Sales of new single-family homes in March plummeted 14.5% to a seasonally adjusted annual rate of 384,000, hitting the lowest level since July 2013, the U.S. Census Bureau reported Wednesday.
The March drop in new home sales was a year-over-year drop of 13.3%. The report showed there were drops in three of four U.S. regions.
The March results were well below analyst expectations. The report can be read here.
Home sales have been tepid in market facing rising interest rates, investor-driven home price increases, declining inventory, a rising affordability gap and the much tighter lending standards imposed on the industry.
“Another disappointing home sales report on the heels of yesterday's decline in existing home sales activity. As we noted yesterday, rising prices are becoming problematic,” said Sterne Agee chief economist, Lindsey Piegza. “While fueling existing homeowners' confidence with a sizable wealth effect, declining affordability is squeezing many potential home buyers out of the market. Without income growth or sizable savings to offset the cost increase, home sales are likely to remain tepid, at least in the near term.”
Sales did pick up in the Northeast region, while falling in the three much larger regions.
Home prices continued to climb through March, rising to a median price of $290,000, up 12.6% from March 2013.
“The sharp decline in March’s new home sales is further evidence that winter weather is not the catalyst for the sluggish housing data the past few months,” Quicken Loans vice president Bill Banfield. “The rise in interest rates and prices of new homes is leaving some potential buyers with sticker shock and ultimately prolonging their home search process.”
The new home supply is at six months given the March sales pace, which is up from five months supply in February.
Wednesday's report comes as the latest bit of bad news for the housing industry.
The Mortgage Bankers Association notes that mortgage applications are down 16% from this time last year, and mortgage activity is actually at its lowest level since 1997. Mortgage originations in general are at a 14-year low according to Black Knight Financial Services.
Housing starts in March rose less than expected and much less than expected given the supposed demand pent up from the bad weather in January and February.
Wednesday, April 23, 2014
Tuesday, April 22, 2014
Fitch: 7 factors that will shape the housing market in 2014
Despite the anemic housing market start so far in 2014, housing metrics should improve later this year, according to Fitch Ratings’ Chalk Line report.
The pickup will be driven, Fitch says, by faster economic growth, some acceleration in job growth, and it will happen despite somewhat higher interest rates, as well as more measured home price inflation.
“Comparisons have been a challenge so far this year, with most housing metrics falling short of expectations from a year ago,” said Robert Curran, managing director and lead homebuilding analyst for Fitch Ratings. "Though the severe winter throughout much of North America has restrained some housing activity, buyer sensitivity to home prices and finance rates and the slowing of job growth at year-end is resulting in diminished consumer momentum.”
Fitch expects stable ratings for most issuers within the homebuilding sector in 2014, reflecting a continued, moderate cyclical improvement in overall construction activity as the year progresses.
Digital Risk's CAO Tom Showalter takes a slightly more pessimistic approach.
Showalter says that the market is currently experiencing friction as a result of economic factors such as Fitch points out, including rising home prices, stagnant income levels, and investor participation in the marketplace.
He believes this friction will keep the housing market from revving up in 2014.
"You know what happens in an engine when you get too much friction and the car just doesn't rev as fast? Its one of those friction based arguments rather than a 'catastrophic change' based arguments. What I’m saying is that there is so much friction here; the friction from the regulators, the friction from the lenders, friction from the borrowers (median incomes aren't going up, coming up with down payments are tough, they aren't sure the house is priced correctly) every one of those reasonable propositions is a source of friction," Showalter said.
Fitch is tapering its forecast to reflect the subpar spring selling season. Single-family starts are now projected to improve 15% to 710,000 as multifamily volume grows about 9% to 335,000.
Fitch projects new home sales to advance about 16% to 500,000 and existing home volume to remain flat at 5.10 million.
This is largely due to fewer distressed homes for sale. New home price inflation should moderate in 2014, at least partially because of higher interest rates. Average and median new home prices should rise about 3.5% in 2014.
“The investors are gradually leaving the market as prices rise, and the retail buyer is waiting in the wings. There are some markets, like Miami and San Francisco, that are driven by outside factors, but markets like St. Louis and Omaha and parts of California and Nevada that aren't driven by structural factors that are unique and powerful, they are going to suffer the friction as the retail buyer struggles to get back into the marketplace," Showalter said.
What are the seven dynamics that Fitch says will shape the housing market through the rest of 2014?
1) Lack of Momentum
The pickup will be driven, Fitch says, by faster economic growth, some acceleration in job growth, and it will happen despite somewhat higher interest rates, as well as more measured home price inflation.
“Comparisons have been a challenge so far this year, with most housing metrics falling short of expectations from a year ago,” said Robert Curran, managing director and lead homebuilding analyst for Fitch Ratings. "Though the severe winter throughout much of North America has restrained some housing activity, buyer sensitivity to home prices and finance rates and the slowing of job growth at year-end is resulting in diminished consumer momentum.”
