclical peak in the fourth quarter of 2009.

“A good portion of the sales activity in the West has been driven by investors taking advantage of discounted foreclosures, with high levels of all-cash transactions,” Yun explained.

The National Association of REALTORS®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

U.S. January house starts rise more than expected

2011-02-16T10:41:00.001-08:00

U.S. housing starts surged a stronger than expected 14.6% in January 2011 to an annualized pace of 596,000 units, which more than retraced December’s 5.1% fall to a revised 520,000 annualized units (previously reported 529,000) and marked the slowest pace of new home construction since April 2009. The level of activity in January was well above market expectations of a more modest retracement to 540,000 annualized units. Building permits plunged 10.4% to an annualized 562,000 units; however, this was slightly above market expectations for a decline to 560,000. The drop in January retraced most of the outsized 15.3% increase to a 627,000 level in December 2010.

The rise in housing starts in January was entirely concentrated in an outsized 77.7% rise in multiple-unit starts and built further on a 10.8% rise in December. Starts in the more stable singles component slipped for a second consecutive month, by falling 1.0% in January after December’s 8.4% decline. Starts rose sharply in the Northeast (41.8%), the Midwest (36.4%) and the South (15.8%). Providing some offset, starts in the West dropped 9.7% in January, although following a 38.1% rise in December.

Permits for new housing units fell 10.4% to an annualized 562,000 in January, thereby retracing the bulk of the larger than expected 15.3% surge to a 627,000 level in December. The Census Bureau previously noted that the surge in permits in December may have reflected application activity being pulled forward into the month to be ahead of changes in state building codes effective January 2011 in California , Pennsylvania and New York . Today’s report is consistent with this view, with the overall decline in January permits concentrated in the Northeast (-38.5%) and the West (-27.3%) following sizeable increases of 74.6% and 30.9%, respectively, in December. The number of permits issued rose in the South (11.4%) as well, although some partial offset was provided by a 5.3% drop in the Midwest .

The rise in housing starts in January is surprising given the earlier reports that weather may have disrupted construction activity in the month, as evidenced by the earlier reported 32,000 drop in construction employment. The plunge in January permits would normally raise questions about the sustainability of new construction at these levels, particularly given that the strength in January starts was largely concentrated in the volatile multiples component; however, in this case, the drop in permits reflected some payback for earlier strength in December when builders rushed to obtain permits ahead of rule changes in some states that took effect in January. Looking through this monthly volatility, the 595,000-average level of permits for December and January outpaced the 558,000-average level of starts for the same period. Assuming no further negative effect from weather, this suggests some room for continued improvement in underlying construction activity in the near term. With that said, the level of housing activity still remains very weak. We continue to expect the Fed to keep monetary conditions very accommodative throughout 2011 in an effort to help support improving housing market conditions.

In another report out this morning, U.S. producer prices rose 0.8% in January, building on the 0.9% gain recorded in December. The monthly increase in January matched market expectations. Despite the sizeable increase in the month, the annual increase in overall producer prices fell to 3.6% from 4.0% in December as the monthly increase this year in January was still below the outsized 1.1% increase recorded last year. Despite the headline number coming in largely as expected in January, the details revealed that more of this increase reflected a larger than expected 0.5% increase in core (excluding food and energy) prices. Markets had expected a smaller 0.2% increase. This result pushed the year-over-year rate of increase in the measure up to 1.6% from 1.3% in December.

Pending Home Sales Continue Uptrend

2011-02-08T11:23:00.000-08:00

Pending home sales improved further in December, marking the fifth gain in the past six months, according to the National Association of Realtors®

The Pending Home Sales Index,* a forward-looking indicator, increased 2.0 percent to 93.7 based on contracts signed in December from a downwardly revised 91.9 in November. The index is 4.2 percent below the 97.8 mark in December 2009. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, credits good affordability conditions and economic improvement. “Modest gains in the labor market and the improving economy are creating a more favorable backdrop for buyers, allowing them to take advantage of excellent housing affordability conditions. Mortgage rates should rise only modestly in the months ahead, so we’ll continue to see a favorable environment for buyers with good credit,” he said.

“In the past two years, home buyers have been very successful, with super-low loan default rates, partly because of stable home prices during that time. That trend is likely to continue in 2011 as long as there is sufficient demand to absorb inventory,” Yun said. “The latest pending sales gain suggests activity is very close to a sustainable, healthy volume of a mid-5 million total annual home sales. However, sales above 6 million, as occurred during the bubble years, is highly unlikely this year.”

The PHSI in the Northeast increased 1.8 percent to 73.9 in December but is 5.3 percent below December 2009. In the Midwest the index rose 8.0 percent in December to 84.6 but is 5.1 percent below a year ago. Pending home sales in the South jumped 11.5 percent to an index of 101.9 and are 1.7 percent above December 2009. In the West the index fell 13.2 percent to 105.8 and is 10.7 percent below a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

# # #

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.

NOTE: Existing-home sales for January will be reported February 23 along with revisions for the past three years, and the next Pending Home Sales Index will be released February 28. Fourth quarter metro area home prices and state home sales will be published February 10; release times are 10:00 a.m. EST.

California home sales rise in December, posting seven-month sales high

2011-02-02T18:07:00.000-08:00

C.A.R. reports California home sales rise in December, posting seven-month sales high

LOS ANGELES (Jan. 21) – California home sales rose in December, posting their highest level since May, according to data from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). The statewide median price increased from November, but was down from a year ago.

“December’s sales increase reflects buyers taking advantage of rock bottom interest rates and improved affordability since the first half of the year, when prices were higher,” said C.A.R. President Beth L. Peerce. “Most of December’s sales opened escrow in October and November. Rates hit their absolute lowest in October but began edging higher in November, prompting buyers to get off the fence,” she said.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 520,680 in December, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. December’s sales were up 5.9 percent from November’s revised pace of 491,590 but were down 6.8 percent from the revised 558,840 sales pace recorded in December 2009. The statewide sales figure represents what would be the total number of homes sold during 2010 if sales maintained the November pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

Following three consecutive monthly declines, the median price of an existing, single-family detached home sold in California increased 1.7 percent from a revised $296,690 in November but was down 1.6 percent from the revised $306,860 median price recorded for the same period a year ago.

“While sales rose in December, the sales pace in the second half of the year was lower than the first half as the housing market weaned itself off home buyer tax credits,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “For 2010 as a whole, sales reached 494,900 homes sold, down 9.5 percent from the 546,860 homes sold in 2009. However, the statewide median price increased 10.2 percent to reach $302,900 for the year, up from the $275,000 recorded in 2009,” she said.

Here are other highlights of C.A.R.’s resale housing report for December 2010:

* A greater than usual drop in listings combined with the sales increase caused C.A.R.’s Unsold Inventory Index to decline more than one month. The Unsold Inventory Index for existing, single-family detached homes was 5.0 months in December, down from 6.2 months in November. The index was 3.8 months in December 2009. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

* Thirty-year fixed-mortgage interest rates averaged 4.71 percent during December 2010, compared with 4.93 percent in December 2009, according to Freddie Mac. Adjustable-mortgage interest rates averaged 3.31 percent in December 2010, compared with 4.31 percent in December 2009.

* The median number of days it took to sell a single-family home was 57.5 days in December 2010, compared with 35.1 days for the same period a year ago.

Regional MLS sales and price information are contained in the tables that accompany this press release. Regional sales data are not adjusted to account for seasonal factors that can influence home sales. The MLS median price and sales data for detached homes are generated from a survey of more than 90 associations of REALTORS® throughout the state. MLS median price and sales data for condominiums are based on a survey of more than 60 associations. The median price for both detached homes and condominiums represents closed escrow sales.

In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 97 of the 329 cities and communities reporting showed an increase in their respective median home prices from a year ago. DataQuick statistics are based on county records data rather than MLS information. DataQuick Information Systems is a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. (The lists are generated for incorporated cities with a minimum of 30 recorded sales in the month.)

Note: Large changes in local median home prices typically indicate both local home price appreciation, and often, large shifts in the composition of housing market activity. Some of the variations in median home prices for November may be exaggerated due to compositional changes in housing demand. The DataQuick tables listing median home prices in California cities and counties are accessible through C.A.R. online at
http://www.car.org/marketdata/historicalprices/2010medianprices/dec2010/.

* Statewide, the 10 cities with the highest median home prices in California during December 2010 were: Beverly Hills, $2,180,000; Los Altos, $1,300,000; Calabasas, $1,175,000; Laguna Beach, $1,105,000; Manhattan Beach, $1,085,500; Newport Beach, $1,000,000; Santa Monica, $921,000; Cupertino, $904,500; Rancho Palos Verdes, $849,000; Los Gatos, $840,000.

* Statewide, the cities with the greatest median home price increases in December 2010 compared with the same period a year ago were: Beverly Hills, 54.3 percent; Calabasas, 39.1 percent; Poway, 25.5 percent; Ridgecrest, 23.3 percent; San Juan Capistrano, 19.2 percent; Compton, 17.5 percent; Laguna Hills, 15.7 percent; Santa Cruz, 14.1 percent; Gilroy, 14.1 percent; La Habra, 13.2 percent.

(Editors’ note: C.A.R. will no longer publish localized Dataquick numbers beginning with the January 2011 home sales news release to be issued next month. Also, C.A.R. will begin issuing a Pending Sales Index news release beginning in late February.)

Multimedia:

* View a video of C.A.R. Chief Economist Leslie Appleton-Young discussing highlights of the December sales and price report.

* View Unsold Inventory by price point.

* View a data table comparing current prices with trough prices in areas throughout the state.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

U.S. growth in manufacturing unexpectedly accelerates into the new year

2011-02-01T09:26:00.000-08:00

The ISM manufacturing index remained in expansionary territory for the eighteenth consecutive month in January, and the pace of growth accelerated for the sixth straight month as the index rose to 60.8 from 58.5 in December (a reading above 50 indicates the sector is generally expanding). The unexpected increase (the market expected a decline to 58.0) pushes the index to its highest level since May 2004. The employment component also increased in the month, rising to 61.7 from 58.9 in December and representing the measure’s highest level since April 1973.

