Housing Starts Soften After Last Month’s Highs

DAILY REAL ESTATE NEWS | TUESDAY, JANUARY 21, 2014

New-home construction posted its largest percentage decrease since April, a big fall after last month’s surge, the Commerce Department reports. Housing starts dropped 9.8 percent in December to a seasonally adjusted annual rate of just under 1 million units.

The drop follows a sharp rise in November, in which new-housing starts had accelerated to the fastest pace since February 2008.

Single-family home construction, which makes up the largest segment of starts, dropped 7 percent in December to a seasonally adjusted annual rate of 667,000 units. However, total single-family housing starts still mark the highest monthly total in 2013, except for November. Multifamily starts fell 14.9 percent for the month.

Regionally, housing starts dropped the most in the Midwest, falling 33.5 percent, which most economists say recent frigid weather likely was to blame.

Housing permits, a sign of future home construction, dropped 3 percent in December, mostly weighed down by a 4.8 percent drop in permits for single-family homes, the Commerce Department reports.

Despite December’s drop, housing starts were up year over year. Housing starts jumped 18.3 percent in 2013 over 2012 data, the Commerce Department reports.

“Last year was a good year for home building,” says David Crowe, National Association of Home Builders’ chief economist. “As pent-up demand is unlocked and the labor market improves, we anticipate that 2014 should be an even better year for home construction. That’s good news for economic growth, as each new home that is built creates three full-time jobs and contributes to the tax base of local communities.”

Source: “U.S. Housing Starts Fall Less Than Expected, Weather May be a Factor,” Reuters (Jan. 17, 2014) and National Association of Home Builders

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2 Bank Giants See Shrinking Mortgage Business

DAILY REAL ESTATE NEWS | WEDNESDAY, JANUARY 15, 2014

With rising mortgage rates, fewer people are refinancing their mortgages, which means big banks are seeing a dip in mortgage lending.

Wells Fargo funded $50 billion in residential mortgages during the fourth quarter, a 60 percent drop from $125 billion a year earlier. Wells Fargo, the largest mortgage lender in the country, is also losing some of its market share. It controls about 19 percent of the U.S. mortgage market, which is a decrease from 30 percent a year ago, according to Mortgage Finance.  The last time the bank issued such few home loans was during 2008 in the midst of the financial crisis.

Still, No. 2 J.P. Morgan did about half of Wells Fargo’s business, funding $23.3 billion in mortgage loans in the fourth quarter, a 54 percent drop from a year earlier. That is also the bank’s lowest amount in originations since before the financial crisis.

“This is something we expected,” says Tim Sloan, Wells Fargo’s chief financial officer. “Originating $50 billion of mortgages in a quarter is a good feat. It just happens to be a little less than it was in the prior quarter.”

Wells Fargo says that about two-thirds of its loan volume was coming from refinancing and now two-third of its business is being driven by applications for home purchases instead.

With a shrinking refi business, however, some lenders may look to generate extra mortgage revenue by easing up credit standards to try to attract more loan applicants, The Wall Street Journal reports.

Source: “The End of the Mortgage Party? Home Lending Plummets at Wells Fargo, JP Morgan Chase,” The Wall Street Journal (Jan. 15, 2014)

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Many Borrowers Facing Higher Mortgage Costs Next Year

DAILY REAL ESTATE NEWS | THURSDAY, DECEMBER 19, 2013

Borrowers will likely see an increase in mortgage costs next spring, particularly those who lack a sizable down payment or have less-than-perfect credit scores. Mortgage giants Fannie Mae and Freddie Mac are raising the fees they charge lenders, which is expected to get passed on to borrowers.

According to Fannie Mae’s web site, here are some of the increases that borrowers can expect:

• A borrower with a 30-year fixed-rate mortgage, a credit score of 735, and a 10 percent down payment will see fees rise from the current rate of 0.75 percent to 2 percent of the loan amount.
• For those borrowers making a 10 percent down payment and who have a 750 credit score, fees are to increase from 0.5 percent to 1.5 percent of the loan amount.
• Borrowers with credit scores of 775 and a 10 percent down payment will see fees rise from 0.5 percent to 1 percent.

Borrowers with higher down payments aren’t likely to escape some rises in mortgage costs either. For example, borrowers who have a down payment of 25 percent but a credit score of 690 will see fees rise from 1.5 percent to 2.25 percent.

Analysts predict that higher fees combined with rising interest rates and new mortgage rates could further tighten mortgage credit in the new year.

“It’s another headwind for housing on top of other headwinds that, individually, might have been manageable,” says Ivy Zelman, chief executive of Zelman & Associates, a housing research and advisory firm.

