homesmillbrae.com » Consumer Sentiment

Is Housing Recovering as Much as Everyone Thinks?

Wed, 10 Oct 2012 06:48:22 +0000

The news is finally good: Consumer sentiment in housing is at the highest level since the recovery began.

Realtors say not only are buyers coming back, but much-needed sellers are too. Inventories of distressed properties are shrinking, and mortgage rates are hitting record lows nearly every week. (Read More: Is Housing Rising From Ashes? ‘Industry Has Come Back’.)

The housing crisis is over, right?

“While we have seen many dramatic headlines touting the housing recovery over the last 3.5 years, these headlines and the analysts who author them have been over- predicting changes in the housing market (versus what actually occurred).” said Laurie Goodman of Amherst Securities in a new report.

“Recoveries, with attendant price increases, were anticipated in the spring and summer of 2009, 2010 and 2011; by the fall and winter the predictions of price changes were amended to reflect further price declines. In actuality, after netting out the seasonal factors, home prices have been little changed in the past few years.”

Does that mean that we’re headed for yet another housing scare come Halloween time? Is housing’s winter chill just around the corner? Not according to the bulk of Americans surveyed in yet another new report:

“Consumers are showing increasing faith in the nascent housing recovery,” said Doug Duncan, senior vice president and chief economist of Fannie Mae. “Home price change expectations have remained positive for 11 straight months, and the share expecting home price declines has stabilized at a survey low of only 11 percent.”

The expectation is now that home prices will increase an average of 1.5 percent in the next year, according to the survey, and that has sellers coming back to the market. Of those surveyed, 19 percent said now is a good time to sell. That’s the highest since the survey began in June 2010. But wait, 19 percent? That’s still not a lot.

These national surveys seek overall trends and tout big headlines, but real estate is and always will be local, and this recovery is becoming increasingly local. That is clear in the latest numbers on supplies of distressed homes.

The so-called “shadow inventory” of homes that either have seriously delinquent mortgages, are in the foreclosure process or are bank-owned but not yet listed for sale, fell to 2.3 million units in July according to CoreLogic. That’s a 10 percent year-over-year drop, and puts the supply at about six months by the current sales pace.

“The decline in shadow inventory has recently moderated reflecting the lower outflow of distressed sales over the past year,” said Mark Fleming, chief economist for CoreLogic. “While a lower outflow of distressed sales helps alleviate downward home price pressure, long foreclosure timelines in some parts of the country causes these pools of shadow inventory to remain in limbo for an extended period of time.”

And that’s the problem. In states where a judge is required in the foreclosure process, like New York, Florida and New Jersey, foreclosure timelines are still marked in years, not months. That will keep home prices from recovering as quickly there. Prices could in fact deteriorate. (Read More: Housing Alert: Short Sales may Be in Big Trouble.)

“Market participants have become too accustomed to speaking about a national housing market and national home price appreciation. Going forward, we expect price behavior to vary by price range and location. To over-generalize — we anticipate that the judicial states, those in which a court order is necessary to proceeds with the foreclosure process, will take much longer to clear the distressed inventory than the non-judicial states, and higher-priced homes will take longer to clear than lower priced,” noted Goodman.

Much of the latest optimism in housing is due to record low mortgage rates. The Federal Reserve’s latest action to buy $40 billion in agency mortgage-backed securities sent rates plunging and mortgage applications rising.

The applications, however, were largely for refinances, not home purchases. The Fed’s move gave more Americans confidence that mortgage rates will not increase in the next year, according to Fannie Mae’s survey, but those consumers may be wrong. (Read More: Will Fed’s Mortgage Buying Juice the Housing Recovery?)

“More recently, MBS yields have made up nearly all of their initial drop. If sustained, that suggests that mortgage rates may not fall much further, and could even rise,” notes Paul Diggle of Capital Economics.

Home buying and selling cannot always be qualified and quantified by monthly economic numbers. It is a highly emotional business, which is why sentiment can not only ignore reality, it can effect reality. Going forward, much of the housing recovery will be driven by sentiment. It remains to be seen if that sentiment will hold if this warming recovery hits a new chill.

—By CNBC’s Diana Olick

Sector Watch: US Home Builders

—Toll Brothers
[TOL
Loading...

()

]

—DR Horton
[DHI
Loading...

()

]

—Hovnanian Enterprises
[HOV
Loading...

()

]

—PulteGroup
[PHM
Loading...

()

]

—Ryland Group
[RYL
Loading...

()

]

—Lennar Corp
[LEN
Loading...

()

]

—Beazer Homes USA
[BZH
Loading...

()

]

—Meritage Homes
[MTH
Loading...

()

]

—KB Home
[KBH
Loading...

()

]

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/49343717?__source=RSS*blog*&par=RSS

How Does the Fed Help My House, My Mortgage?

Sat, 15 Sep 2012 11:04:44 +0000

For those of you who expected to wake up to a 30-year fixed rate mortgage below 3 percent, you may as well go back to sleep.

