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Housing’s Spring Bloom ‘Stuck’ Due to Short Supply

Mon, 22 Apr 2013 16:57:49 +0000

“If I am underwater in my equity and now suddenly I’m not, but I’m up 5 percent and the market around me is appreciating 6,7,8,9, 10 percent, why don’t I wait and perhaps get a 10 percent return on my investment, not a 5 percent return,” noted Richard Smith, CEO of Realogy Holdings.

Inventories are tightest on the low end of the market, where investors came in and bought most of the distressed properties and are now holding them as single-family rentals. There is about a four-month supply of homes priced under $100,000, while there is around a twelve-month supply of homes priced over $500,000. That’s why sales of those low-end homes are down 16 percent from a year ago, and sales of higher-end homes are up 25 percent, according to the Realtors.

(Read More: Housing’s Big Challenge: Student Debt)

“The housing shortage is going to continue,” claimed Yun, who says the builders need to ramp up housing starts by 50 percent. He admits that is unlikely to happen due to land, labor and supply constraints.

Weak supplies are pushing home prices up far faster than wage growth, which is keeping first-time buyers especially on the sidelines. These buyers made up just 30 percent of the market in March, compared to the historical norm of 40-45 percent. They just can’t compete with all cash investors.

(Read More: Why Housing Affordability Is at Risk)

But if prices get too high, investors could leave the market. Their share was already down in March to 19 percent compared to 22 percent just one month ago. The danger is that they will start to unload the homes they own, which would bring much-needed supply back but which could also turn home prices in the other direction.

Article source: http://www.cnbc.com/id/100660999

More Homes Are Above Water, But Some Sellers Still Suffer

Thu, 13 Sep 2012 04:56:08 +0000

As home sale prices rise, overall home equity rises, and consequently more and more mortgages are no longer “under water.”

1.3 million homes that were previously worth less than the mortgages on them came back into positive territory in the first half of this year, according to CoreLogic.

Billions of dollars in home equity are returning, but what exactly are homeowners doing with this new found cash? Not much.

They certainly aren’t taking it out of their homes the way they used to. In fact, they are actually putting more cash in during refinances, according Freddie Mac. Lenders say it is becoming nearly the norm.

“I continue to see large cash infusions at closing to pay down to conforming [loan] limits, as well as increases in monthly payments to obtain lower rates on shorter amortizations, both of which are very atypical traditionally, but more and more common in this latest refi market,” said Craig Strent, CEO of Rockville, Maryland-based Apex Home Loans.

As for home sales, the reason so many people cannot move isn’t entirely negative equity, but what’s called “near negative equity,” or having less than 5 percent equity in your home. 10.8 million or 22.3 percent of all residential properties with a mortgage were in a negative equity position at the end of the second quarter of 2012, according to CoreLogic, but an additional 2.3 million borrowers had less than 5 percent equity. (Read More: Pending Home Sales Beat Expectations in July.)

The bottom line is that most move-up buyers, the ones desperately needed for a real robust housing recovery, cannot move if they can’t make enough in the sale not only to cover the mortgage but to cover real estate agent fees, closing fees and of course a down payment on a new home.

Much of the recovery in the housing market of late has been thanks to investors, who are often all-cash buyers and who do not have to sell a home in order to buy another. All that activity on the very low/distressed end of the market is pushing overall prices higher. (Read More: How Investors Are Skewing Home Price Recovery.)

Many Realtors with whom I’ve spoken have said yes, the low end is still on fire, and even the very high end is doing well because high end buyers don’t rely so much on credit. It’s the middle that is still suffering.

But wait! According to CoreLogic’s report, negative equity is concentrated on the low end of the housing market: “For example, for low-to-mid value homes (less than $200,000) the negative equity share is 32 percent, almost twice the 17 percent of borrowers with home values greater than $200,000.”

So with less negative equity in the middle, why is the low end moving and the middle not? (Read More: Where Are the Move-Up Home Buyers?)

Because the low end activity is largely in short sales (when the home is sold for less than the value of the mortgage) and foreclosure sales. That’s also where we’re seeing investors do all the bulk deals. Witness Fannie Mae’s sale of 699 properties earlier this week to Pacifica Group, a real estate investment company. The homes in that deal averaged around $111,000.

The middle of the market is still struggling with near negative equity, not to mention tighter credit the higher the loan value is. The more expensive the home, the bigger down payment you’re going to need to meet today’s tough standards. Home prices are going to have to come back a whole lot more strongly before the middle of the market is able to move again.