Source: “Why Mortgage Costs Could Rise in 2014,” The Wall Street Journal (Dec. 17, 2013) andFannie Mae

Read more:

Where are Mortgage Rates Heading in 2014?

 

 

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Home Owners Stand to Recapture More Equity in 2014

DAILY REAL ESTATE NEWS | WEDNESDAY, DECEMBER 18, 2013

The number of underwater homes continues to slip, with 791,000 properties regaining equity during the third quarter, CoreLogic reports.

Currently, about 13 percent of all homes with a mortgage — or 6.4 million — remain in negative equity compared to 14.7 percent — or 7.2 million — at the end of the second quarter.

An estimated 42.6 million homes in the U.S. have positive equity. About 20 percent– or 10 million — of those homes, however, have less than 20 percent of equity or what is considered “under-equitied,” according to CoreLogic.

What’s more, about 1.5 million properties have less than 5 percent and are considered near-negative equity. They are the most at risk if prices happen to fall, CoreLogic reports.

The following states have the highest levels of negative equity and account for 36.4 percent of all the negative equity in the country:

• Nevada: 32.2% of properties have negative equity
• Florida: 28.8%
• Arizona: 22.5%
• Ohio: 18%
• Georgia: 17.8%

The majority of the homes that have positive equity are in the high-end housing market. Ninety-two percent of homes valued at more than $200,000 have equity compared to 82 percent of homes values at less than $200,000, CoreLogic found.

“We should see a further rebound in consumer confidence and economic growth in 2014 as more homeowners escape the negative equity trap,” says Anand Nallathambi, president and CEO of CoreLogic. “Home price appreciation has helped more than 3 million property owners regain equity since the first quarter of 2013.”

Source: “Negative Equity Will Continue Declining in 2014: CoreLogic,” Mortgage News Daily (Dec. 17, 2013)

Read More

2.5M Mortgages Emerge From Negative Equity
Underwater Home Owners Not Being Held Back, Study Says

 

 

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Economists: Growth in Home Prices Will Slow by Half in 2014

DAILY REAL ESTATE NEWS | TUESDAY, DECEMBER 17, 2013

Economists are predicting housing prices to continue to rise next year — but only at about half the rate that they did in 2013, Money Magazine reports.

However, “for a sustainable recovery, you want to see more balance between buyers and sellers,” says David Stiff, chief economist at CoreLogic Case-Shiller.

Home sales will likely see modest growth next year, says Lawrence Yun, chief economist at the National Association of REALTORS® . Strict underwriting practices by lenders, rising interest rates, and tight inventories in many markets will moderate sales growth. NAR has predicted home sales of about 5.12 million for 2014, which is close to the same level forecasted for 2013.

Meanwhile, inventory levels are expected to see some improvement in 2014. In September, they rose 1.8 percent compared to a year earlier, according to NAR data. That marked the first increase in inventory levels since late 2011.

Still, expect 2014 to continue to be a seller’s market while inventory levels remain tight, analysts say.

Fewer distressed homes on the market also will likely mean investors will take a step back, leaving more room for home buyers to step in. Investors’ share of residential home purchases dropped from 23 percent earlier this year to 17 percent in September, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking survey.

But buyers will likely be greeted by higher mortgage rates. The 30-year fixed-rate mortgage is expected to increase from a 4.5 percent average to more than 5 percent in the new year.

Also, buyers will still face tight underwriting standards. While real estate professionals are reporting that qualifying for a loan is getting easier, the speed of processing the loan has not improved. Virginia real estate professional Rob Wittman told Money Magazine that buyers might want to consider using local lenders with ties to nearby appraisers for faster closings.

And sellers shouldn’t underestimate buyers in the new year, either.

“Buyers are smart these days — they know where the market is and know that rates are higher. They aren’t going to bite on a list price above recent comparables,” says Sara Fischer, an agent with San Diego-based Redfin.

Source: “Real estate: Look for value in 2014,” Money Magazine (December 2013) and “NAR: Price Gains, Not Sales, to Drive Housing Growth,” REALTOR® Magazine Daily News (November 2013)

Read more: 

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Interactive Median Home Price Map

 

 

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FHA Closing Gap on Capital Shortfall

DAILY REAL ESTATE NEWS | MONDAY, DECEMBER 16, 2013

A year ago, the Federal Housing Administration was projected to face a $16.3 billion shortfall, but the shortfall now has fallen to $1.3 billion, a new independent audit shows.