In addition to the solid headline reading, the details of the ISM manufacturing index were also extremely positive. The new orders component jumped to 67.8 in the month, its highest level since January 2004, following the previous month’s increase to 62.0, and the production index edged higher to 63.5 from 63.0 in the previous month, representing its highest level since last May. The pace of expansion in employment rose to its highest level in almost four decades, increasing to 61.7 from 58.9 in December. Growth in manufacturers’ inventories increased following the previous month’s sharp decline, rising to 52.4 from 51.8. With respect to inflationary pressures, the prices paid component jumped 9.0 points to 81.5 from 72.5 in December, the rapidest pace of growth since July 2008.

With the unexpected acceleration in the pace of growth in the manufacturing sector in January, the ISM index moved even further into expansionary territory and is well above the series’ 20-year average of 51.2. This result suggests that the goods-producing side of the U.S. economy is maintaining its positive momentum entering 2011. Indeed, the greater than expected drawdown in inventories in the final quarter of 2010 suggests that there is scope for manufacturing to remain strong against a background of improving demand. As well, the solid increase in the employment sub-index is consistent with our view that labour market conditions are continuing to improve, and we expect that Friday’s payroll report will show private-sector employment expanded by 141,000.

In a separate release this morning, construction spending in the U.S. closed out 2010 with an unexpected 2.5% decline in December. Market expectations were for spending to rise 0.1% in the month. As well, November’s initially reported 0.4% increase was revised downward to show a 0.2% decrease of its own. The weakness in December was fairly broad-based across sectors with private and public-sector construction spending down 2.2% and 2.8%, respectively. Total residential construction decreased by 4.4% in the month while non-residential construction declined by 1.6%. For 2010 as a whole, construction spending was down 10.3% from 2009 and was at its lowest dollar value ($814 billion) since 2000.

U.S. personal spending rises more than expected in December

2011-01-31T19:38:00.000-08:00

Personal consumer expenditure (PCE) rose 0.7% in December following a downwardly revised 0.3% gain (previously reported as 0.4%) in November. The increase in December was above market expectations for a 0.5% gain. On a volumes basis, PCE was up 0.4% in the month following a 0.2% (was 0.3%) gain in November. Personal incomes rose 0.4% in December, thereby matching market expectations and building further on 0.4% and 0.5% increases in November and October, respectively. With spending outpacing income growth, the savings rate slipped to 5.3% in December from 5.5% in November.

The increase in overall spending reflected gains across all major categories. Spending on consumer durables rose 0.7% in December, which is consistent with the earlier reported 2.3% increase in unit vehicle sales in the month. Spending on non-durables surged 1.5% following a 0.6% increase in November, although the bulk of the increase in December likely reflected rising gasoline prices. Spending on services rose 0.4% in December, matching the gain recorded in November. In volume terms, spending rose 0.4% in December following 0.2% and 0.5% gains in November and October, respectively.

On the inflation front, the core PCE measure was flat in December, below market expectations for a 0.1% gain. As a result, the year-over-year rate of increase fell to a new record low of 0.7% in the month, down from 0.8% in November.

Today’s report provides the monthly detail of the encouraging 4.4% fourth-quarter 2010 gain in real consumer spending reported in last Friday’s GDP report. The solid increase in December spending suggests that positive momentum remains heading into 2011. Along with new payroll tax cuts that went into effect at the start of the year and our expectation that private employment will continue to grow, this remains consistent with our forecast that consumer spending will pick up to a 3.3% pace in 2011 following a 1.8% increase in 2010. We expect that overall GDP growth will pick up as well, to a 3.4% pace in 2011 from 2.9% in 2010; however, while encouraging, this will still be sufficient to put only modest downward pressure on the unemployment rate in the near term. With unemployment forecasted to remain stubbornly high and the inflation backdrop remaining subdued, we continue to expect that the Fed will leave the fed funds target in its current 0% to 0.25% range into 2012.

U.S. new home sales surged 17.5% to an eight-month high in December

2011-01-26T12:33:00.000-08:00

New home sales jumped 17.5% to an annualized 329,000 units in December following the downwardly revised flat reading of a 280,000 pace (previously 290,000) in November. Market expectations were for a more moderate increase to 300,000. The strong finish to the fourth quarter of 2010 pushed the quarterly pace of new home sales 1.7% above that of the previous quarter, marking the first increase since the third quarter of 2009. With that said, the 321,000 total for 2010 was the lowest on record dating back to 1963. The monthly increase in the pace of sales and a 2.6% decline in homes available for sale pushed the months’ supply of unsold new homes down sharply to 6.9 from 8.4 in November, the lowest level since April 2010.

The strong increase in the pace of new home sales in December was largely the result of a mammoth 71.9% surge in the West, which followed November’s outsized 30.6% increase. The Midwest (3.2%) and the South (1.8%) posted far more moderate increases in the month, while new homes sales declined for the third consecutive month in the Northeast (-5.0%).

Inventories, as measured by months’ supply of unsold homes on the market at the current sales rate, dropped sharply to 6.9 in December from 8.4 in November. The inventory of new homes for sale declined 2.6% to 190,000 in December from 195,000 in November, which was the eleventh consecutive month in which new homes for sale either held steady of decreased. The drop in months’ supply is now within striking distance of the series’ long-term average of 6.2 and well below the recent peak of 12.1 months seen in January 2009.

Today’s report rounds out a month of housing data releases that have been quite mixed. Housing starts and prices declined, permits and sales, rose and the homebuilders’ sentiment index held steady. While this month’s Beige Book noted that “residential real estate markets remained weak across all Districts” for the end of 2010, there is evidence that the market stabilized (although at very depressed levels of activity) in the fourth quarter. As a result, we do not expect Friday’s release of fourth-quarter 2010 real GDP to repeat the outsized 27.3% drop in residential investment seen in the third quarter and, combined with the recent pick-up in consumer spending and indications that net trade could contribute more to growth than we previously expected, is consistent with our expectation that overall GDP growth accelerated to a 3.5% annualized rate in the fourth quarter from the 2.6% increase in the previous quarter.

U.S. consumers start the year with a boost of confidence but home prices continue to fall

2011-01-25T14:38:00.001-08:00

The Conference Board’s measure of U.S. consumer confidence jumped 7.3 points in January to 60.6 from an upwardly revised 53.3 level in December (initially reported as 52.5). Market expectations were for a much more moderate increase in the index to 54.0. The labour market differential (those saying jobs are “plentiful” less respondents saying jobs are “hard to get”) posted its best reading since May 2009, improving to -38.2 from the prior month’s -41.8 (previously reported as -42.9).

The better than expected rise in consumer confidence in January reflected an improvement in both in the “expectations” and the “present situation” components. The expectations component rose to 80.3 from 72.3 in December, led by an improvement in the outlooks for business conditions and employment. The present situation index rose to its highest level since November 2008, increasing to 31.0 from 24.9 in December. Consumers’ appraisal of the job market was somewhat more positive than last month, with the “jobs hard to get” index declining to 43.4 from 46.0 in December, its lowest level since January 2009, and the “jobs plentiful” index increased to 5.2 from 4.2, its highest level since May 2009. These numbers resulted in the employment differential improving to -38.2 from -41.8 in December, the best reading in this measure since May 2009.

While the jump in overall consumer confidence in January is an encouraging start to the new year, today’s report still indicates that the level of confidence remains well below the pre-recession peak of 111.9. The persistently weak labour market conditions are a key factor weighing on confidence, and with the unemployment rate expected to improve only gradually, consumers’ attitudes are not likely to change significantly in the near future. Further adding to the subdued consumer outlook is the evidence that suggests that any recovery in the housing market is faltering. With a large portion of Americans having their wealth tied to their homes, falling home prices have a significant effect on household finances. The elevated unemployment rate and lack of a sustained housing market rebound are among the main reasons why we expect that the Fed will not make any changes to its monetary policy stance at this week’s meeting.

In a separate release this morning, November’s S&P/Case-Shiller 20-City Composite measure of U.S. house prices fell for the fifth straight month, although dropping by a smaller than expected 0.5% on a seasonally-adjusted basis from October (market expectations were for a 0.8% decline). On a year-over-year basis, the pace of growth in the unadjusted index decelerated for the sixth straight month and posted the largest 12-month decline since December 2009, falling 1.6% in November. The accompanying report noted that the housing market has experienced an “unambiguous deceleration in home price returns” and that a double-dip (defined as the index posting a new post-peak low) “could be confirmed before the spring.”

1323 S Driftwood Dr, Palm Springs, CA | Powered by Postlets

2011-01-20T19:48:00.000-08:00

1323 S Driftwood Dr, Palm Springs, CA | Powered by Postlets

Existing home sales jump 12%

2011-01-20T19:44:00.000-08:00

Sales of existing homes jumped in December, marking the fifth month of gains in the past six months, based on an industry report released Thursday.

Previously-owned home sales climbed 12.3% in December to an annual rate of 5.28 million, from 4.70 million in November, according to the National Association of Realtors.

That puts sales at the highest level since the homebuyer tax credit expired in June, said Stuart Hoffman, chief economist at PNC Financial Services Group.

The December rate came in much higher than expected. A consensus of experts surveyed by Briefing.com had forecast an annualized sales rate of 4.8 million. However, sales were down 2.9% from 12 months earlier and fell 4.7% in 2010.
Foreclosure glut threatens housing recovery

"December was a nice finish to the year, but looking at the bigger picture -- home sales and prices have been scraping along the bottom for the last three years," Hoffman said. "So, while we're not digging a deeper hole -- the housing market is still quite weak, and there are still more homes available on the market than there are likely to be buyers."

The median price of all existing homes sold in December was $168,800, down 1% from a year ago.