—By CNBC’s Diana Olick

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/49005248?__source=RSS*blog*&par=RSS

More Homes Are Above Water, But Some Sellers Still Suffer

Thu, 13 Sep 2012 04:56:08 +0000

As home sale prices rise, overall home equity rises, and consequently more and more mortgages are no longer “under water.”

1.3 million homes that were previously worth less than the mortgages on them came back into positive territory in the first half of this year, according to CoreLogic.

Billions of dollars in home equity are returning, but what exactly are homeowners doing with this new found cash? Not much.

They certainly aren’t taking it out of their homes the way they used to. In fact, they are actually putting more cash in during refinances, according Freddie Mac. Lenders say it is becoming nearly the norm.

“I continue to see large cash infusions at closing to pay down to conforming [loan] limits, as well as increases in monthly payments to obtain lower rates on shorter amortizations, both of which are very atypical traditionally, but more and more common in this latest refi market,” said Craig Strent, CEO of Rockville, Maryland-based Apex Home Loans.

As for home sales, the reason so many people cannot move isn’t entirely negative equity, but what’s called “near negative equity,” or having less than 5 percent equity in your home. 10.8 million or 22.3 percent of all residential properties with a mortgage were in a negative equity position at the end of the second quarter of 2012, according to CoreLogic, but an additional 2.3 million borrowers had less than 5 percent equity. (Read More: Pending Home Sales Beat Expectations in July.)

The bottom line is that most move-up buyers, the ones desperately needed for a real robust housing recovery, cannot move if they can’t make enough in the sale not only to cover the mortgage but to cover real estate agent fees, closing fees and of course a down payment on a new home.

Much of the recovery in the housing market of late has been thanks to investors, who are often all-cash buyers and who do not have to sell a home in order to buy another. All that activity on the very low/distressed end of the market is pushing overall prices higher. (Read More: How Investors Are Skewing Home Price Recovery.)

Many Realtors with whom I’ve spoken have said yes, the low end is still on fire, and even the very high end is doing well because high end buyers don’t rely so much on credit. It’s the middle that is still suffering.

But wait! According to CoreLogic’s report, negative equity is concentrated on the low end of the housing market: “For example, for low-to-mid value homes (less than $200,000) the negative equity share is 32 percent, almost twice the 17 percent of borrowers with home values greater than $200,000.”

So with less negative equity in the middle, why is the low end moving and the middle not? (Read More: Where Are the Move-Up Home Buyers?)

Because the low end activity is largely in short sales (when the home is sold for less than the value of the mortgage) and foreclosure sales. That’s also where we’re seeing investors do all the bulk deals. Witness Fannie Mae’s sale of 699 properties earlier this week to Pacifica Group, a real estate investment company. The homes in that deal averaged around $111,000.

The middle of the market is still struggling with near negative equity, not to mention tighter credit the higher the loan value is. The more expensive the home, the bigger down payment you’re going to need to meet today’s tough standards. Home prices are going to have to come back a whole lot more strongly before the middle of the market is able to move again.

—By CNBC’s Diana Olick

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/49005248?__source=RSS*blog*&par=RSS

Vacant Homes Will Drown Housing Recovery

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

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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.

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Obama Says Multiple Ways Out of Debt Ceiling Mess

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

Home Sales Contracts Rise, But Cancellations Run High

Thu, 28 Jul 2011 22:03:53 +0000

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Last month, the National Association of Realtors reported a huge jump in cancellations of pending home sale contracts. 16 percent of contracts didn’t make it to closing, up from a norm of about 4 percent.

The chief economist at the NAR said he was baffled by it, but ask any agent working the nation’s neighborhoods, and they’ll tell you it is all about confidence and financing—specifically, a lack of both.

“It seems like everybody’s got home purchase ‘cancel-itis,’” says David Fogg, a real estate agent in Burbank, Calif.

“Currently, we are seeing about 75 percent, when we close escrow, had been in escrow 2 or 3 times prior.”

Fogg says the higher cancellations recently are most definitely tied to the turmoil in Washington, D.C. over the debt ceiling . Already nervous buyers are suddenly changing course, unsure how the debt crisis will affect the overall economy, and more importantly, their own employment.

More buyers did sign sales contracts in June than in May, though, according to a new report from the National Association of Realtors. Pending home sales rose 2.4 percent month-to-month and are nearly 20 percent* higher than June of 2010, the low point following the end of the home buyer tax credit.

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Debt Fallout: Even Market Pros Don’t Know What to Do

Wall Street Finally Gets the Gridlock It Was Hoping For

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Article source: http://www.cnbc.com/id/43926826?__source=RSS*blog*&par=RSS