FHA received $1.7 billion in funds from the U.S. Treasury in September to help cover projected losses. The agency also raised the amount it charges borrowers to insure mortgages against default six times, and has tightened its underwriting standards in an attempt to prevent future defaults on mortgages.

The FHA insures more than $1 trillion in mortgages. The number of mortgages it insures increased during the housing crisis, and it now insures more than one-third of all U.S. mortgages—that’s an increase from about 5 percent in 2006, Reuters reports. Many loans it insured from 2007 to 2009 had gone bad and had chipped away at its cash reserves. Loans made since 2010 are expected to remain profitable, according to the audit.

The FHA is required by law to maintain a 2 percent capital ratio. It has failed to meet that ratio since 2009. The audit found FHA will likely meet it in the 2015 fiscal year.

The National Association of REALTORS® is a strong supporter of FHA and what it calls the agency’s “vital role in the mortgage marketplace.”

“These promising gains are the result of strong leadership and a commitment to policies that balance risk with FHA’s mission of making mortgage insurance available to qualified home buyers,” NAR said in a statement. “In light of this report, NAR believes that Congress should not dramatically change the FHA or redefine its purpose. We will continue our work with FHA to help make the dream of home ownership a reality for millions more Americans.”

Source: “U.S. FHA Faces $1.3 Billion Capital Shortfall,” Reuters (Dec. 13, 2013)

Read more

Will the FHA Need a Bailout?
FHA Looks to Raise Mortgage Fees to Avoid Bailout

 

 

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Housing Crisis Is in ‘Rear View Mirror’

DAILY REAL ESTATE NEWS | FRIDAY, DECEMBER 13, 2013

One of the biggest scars from the housing crisis – foreclosures – is rapidly fading away. Foreclosure activity posted a 15 percent month-to-month drop from October to November – the largest monthly drop in three years, RealtyTrac reports in its latest foreclosure report. What’s more, foreclosure filings have posted a 37 percent decrease from year ago levels.

Reports on foreclosure filings, default notices, auctions, and bank repossessions all showed big declines in the latest report.

“I think that [the housing crisis is] really in the rear-view mirror,” Daren Blomquist, vice president at RealtyTrac, told ABC News.

The number of homes entering the foreclosure process has dropped by two-thirds since the peak of the housing crisis in 2010. The number of homes that have started the foreclosure process has fallen to its lowest level since December 2005.

“While some of the decrease in November can be attributed to seasonality, the depth and breadth of the decrease provides strong evidence that we are entering the ninth inning of this foreclosure crisis with the outcome all but guaranteed,” says Blomquist. “While foreclosures will likely continue to stage a weak rally in certain markets next year as the last of the distress left over from the Great Recession is dealt with, it is highly unlikely that there will be a foreclosure comeback that poses any major threat to the solid housing recovery that has now taken hold.”

Source: RealtyTrac and “Foreclosures Plunge as Housing Crisis Retreats,” ABC News (Dec. 12, 2013)

Read More:

Principal Reductions Best Way to Avoid Foreclosure, Experts Say

 

 

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HUD Issues Final ‘Qualified Mortgage’ Ruling

DAILY REAL ESTATE NEWS | THURSDAY, DECEMBER 12, 2013

The U.S. Department of Housing and Urban Development released its final ruling on the definition of “Qualified Mortgage,” which includes new requirements that mortgages must meet starting Jan. 10, 2014, in order to be insured, guaranteed, or administered by HUD or the Federal Housing Administration.

HUD’s rule is similar to the existing qualified mortgage rule that was issued by the Consumer Financial Protection Bureau earlier this year.

According to HUD’s rule, “qualified mortgage” loans will have to meet the following criteria in the new year:

• Require periodic payments without risky features;
• Have terms that do not exceed 30 years;
• Limit upfront points and fees to no more than 3 percent with adjustments to facilitate smaller loans (there are a few exceptions, such as for manufactured housing);
• Be insured or guaranteed by FHA or HUD.

HUD says the first two elements of the rule — periodic payments without risky features and terms that don’t exceed 30 years — are already part of its current underwriting processes. The requirement that limits upfront points and fees is not, but it’s consistent with private-sector and conventional mortgages guaranteed by Fannie Mae and Freddie Mac, HUD notes.

HUD’s rule also establishes two types of qualified mortgages: Rebuttable Presumption QM and Safe Harbor QM. The Rebuttable Presumption QM will contain annual percentage rates that are greater than the rate for the average borrower receiving a conventional mortgage. The Safe Harbor QM, which offers lenders the greatest legal certainty, will have a smaller APR. Both types of qualified mortgages hold different protections for consumers and consequences for lenders.

