While the number of distressed homes is falling, the remnants of the housing crash are still weighing on the recovery. There are still 5.1 million properties where the owner is either delinquent on the mortgage or the home is already in the foreclosure process, according to a new report from Lender Processing Services. As banks ramp up the foreclosure process, following delays due to processing fraud over the past few years, more distressed properties will come to the market. That may ease some of the price gains, although investors, still reaping rental rewards, seem ready for all of it.

(Read More: No Money? No Worries. Home Lenders Ease Rules)

What remains to be seen is for how long those rents will stay strong? With more Americans looking to buy and souring on renting, rent rates could start to come down. In addition, new supply of rental apartment buildings will be hitting the market in force over the next two years, as developers have been increasing multi-family housing construction.

(Read More: Defying Gravity: Miami Condos Soar Again)

—By CNBC’s Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Questions? Comments? RealtyCheck@cnbc.com

Article source: http://www.cnbc.com/id/100592690

“It’s much smaller inventory, which is holding the price point, and further, the deposit structure is much more beneficial to the developer at this point, so we’re back,” said PMG’s Maloney.

Maloney has sold 100 of the 190 units he plans to build in his “Echo” development and that is without even breaking ground. The rest he hopes to entice with flash and fantasy, which is exactly what Miami is all about.

“I believe in the future,” said Argentinean Antonio Aguirre at the Echo party. “The prices are going to come up faster, so today is a great time to buy.”

(Read More: No Money? No Worries. Home Lenders Ease Rules)

At Marina Palms Yacht Club and Residences in North Miami’s Aventura, broken-down boat slips frame two new condo sites, one of which has the concrete beginnings of a first floor that has been standing idle for six years, since the developers went bankrupt.

“There’s an enormous demand. We actually didn’t think the demand would be as strong as it is today,” said Neil Fairman, of Miami-based The Plaza Group, the project’s developer.

The Plaza Group, along with the DevStar group, are getting ready to put up two 25-story towers with a combined 468 units, starting in the $600,000s. The project will include a full-service, 112-slip marina. Half the units in the first tower sold in just the past two months. Fairman said he already has financing proposed from both banks and private hedge funds.

“There’s a lot more scrutiny, they’re going to scrutinize the buyers a great deal, they’re going to scrutinize the developer’s track record. They want people with experience, they want people with hard deposits,” Fairman noted.

Article source: http://www.cnbc.com/id/100568846

While the percentage jump is large, in a twist, some argue the foreclosure delays still persist and are hurting the recovery.

(Read More: No Money? No Worries. Home Lenders Ease Rules)

“While policy makers state that the purpose of government intervention is to help homeowners by delaying foreclosures, instead they have created an artificial shortage in bank-owned inventory (REO). The combination of the decline in REO inventory and lack of motivated sellers has left the California real estate market with an acute lack of inventory, which is putting upward pressure on prices,” say analysts at ForeclosureRadar.

(Read More: REO: CNBC Explains)

While price gains help recovery, if they happen too fast, they price would-be buyers and investors out of the market, which slows sales again. Price recovery has many believing that housing is suddenly not just back on its feet again, but surging ahead—much of the price recovery is based on lack of inventory of homes for sale, which in turn is due to foreclosure delays, which as we now see, can turn very quickly.

—By CNBC’s Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Questions? Comments? RealtyCheck@cnbc.com

Article source: http://www.cnbc.com/id/100553116

Now, facing a $16 billion shortfall, the FHA has raised premiums and will raise them yet again next month. FHA loans are becoming increasingly expensive.

(Read More: Housing Jobs Jump, Where Are the Workers?)

Meanwhile, as the housing market improves, private mortgage insurers are starting to remove overlays on higher loan-to-value loans, meaning the percentage of the home value that is mortgaged. Low LTV’s and high credit scores were the rule recently for the private insurers, but that may now be loosening, making these loans cheaper than FHA.

“FHA is certainly becoming more expensive,” noted Craig Strent, CEO of Apex Home Loans in Bethesda, Maryland. “The increase in low down payments is reflective of first time buyers coming off the sidelines and entering the market. We’re going to see more of this trend in the next couple of years as the economy improves and renters start to once again see the benefit of buying over renting. FHA has become more expensive and the mortgage insurance companies are the beneficiary of that, which is really not a bad thing as it means the private market is insuring the lower down payments rather than the government.”

(Read More: Home Buyers Are Back, but Where Are the Houses?)

The stocks of mortgage insurers like MGIC and Radian spiked in the first months of this year, as home prices improved and FHA policy changes designed to shrink its share of the market were announced. There is currently a bipartisan effort in the U.S. Senate to reduce the FHA’s role, and in the House of Representatives a hearing is being held Wednesday looking at, “the competitive advantages the Federal Housing Administration has relative to private mortgage insurers and how those advantages contribute to the crowding out of private capital in housing finance,” according to the House Financial Services Committee release.

Despite the advantages, FHA’s share is already shrinking, as Fannie Mae’s is rising. In the first quarter of 2012, loans with between 3 and 10 percent down payment made up 15 percent of Fannie Mae’s business for home purchase loans (not refinances). In the second quarter it rose to 17 percent and in the third to 18 percent. Fannie Mae has not reported its fourth quarter yet, but that share is expected to rise again. While a credit thaw is part of it, as mortgage interest rates rise and fewer borrowers apply to refinance, lenders are simply looking for more business.

Article source: http://www.cnbc.com/id/100548913