Yes, rates moved down, 0.125 percent, according to several sources, but that was not as low as some had predicted. Remember, we hit the low of 3.49 percent in July, but then we jumped back into the mid to high threes. (Read More: Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates.)

“Short term, people who are thinking about moving really need to lock in,” says Craig Strent of Maryland-based Apex Home Loans. He is concerned that the strong consumer sentiment number that came in today could cause the Federal Reserve to pull back on its buying in the future. “When this thing turns, it’s going to be fast. Just pulling back a little sends a message,” adds Strent.

But others argue that the housing market is still on such shaky ground that that’s unlikely to happen. Mortgage applications to purchase a home have declined five of the last six months, according to Diane Swonk of Mesirow Financial.

“I think that this will be a trillion dollar commitment from the Fed,” said Swonk on CNBC’s “Squawk on the Street.” “Home values appreciating, that’s something very important in this economy getting more legs and moving forward more rapidly.” (You can watch the interview here.)

So say mortgage rates could dip lower than the latest record, perhaps to around 3.25 percent. How does that help me? Does it boost my home price? (Read More: Will Fed’s Mortgage Buying Juice the Housing Recovery?)

On the one hand, lower mortgage rates give potential buyers more purchasing power. “A 0.125 percent drop in rates adds 1.5 percent to your maximum purchase price (given all the other fees),” according to Dan Green at Waterstone Mortgage. “Assuming a mortgage payment of $1500, that’s the difference between $404,800 and $411,000-ish.” So that is how much more house you can buy. If people can buy more house, then perhaps home prices will rise.

But as we’ve noted so many times before, the great low rate doesn’t mean anything if you can’t qualify, if you don’t have the down payment or credit scores to get it.

“Instead, the underlying improvement in housing demand is still very reliant on cash buyers and investors,” notes Paul Diggle of Capital Economics, who does not believe mortgage rates will fall dramatically. “Admittedly, low bond yields and savings rates more generally are probably playing a part in the strength of investor demand for housing.”

Lower rates could cause a boost in refinances, but so many have already refied at record low rates that it would take a pretty large drop to lure more in, given the fees and hassle involved. And of course negative equity keeps millions of potential refinancers out of the game. The government’s refinance program for underwater borrowers (HARP) has helped over half a million borrowers get lower rates since the beginning of this year, but unless you have a Fannie Mae or Freddie Mac
[FNMA
Loading...

()

] backed loan, you’re not eligible.

There is a push by Democrats in Congress to expand the government’s refi program, and lower mortgage rates could help more Republicans come on board, but that is unlikely to happen before election day. (Read More: Wealthiest Counties Rake In Government-Backed Mortgages)

“To ensure as many voters as possible can benefit from this, we believe there will be another push to enact HARP expansion legislation during the lame duck session that will start after the election,” says Jaret Seiberg of Guggenheim Partners. “Lower mortgage rates only matter if people can refinance and plow that extra cash into the economy. Given that as many as a quarter of borrowers may be underwater, the HARP is the way to translate the Federal Reserve’s effort into economic stimulus.”

It is hard to say now just how low rates will go and just who will be able to benefit from lower mortgage rates. In today’s tricky housing recovery, so dependent on investors and so sensitive to a still-swollen pipeline of foreclosed properties and delinquent loans, mortgage rates are just one piece of the recovery puzzle.

Sector Watch – Nation’s Biggest Mortgage Lenders:

Wells Fargo
[WFC
Loading...

()

]

JPM Chase
[JPM
Loading...

()

]

Bank of America
[BAC
Loading...

()

]

Citi
[C
Loading...

()

]

U.S. Bancorp
[USB
Loading...

()

]

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/47260576?__source=RSS*blog*&par=RSS

San Francisco Area Home Prices Jump to a Four-Year High

Tue, 21 Aug 2012 14:11:45 +0000

The median home price in the San
Francisco Bay area climbed to the highest level in almost four
years as more expensive properties made up a larger portion of
transactions, according to DataQuick.

The median paid last month was $421,000, up 1 percent from
June and 13 percent from a year earlier, the San Diego-based
data firm said today in a statement. It was the highest for the
nine-county region since $447,000 in August 2008. Sales rose on
a year-over-year basis for the 13th straight month.

Across California, housing has been buoyed by consumer
sentiment and low mortgage rates, with coastal areas like San
Francisco and West Los Angeles showing the biggest price
advances, Stuart Gabriel, director of the Ziman Center for Real
Estate at the University of California, Los Angeles, said in a
telephone interview. Inland cities still have widespread
negative equity, with many homes valued at less than their
mortgage balances, he said.

The median price statewide rose almost 12 percent from a
year earlier to $281,000, the highest since September 2008,
DataQuick said today in a separate report. Foreclosure deals
made up 22 percent of transactions, the smallest share since
November 2007, the company said.

“Housing has bottomed and, in fact, has turned,” Gabriel
said. “The coasts are among the hottest markets in the country.
Underwater homes are a limiting factor, but as prices rise they
will naturally bring forward new inventory and a willingness by
owners to market properties.”