Read more on HUD’s ruling of “Qualified Mortgage.” 

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires HUD to have a “qualified mortgage” definition that meets the ability-to-repay criteria, requiring borrowers to have the finances to be able to one day repay the loan.

The qualified mortgage rule will have a major effect on determining the underwriting standards that most lenders will use to qualify borrowers, the National Association of REALTORS® has said. NAR has actively worked with lawmakers in shaping the qualified mortgage rule issued by the Consumer Financial Protection Bureau. Read a full summary of the issues that NAR views as a concern.

Source: U.S. Department of Housing and Urban Development; “HUD Releases Final Rule on Qualified Mortgages,” American Banker (Dec. 11, 2013); and “HUD QM Rule Announced; Closely Mirrors CFPB QM,” Mortgage News Daily (Dec. 11, 2013)

Read more: 

NAR Resource Page on Qualified Mortgages 

 

 

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Obama Scorecard: Housing Makes Gains, Headwinds Remain

DAILY REAL ESTATE NEWS | WEDNESDAY, DECEMBER 11, 2013

The Obama administration’s Housing Scorecard for November showed an improving housing market, with home prices remaining strong and foreclosures falling. But the administration cautions in the report that the recovery remains “fragile.”

Economic and job growth and rising home prices “have helped to reduce foreclosure starts to levels not seen since 2005,” says Kurt Usowski, the U.S. Department of Housing and Urban Development’s deputy assistant secretary for economic affairs. “And although the number of home owners ‘underwater’ … is down more than 40 percent from its peak, the number remains historically elevated, meaning more work needs to be done to ensure the continued stability of the housing market.”

The scorecard reviews housing data to gauge the health of the housing market.

Existing-home sales dropped in November, but remained strong over last year’s numbers (426,700 in November 2013 compared to 402,500 in November 2012), according to National Association of REALTORS® data.

New-home sales also posted year-over-year gains: 37,000 in October 2013, up from 30,400 in October 2012, according to U.S. Census and HUD data.

Inventory levels of existing homes inched up slightly in November to a 5-month supply compared to a 4.9-month supply in October, NAR reports. But inventory levels are down from a 5.2-month supply last year.

The inventory of new homes for sale took a big fall, to a 4.9-month supply in November compared to a 6.4-month supply in October, the Census bureau and HUD report.

“Although the housing market has largely recovered, there are still home owners struggling, and it is key that we continue to help them,” says Treasury Deputy Assistant Secretary Tim Bowler.

The government’s foreclosure mitigation programs are providing some relief to struggling home owners. For example, more than 1.8 million home owner assistance actions have taken place through the Making Home Affordable Program. Home owners who have taken part through the government’s Home Affordable Modification Program have saved on average about $547 monthly on their mortgage payments — nearly a 40 percent savings from their previous payment.

View the full Housing Scorecard at www.hud.gov/scorecard.

Source: U.S. Housing and Urban Development 

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Number of Underwater Homeowners Down 42%
10% of Home Owners Still Underwater

 

 

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Consumers’ Caution Could Spell Danger for Housing

DAILY REAL ESTATE NEWS | TUESDAY, DECEMBER 10, 2013

The momentum in the housing market is losing some steam as more Americans say they are feeling more cautious about the economy and their personal finances, according to Fannie Mae’s November National Housing Survey of more than 1,000 Americans.

Nearly two-thirds of Americans surveyed say they believe the economy is on the wrong track. What’s more, the number of Americans who expect their personal finances to worsen in the next year has risen to 22 percent.

Expectations about rising home prices is also curtailing: Only 45 percent of Americans now say they think home prices will increase in the next 12 months. For those who do believe home prices will rise, they expect the increase to be 2.5 percent, down from 2.9 percent a few months ago. More Americans expect mortgage rates to rise in the next year, too.

“We continue to see caution as the defining feature of Americans’ attitudes toward the economy and their personal financial situation. In this environment, the housing recovery is likely to improve, but only at a gradual pace,” says Doug Duncan, senior vice president and chief economist at Fannie Mae. “Our November National Housing Survey results show a loss of momentum in expectations for home prices and personal finances. Also, the majority of consumers expecting higher mortgage rates implies a slowing of housing market momentum. As the economy continues to improve and household balance sheets for most Americans are slow to repair, we continue to see the transition to a full housing recovery as a slow process. Upcoming fiscal policy discussions and labor market developments may also lead to some bumps along the way.”

Source: Fannie Mae

Read more:

Understanding Client Psychology, Managing Expectations, and Communicating Effectively

 

 

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