Fitch expects stable ratings for most issuers within the homebuilding sector in 2014, reflecting a continued, moderate cyclical improvement in overall construction activity as the year progresses.
Digital Risk's CAO Tom Showalter takes a slightly more pessimistic approach.
Showalter says that the market is currently experiencing friction as a result of economic factors such as Fitch points out, including rising home prices, stagnant income levels, and investor participation in the marketplace.
He believes this friction will keep the housing market from revving up in 2014.
"You know what happens in an engine when you get too much friction and the car just doesn't rev as fast? Its one of those friction based arguments rather than a 'catastrophic change' based arguments. What I’m saying is that there is so much friction here; the friction from the regulators, the friction from the lenders, friction from the borrowers (median incomes aren't going up, coming up with down payments are tough, they aren't sure the house is priced correctly) every one of those reasonable propositions is a source of friction," Showalter said.
Fitch is tapering its forecast to reflect the subpar spring selling season. Single-family starts are now projected to improve 15% to 710,000 as multifamily volume grows about 9% to 335,000.
Fitch projects new home sales to advance about 16% to 500,000 and existing home volume to remain flat at 5.10 million.
This is largely due to fewer distressed homes for sale. New home price inflation should moderate in 2014, at least partially because of higher interest rates. Average and median new home prices should rise about 3.5% in 2014.
“The investors are gradually leaving the market as prices rise, and the retail buyer is waiting in the wings. There are some markets, like Miami and San Francisco, that are driven by outside factors, but markets like St. Louis and Omaha and parts of California and Nevada that aren't driven by structural factors that are unique and powerful, they are going to suffer the friction as the retail buyer struggles to get back into the marketplace," Showalter said.
What are the seven dynamics that Fitch says will shape the housing market through the rest of 2014?
1) Lack of Momentum
Comparisons are challenging through first-half 2014, and so far this year most housing metrics seem to have defied expectations and fallen somewhat from a year ago. Though the severe winter throughout much of North America has restrained some housing activity, nonetheless, there is an absence of underlying consumer momentum this spring, perhaps due to buyer sensitivity to home prices and finance rates and the slowing of job growth at year end.2) Recovery Supports Ratings, Likely Some Upgrades
Fitch Ratings expects stable ratings for most issuers within the homebuilding sector in 2014, reflecting a continued, moderate, cyclical improvement in overall construction activity during the year. Of course, financial performance will vary among issuers, reflecting customer, geographic and product strengths. However, there is the potential for a few upgrades.3) Public Builders Continue to Outperform
Generally, the major public builders realized much stronger operating results, year over year, during fourth-quarter 2013 and, for the full year, they gained market share. On average, fourth-quarter net orders were down 1.7%. The unit backlog typically improved 8.5% (22.6% on a dollar basis). The implied price in backlog grew 12.8%, largely due to price increases.4) 2014 Volume Should Increase Moderately
Housing metrics should improve in 2014 due to faster economic growth, and some acceleration in job growth, despite somewhat higher interest rates, as well as more measured home price inflation. However, we are tapering our forecast to reflect the subpar spring selling season. Single-family starts are now projected to improve 15% to 710,000 as multifamily volume grows about 9% to 335,000. Thus, total starts this year should top 1 million. New home sales are forecast to advance about 16% to 500,000, while existing home volume is flat at 5.10 million, largely due to fewer distressed homes for sale.5) Positive Valuations and Affordability
Still-attractive home prices in most markets, low absolute mortgage rates and a moderate rise in nominal incomes have driven improved affordability and valuations. Mortgage rates remain well below their historic averages and housing pricing remains undervalued versus incomes.6) Challenges Persist
Demand will continue to be affected by narrowing of affordability, diminished but persistent and widespread negative equity, challenging mortgage-qualification standards and lot shortages. As Fitch has noted in the past, the recovery will likely remain fitful.7) Caution on Land Spend and Liquidity
The improving economy warrants reasonable optimism on the part of builders, but some restraint should be exercised as to excessive new land purchases and meaningful depletion of liquidity in these still-uncertain times.
Thursday, April 17, 2014
17% of homes with a mortgage seriously underwater
Fully 9.1 million U.S. residential properties were seriously underwater, representing 17% of all properties with a mortgage in the first quarter, according to RealtyTrac’s U.S. Home Equity & Underwater Report for the first quarter of 2014.
To be seriously underwater, the combined loan amount secured by the property is at least 25% higher than the property’s market value. The first quarter negative equity numbers were down to the lowest level since RealtyTrac began reporting negative equity in the first quarter of 2012.
In the fourth quarter of 2013, 9.3 million residential properties representing 19% of all properties with a mortgage were seriously underwater, and in the first quarter of 2013 10.9 million residential properties representing 26% of all properties with a mortgage were seriously underwater.
