According to Seeking Alpha the US Residential Home market could see 10% more decline in prices

Oct 28, 2009 | No Comments | Sean Mills

I love the source website for this article, Seeking no prescription online pharmacy Alpha, I suggest you spend some time looking at it from time to time. -Sean
U.S. House Prices Could Fall Another 10%
Guest Post by Oxford Analytica

Over the past few months, there have been suggestions that the US housing market might finally be bottoming out. [...]

I love the source website for this article, Seeking no prescription online pharmacy Alpha, I suggest you spend some time looking at it from time to time. -Sean

U.S. House Prices Could Fall Another 10%

Guest Post by Oxford Analytica

Over the past few months, there have been suggestions that the US housing market might finally be bottoming out. Since July, the decline in sales of both new and existing homes has moderated. Moreover, over the past three months, there has been a very modest increase in home prices at the national level as measured by the 20-city S&P/Case-Shiller home price index. However, the high inventory of unsold homes, continuing foreclosures, and double-digit unemployment could mean that housing prices have further to fall.

 

Reasons for cheer. A number of ‘green shoots’ suggest cause for some optimism:

• Inventory reduction. Whereas housing starts are presently estimated to be running at a 600,000 annual rate, underlying US household formation is presently running at an annual rate of approximately 1.5 million units. Lower residential construction relative to household formation is allowing excessive home inventories to be gradually worked off.
• Cheap mortgages. As a result of the Federal Reserve’s highly accommodative monetary policy, and the activity of the government sponsored home lending enterprises, mortgage rates have declined to more affordable levels. For example, 30-year fixed rate mortgages have fallen below 5% for the first time in many years.
• Increased affordability. The slide in home values has brought prices more into line with their long-run fundamentals. Since September 2006, US home prices have fallen 27%, bringing prices back to the level prevailing in mid-2003. As a result, the ratios of home prices to rents and of home prices to incomes are now much more in line with historic levels. The index of housing affordability now stands at its most favourable level in the past 20 years.

Reasons for doubt. Despite these ‘green shoots’ there remain a number of factors that suggest that US home prices have not quite hit bottom:

• Inventories historically high. Despite small declines in recent months, the inventory of unsold homes at the national level remains at close to its historic high. A key indication of the degree of excess home inventory is that the number of vacant homes, in which neither an owner nor a renter presently dwells, exceeds its normal level by nearly 1 million units.

• Foreclosure crisis. The United States is presently suffering from a foreclosure crisis that is further adding more homes to a market already characterised by excess inventories. Forward looking indicators, such as the number of mortgages that are more than 90 days delinquent (ie behind payment) suggest that the pace of foreclosures could increase in the months ahead.

• High unemployment. A very weak labor market situation inhibits households from making the long-term financial commitments, such as buying a home. The Labor Department estimates that approximately 16.5% percent of the labour force is either unemployed or in involuntary part-time employment. At the same time, the huge slack presently affecting the labour market is exerting downward pressure on wage income growth. Most economists — including White House Council of Economic Advisers Chair Christina Romer — do not foresee much improvement in the labour market in 2010.

• Mortgage resets. Next year, approximately 200 billion dollars in ‘Option ARM’ mortgages (adjustable rate mortgages) are due to reset to higher rates. This is likely to add to the foreclosure problem, since these resets will produce a sharp jump in debt service payments.

• Default incentive. Finally, another factor adding to the foreclosure problem is that a growing number of US households now have ‘negative equity’ in their homes (ie their mortgage debt exceeds the value of their homes). Since mortgages in most US states are ‘non-recourse loans’ (the lender cannot pursue the borrowers’ other assets, beyond the home), negative equity gives homeowners a strong incentive to default on their mortgage loans.

Outlook. The present high level of unsold housing inventories, the poor state of the labour market and the current wave of foreclosures suggest that home prices may have a further 10% to fall (in real terms). This will add to the financial distress facing the banking sector, inhibiting a return to above trend GDP growth in 2010.

This will add to the financial distress facing the banking sector, inhibiting a return to above trend GDP growth in 2010.

Housing bottom? Analysts wary

Oct 28, 2009 | No Comments | Sean Mills

If intervention continues by the feds we are just going to put off the inevitable correction until….?  I know this is for the east coast and most people will say this does not pertain to me or where we are but the biggest foreclosures and pain in real estate are concentrated in the coastal states or [...]