Meanwhile, the inventory of homes on the market fell 4.2% in December to 3.56 million units. That's enough inventory to last 8.1 months, and is down from a 9.5-month supply in November.

While that's an improvement, Hoffman said that data doesn't reflect the large number of foreclosures that could soon enter on the market.

"What's hidden behind the curtain are potential foreclosures adding to those inventory levels," he said. "Even as we have jobs growing, inventory is still large and more foreclosures are going to be coming on the market. Prices will go down and it's going to continue to be very much a buyer's market."

That said, Hoffman expects sales to gradually improve -- rising about 4% or 5% -- by the end of 2011, as the employment picture improves.

"I do think there will be more sales in 2011, because job growth will support homebuyers," Hoffman said. "We're getting back to the underlying demand without the homebuyer tax credit, but housing is still not contributing much to the overall economic improvement in the economy."

U.S. Beige Book: Economic activity “continued to expand moderately” from November to December

2011-01-12T14:12:00.000-08:00

The Fed’s Summary of Commentary on Current Economic Conditions, the so called ‘Beige Book’, compiled using data collected on or before January 3, 2011 in preparation for the January 26 FOMC meeting, characterized U.S. economic activity as continuing to “expand moderately” during the reporting period. Overall conditions and activity were noted to have improved by some degree in all 12 districts, a step up from the last report in which two Districts cited “mixed” business conditions.

· Consumer spending “showed improvement” across all Districts, with retailers indicating that sales were above the levels seen last holiday season and, in some cases, better than expectations.

· Manufacturing activity “continued to recover” across all Districts, with several reporting a notable pick up in new orders; overall, demand was characterized as “stable and steady”. In stark contrast to the reports in the summer, no Districts made mention of lingering fears of a double-dip recession.

· Activity within housing markets “remained slow” across all Districts, with a majority characterizing local markets as “weak and sluggish” with no changes from the previous reporting period. All Districts cited concerns regarding the pace of economic recovery, particularly in employment, as a cause for the slumping activity. The commercial real estate sector was once again described as “mixed” because leasing activity showed increasing signs of recovery, but construction activity remained “weak”.

· Lending activity was “mixed” across Fed Districts, with some stating that overall loan demand was “slowly improving” while others noted it was “weaker” or “slightly softer”. Most Districts reported that credit quality was “improving”.

· The report noted that labor markets in most Districts “appear to be firming somewhat”, but that there was “virtually no upward pressure on wages”. All Districts reported that employment levels were rising, but “generally by modest amounts”.

· Most Districts indicated that firms were facing increasing cost pressures; however, there was “only modest pass-through into final prices because of competitive pressures”. In general, any increases in selling prices were being done on a selective basis.

Today’s Beige Book provides a slightly more upbeat characterization of the U.S. economy, with businesses indicating that they are cautiously optimistic about the near-term outlook. Unfortunately, however, today’s report indicates that while labour markets are improving, these job gains are generally modest, and prices pressures continue to remain subdued, areas in which the Fed has repeatedly noted that progress of improvement has been “disappointingly slow”. Against this backdrop, we expect that the Fed will not make any changes to its highly accommodative monetary policy stance at its upcoming meeting.

Court gives banks 'beat-down' over foreclosures

2011-01-12T08:36:00.000-08:00

The Massachusetts high court ruled on Friday that two foreclosures are invalid because the banks could not prove they had the proper paperwork to foreclose.

The banks "failed to make the required showing that they were the holders of the mortgages at the time of foreclosure," Justice Ralph Gants wrote for the Massachusetts Supreme Court.

This could be a harbinger of things to come because it is the first ruling by a state high court on the issue of whether banks can foreclose on homeowners if can't prove they hold the mortgages.

Numerous instances of this emerged last fall, as evidence appeared that banks were robo-signing foreclosure documents without actually reading them. As a result, there are dozens of similar cases in lower courts across the country, all waiting for the Massachusetts Supreme Court ruling.

"It's about the most extensive beat-down the banks have received over their shoddy practices," said Christopher Peterson, a real estate law professor at the University of Utah. "It could be a wake-up call for rubberstamping judges that they need to more carefully examine practices."
Confessions of a robo-signer

What's the issue? Mortgage loans are like real property and can only be transferred by physically signing over the paperwork -- like someone endorsing a check or the title to a car -- and delivering it to the next holder. Without that, the holder of record doesn't change.

Under mortgage securitization, loans get transferred many times after origination before landing in pools of mortgages that are sold to investors. But often times, the banks simply didn't endorse the paperwork between steps.

Massachusetts law on how to legally transfer mortgages goes back more than 200 years and is very clear, according to Paul Collier, the attorney who represented homeowner Antonio Ibanez in the case. "You've never been able to assign in blank in Massachusetts," he said.

The high court agreed with that assessment, but also clarified that when banks transfer mortgages into a pool they can establish ownership through proper recording or through a document that states all of the mortgages held in the pool, with addresses and owner names. Although, Justice Grants said, "recording is likely the better practice."

"The key in either case is that the foreclosing entity must hold the mortgage at the time of the notice and sale in order accurately to identify itself as the present holder in the notice and in order to have the authority to foreclose under the power of sale," he added.

What happened? Regardless of recording issues, there is little dispute that Antonio Ibanez, a special education teacher in Springfield, Mass., defaulted on his loan for $103,500. He did not even fight the foreclosure when it came in 2007.
0:00 /4:39Florida's foreclosure robo-judges

The case only went to trial because the bank needed to establish clear title to the property after foreclosure so it could resell the house. The insurance companies would not issue title insurance on the home without a court ruling.

The case went before state Land Court Judge Keith Long, who found no evidence that the plaintiffs were the actual mortgage holders and asked them to prove it.

According to court papers, Ibanez's loan went through five different owners before winding up in a pool of mortgages that U.S. Bank was the trustee for. During that trip down the chain, the parties failed to legally assign the mortgage.

The bank produced documents that showed that the loan was one of the mortgages put into a pool, but that failed to satisfy the court, which cited "the utter carelessness with which the plaintiff banks documented the titles to their assets."

In the case of Mark and Tammy LaRaces, Wells Fargo, provided evidence that the loan had been assigned to a pool. The evidence, however, was merely a copy of the pooling and servicing agreement that had been downloaded from the SEC website and was unsigned.

The state's high court ruled that, in both the Ibanez and the LaRace cases, no valid assignments were made after the lender assigned it to the record holder, Option One Mortgage Corp. in both cases. Option One, therefore, was the mortgage holder at the time of the foreclosures and no one else had the right to foreclose.

The future: Bruce Allensworth, an attorney for the banks, said they have the records to prove ownership in both cases, but since they were not introduced in Land Court hearing, rules of evidence prevented them from being introduced into the appeal.

"I'm thinking if there's a way of going back and reintroducing these documents to the Land Court," he said.

So where does that leave Ibanez and the LaRaces?

According to Collier, his clients may now own the home free and clear. "I don't see how [the banks] can win if they challenge the decision," he said, "but maybe they'll take a shot."

U.S. Fed more confident in economic recovery, but risks remain and progress limited

2011-01-05T19:25:00.001-08:00

The minutes of the December 14, 2010 Federal Open Market Committee (FOMC) meeting provided a slightly more upbeat assessment of the near-term outlook. Although given that the improvement was considered "modest", little change to the statement was deemed necessary, and the Fed remaining comfortable with the range of 0% to 0.25% for the fed funds target and keeping the program to buy $600 billion in U.S. Treasury bonds intact.

The minutes provided some detail on the Fed's view that the near-term outlook had improved somewhat relative to November. Production and household spending were mentioned as having strengthened, and the tone in the labour market was "a little better on balance". Policymakers said that the new fiscal package "was generally expected to support the pace of recovery next year." Still, the risks associated with developments in Europe , household and business deleveraging, businesses "reluctant" to hire and the depressed level of housing market activity could restrain growth going forward, policymakers said. Additionally, progress toward the Fed’s mandate of full employment and price stability was considered "disappointingly slow".

While the statement clearly indicates the Fed's commitment to maintain all of its accommodative policy programs, some members suggested that the plans for the eventual unwinding of these policy measures should continue. Other members were cited as saying that "they had a fairly high threshold for making changes to the program" of asset purchases currently underway.

The minutes of the December meeting hammered home that the Fed still saw significant risks to the outlook and viewed the progress on inflation and employment as likely to remain slow even against a mildly improved outlook for growth. Our assessment is that recent economic reports indicate that the U.S. economy pulled out of the doldrums in the final quarter of 2010 with the growth rate forecasted to come in around 3.5%, which would be the fastest pace since the first quarter of 2010. Furthermore, we expect the economy's momentum to accelerate as the government's tax package bolsters consumer activity and businesses keep investing in capital goods. While the labour market has lagged the revival in activity, we anticipate that hiring will pick up its pace thereby resulting in a slow decline in the unemployment rate. Even with conditions improving, however, we see little chance of the Fed being in position to raise interest rates this year given the Fed's assessment that inflation will remain below the level consistent with its mandate "for some time". Rather, should the economy build momentum as expected, we look for the process of reducing policy stimulus to begin with the expiration of the asset purchase program, followed by the ending of the program to reinvest the proceeds of maturing holdings and eventually the sale of bonds held by the Fed. Assuming that the unwinding of these measures does not jar the economy from its stronger growth path, rate hikes are likely to follow in early 2012.

U.S. service sector growth accelerated at a faster than expected pace in December

2011-01-05T19:20:00.000-08:00

The ISM non-manufacturing index indicated that the sector expanded for the twelfth consecutive month in December and the pace of growth increased by more than was expected, as the index rose to 57.1 from 55.0 in the previous month (a reading above 50 indicates the sector is generally expanding). Market expectations were for a smaller increase to 55.7. The employment sub-index declined for the first time in four months but remained in expansionary territory at 50.4 in December.