“U.S. homeowners are continuing to recover equity lost during the Great Recession, but the pace of that recovering equity slowed in the first quarter, corresponding to slowing home price appreciation,” said Daren Blomquist, vice president at RealtyTrac. “Slower price appreciation means the 9 million homeowners seriously underwater could still have a long road back to positive equity.”
The recent peak in negative equity was the second quarter of 2012, when 12.8 million U.S. residential properties representing 29% of all properties with a mortgage were seriously underwater.
The universe of equity-rich properties — those with at least 50 percent equity — grew to 9.9 million representing 19% of all properties with a mortgage in the first quarter, up from 9.1 million representing 18% of all properties with a mortgage in the fourth quarter of 2013.
Another 8.5 million properties were on the verge of resurfacing in the first quarter, with between 10% negative equity and 10% positive equity. This segment represented 16% of all properties with a mortgage in the first quarter.
That was compared to 8.3 million properties representing 17% of all properties with a mortgage in the fourth quarter of 2013.
Fewer distressed properties had negative equity in the first quarter, with 45% of all properties in the foreclosure process seriously underwater — down from 48% in the fourth quarter of 2013 and down from 58 percent in the first quarter of 2013.
Conversely, the share of foreclosures with positive equity increased to 35% in the first quarter, up from 31% in the fourth quarter and up from 24% in the third quarter of 2013.
“The relatively high percentage of foreclosures with equity is surprising to many because it would seem homeowners with equity could easily avoid foreclosure by leveraging that equity by refinancing or with an equity sale of the home,” Blomquist noted. “But many distressed homeowners with equity may not realize they have equity and in some cases have vacated the property already, assuming that foreclosure is inevitable.”
“Underwater properties have become an insignificant part of the housing market in Orange County,” said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market. “Out of the nearly 40,000 properties we currently have listed only about 3,000 of those are distressed or short sale properties, proving that the continual rise in home prices is relieving the housing market of underwater homeowners.”
To be seriously underwater, the combined loan amount secured by the property is at least 25% higher than the property’s market value. The first quarter negative equity numbers were down to the lowest level since RealtyTrac began reporting negative equity in the first quarter of 2012.
In the fourth quarter of 2013, 9.3 million residential properties representing 19% of all properties with a mortgage were seriously underwater, and in the first quarter of 2013 10.9 million residential properties representing 26% of all properties with a mortgage were seriously underwater.
“U.S. homeowners are continuing to recover equity lost during the Great Recession, but the pace of that recovering equity slowed in the first quarter, corresponding to slowing home price appreciation,” said Daren Blomquist, vice president at RealtyTrac. “Slower price appreciation means the 9 million homeowners seriously underwater could still have a long road back to positive equity.”
The recent peak in negative equity was the second quarter of 2012, when 12.8 million U.S. residential properties representing 29% of all properties with a mortgage were seriously underwater.
The universe of equity-rich properties — those with at least 50 percent equity — grew to 9.9 million representing 19% of all properties with a mortgage in the first quarter, up from 9.1 million representing 18% of all properties with a mortgage in the fourth quarter of 2013.
Another 8.5 million properties were on the verge of resurfacing in the first quarter, with between 10% negative equity and 10% positive equity. This segment represented 16% of all properties with a mortgage in the first quarter.
That was compared to 8.3 million properties representing 17% of all properties with a mortgage in the fourth quarter of 2013.
Fewer distressed properties had negative equity in the first quarter, with 45% of all properties in the foreclosure process seriously underwater — down from 48% in the fourth quarter of 2013 and down from 58 percent in the first quarter of 2013.
Conversely, the share of foreclosures with positive equity increased to 35% in the first quarter, up from 31% in the fourth quarter and up from 24% in the third quarter of 2013.
“The relatively high percentage of foreclosures with equity is surprising to many because it would seem homeowners with equity could easily avoid foreclosure by leveraging that equity by refinancing or with an equity sale of the home,” Blomquist noted. “But many distressed homeowners with equity may not realize they have equity and in some cases have vacated the property already, assuming that foreclosure is inevitable.”
“Underwater properties have become an insignificant part of the housing market in Orange County,” said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market. “Out of the nearly 40,000 properties we currently have listed only about 3,000 of those are distressed or short sale properties, proving that the continual rise in home prices is relieving the housing market of underwater homeowners.”
Tuesday, April 15, 2014
Here's proof the housing bubble is about to burst- from Housing Wire
Many housing industry experts and economists (especially “celebrity economists”) have been touting their belief that the housing recovery has been very real over the past year to 18 months, and see things only getting better.
We, on the other hand, have seemingly been a rare contrarian.
For many months we have privately and publicly stated that the current housing “recovery” is an illusion – a false recovery built upon a sandy foundation above a slippery slope.
But the truth is, things are even worse.
In a recent article published by the Daily Real Estate News, (February 12, 2014 – “Rising Prices Chip Away at Housing Affordability”), evidence seems to suggest there are signs of a new housing bubble.