If intervention continues by the feds we are just going to put off the inevitable correction until….?  I know this is for the east coast and most people will say this does not pertain to me or where we are but the biggest foreclosures and pain in real estate are concentrated in the coastal states or west coast.  (i.e. Florida, Nevada, Arizona and California)  Over 50 % of the loan origination for the distressed housing is in major cities in the west or in coastal states.  Do a little leg work check out www.lpsasap.com and run the  numbers for the auctions in your area for today, one week and for the last 30 days then you tell me if you this we have seen the end of this. -Sean

Housing bottom? Analysts wary

For months now, it appeared that Southwest Florida real estate prices had bottomed out.

But two analyses commissioned by the Herald-Tribune suggest that a second wave of home foreclosures looms and will likely cause a new flood of homes for sale — and even lower prices, possibly lasting through 2011.

Zillow.com analyzed monthly median home values in Southwest Florida since the start of the decade.

The online home valuation service found that the rate of decline in markets from Bradenton to Punta Gorda has slowed to the point where it is statistically flat, meaning it rose or fell by about 1 percent or less from July to August.

That would seem to imply the bottom many real estate experts have noted, but Zillow’s chief economist thinks that the results only point to a respite before the new wave of foreclosures pushes prices down again.

“In Sarasota metro, there is a fair bit of supply of for-sale homes, and since we suspect that there is a high number of foreclosures ready to stream in, that will continue to keep the inventory of for-sale homes high and thus prices low,” Zillow’s Stan Humphries said. “I expect prices will dip down in the coming months.”

“This is what a bottom would look like,” Humphries noted. “You should take some comfort in the fact that these numbers look good, but I would not say it is completely behind us in Florida by any means.”

The second analysis — this one by California-based RealtyTrac Inc. — looked at foreclosures within various ZIP codes in the region.

It found that despite banks’ growing ability to both forestall and to more quickly process distressed properties, the rate of foreclosures is still growing. Foreclosures also are rising in traditionally strong segments of the Southwest Florida real estate market.

Foreclosures in downtown Sarasota and on Lido Key, for example, were up 51 percent in the third quarter from a year ago.

That could be an indication that it is no longer just investors or buyers with marginal financial strength who are suffering. Prime borrowers — those with good credit scores and traditionally strong finances — are being hit, many the victims of the region’s 12.5 percent unemployment rate.

“Rational, reasonable, intelligent people that normally take great pride in paying all of their bills on time are deciding to turn in their keys and walk away from their homes,” said Jack McCabe, a Deerfield Beach-based housing analyst who correctly predicted the housing downturn.

But many regional real estate experts do not buy this gloomy scenario.

They argue that the growing interest of buyers — demonstrated by a 30 percent increase in sales during July, a 23 percent rise in August and a 42 percent jump in September in the Sarasota-Bradenton market — will help ameliorate the effects of rising foreclosures.

Budge Huskey, the Southeast region executive vice president for Coldwell Banker’s parent NRT LLC, also has data that suggest the growth in foreclosures could dampen or lower prices in Southwest Florida.

But Huskey argues that the market’s future is unwritten because historically low interest rates will continue to govern buyers. He also notes lenders’ growing sophistication in handling distressed properties.

Rising markets

 

In real dollars Zillow’s analysis of the Southwest Florida real estate market found median home values actually rose in three local markets from July to August:

• By $500 to $221,700 in Punta Gorda.

• By $1,000 to $91,100 in Port Charlotte.

• By $1,200 to $120,700 in Bradenton.

The biggest decline was just $700 in Englewood.

But Zillow’s median home values — derived from a formula that includes both homes that have sold and those not on the market — have been greatly influenced by historically low interest rates and the $8,000 first-time home buyers credit set to expire at the end of November, said Humphries, the company’s chief economist.

At the same time, the list of foreclosures continues to grow in Florida.

There are more than 200,000 mortgages in the state that are substantially delinquent, but in its most pessimistic view of the potential for the Sunshine State, a California lender processing services company predicts that number could rise to 900,000.

Applied Analytics — which tracks more than 40 million mortgages nationwide — predicted that those high levels of foreclosures could persist throughout 2010.

The company expects the total to then fall slowly through 2013 to roughly 500,000.