The increase in the ISM non-manufacturing index was fairly broad based and brought the measure to its highest level since May 2006. Business activity expanded for the thirteenth month in a row, and sub-index rose to its highest level since August 2005, surging to 63.5 from 57.0 in November. The pace of growth in new orders jumped as well, rising to 63.0 from 57.7 in the previous month, also representing the highest level since August 2005. The employment sub-index stayed in expansionary territory for the fourth consecutive month, but the measure declined for the first time since this August 2010, falling to 50.5 from 52.7 in November. With respect to inflationary pressures, growth in prices paid jumped to 70.0 from 63.2 in November, representing the highest level of the sub-index since September 2008.

When combined with the solid manufacturing report on Monday, January 3, 2011, today’s much better than expected ISM non-manufacturing report provides evidence that the U.S. economy is maintaining significant momentum as we move into the new year and is consistent with our forecast for the pace of growth to accelerate to an annualized 3.5% pace in the final quarter of 2010. On the jobs front, while the sub-indices for both of December’s ISM reports declined in the month, they still suggest that employment expanded in the month. Taken with the extraordinary jump in the ADP’s private payrolls, these factors suggest that Friday’s payroll report (January 7, 2011) could show that private-sector employment increased by 205,000, the largest monthly gain since April 2010. These gains, however, are not expected to put significant downward pressure on the unemployment rate in the near term, and given the Fed’s view that progress toward the mandate of full employment has been “disappointingly slow”, we continue to expect the Fed funds rate to remain on hold throughout 2011.

In a separate release this morning, the ADP National Employment Report showed U.S. non-farm private-payroll employment surged by 297,000, the measure’s largest monthly increase since data began in 2001 and almost triple market expectations for a gain of 100,000. The gain seen in November was revised down just slightly from the initially reported 93,000 to 92,000.

Kiss 4% mortgage rates goodbye

2010-12-31T16:19:00.000-08:00

The era of near 4% mortgage rates has ended after a quick rate rise since early November. But some industry experts think that may be a good thing for the flagging housing market.

The average 30-year fixed mortgage rate has risen to 4.86% from 4.17%, according to Freddie Mac's weekly mortgage market survey. In the Bankrate.com weekly survey, the rate has risen to 5.02% -- crossing the 5% mark for the second time in three weeks -- after being as low as 4.42% as recently as early November.

Rates haven't been this high since May and forecasters now predict them to remain between 5% and 6% for all of 2011.

"You can kiss those record lows goodbye," said Greg McBride, chief economist for Bankrate.com.

Keith Gumbinger of HSH Associates, a provider of mortgage information said that the market reached a new plateau.

"I don't think we're going back to a 50-year low anytime soon without an economic collapse," he said. "Rates will probably never revisit those levels."

The increase will push mortgage payments higher for homebuyers. When rates rise from 4.25% to 5% it takes away about 9% of buying power, according to McBride.

"That's nothing to sneeze at," he said. "But it's still small relative to the steep drop in home prices over the past few years."
Good for the market?

Higher interest rates may even prove stimulating to the still quiet housing market in which sales volume and prices are scraping near their bottoms.

"The initial phase of an interest rate increase generally does not hurt markets," said Lawrence Yun, chief economist for the National Association of Realtors. "In fact, it can help."

The rapid rise introduces an element of urgency for potential homebuyers. They may now rush to buy before rates spurt even more.

The strength of the economic recovery will have far more impact on the housing market that this relatively modest increase in mortgage rates, according to Yun. If hiring gains momentum, housing markets should revive.
0:00 /1:49Suburbia's foreclosure crisis

"If we add 2 million jobs as expected in 2011, and mortgage rates rise only moderately, we should see existing-home sales rise to a higher, sustainable volume," said Yun.

Gumbinger said that demand for homes may be tempered somewhat by the increased mortgage costs and so affect home prices a bit but the improving job picture and better consumer confidence matter much more.

"If the other factors are aligned," he said, "interest rates are not a big thing."

The real mortgage challenge, according to Yun, is to increase the number of loan applicants winning approvals. Too many potential homebuyers are still finding it difficult to qualify for loans.

"The current mortgage market is a unique situation" he said. "It's less about rates than it is about underwriting standards, which are, in my opinion, still too stringent."

"If lenders return to more normal, safe underwriting standards for creditworthy buyers, there would be a bigger boost to the housing market and spillover benefits for the broader economy."

The coastal cities of California and the nation's capital were the only apparent bright spots in October's report.

2010-12-30T15:42:00.000-08:00

The year-over-year decline is the first since January and considerably more than economists had expected. The 1.3% drop from September marks a third consecutive decline.

The U.S. economy is expected to gain steam in 2011, but the housing market is sputtering again, with home prices falling in the nation's largest metropolitan areas.

Prices of previously owned single-family homes fell 0.8% in October from the same time last year, according to the Standard & Poor's/Case-Shiller index of 20 metropolitan areas. The closely watched index fell 1.3% from September to October as six metro areas hit fresh lows.

"It is grim, baby. We don't see any basis for sustained price increases in 2011," said Glenn Kelman, chief executive of online brokerage Redfin. "Prices are going to be in the doldrums all year, and usually you look for housing to lead the overall recovery, but that seems doubtful."

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The year-over-year decline was the first since January and considerably worse than economists had expected. Because the index is an average of three months, meaning sales for August, September and October are included in the reading, many analysts saw the October drop as fresh evidence of a sustained downward move. On a month-over-month basis, October marked the third consecutive decline.

"The October decline is consistent with the idea that housing is going to double dip," said Mark Zandi, chief economist for Moody's Economy.com. "The broader economy is going to avoid a double dip, but housing has not been able to," said the prominent forecaster, who expects strong economic growth in 2011.

Dean Baker, co-director of the Center for Economic and Policy Research, predicts a sizable decline in home prices, led by entry-level homes, which had been snapped up by first-time buyers looking to cash in on the federal tax credit earlier this year.

"Price declines are accelerating and it is overwhelmingly at the bottom of the market, and it is totally consistent with the first-time credit having propped up prices," he said. "Basically, that effect is going in reverse now in a very big way."

The Case-Shiller index, created by economists Karl E. Case and Robert J. Shiller, is widely considered the most reliable read on home prices. The index compares the latest sales of detached houses with previous sales and accounts for factors such as remodeling that might affect a house's sale price over time.

The coastal cities of California and the nation's capital were the only apparent bright spots in October's report. Los Angeles, San Diego, San Francisco and Washington were the only cities that showed any year-over-year gains, but even those areas were weak when comparing October with September.

"California is the only state in the union that is up year over year, and it has had a pretty good bounce on the coasts," said Case, a Wellesley College professor. "I still remain cautiously optimistic about California — it could be the engine that gets the train going."

The performance of the California cities in the index doesn't reflect most of the state's overbuilding, which occurred in places such as the Inland Empire and Central Valley. The Golden State has also been able to work through its foreclosures relatively faster than Florida, for example, because of its streamlined repossession process.

"The California markets will see further decline, though I do think they are closer to a bottom than many of the other markets because they went through the housing recession earlier and they had sustained such steep declines from their peaks," said Stan Humphries, chief economist at Zillow.com.

Six markets — Atlanta; Charlotte, N.C.; Miami; Portland, Ore.; Seattle and Tampa, Fla. — hit their lowest levels since home prices started to fall in 2006 and 2007. That means average home prices in those metro areas have fallen below the worst of the declines seen during the worst of the financial crisis in the spring of 2009.

Every major metro area declined month over month, and the 20-city index was down 1.3% when the data weren't adjusted to reflect seasonal factors. Atlanta dropped the farthest, down 2.9%, followed by Detroit, 2.5%, and Chicago, 2%. San Francisco, which has exhibited robust appreciation during the recent bounce in prices this year, declined 1.9% in October. San Diego fell 1.5% and Los Angeles was down 0.7%.

Adjusted for seasonal factors, the index painted a similar picture, falling slightly less, down 1%, with only Washington and Denver eking out gains of 0.1% and 0.3%. Standard & Poor's has warned that such an adjustment lately has distorted the index because of the huge glut of foreclosures.

Several economists attributed the index's drop to the expiration of the federal tax credit for buyers in April. The main boost from that credit evaporated in July after deals closed, sending sales plunging. Sales have remained weak ever since. Both home sales and housing starts were weak in November, portending further declines when data for that month are reported.

"Neither is giving any sense of optimism," said David M. Blitzer, chairman of the index committee at Standard & Poor's.

In another sign of economic weakness, consumer confidence dropped unexpectedly in December. The Conference Board's consumer confidence index, which had improved in November, fell slightly in December to 52.5 from 54.3.

The present-situation index — which measures how people feel about their current economic circumstances — declined to 23.5 from 25.4. The expectations index — which measures how people feel about their future prospects — fell to 71.9 from 73.6 last month.

"Consumers are still in a fragile state and confidence remains at depressed levels despite strong holiday retail sales, low prices and a relatively robust stock market," said Chris Christopher, an economist with research firm IHS Global Insight. "The poor housing market performance, high gasoline prices and a lackluster job market are keeping consumers in a tepid mood."

The index is based on the Conference Board's survey of 5,000 U.S. households. The group started the survey in 1967. The index is benchmarked to consumer sentiment in 1985, because that year was neither a peak nor a trough. Any reading above 100 indicates strong growth.

Forecasters in recent months have turned upbeat on the prospects for the U.S. economy, predicting strong growth that could add jobs in significant numbers and eat into the stubbornly high unemployment rate. But Zandi of Moody's Economy.com said the foreclosure crisis remained the biggest threat to that recovery.

"I believe we are going to get strong economic growth in 2011, and enough job growth to bring down unemployment, but the ongoing foreclosure crisis and the prospect of more price declines is the great threat to that optimism," he said.

"As long as house prices are weak, the economy just can't get into full swing. The home is still the most important asset that most households own, and if it is falling in value they are far less willing and able to spend."

Mortgage rates this year were lowest since 1955, Freddie Mac says

2010-12-30T15:41:00.001-08:00

Rising interest rates have lifted fixed mortgage rates back to the levels of last spring, Freddie Mac said as 2010 wound down, with a reminder that judging by the past ,that's an impressive place to be.