In the aforementioned piece it was stated that according to the National Association of Realtors’ latest quarterly report, “strong year-over-year price gains are starting to take a bite into housing affordability.” It also noted that the median single-family home price rose in 119 out of 164 metro areas in the fourth quarter of 2013, which is 73%, with 26% of those metros posting double-digit increases.
That sounds like good news on the surface of it, but when one takes into consideration that incomes for the middle class in America have not come close to keeping pace with the rise in home prices, and that interest rates are expected to rise noticeably into 2015, you see that housing affordability is being negatively impacted.
This will impact prices.
Without housing affordability there cannot be a rise in first-time buyer participation. Without the entrance of first-time buyers, those wishing (or hoping) to move up to a larger home or relocate into other neighborhoods will not be able to so, at least not readily. This can produce a cascade effect on housing prices, starting to drive them downward to reflect a decrease in demand.
In another recent article by Christopher Matthews featured in Fortune, the author poses the question, “Is the housing recovery losing steam?” Additional evidence certainly seems to answer his question in the affirmative.
According to Matthews, new home construction has severely lagged behind the growing demand for housing with only 880,000 new homes under construction in January of this year, which is 16% below the revised December estimate of 1,048,000 and 2% below the January 2013 rate of 898,000. Without the accompanying job growth created by a real, sustainable increase in new housing starts there cannot be a “real” housing recovery.
These numbers above, along with continued dismal employment figures should sound alarm bells. In addition, much of the rise in home prices is also due to the participation of large and even smaller investors who have entered or are now entering the new REO-to-rental or long-existing single-family rental market.
Many of these hedge funds or individual investors paid higher than listing prices in order to secure these properties. By doing so, believing that purchasing homes above list price but below replacement cost would be a wise investment, available homes went to investors, not owner-occupants.
This practice, in addition to the government’s continuing efforts to modify loans and stall the foreclosure process has contributed to over-inflated home “values.” If housing prices begin to fall, wouldn’t one expect the investors to at least consider dumping homes onto the market to minimize potential losses? If they did so, the aforementioned cascade-effect would drive prices down even further.
If that isn’t enough to convince you that we may be seeing another housing bubble, consider the fact that traditional mortgage lenders have much stricter lending guidelines today.
This has pushed many buyers into FHA loans or even loans provided by non-banks.
In 2010 for example, over 40% of all mortgages were financed with FHA backing. It can be argued that many of these loans are riskier. Some have very low down payments or are adjustable-rate loans. Higher risk loans simply means more people have received mortgages on homes they cannot afford. That translates into more and more loans going into default. That should certainly sound familiar.
Additionally, millions of loans that went through the Home Affordable Modification Program are soon to be recast. Some economists are predicting that 30% or more of those loans will go back into default. Many others believe that government agencies will not let that happen. If those economists who believe the government will continue to intervene are right, the outcome would further fuel a false demand for available housing – once again prolonging the inevitable. But will this government or even a new one want to step in again to bail out consumers?
Haven’t we learned anything over the past five years? Much of what we covered here contributed to the housing crash of 2008, and an artificial recovery. Surely I am not the only one who sees this latest bubble coming – perhaps not simmering up to the boiling point as did the last one, but a bubble nonetheless.
We, on the other hand, have seemingly been a rare contrarian.
For many months we have privately and publicly stated that the current housing “recovery” is an illusion – a false recovery built upon a sandy foundation above a slippery slope.
But the truth is, things are even worse.
In a recent article published by the Daily Real Estate News, (February 12, 2014 – “Rising Prices Chip Away at Housing Affordability”), evidence seems to suggest there are signs of a new housing bubble.
In the aforementioned piece it was stated that according to the National Association of Realtors’ latest quarterly report, “strong year-over-year price gains are starting to take a bite into housing affordability.” It also noted that the median single-family home price rose in 119 out of 164 metro areas in the fourth quarter of 2013, which is 73%, with 26% of those metros posting double-digit increases.
That sounds like good news on the surface of it, but when one takes into consideration that incomes for the middle class in America have not come close to keeping pace with the rise in home prices, and that interest rates are expected to rise noticeably into 2015, you see that housing affordability is being negatively impacted.
This will impact prices.
Without housing affordability there cannot be a rise in first-time buyer participation. Without the entrance of first-time buyers, those wishing (or hoping) to move up to a larger home or relocate into other neighborhoods will not be able to so, at least not readily. This can produce a cascade effect on housing prices, starting to drive them downward to reflect a decrease in demand.
In another recent article by Christopher Matthews featured in Fortune, the author poses the question, “Is the housing recovery losing steam?” Additional evidence certainly seems to answer his question in the affirmative.
According to Matthews, new home construction has severely lagged behind the growing demand for housing with only 880,000 new homes under construction in January of this year, which is 16% below the revised December estimate of 1,048,000 and 2% below the January 2013 rate of 898,000. Without the accompanying job growth created by a real, sustainable increase in new housing starts there cannot be a “real” housing recovery.