Huskey has data that suggest a similar track for foreclosures in Southwest Florida.

“We are at delinquency and default rates that are higher than anything we’ve seen in years,” said Huskey, who works out of Sarasota. “Many buy prozac of the models suggest that defaults will peak in the second half of 2010 and into 2011.”

Huskey’s models show that there will be more loan defaults this year than in 2008.

But “the ultimate impact will be largely influenced by the direction of interest rates,” Huskey said. “Fortunately, interest rates are at historic lows, but there is a general belief that rates will begin to escalate as we move through next year.”

Although the increasing trend of delinquencies and defaults is unmistakable, Huskey believes that the final impact is uncertain.

Lenders are becoming much more effective at loan modifications and short sales, transactions where the lender agrees to accept less for a property than what is owed to avoid a foreclosure.

Banks also are better capitalized now and will control the release of foreclosures over time to minimize the losses on their balance sheets, Huskey said.

Foreclosures in some of the region’s neighborhoods have been snapped up to the point where there are more buyers than homes for sale, Huskey noted.

That may help keep inventory levels low at some price points even when the new wave of foreclosures hits, he said.

The prime problem

 

During the second quarter, delinquency rates on conventional prime mortgages were up in every category when compared with a year before, the Mortgage Bankers Association reported.

During the second quarter, a majority of loan delinquencies were represented by prime mortgage products.

Prime mortgages that are past due have increased from 3.73 percent in 2008 to 6.01 percent this year. Prime mortgages in foreclosure have risen from 0.61 percent of all such loans to 1.01 percent.

Prime mortgage foreclosure inventory more than doubled during the last year — from 1.42 percent to 3 percent.

RealtyTrac’s analysis for the Herald-Tribune found delinquencies and defaults rising by double-digits in most areas of the region.

Foreclosures rose by 38 percent along western Cortez Road in Manatee County and by 17 percent in Charlotte County’s Rotonda community.

That supports the case that McCabe — the Deerfield Beach housing analyst — has been making for months: that the first wave of foreclosures may be slowing, but that the new wave of foreclosures will push in, driven by a fresh crop of adjusting subprime mortgages written during the boom and by rising unemployment.

The recent “bottom” in pricing is a “short-term thing,” McCabe said.

“We are three-and-a-half years into this unfolding case and you can say there were five years of the build-up, so we’re looking at at least two more years before we work through all of this,” he said.

Foreclosures in the last 24 to 36 months were laden with subprime and investor-owned mortgages — the most risky. Nationwide, there are as many as 8 million adjustable-rate mortgages poised to reach their first-term adjustment within the next two years, and as many as 12 million during the next five years, McCabe said.

“There are a lot of foreclosures in limbo and a lot of lenders are allowing people to live in them so they do not have to assume the risk,” he said. “These are the next big shoes to drop.”

Source Article

MBA: Mortgage Applications Decrease

Oct 28, 2009 | No Comments | Sean Mills

This is no “news” to any of my friends in the business but some how it is to a lot of other people.  2009 is a time to survive and get through it not to kill it with record business.-Sean
(Calculated Risk) The MBA reports: Mortgage Applications Decrease
The Market Composite Index, a measure of mortgage loan application [...]

This is no “news” to any of my friends in the business but some how it is to a lot of other people.  2009 is a time to survive and get through it not to kill it with record business.-Sean

(Calculated Risk) The MBA reports: Mortgage Applications Decrease

The Market Composite Index, a measure of mortgage loan application volume, decreased 12.3 percent on a seasonally adjusted basis from one week earlier. …

The Refinance Index decreased online drugs 16.2 percent from the previous week and the seasonally adjusted Purchase Index decreased 5.2 percent from one week earlier.
…
The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.04 percent from 5.07 percent, with points increasing to 1.25 from 1.13 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The purchase index is off almost 17% over the last 3 weeks, and the refinance index is off about 30%.

It appears the post home buyer tax credit slump has started, although apparently the tax credit will be extended and the eligibility expanded – so the slump might be delayed …

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 2002.

The Purchase index declined to 254.9, and the 4-week moving average declined to 280.

Note: The increase in 2007 was due to the method used to construct the index: a combination of lender failures, and borrowers filing multiple applications pushed up the index in 2007, even though activity was actually declining. 