For the year as a whole, 30-year fixed mortgage rates for well-qualified borrowers averaged just below 4.7%, the lowest since 1955, when the typical home price was $22,000, Freddie Mac economist Frank Nothaft said.

This week's survey of lender offering rates, released Thursday morning by the big loan buyer, showed 30-year fixed-rate mortgages averaged 4.86% with 0.8% of the loan amount paid upfront in lender fees. That compared with 4.81% last week and 5.14% at this time last year. It's about what lenders were offering last May -- still "incredibly low" by historical standards, Freddie Mac said.

Home_lookup_icon This week's average rate for a 15-year fixed mortgage was 4.20% with an average 0.8% of the loan balance paid upfront in lender fees, higher than last week's average of 4.15%. A year ago at this time, the 15-year loan averaged 4.54%, Freddie Mac said.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.77% this week, with an average 0.7% in lender fees, up from 3.75% last week. A year ago, the five-year ARM, which becomes variable after five years at a fixed rate, had an average starting rate of 4.44%.

The Freddie Mac survey asks lenders what rates they are offering to borrowers with solid credit, 20% down payments or equivalent equity if they are refinancing their homes, and enough verifiable income to afford the mortgage payments.

Mortgage professionals say these well-qualified buyers often can find slightly better rates if they shop around -- 4.75% this week on average for a 30-year fixed loan, according to FreeRateUpdate.com, which monitors the industry's internal pricing documents.

U.S. initial jobless claims drop sharply

2010-12-30T15:18:00.001-08:00

U.S. initial jobless claims drop sharply

Initial unemployment insurance claims fell 34,000 to 388,000 for the week ending December 25th. The 4-week moving average of initial claims, a better indication of the underlying trend in labor markets, slipped to 414,000 from 426,500 the prior week. Continuing claims (for the week ending December 18th) rose 57,000 to 4,128,000 after falling 96,000 to 4,071,000 the previous week.

This report needs to be viewed with a degree of caution given the significant volatility associated with the seasonal factors surrounding the Christmas holiday period and uncertainty as to whether these declines will be sustained. While the sharp drop in claims in the latest week is encouraging, this report will likely have little influence on expectations for the December payroll employment (the payroll employment survey is conducted during the week containing the 12th day of the month). The trend down in the four-week-moving average of initial claims to 426,000 in the December payroll survey week from 443,500 in November bodes well for private hiring to improve by 130,000 from the 50,000 increase recorded in November. The drop in claims bodes well for improved momentum in labour markets into 2011. Weakness in public-sector hiring persisted in December, providing some offset with an expected 10,000 drop reflecting the weak financial position at the state and local level. In total we expect next Friday’s payroll report to show an overall gain in December payrolls of 120,000 (which compares to a 39,000 gain on this basis in November).

Riding the unlikely commercial real estate rebound

2010-12-20T09:45:00.000-08:00

For years commercial real estate has been billed as the next big train wreck. So why are some investors shouting all aboard?

A slowly recovering economy is part of it, though no one expects to make a quick killing on loans and securities tied to office buildings, hotels, shopping malls and the like. The bigger drivers of this rally are the low rates pushing investors to reach for yield by taking on more risk, and the wide open junk bond market that has allowed lots of companies once left for dead to refinance loans and trudge forth.

Those trends made commercial real estate debt and commercial mortgage-backed securities, or CMBS, among the top-performing asset classes this year. Buyers aren't banking on a repeat of the past year's mega-returns, which were driven by the sector's stubborn failure to collapse and by a surge in bond prices fueled both by liberal government buying and fear that the economy was turning Japanese.

But at a time when investors feel the powers that be are forcing them to take on more risk, some strong supply-and-demand factors appear to be on CMBS investors' side, at least if they keep their wits and stick to higher-quality deals.

"Commercial real estate is one of our favorite risk assets," said Christine Hurtsellers, chief investment officer for fixed income and proprietary investments at ING Investment Management. She said the firm has 10% of assets in whole commercial loans and is also overweight CMBS.

Greg Michaud, who is the head of real estate finance at ING, said CMBS values have been especially aided by loose Federal Reserve policy because they are priced against Treasury bonds, which until recently were trading at yields near longtime lows. The yearlong decline in Treasury yields helped to bring in CMBS spreads as well.

"If you can give it some time, employment will bounce back and then commercial real estate will start rising," said Michaud. "And you're getting paid enough that you can afford to wait for a bit, because it's not going to happen tomorrow."

No indeed. A recent Deutsche Bank report notes as "headwinds" the continued weakness of household balance sheets, the rising number of underwater mortgages, the lack of corporate pricing power and the unhappy fiscal outlook for all levels of government. So it's pretty windy out there. Add to that the recent back-up in bond yields, and you have a good, stiff breeze blowing in your face.

"Investors should be cognizant of the impact downside risks could have on their portfolio," Deutsche Bank analyst Harris Trifon counsels.

Even so, many investors are crossing their fingers and hoping for a low double-digit return in 2011, on the assumption spreads will further tighten. CMBS spreads have narrowed sharply over the past year in part because the worst case scenario widely discussed in mid-2009 failed to materialize, and more of the same is expected for 2011.

"A year or two ago these were priced for the second Depression and then some," said Arne Espe, vice president of fixed income research at USAA Investment Management in San Antonio. "We haven't seen the huge defaults a lot of people were expecting."

Bank of America analysts say the high-yield default rate should fall to 2% in 2011 from 13% or so at the worst of the 2008-2009 crisis. Meanwhile high-yield issuance could hit $300 billion, in line with this year's record performance.

Yet CMBS issuance remains deeply depressed, an artifact of the near total collapse of this market after the bust of 2007. New bond sales are expected to rise for the second straight year to a range of $40 billion to $50 billion, yet are likely to remain some 80% below the 2007 peak. As long as the bond market stays open, it appears there will be deals to be had.

No one can guarantee the slow moving commercial real estate recovery won't jump the track, obviously. Deutsche Bank's Trifon warned this month that while banks have managed to slash commercial real estate exposure by $150 billion over the past 15 months, the sector still poses "a systemic risk to the banking system if the economic recovery falters."

What's more, the flood of high-yield issuance creates the prospect of a refinancing cliff in coming years. Deutsche Bank points to $700 billion of high-yield refinancing obligations coming due this year, though it sees that sum as eminently manageable.

Less optimistically, Moody's warned in a recent report that while the wave of extend-and-pretend deals in high-yield land "has allowed many to avoid default and continue to ride out the halting economic recovery, it has built a towering debt obligation in the years ahead."

That doesn't sound healthy. Even so, some bond buyers say the deleveraging and property price declines of recent years make both commercial loans and CMBS a decent relative value at a time when value plays are few and far between.

"With low yields, people are sniffing around everywhere," said Espe, who helps run funds including the USAA Cornerstone (USCRX) fund, which invests up to a fifth of its money in real estate related plays. "There is some risk, but it is hard to stress super seniors enough to lose money."

And while it may seem like everyone and his brother is piling into high-yield this and mortgage-backed that, the lesson to skeptics from the past decade is that the market can stay irrational far, far longer than you can stay solvent.

"Yes, I'm worried about herding," said Espe. "But I think the move into these assets is just beginning to happen."

U.S. housing starts rose 3.9% in November to 555,000 annualized units

2010-12-16T10:59:00.000-08:00

U.S. housing starts rose 3.9% in November to an annualized pace of 555,000 units, retracing some of October’s unexpected 11.1% decline to an upwardly revised 534,000 annualized units (previously reported 519,000). The level of starts was marginally higher than market expectations going into today’s report of 550,000 annualized units. Building permits surprised to the downside, falling 4.0% to an annualized 530,000 compared to market expectations for a 1.5% increase to 560,000.

The increase in overall starts reflected a strong 6.9% increase in the typically stable singles component to 465,000 annualized units, representing the fastest pace of construction since April 2010. The more volatile multiples component unexpectedly fell 9.1% to an annualized 90,000 units, building on the outsized 35.7% decline recorded in October. Permits for new housing units fell 4.0% to an annualized 530,000, their lowest level since April 2009 and reflecting a sharp 23.0% drop in the multiple-unit component. On a more positive note, however, permits for single-unit structures rose 3.0% to an annualized 416,000, their highest level since June 2010.

Today’s report provides more evidence that housing market activity remains at low levels. Housing starts have generally held in the 450,000 to 650,000 range since the beginning of 2009, with this level of construction representing roughly one-third of the pre-recession long-term average. The low level of housing activity continues to reflect sluggish job growth and a persistently high unemployment rate as well as the high inventories of unsold homes and the uncertainties surrounding the foreclosure process. The weak labour market conditions are likely to remain for the near term, and probes into lenders’ foreclosure practices are likely to continue to delay the absorption of housing inventories. We expect the Fed to keep monetary conditions very accommodative during 2011, which should help support improving housing market conditions.

In a separate report released this morning, initial unemployment insurance claims fell by 3,000 to 420,000 for the week ending December 11 following the previous week’s 15,000 drop to a revised 423,000 level (initially reported as 421,000). Expectations were for the level of claims to come in at 425,000. The four-week moving average of initial claims, which tends to provide a better indication of the underlying trend in labour markets, fell for the sixth straight week declining to 422,750 from 428,000 the prior week. Continuing claims (for the week ending December 4) rose 22,000 to 4,135,000 from 4,113,000 the previous week.

U.S. November industrial production rises

2010-12-15T13:03:00.001-08:00

Industrial production (IP) in November rose 0.4% following a downwardly revised 0.2% decline in October (originally 0.0%) and an upwardly revised 0.1% increase in September (previously -0.2%). Expectations were for a 0.3% rise in November. The overall gain in IP sent the capacity utilization rate up to 75.2% from 74.9% in October. This result puts capacity utilization essentially at half way between its recessionary trough of 68.2% and its pre-recession peak of 81.7%.