‘Big Challenges’

Buyers in “mid- and move-up markets” fueled the price
gain in the Bay Area, with properties offered at $500,000 or
more accounting for 42 percent of total sales, up from 36
percent a year earlier, DataQuick President John Walsh said.
Mortgage availability “remains one of the big challenges in the
Bay Area,” he said in the statement.

Distressed deals in the Bay Area including foreclosures and
short sales, where the purchase price is lower than the loan
balance, made up almost 35 percent of transactions, down from 37
percent in June and 45 percent a year earlier, according to the
company.

Purchases financed by adjustable-rate mortgages were used
in 13 percent of Bay Area deals in July, down from 14 percent
both in June and a year earlier. Since 2000, those loans have
been used in almost half of all home purchases in the region,
DataQuick said.

Sales totaled 8,461, up 23 percent from July 2011.

San Francisco tops a list of U.S. metropolitan areas with
improved residential markets, based on price gains, inventories
and foreclosures, according to data compiled by Bloomberg.

To contact the reporter on this story:
Dan Levy in San Francisco at
dlevy13@bloomberg.net

To contact the editor responsible for this story:
Kara Wetzel at
kwetzel@bloomberg.net

Article source: http://www.businessweek.com/news/2012-08-15/san-francisco-area-home-prices-jump-to-a-four-year-high

Home Sales Disappoint Twice

Fri, 27 Jul 2012 17:15:24 +0000

Sales of newly built homes fell hard in June, despite newfound optimism in the housing recovery, especially among the home builders themselves.

Signed contracts to buy new homes fell 8.4 percent from the previous month, according to the U.S. Commerce Department, although they are still up 15 percent from a year ago.

Sales levels are now at their lowest since January.

This is the second miss for housing in the same month. Sales of existing homes fell as well, despite expectations for a gain.

The biggest drop in new home sales came in the Northeast, down 60 percent month-to-month, but the Northeast represents the smallest sample and is therefore highly volatile. In May it was that same segment of the country that pushed new home sales higher. The biggest June gains were seen in the Midwest, with a slight gain out West, where dwindling supplies of foreclosed homes have removed some of the competition for the home builders.

“With new home sales at current levels 75 percent below peak and with a run rate near 50+ year lows, new home construction has bottomed, but there is still a long bridge between a bottom and a robust recovery, as existing home inventories (shadow and otherwise) remain elevated,” writes Peter Boockvar, an analyst at Miller Tabak.

These latest numbers fly in the face of rising home builder optimism and a huge run on the stocks of the public builders. Some analysts, however, have been warning that this recovery is fragile at best, given other factors in the economy, specifically lackluster job growth and poor consumer sentiment.

“Builder stocks have continued to outperform the market as demand has remained strong into summer; also, earnings and the next few macro data points should be positive,” wrote analysts at Deutsche Bank earlier this week. “However, we think downside tail risk is mounting for 2H12. It shouldn’t take more than muddle-through economic growth for housing recovery to continue, but the risks are that even that doesn’t happen or it happens unevenly against tenuous investor optimism.”

Several home builders reported big jumps in new orders this spring, but those orders did not translate into pricing power for the market. Prices of new homes fell 3.2 percent in June after several months of gains.

Single family housing starts rose 4.7 percent in June from the previous month to a four year high, but they are still running at about one third the historical average volume. Inventories of new homes for sale rose to 144,000, representing a 4.9 month supply, but that is still historically very low.

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/48318563?__source=RSS*blog*&par=RSS

Vacant Homes Will Drown Housing Recovery

Fri, 29 Jul 2011 16:14:57 +0000

Page 1 of 3 | Next Page
Show Entire Article

A real estate source I knew recently told me about a guy he knows in Atlanta who has been hired by several different banks to winterize their REO’s (real estate owned, i.e. the bank-owned foreclosures).

The homes are abandoned and empty, and clearly the banks think they’re going to stay that way for a while.

The winterizer didn’t want to do an interview, for fear he would lose his clients, the banks, who might not want us all to know about this.

A new study by an economist at the Cleveland Federal Reserve finds today’s foreclosures stay vacant far longer than the historical norm. Studying one Ohio county, Stephan Whitaker found, “foreclosed homes go through more than a year of very high vacancy rates following the auction and are substantially more likely to be vacant up to 60 months after the foreclosure.” The higher the poverty rate in the area, the longer the property stays vacant.

Foreclosed homes obviously lower the value of surrounding homes, but Whitaker says the damage can go on much longer than we might think. “The data suggest that foreclosure may permanently scar some homes,” he writes in his research.

Page 1 of 3 | Next Page
Show Entire Article

Obama Says Multiple Ways Out of Debt Ceiling Mess

Republicans Race to Revive US Debt Plan

Fed May Have Options If US Defaults: Lockhart

Economy Grows at Sluggish 1.3%; Consumers Pull Back

Consumer Sentiment Falls to Lowest Level Since March 2009

More Top Stories

Article source: http://www.cnbc.com/id/43913483?__source=RSS*blog*&par=RSS