These numbers above, along with continued dismal employment figures should sound alarm bells. In addition, much of the rise in home prices is also due to the participation of large and even smaller investors who have entered or are now entering the new REO-to-rental or long-existing single-family rental market.
Many of these hedge funds or individual investors paid higher than listing prices in order to secure these properties. By doing so, believing that purchasing homes above list price but below replacement cost would be a wise investment, available homes went to investors, not owner-occupants.
This practice, in addition to the government’s continuing efforts to modify loans and stall the foreclosure process has contributed to over-inflated home “values.” If housing prices begin to fall, wouldn’t one expect the investors to at least consider dumping homes onto the market to minimize potential losses? If they did so, the aforementioned cascade-effect would drive prices down even further.
If that isn’t enough to convince you that we may be seeing another housing bubble, consider the fact that traditional mortgage lenders have much stricter lending guidelines today.
This has pushed many buyers into FHA loans or even loans provided by non-banks.
In 2010 for example, over 40% of all mortgages were financed with FHA backing. It can be argued that many of these loans are riskier. Some have very low down payments or are adjustable-rate loans. Higher risk loans simply means more people have received mortgages on homes they cannot afford. That translates into more and more loans going into default. That should certainly sound familiar.
Additionally, millions of loans that went through the Home Affordable Modification Program are soon to be recast. Some economists are predicting that 30% or more of those loans will go back into default. Many others believe that government agencies will not let that happen. If those economists who believe the government will continue to intervene are right, the outcome would further fuel a false demand for available housing – once again prolonging the inevitable. But will this government or even a new one want to step in again to bail out consumers?
Haven’t we learned anything over the past five years? Much of what we covered here contributed to the housing crash of 2008, and an artificial recovery. Surely I am not the only one who sees this latest bubble coming – perhaps not simmering up to the boiling point as did the last one, but a bubble nonetheless.
Lending Drops to 17-Year Low as Rates Curb Borrowing
Mortgage lending is contracting to levels not seen since 1997 as rising interest rates and home prices drive away borrowers.
Wells Fargo & Co. and JPMorgan Chase & Co., the two largest U.S. mortgage lenders, reported a first-quarter plunge in loan volumes that's part of an industrywide drop off. Lenders made $226 billion of mortgages in the period, the smallest quarterly amount since 1997 and less than one-third of the 2006 average, according to the Mortgage Bankers Association in Washington.
Lending has been tumbling since mid-2013 when mortgage rates jumped about a percentage point after the Federal Reserve said it might taper stimulus spending. A surge in all-cash purchases to more than 40% has kept housing prices rising, squeezing more Americans out of the market. That will help push lending down further this year, according to the association.
"Banks large and small are going to have to adapt to a new reality because mortgage origination volumes going forward aren't going to support the big businesses they've had in place for the last few years," said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Conn. "They're going to have smaller, leaner operations, and we're seeing them make that shift."
At Wells Fargo, home-loan originations exceeded $100 billion for seven straight quarters, ending in June 2013. The figure plunged to $36 billion in the three months through March, the San Francisco-based bank said April 11.
Wells Fargo's results show the shift in the housing market away from refinancings as interest rates climb. Just 34% of its originations went to customers refinancing loans, compared with 69% in the same period of 2013.
Timothy Sloan, Wells Fargo's chief financial officer, said a combination of forces, including tougher standards following the housing crash, account for the falloff in lending.
"It's too early to call it a secular shift," Sloan said in an interview. "This recovery has just been more complicated because of the impact of rates being low, and now they are backing up a little bit. We've had a lot of regulatory changes, we've had a change in underwriting standards that the market is getting used to."
The average interest rate for a 30-year fixed mortgage was 4.34% last week, up from 3.54% a year ago, according to a statement from Freddie Mac.
Lenders also are tightening credit standards, requiring higher FICO scores. More than 40% of borrowers in 2013 had scores above 760, compared with about 25% in 2001, according to a Feb. 20 report by Goldman Sachs Group Inc. analysts Hui Shan and Eli Hackel.
JPMorgan originated $17 billion of home loans in the first quarter of 2014, lower than at any time during the housing crash. The New York-based bank made $52.7 billion of mortgages a year earlier. Marianne Lake, JPMorgan's CFO, cited severe winter weather as among the reasons for the first-quarter drop.
"We view JPM and WFC's mortgage banking results as lower than expected," Keefe, Bruyette & Woods analysts led by Frederick Cannon said Friday in a research note, referring to the bank's stock symbols. "Mortgage volumes and applications were down materially."
The lenders are cutting staff in the slump. JPMorgan said it reduced the number of jobs at its mortgage unit by 30%, or 14,000 positions, since the start of last year. That includes 3,000 reductions in the first quarter. Wells Fargo said it got rid of 1,100 jobs in its residential mortgage business in the first period.
JPMorgan projected on April 11 that it will lose money on mortgage production this year because of the drop in demand.