The overall increase in IP mainly reflected a 0.3% gain in manufacturing output. This gain occurred despite the motor vehicle and parts output declining 6.0% in the month, which was offset by generally broad-based strength elsewhere in manufacturing and led by a 3.4% jump in primary metal production. Utilities output rose a strong 1.9% although this retraced only one-half of the 3.7% drop in October. Output in the mining sector fell a slight 0.1% following a 0.2% drop in October.

Today’s November IP report provides another indicator coming in stronger than expected; however, the quarterly pattern of growth is less encouraging. The level of IP for October and November is up only an annualized 0.6% relative to the third quarter of 2010. This amount implies a slowing in growth relative to gains of 5.9% and 7.2% in third and second quarters, respectively. To prevent this slowing trend from continuing, policy is likely to remain highly accommodative with fed funds being maintained at its current very stimulative range of 0% to 0.25% throughout 2011. Any move to hike interest rates will likely be preceded by the Fed first reducing the size of its balance sheet by allowing assets to mature and not reinvesting the proceeds; however, there is little reason to believe that this change will occur anytime soon with the Fed indicating yesterday (December 14, 2010) at the conclusion of the FOMC meeting that the committee “will maintain its existing policy of reinvesting principal payments from its securities holdings.”

Bank of America to resume foreclosures

2010-12-13T10:42:00.000-08:00

Bank of America said Friday it was ending its hiatus on foreclosure sales, and promised to get its act together after a series of sloppy home seizures prompted the bank to back off and re-examine its process.

"We have identified areas of our process that can be improved and while we make these improvements, it's important that we move ahead with efforts to reduce the number of abandoned properties across the country," said Barbara Desoer, president of Bank of America (BAC, Fortune 500) Home Loans, in a statement. "The properties can drag home values in neighborhoods and slow the eventual recovery of the housing market."

The bank said it plans to proceed with 16,000 foreclosures this month, though it will observe a "holiday suspension" of sales and evictions from Dec. 20 to Jan. 2. Freddie Mac (FMCC) and Fannie Mae (FNMA) have announced a similar holiday freeze.

The Bank of America action ends the "voluntary freeze" that the bank initiated in October, after a series of messy real estate mistakes. They included the foreclosure of a house that was owned outright by someone who had paid cash, without any mortgage at all, as reported by the Sun Sentinel of Florida.

In another case, the bank shut off the utilities of a Pittsburgh homeowner and seized her pet parrot, despite the fact that she was current on her payments.

"We continue to be committed to ensuring that no property is taken to foreclosure sale until our Bank of America customer is given an opportunity to be evaluated for a modification or, if ineligible for a modification, a short sale or deed in lieu solution," said Desoer. "Foreclosure is the option of last resort."
0:00 /1:49Suburbia's foreclosure crisis

Last month, Desoer said the bank "deeply regrets" the way it handled some of its foreclosures.

The bank reiterated that "more than 86% of the bank's home loans are current on their mortgage," which means that less than 14% of home owners are not current.

The bank also reiterated that "at the point of foreclosure sale, one-third (of the) properties it services are vacant."

The Conference Board Consumer Confidence Index® Increases

2010-12-10T09:03:00.000-08:00

The Conference Board Consumer Confidence Index®, which had improved in October, increased further in November. The Index now stands at 54.1 (1985=100), up from 49.9 in October. The Present Situation Index rose to 24.0 from 23.5. The Expectations Index increased to 74.2 from 67.5 last month.

The Consumer Confidence Survey® is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world’s largest custom research company. The cutoff date for November’s preliminary results was November 19th.

Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumer confidence is now at its highest level in five months, a welcome sign as we enter the holiday season. Consumers’ assessment of the current state of the economy and job market, while only slightly better than last month, suggests the economy is still expanding, albeit slowly. Expectations, the main driver of this month’s increase in confidence, are now at the highest level since May (Exp. Index, 84.6). Hopefully, the improvement in consumers’ mood will continue in the months ahead.”

Consumers’ assessment of current-day conditions was virtually unchanged from October. Those claiming business conditions are “bad” increased to 43.6 percent from 42.3 percent, while those claiming business conditions are “good” edged down to 8.1 percent from 8.3 percent. Consumers’ appraisal of the job market, however, was more positive than last month. Those stating jobs are “plentiful” increased to 4.0 percent from 3.5 percent, while those stating jobs are “hard to get” edged up to 46.5 percent from 46.3 percent.

Consumers were more optimistic about the short-term outlook than in October. Those anticipating an improvement in business conditions over the next six months rose to 16.7 percent from 15.8 percent, while those anticipating business conditions will worsen declined to 12.1 percent from 14.4 percent.

Consumers were also more upbeat about future job prospects. Those expecting fewer jobs in the months ahead declined to 18.8 percent from 22.3 percent, while the percentage expecting more jobs rose to 15.5 percent from 14.5 percent. The proportion of consumers expecting an increase in their incomes increased to 10.6 percent from 9.7 percent.

Foreclosure freeze coming for the holidays

2010-12-04T13:36:00.000-08:00

Several of the big mortgage players are playing Santa Claus again this year, saying they will not evict borrowers in default during the two weeks surrounding Christmas.

Freddie Mac (FMCC) and Fannie Mae (FNMA), the two government-controlled mortgage giants, are freezing all foreclosure evictions on mortgage loans they own or back from Dec. 20 through Jan.3.

Evictions mark the end of the foreclosure process. After the home is sold at foreclosure auction -- or banks take possession of the home -- owners must leave the property or face eviction notices.

"If the property is occupied, our foreclosure attorneys will suspend the eviction to provide a greater measure of certainty to families during the holidays," said Anthony Renzi, executive vice president of single family portfolio management at Freddie Mac.
House hunters are too scared to buy

For some of the big private banks, who also usually observe a freeze during the holidays, the situation is a little different this year, thanks to moratoriums they already have in place because of the robo-signing scandal.

That freeze was initiated to give the banks time to examine whether they violated any legal procedures in processing foreclosures and to correct and refile questionable documents they uncover.

A spokesman for Bank of America (BAC, Fortune 500), Rick Simon, said that made addressing this year's situation a little awkward but it would still observe its usual holiday policy.

"Bank of America's practice in recent years [is to hold off on] foreclosure sales or evictions from late December through New Year's Day on loans held in our investment portfolio or that are owned by investors who give the bank delegated authority," he said.

U.S. consumers more confident than expected in November

2010-11-30T09:43:00.000-08:00

The Conference Board’s measure of U.S. consumer confidence rose 4.2 points in November to 54.1 from a downwardly revised 49.9 level in October (initially reported as 50.2). Market expectations were for an increase in the index to 53.0. The labour market differential (those saying jobs are “plentiful” less respondents saying jobs are “hard to get”) improved for the first time since June 2010, edging up to -42.5 from the prior month’s -42.8 reading (previously reported as -42.6).

The rise in consumer confidence in November reflected an improvement in both the “expectations” and the “present situation” components. The expectations component rose to 74.2 from 67.5 in October, led by an improvement in the outlooks for business conditions and employment. The present situation index rose for the third consecutive month, increasing to 24.0 from 23.5 in October because the consumers’ appraisal of the job market was somewhat more positive than last month. While the “jobs hard to get” index rose to 46.5 from 46.3 in October, the “jobs plentiful” index increased for the first time since July, rising to 4.0 from 3.5 that resulted in the employment differential improving to -42.5 from the -42.8 reading posted in October, the first increase in five months.

While the overall increase in consumer confidence in November is encouraging, today’s report still indicates that consumers maintain a highly pessimistic view of the economy with the index’s level at roughly half of its pre-recession long-term average. Understandably, persistently weak labour market conditions are a key reason for the less than optimistic view of overall prospects, and with the unemployment rate expected to improve only gradually, generally weak consumer attitudes will likely continue to prevail. We expect that this pessimism will weigh on consumer spending, keeping the pace of growth modest, but still positive, in the near term.

In a separate release this morning, September’s S&P/Case-Shiller 20-City Composite measure of U.S. house prices fell for the third straight month, dropping a greater than expected 0.8% on a seasonally adjusted basis from August (market expectations were for a 0.4% decline). On a year-over-year basis, the pace of growth in the unadjusted index eased further to 0.6% following the 1.7% gain in August, slower than the expected increase of 1.0%. The reading represents the eighth consecutive gain on a year-over-year basis after more than three years of declines, although it was the slowest pace of annual growth for this period.

U.S. October consumer spending continues to rise

2010-11-24T09:55:00.000-08:00

Personal consumer expenditure (PCE) in October rose for the four consecutive month increasing by 0.4%. This result is up from a 0.3% increase in September (revised up from an initially estimated 0.2% gain) although down slightly from market expectations of 0.5% increase.

The increase in spending received support from incomes rising 0.5% in the month, which was stronger than the 0.4% gain expected. With incomes rising faster than spending, the savings rate managed to return to an upward trend by rising to 5.7% after dipping in September to 5.6% from 5.9% in August.

The overall increase in PCE largely reflected a 1.9% jump in the durables component although non-durables were also up strongly by rising 0.8%. Spending on services rose a negligible 0.1% in the month. The strength in non-durables was largely price-related, with gasoline prices up strongly in the month, because the volume increase in this component was only up 0.2%. In contrast, the volumes component of durables was up an even stronger 2.2%, thereby indicating falling prices for these items. The volume of services was unchanged in the month. In total, real PCE rose a solid 0.3% following gains of 0.2% and 0.3% in September and August, respectively.

On the inflation front, the core PCE measure was unchanged in the month benefiting from the weakness in durable prices. This weakness contributed to the year-over-year rate for core prices dropping to a record low of 0.9% from 1.2% in September. Expectations were for an unchanged monthly rate and a 1.0% annual increase.