The MBA reports: Mortgage Applications Decrease

The Market Composite Index, a measure of mortgage loan application volume, decreased 12.3 percent on a seasonally adjusted basis from one week earlier. …

The Refinance Index decreased 16.2 percent from the previous week and the seasonally adjusted Purchase Index decreased 5.2 percent from one week earlier.
…
The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.04 percent from 5.07 percent, with points increasing to 1.25 from 1.13 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The purchase index is off almost 17% over the last 3 weeks, and the refinance index is off about 30%.

It appears the post home buyer tax credit slump has started, although apparently the tax credit will be extended and the eligibility expanded – so the slump might be delayed …

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 2002.

The Purchase index declined to 254.9, and the 4-week moving average declined to 280.

Note: The increase in 2007 was due to the method used to construct the index: a combination of lender failures, and borrowers filing multiple applications pushed up the index in 2007, even though activity was actually declining.

Another Home Buyer Tax Credit Update

Oct 28, 2009 | No Comments | Sean Mills

Sorry there have been no posts lately I have been traveling and have been sick I will resume my normal posts.-Sean
(Calculated Risk) 
Yesterday I heard a compromise had been reached on extending and expanding eligibility for the home buyer tax credit, and that the housing tax credit would be attached to the extension of unemployment benefits, [...]

Sorry there have been no posts lately I have been traveling and have been sick I will resume my normal posts.-Sean

(Calculated Risk) 

Yesterday I heard a compromise had been reached on extending and expanding eligibility for the home buyer tax credit, and that the housing tax credit would be attached to the extension of unemployment benefits, and that the Senate would vote today – and a House vote would follow shortly.

Hold on …

Albert Buzzo at CNBC reports: Senate Vote On Home-Buyer Tax Credit Unlikely Today. Buzzo says there is “no chance” the Senate will vote today on the home buyer’s tax credit.

There was hope last night that a vote on one of several versions might be voted on Wednesday but a battle over legislation extending unemployment benefits is taking priority and right now there’s “no agreement” on that issue …CNBC’s Diana Olick provides the same details that I heard on the tax credit: A Compromise on Home Buyer Tax Credit? and adds:

[T]here may have been a bit of a revolt among Democrats who didn’t want the controversial measure attached to the Unemployment Insurance bill.And from Andy Sullivan and Corbett Daly at Reuters:

Reid had wanted to attach a bill to extend the homebuyer credit as an amendment to a bill to lengthen insurance benefits for unemployed workers. The Senate voted 87-13 on Tuesday to take up the insurance benefit bill, but did not attach the homebuyer tax credit to the measure as Reid had wanted.

Despite that apparent roadblock, Senate Finance Committee Chairman Max Baucus, who has been involved in negotiations over the tax credit, told Reuters late on Tuesday that he expected the Senate would vote on the bill sometime this week.As Ms. Olick concluded: “Stay tuned. It could all change dramatically.” 

Yesterday I heard a compromise had been reached on extending and expanding eligibility for the home buyer tax credit, and that the housing tax credit would be attached to the extension of unemployment benefits, and that the Senate would vote today – and a House vote would follow shortly.

Hold on …

Albert Buzzo at CNBC reports: Senate Vote On Home-Buyer Tax Credit Unlikely Today. Buzzo says there is “no chance” the Senate will vote today on the home buyer’s tax credit.

There was hope last night that a vote on one of several versions might be voted on Wednesday but a battle over legislation extending unemployment benefits is taking priority and right now there’s “no agreement” on that issue …CNBC’s Diana Olick provides the same details that I heard on the tax credit: A Compromise on Home Buyer Tax Credit? and adds:

[T]here may have been a bit of a revolt among Democrats who didn’t want the controversial measure attached to the Unemployment Insurance bill.And from Andy Sullivan and Corbett Daly at Reuters:

Reid had wanted to attach a bill to extend the homebuyer credit as an amendment to a bill to lengthen insurance benefits for unemployed workers. The Senate voted 87-13 on Tuesday to take up the insurance benefit bill, but did Xenical Online not attach the homebuyer tax credit to the measure as Reid had wanted.

Despite that apparent roadblock, Senate Finance Committee Chairman Max Baucus, who has been involved in negotiations over the tax credit, told Reuters late on Tuesday that he expected the Senate would vote on the bill sometime this week.As Ms. Olick concluded: “Stay tuned. It could all change dramatically.”