All-cash purchases, dominated by investors, are surging as lending drops. Deals in cash accounted for more than 43% of U.S. residential sales in February, up from 20% a year earlier, with the most in Florida, New York and Nevada, according to data firm RealtyTrac.
Wells Fargo said last week that it's seeing more cash buyers in the housing market.
"Some of those cash buyers were investors, both individuals and private equity firms and the like, and that had an impact on home prices," Wells Fargo's Sloan said. "If you look at the year-over-year increase in home prices being in the low teens, our folks think probably a third of that increase was due to the impact of investors as buyers."
Private-equity firms, hedge funds, real estate investment trusts and other institutional landlords have spent more than $20 billion to buy as many as 200,000 rental homes in the last two years. They snapped up properties after prices fell as much as 35% from the 2006 peak and rental demand rose from the almost 5 million owners who went through foreclosure since 2008.
Investors focused on the markets hardest hit by the real estate crash, including Phoenix, Las Vegas and Atlanta, and have helped push prices higher in those areas.
"This is an investor-heavy market recovery," said Daren Blomquist, vice president of RealtyTrac in Irvine, Calif. "We've seen a relatively high percentage of institutional investors as one segment, and regular mom-and-pop investors as another, jumping back in as they see the market hit bottom and start to rise."
Home prices have surged 23% since a post-bubble low in March 2012, according to the S&P/Case-Shiller index. The gains have slowed as climbing values in the past two years started to reduce affordability.
Prices for single-family homes rose in fewer areas in the fourth quarter, with 73% of U.S. cities experiencing gains compared with 88% in the previous three months, according to the National Association of Realtors.
Higher values will make it harder for banks to find qualified borrowers this year.
"We're going to have a small market," JPMorgan's Lake said on an April 11 conference call. "We'd be hopeful that the market would be above $1 trillion for the whole year."
Wells Fargo & Co. and JPMorgan Chase & Co., the two largest U.S. mortgage lenders, reported a first-quarter plunge in loan volumes that's part of an industrywide drop off. Lenders made $226 billion of mortgages in the period, the smallest quarterly amount since 1997 and less than one-third of the 2006 average, according to the Mortgage Bankers Association in Washington.
Lending has been tumbling since mid-2013 when mortgage rates jumped about a percentage point after the Federal Reserve said it might taper stimulus spending. A surge in all-cash purchases to more than 40% has kept housing prices rising, squeezing more Americans out of the market. That will help push lending down further this year, according to the association.
"Banks large and small are going to have to adapt to a new reality because mortgage origination volumes going forward aren't going to support the big businesses they've had in place for the last few years," said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Conn. "They're going to have smaller, leaner operations, and we're seeing them make that shift."
At Wells Fargo, home-loan originations exceeded $100 billion for seven straight quarters, ending in June 2013. The figure plunged to $36 billion in the three months through March, the San Francisco-based bank said April 11.
Wells Fargo's results show the shift in the housing market away from refinancings as interest rates climb. Just 34% of its originations went to customers refinancing loans, compared with 69% in the same period of 2013.
Timothy Sloan, Wells Fargo's chief financial officer, said a combination of forces, including tougher standards following the housing crash, account for the falloff in lending.
"It's too early to call it a secular shift," Sloan said in an interview. "This recovery has just been more complicated because of the impact of rates being low, and now they are backing up a little bit. We've had a lot of regulatory changes, we've had a change in underwriting standards that the market is getting used to."
The average interest rate for a 30-year fixed mortgage was 4.34% last week, up from 3.54% a year ago, according to a statement from Freddie Mac.
Lenders also are tightening credit standards, requiring higher FICO scores. More than 40% of borrowers in 2013 had scores above 760, compared with about 25% in 2001, according to a Feb. 20 report by Goldman Sachs Group Inc. analysts Hui Shan and Eli Hackel.
JPMorgan originated $17 billion of home loans in the first quarter of 2014, lower than at any time during the housing crash. The New York-based bank made $52.7 billion of mortgages a year earlier. Marianne Lake, JPMorgan's CFO, cited severe winter weather as among the reasons for the first-quarter drop.
"We view JPM and WFC's mortgage banking results as lower than expected," Keefe, Bruyette & Woods analysts led by Frederick Cannon said Friday in a research note, referring to the bank's stock symbols. "Mortgage volumes and applications were down materially."
The lenders are cutting staff in the slump. JPMorgan said it reduced the number of jobs at its mortgage unit by 30%, or 14,000 positions, since the start of last year. That includes 3,000 reductions in the first quarter. Wells Fargo said it got rid of 1,100 jobs in its residential mortgage business in the first period.
JPMorgan projected on April 11 that it will lose money on mortgage production this year because of the drop in demand.
All-cash purchases, dominated by investors, are surging as lending drops. Deals in cash accounted for more than 43% of U.S. residential sales in February, up from 20% a year earlier, with the most in Florida, New York and Nevada, according to data firm RealtyTrac.