The 0.3% rise in the volume of October PCE is encouraging and bodes well for consumer spending in the fourth quarter of 2010 to rise 2.5%, which would be down only slightly from the surprisingly strong third-quarter pace of 2.8%. This strength domestically, however, is not being matched by similar strength on the external, or trade, side of the economy, resulting in an overall GDP growth rate that offers only modest downward pressure on the unemployment rate. Thus, although the Fed will take some encouragement from sustained growth in domestic spending, it will likely keep conditions very accommodative to encourage a faster drawdown in unemployment. The recently announced quantitative easing demonstrated the preparedness of the central bank to encourage such. Although we are not assuming any further easing initiatives, we expect the current highly stimulative conditions to be maintained for ‘an extended period’ with the current range for Fed funds of 0% to 0.25% to be maintained into 2012.

Add 2.1 million houses to pre-foreclosure!

2010-11-23T15:40:00.000-08:00

According to CoreLogic, a financial information provider, there were 2.1 million homes in this uncounted inventory as of the end of August, up from 1.9 million units 12 months earlier.
There's a large number of homes, either already repossessed by lenders or very seriously delinquent, that are poised to be added to the already glutted regular supply of homes on the market.

This "shadow inventory" jumped 10% during the past year, to an eight-month supply at the current rate of home sales, according to a report issued Monday.

Adding the shadow inventory to the visible supply of homes on the market boosted the total housing-market supply to 6.3 million units from 6.1 million in August 2009. At the current sales rate, it would take 23 months to go through the entire visible and shadow inventory of homes -- more than three times the normal rate of six to seven months.

The potential extra supply raises the risk of further home price declines, according to Mark Fleming, CoreLogic's chief economist.

"[Weak demand] is being exacerbated by a significant and growing shadow inventory that is likely to persist for some time," he said.

The shadow inventory has been growing as banks take a long time to process defaults.
Home prices expected to slide another 8%

Many banks have been slowing the foreclosure process because they already own a glut of homes, according to Rick Sharga, spokesman for RealtyTrac, the online marketer of foreclosed properties.

He said the banks are "managing" their inventory and not pushing delinquent borrowers quickly through the foreclosure pipeline so they don't have to repossess homes that will take a long time to sell.

It's better for the banks to allow borrowers to stay in these homes, doing the maintenance and protecting them from vandalism, than leaving them vacant for months in moribund markets.
Foreclosures: Where does your state rank?

The recent "robo-signing" scandal has further lengthened the foreclosure process. Several servicers temporarily froze foreclosure actions amid questions about whether many of the foreclosure documents were signed without proper review, raising questions about the procedure's validity.

Florida, Michigan, and California have the highest ratios of properties 90 days or more late compared with home sales. Texas has the lowest ratio of distressed properties to sales

Fewer homeowners behind on mortgage payments

2010-11-21T19:10:00.000-08:00

Mortgage delinquency rates dropped in the last three months -- but only because more borrowers had their homes repossessed. You can't be late on your mortgage payment if you've already lost your home.

The number of mortgage borrowers behind in their loans dropped during the three months ended Sept. 30 to a seasonably adjusted 9.13%, according to a report released Thursday by the Mortgage Bankers Association.

However, that only includes loans that were at least one payment past due, not loans that are in the foreclosure process. The number of foreclosures started -- which happens typically after a borrower is 90-plus days late -- rose to 1.34% of all loans from 1.11% a quarter earlier.

"Delinquency rates dropped pretty sharply," said Michael Fratantoni, MBA's vice president of research and economics, "mostly from a reduction in 90-plus days late category. That represents a move to the next category of delinquency -- foreclosure starts."
Obama administration sings new tune on foreclosures

So while overall delinquency rates are improving, it's only because foreclosures are being pushed through the pipeline faster.

"The foreclosure starts rate increased for all loan types and the foreclosure starts rate for prime fixed loans set a new record high in the survey, as more loans entered the foreclosure process," said Fratantoni.

Loans very seriously delinquent can sit in the pipeline for months, contributing to the high delinquency rates quarter after quarter. If they exit quicker, it shows up in improved delinquency rates.
0:00 /4:39Florida's foreclosure robo-judges

The foreclosure rate for prime fixed loans set a record high at 1.12%. That high rate for the safest loan category is an indication that the main causes of mortgage payment problems have continued to shift since the mortgage meltdown began back in 2007.

In the initial stage of the crisis, toxic subprime loans were the driving force behind the high default numbers. These were mortgages that were often unaffordable to begin with, their borrowers dependent on soaring home prices, which added value to their homes, to make them work.

Now, more fundamental economic issues, especially job losses, are the main causes of delinquency.

The economy is unlikely to improve substantially over the next few months, according to Fratantoni, and job growth will be sluggish. The MBA is forecasting that the unemployment rate will be around 9.5% through to the end of 2011.

"So much depends on the job market," Fratantoni said. "And while we're getting some job growth, it's still weak."

The robo-signing scandal, which broke in September and involved problems with filings of foreclosure related documents, had little or no impact on the MBA's delinquency statistics; it simply came too late.

But, by delaying foreclosure starts as the banks sort out all the problems, it could well increase foreclosure inventory numbers in the fourth quarter of 2011

U.S. retail sales rise by a greater than expected 1.2% in October

2010-11-15T07:42:00.000-08:00

Retail spending in the US rose for the fourth consecutive month in October, up 1.2% from September. The reading was well above the 0.7% gain the market expected and is the biggest monthly increase since March 2010. As well, the monthly increase represents acceleration in the pace of growth from the 0.7% gain in September (initially reported as 0.6%). Much of the strength in the month was due to a 5.0% increase in motor vehicle and parts sales, with sales excluding this automotive component up 0.4% in the month, which was in line with market expectations.

The increase in ex-auto sales in October was in part helped by rising gasoline prices which contributions to sales at gasoline stations rising 0.8% in the month following a 1.2% gain in September. Encouragingly, sales excluding the motor vehicle and gasoline station components were up a stronger than expected 0.4% and followed the upwardly revised 0.4% increase in September. This increase reflected solid gains in sales at building materials dealers (1.9%), sporting good and hobby stores (1.0%) and clothing stores (0.7%), which offset declines in the electronic and appliance (-0.7%) and furniture (-0.7%) components. Core sales, which exclude autos, gasoline and building materials components, and are the U.S. Bureau of Economic Analysis’ (BEA) preferred indicator of non-durable consumption, rose 0.2% in the month, which was an easing from the 0.4% rate of increase recorded in September.

Retail sales took the hand off from the third quarter of 2010 and appear to be running with the positive trajectory as we head into the holiday shopping season. The solid growth in retail spending is consistent with the earlier reported indications of improvements in the labour market in the month. We expect that private employment will continue to grow, albeit at a moderate pace, which should be sufficient to support sustained growth in consumption going forward. With that said, the economic recovery has been moderate by historical standards, and the modest pickup in core spending implies an overall GDP growth rate that is unlikely to put any significant downward pressure on the unemployment rate in the near term. With inflation subdued, the Fed earlier this month decided to implement a fresh round of monetary stimulus in an effort to support the recovery. We expect that the Fed will maintain its highly accommodative monetary policy stance until evidence of increased and sustainable economic growth is more firmly established.

Desert Market will be better in 2011

2010-11-13T09:14:00.000-08:00

Expert says favorable mortgage rates, increased affordability should boost sales.

Everyone from home-sellers to bankers to Realtors who took a beating over the past year in the Coachella Valley's improving but still rough-and- tumble real estate market may find solace in analysts' predictions that 2011 will be less hostile.

“There's good news, with some caution,” Robert Kleinhenz, deputy chief economist for the California Association of Realtors, told more than 500 real estate professionals Thursday during the 2011 Local and Regional Real Estate Forecast.

The valley's real estate market is “moving in the right direction,” he said at the Renaissance Esmeralda Resort and Spa in Indian Wells.

Favorable mortgage rates and attractive home prices should translate into continued, gradual improvement, he said.

“Affordability is close to a record high,” Kleinhenz said. “Two-thirds of households in California can afford an entry-level home.”

Statewide, the California Association of Realtors predicts a 2 percent increase in both sales and median prices statewide, he said.

Not surprisingly, some of the most aggressive and seasoned real estate agents in the Coachella Valley are benefiting the most from improving market conditions, said Pat Veling, an industry analyst and president of Brea-based Real Data Solutions, which tracks sales, prices and other real estate information.

“The market is floating some boats, but not all boats,” he said.

About 26 percent of the valley's real estate agents, for instance, failed to earn a single commission last year, he said.

And those agents who did “had to work twice as hard to earn half the money in some cases” than in better years, Veling said.

The top 1 percent of agents — about 25 individuals — garnered 13 percent of all commissions, selling homes at an average price of $411,000 and racking up $27 million each in volume, Veling said.

About 50 percent of agents at the bottom of the pack accounted for only 10 percent of the real estate transactions, Veling said.

Some cities have seen an overall increase in home sales since mid-2008, Veling said.

Bermuda Dunes, Cathedral City, Indian Wells, La Quinta, Palm Desert, Palm Springs, Rancho Mirage and Thousand Palms have reported overall increases in home sales over the past nine quarters.

“(Home) inventories have significantly improved over the past two years” as well, he said.

Statewide, inventories of homes priced under $500,000 continue to be lean, driving moderate or significant price appreciation, officials said.

About 5,969 properties were on the market valleywide in September, according to the California Desert Association of Realtors.

Key economic factors that could dramatically influence the real estate market next year are consumer confidence and the stubborn jobless rate, analysts said.

Foreclosures will continue to have a big impact on the real estate market for three or four more years, with 13,000-15,000 bank-owned properties added to the inventory statewide every month, Kleinhenz said.

In August, bank-owned properties accounted for 38 percent of sales and short-sales were 27 percent of the market in Riverside and San Bernardino counties, CAR reported.

Officials noted that although the federal tax credit was a factor enticing first-time homebuyers, improved affordability was key, CAR officials said.

The share of first-time homebuyers increased for the second year statewide to 46 percent this year from 38 percent in 2009.

Greg Berkemer, executive vice president of the California Desert Association of Realtors, urged real estate agents to confront the market, not complain about it, and to note the positive signs.

“It certainly is a steady march to a better day,” he said.

Home sales, price trends across the valley

Valleywide one-year sales trend: Down 17 percent
Valleywide two-year sales trend: Flat
Valleywide one-year average price trend: Up 12 percent
Valleywide two-year average price trend: Down 11 percent

Tracking sales, prices

Home sales and price trends by city:

BERMUDA DUNES
One-year sales trend: Up 6 percent
Two-year sales trend: Up 65 percent
One-year price trend: Down 5 percent
Two-year price trend: Down 21 percent

Cathedral City
One-year sales trend: Down 15 percent
Two-year sales trend: Up 6 percent
One-year price trend: Up 10 percent
Two-year price trend: Down 19 percent

Indian Wells
One-year sales trend: Down 5 percent
Two-year sales trend: Up 60 percent
One-year price trend: Up 2 percent
Two-year price trend: Down 38 percent

Indio ZIP Code 92201
One-year sales trend: Down 14 percent
Two-year sales trend: Down 15 percent
One-year price trend: Up 26 percent
Two-year price trend: Down 9 percent

La Quinta ZIP Code 92253
One-year sales trend: Down 11 percent
Two-year sales trend: Up 3 percent
One-year price trend: Up 13 percent
Two-year price trend: Down 2 percent

Palm Desert ZIP Code 92211
One-year sales trend: Up 4 percent
Two-year sales trend: Up 18 percent
One-year price trend: Down 4 percent
Two-year price trend: Down 24 percent

Palm Springs ZIP Code 92262
One-year sales trend: Down 29 percent
Two-year sales trend: Down 12 percent
One-year price trend: Up 5 percent
Two-year price trend: Down 22 percent

Rancho Mirage ZIP Code 92270
One-year sales trend: Up 19 percent
Two-year sales trend: Up 23 percent
One-year price trend: Down 14 percent
Two-year price trend: Down 6 percent

Real Data Strategies Inc.

U.S. service sector growth accelerated at a faster than expected pace in October

2010-11-03T12:00:00.000-07:00

The ISM non-manufacturing index indicated that the sector expanded for the tenth consecutive month in October, and the pace of growth increased by more than was expected, because the index rose to 54.3 from 53.2 in the previous month (a reading above 50 indicates the sector is generally expanding). Market expectations were for a more moderate increase to 53.5. The employment sub-index moved more firmly into expansionary territory, rising to 50.9 from 50.2 in September.

The increase in the ISM non-manufacturing index was broad based. Business activity expanded for the tenth month in a row, and the pace of growth increased for the first time since May 2010, surging to 58.4 from 52.8 in September. The pace of growth in new orders rose to 56.7 from 54.9 in the previous month, and the employment sub-index increased for the second straight month, rising to 50.9 from 50.2. With respect to inflationary pressures, growth in prices paid jumped to 68.3 from 60.1 in September, representing the highest level of the sub-index since September 2008.

Today’s better than expected ISM non-manufacturing report indicates that the largest part of the U.S. economy continues to expand in the fourth quarter of 2010 at a stronger pace than in the previous quarter. On the jobs front, the sub-indices for both of October’s ISM reports suggest that employment expanded in the month, which is in line with our call for Friday, November 5, 2010’s payroll report to show an 80,000 gain in private sector employment. These gains, however, are not expected to put significant downward pressure on the unemployment rate in the near term, and we expect that the Fed will announce the introduction of further monetary stimulus later today in an effort to support the recovery.

In a separate release this morning, the ADP National Employment Report showed U.S. non-farm private payroll employment increased more than was expected, rising by 43,000 in October compared to market expectations for a gain of 20,000. As well, the decline seen in September was revised down significantly to 2,000 from the initially reported 39,000. As a note, compared with the payroll report released by the Labor Department, the ADP report (including these revisions) has underestimated changes to private payrolls by an average of 75 to 2,000 this year until September.

3 ways low mortgage rates can work for you

2010-11-02T13:47:00.000-07:00

Just when it looked as if mortgage rates couldn't fall any further, they did.

Rates on 30-year fixed-rate mortgages (excluding jumbos) hit an average of 4.3% in September, the lowest level since 1953, according to Freddie Mac, and are still hovering below 4.5%.

Fifteen-year rates are even more mouthwatering: 3.8%. Mind you, those are averages. The most creditworthy borrowers can do even better, snagging rates perhaps a quarter of a percentage point lower.

So what's in this for you? A lot, potentially. If you have a credit score of 720 or higher and at least 20% equity in your home, you might use these crazy-low rates to shorten your mortgage term, free up cash, or even add to your real estate holdings, for example.

Whatever you decide, don't wait too long.
Home prices expected to slide another 8%

"The consensus is that rates will gradually move up in the new year," says Frank Nothaft, chief economist for Freddie Mac. Freddie projects that the average 30-year fixed will hit 5% by the end of 2011.
Get mortgage-free relief sooner

It's easy to see why more than a quarter of borrowers today are choosing a 15-year mortgage, according to analytics firm Core-Logic, up from about 9% in 2007. A 15-year lets you save in two ways: You get a rate that's about half a percentage point lower than that of a standard 30-year, plus you can save tens of thousands by retiring the loan in half the time.

Let's say you took out a $270,000, 30-year mortgage at 5.9% when you bought your house in 2005. You're paying $1,596 a month in principal and interest and now have a $250,000 balance.
0:00 /4:11Top foreclosure myths debunked

Let's further assume that you roll $5,000 in refinancing costs into a new 15-year mortgage at 3.8% (so the loan is for $255,000). Your new monthly payment will be a heftier $1,860, but you'll save more than $147,000 in interest over the life of the loan.

What if you can't manage the bigger monthly bite? Refi to another 30-year and simply pay more in months when you're able to, assuming you're disciplined enough to actually follow through with that plan.

Given that few new mortgages carry prepayment penalties anymore, kicking in extra money shouldn't be a problem, says Keith Gumbinger, vice president of mortgage data tracker HSH Associates.

Caveat: If you have only a few years left on your current mortgage, or you plan to move soon, a refi may not pay off. Calculate how long it will take to break even on your closing costs, up to three years is typical.
Improve cash flow

Freeing up cash may be your biggest priority right now. Maybe you're trying to replenish your emergency fund after being out of work, or you have lots of high-interest credit card debt to pay off.

Maybe your twins got into Harvard, and you need to cover some of the tuition out of current income. Or maybe you see enough investment opportunities around that you want to lower your monthly payment and invest the difference.

In those cases, choose a 30-year loan. Using the previous example, if you refinance to a $255,000 30-year at 4.4%, you'll lower your monthly payment from $1,596 to $1,277.

True, you won't save nearly as much in interest as you would with a 15-year. But that's not so bad, says Matthew Keeling, a certified financial planner in Mashpee, Mass., as long as you do something smart with the extra $319 a month you'll save.
Double down on real estate

Do your retirement plans call for moving to a house near the beach or a cabin in the mountains? If you can afford another mortgage payment, you may want to start your search now, while rates are in your favor and prices are depressed. Ditto if you've been wanting to buy a second home or an investment property, says Jonathan Bergman, vice president of Palisades Hudson Financial Group in Scarsdale, N.Y.

Assuming you're buying the place as a true second home, lenders generally charge the same rate they would for a primary residence. But if you intend to rent the place out, even if just for a few years until you retire and you need rental income to qualify for the mortgage, it's considered an investment property.

And mortgage rates on investment properties are running about a half to a full percentage point higher. Still, the numbers are "pretty compelling," says Justin Krane, a certified financial planner in Los Angeles.

U.S. consumer confidence shows a better than expected improvement in October

2010-10-26T11:07:00.000-07:00

U.S. consumer confidence shows a better than expected improvement in October

The Conference Board’s measure of U.S. consumer confidence rose 1.6 points in October to 50.2 from an upwardly revised 48.6 level in September (previously 48.5). Market expectations were for a slightly smaller increase in the index to 49.9. Despite the overall increase in the index, the labour market differential (those saying jobs are “plentiful” minus respondents saying jobs are “hard to get”) deteriorated for a fourth consecutive month, slipping to –42.6 from the prior month’s –42.0 reading (previously–42.3).

The rise in consumer confidence in October reflected an improvement in both the “expectations” and the “present situation” components. The expectations component rose to 67.8 from 65.5 in September, led by an improvement in the outlook for business conditions, while the outlooks for employment and income were less pessimistic. The present situation index rose for the first time since May, increasing to 23.9 from 23.3 in September because consumers’ appraisal of current business conditions improved. Despite this improvement, the “jobs hard to get” index rose to 46.1 from 45.8 in September while the “jobs plentiful” index slipped to 3.5 from 3.8. These numbers resulted in the employment differential slipping to -42.6 from the -42.0 reading posted in September.

While the overall increase in consumer confidence in October is encouraging, today’s report still indicates that consumers maintain a highly pessimistic view of the economy with the index “still hovering at historically low levels.” While we expect employment to continue to strengthen in coming months, the pace of growth will likely not be sufficient to generate significant improvements in the unemployment rate in the near term, and consumers’ less than optimistic view of employment prospects will weigh on consumption. As a result, while we expect continued growth in consumer spending, the pace of improvement will likely remain relatively modest compared to previous periods of U.S. economic recovery.

In a separate release this morning, August’s S&P/Case-Shiller 20-City Composite measure of U.S. house prices fell for the second consecutive month, dropping 0.3% on a seasonally adjusted basis from July. Market expectations were for a slightly smaller 0.2% monthly decline. On a year-over-year basis, the pace of growth in the unadjusted index moderated to 1.7% following the 3.2% gain in July, missing expectations for an increase of 2.1%. The reading represents the seventh consecutive gain on a year-over-year basis after more than three years of declines, although it was the slowest pace of annual growth since February. The report noted that the housing market is stabilizing at new lows, but that “it does not seem that any of the markets are hanging on to the temporary momentum caused by the homebuyers’ tax credits” that expired at the end of April.