Wells Fargo said last week that it's seeing more cash buyers in the housing market.
"Some of those cash buyers were investors, both individuals and private equity firms and the like, and that had an impact on home prices," Wells Fargo's Sloan said. "If you look at the year-over-year increase in home prices being in the low teens, our folks think probably a third of that increase was due to the impact of investors as buyers."
Private-equity firms, hedge funds, real estate investment trusts and other institutional landlords have spent more than $20 billion to buy as many as 200,000 rental homes in the last two years. They snapped up properties after prices fell as much as 35% from the 2006 peak and rental demand rose from the almost 5 million owners who went through foreclosure since 2008.
Investors focused on the markets hardest hit by the real estate crash, including Phoenix, Las Vegas and Atlanta, and have helped push prices higher in those areas.
"This is an investor-heavy market recovery," said Daren Blomquist, vice president of RealtyTrac in Irvine, Calif. "We've seen a relatively high percentage of institutional investors as one segment, and regular mom-and-pop investors as another, jumping back in as they see the market hit bottom and start to rise."
Home prices have surged 23% since a post-bubble low in March 2012, according to the S&P/Case-Shiller index. The gains have slowed as climbing values in the past two years started to reduce affordability.
Prices for single-family homes rose in fewer areas in the fourth quarter, with 73% of U.S. cities experiencing gains compared with 88% in the previous three months, according to the National Association of Realtors.
Higher values will make it harder for banks to find qualified borrowers this year.
"We're going to have a small market," JPMorgan's Lake said on an April 11 conference call. "We'd be hopeful that the market would be above $1 trillion for the whole year."
Monday, April 14, 2014
Mortgage Originations Could Drop to Lowest Level in 14 Years
The Mortgage Bankers Association has lowered its mortgage origination forecast again and it looks like 2014 could be the slowest year for the industry in 14 years.
The trade group's economists estimate that lenders will originate $1.065 trillion in single-family loans this year, down 39% from 2013.
The last time originations were at this level was in 2000 when lenders made $1.067 trillion in mortgages, according to National Mortgage News’ Quarterly Data Report.
Economists were hoping for a significant pickup in mortgage applications in March and early April when the spring home buying season kicks in.
"That just hasn't happened," said Joel Kan, director of economic forecasting for MBA, in an interview.
Mortgage application activity has increased over the past three weeks, "but this is coming off a really low base and the increases haven't been large enough to boost overall production," Kan said.
Originations fell to $226 billion in the first quarter, from $293 billion in the fourth quarter of 2013, according to MBA estimates. The group predicts that originations will bounce back to $267 billion in the second quarter.
Lenders made $1.75 trillion in single-family loans in 2013.
"You would have to bank on a really big second half of the year for originations to come in at the 2013 level," Kan said Friday.
MBA economists released their first 2014 forecast back in October. It called for $1.18 trillion in loan production. That estimate was ratcheted down to $1.12 trillion in January.
The trade group's economists estimate that lenders will originate $1.065 trillion in single-family loans this year, down 39% from 2013.
The last time originations were at this level was in 2000 when lenders made $1.067 trillion in mortgages, according to National Mortgage News’ Quarterly Data Report.
Economists were hoping for a significant pickup in mortgage applications in March and early April when the spring home buying season kicks in.
"That just hasn't happened," said Joel Kan, director of economic forecasting for MBA, in an interview.
Mortgage application activity has increased over the past three weeks, "but this is coming off a really low base and the increases haven't been large enough to boost overall production," Kan said.
Originations fell to $226 billion in the first quarter, from $293 billion in the fourth quarter of 2013, according to MBA estimates. The group predicts that originations will bounce back to $267 billion in the second quarter.
Lenders made $1.75 trillion in single-family loans in 2013.
"You would have to bank on a really big second half of the year for originations to come in at the 2013 level," Kan said Friday.
MBA economists released their first 2014 forecast back in October. It called for $1.18 trillion in loan production. That estimate was ratcheted down to $1.12 trillion in January.
Thursday, April 10, 2014
FOMC: Weather slows economic growth- Tapers another $ 10 million
Economic growth slowed early this year, largely due to the temporary effects of the unusually cold and snowy winter weather, the minutes from the March 18-19 Federal Open Market Committee meeting said.
“Information received since the FOMC met in January indicates that growth in economic activity slowed during the winter months, in part reflecting adverse weather conditions. Labor market indicators were mixed but on balance showed further improvement. The unemployment rate, however, remains elevated,” the minutes said.
“Household spending and business fixed investment continued to advance, while the recovery in the housing sector remained slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable,” it continued.
The committee decided that it would add to its holdings of agency mortgage-backed securities at a pace of $25 billion per month rather than $30 billion per month, and would add to its holdings of longer-term Treasury securities at a pace of $30 billion per month rather than $35 billion.
“While making a further measured reduction in its pace of purchases, the committee emphasized that its holdings of longer-term securities were sizable and would still be increasing, which would promote a stronger economic recovery by maintaining downward pressure on longer-term interest rates, supporting mortgage markets, and helping to make broader financial more accommodative,” the minutes stated.
In addition, the committee continues to seek conditions in reserve markets consistent with federal funds trading in a range from 0 to 1⁄4 percent.
Narayana Kocherlakota, Minneapolis Fed president, was the only dissenting vote, saying that a part of the guidance would weaken the credibility of the committee’s commitment to its inflation goal by failing to communicate purposeful steps to more rapidly increase inflation to the 2% target and by suggesting that the committee views inflation persistently below 2% as an acceptable outcome.
“Moreover, he judged that the new guidance would act as a drag on economic activity because it provided little information about the desired rate of progress toward maximum employment and no quantitative measure of what constitutes maximum employment, and thus would generate uncertainty about the extent to which the Committee is willing to use monetary stimulus to foster faster growth,” the minutes said.
“Information received since the FOMC met in January indicates that growth in economic activity slowed during the winter months, in part reflecting adverse weather conditions. Labor market indicators were mixed but on balance showed further improvement. The unemployment rate, however, remains elevated,” the minutes said.
“Household spending and business fixed investment continued to advance, while the recovery in the housing sector remained slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable,” it continued.
The committee decided that it would add to its holdings of agency mortgage-backed securities at a pace of $25 billion per month rather than $30 billion per month, and would add to its holdings of longer-term Treasury securities at a pace of $30 billion per month rather than $35 billion.
“While making a further measured reduction in its pace of purchases, the committee emphasized that its holdings of longer-term securities were sizable and would still be increasing, which would promote a stronger economic recovery by maintaining downward pressure on longer-term interest rates, supporting mortgage markets, and helping to make broader financial more accommodative,” the minutes stated.
In addition, the committee continues to seek conditions in reserve markets consistent with federal funds trading in a range from 0 to 1⁄4 percent.
Narayana Kocherlakota, Minneapolis Fed president, was the only dissenting vote, saying that a part of the guidance would weaken the credibility of the committee’s commitment to its inflation goal by failing to communicate purposeful steps to more rapidly increase inflation to the 2% target and by suggesting that the committee views inflation persistently below 2% as an acceptable outcome.
“Moreover, he judged that the new guidance would act as a drag on economic activity because it provided little information about the desired rate of progress toward maximum employment and no quantitative measure of what constitutes maximum employment, and thus would generate uncertainty about the extent to which the Committee is willing to use monetary stimulus to foster faster growth,” the minutes said.
Wednesday, April 9, 2014
Break Down of Jobs Numbers
There are some good things in the JOLTS (Job Openings and Labor Turnover Survey). There were 4.2 million new job postings in February, 300,000 more than in January. We're at January 2008 levels now.
But let’s have our fresh numbers with a side of pickled context shall we?
First, these are mostly low wage jobs: restaurant jobs, temp jobs, for example. This is typical of any post-recession recovery; these are the jobs that rebound first. We may not like them, but at least they’re rebounding. Second, we still have 2.5 times as many people as job postings. That means 60 percent of people looking for a job in February weren't going to get hired no matter what they did. In this kind of environment, employers have little incentive to bid up wages.
If employers aren’t bidding up wages and there aren’t nearly enough jobs to go around, then, thirdly, people aren’t going to really feel very comfortable with their job prospects. Which is reflected in the Quits Rate – that’s the number of job quits/total employment. It’s low, at *1.9 percent and it hasn’t really changed meaningfully in three years.
Finally, job postings don’t mean job hirings. Employers appear to be taking their time filling these positions. That’s why the Hires Rate (number of hires during the entire month as a percent of total employment) is still depressed at 3.3 percent. But let’s not get all doom and gloom here. Things are improving without a doubt. They’re just doing so very slowly.
But let’s have our fresh numbers with a side of pickled context shall we?
First, these are mostly low wage jobs: restaurant jobs, temp jobs, for example. This is typical of any post-recession recovery; these are the jobs that rebound first. We may not like them, but at least they’re rebounding. Second, we still have 2.5 times as many people as job postings. That means 60 percent of people looking for a job in February weren't going to get hired no matter what they did. In this kind of environment, employers have little incentive to bid up wages.
If employers aren’t bidding up wages and there aren’t nearly enough jobs to go around, then, thirdly, people aren’t going to really feel very comfortable with their job prospects. Which is reflected in the Quits Rate – that’s the number of job quits/total employment. It’s low, at *1.9 percent and it hasn’t really changed meaningfully in three years.
Finally, job postings don’t mean job hirings. Employers appear to be taking their time filling these positions. That’s why the Hires Rate (number of hires during the entire month as a percent of total employment) is still depressed at 3.3 percent. But let’s not get all doom and gloom here. Things are improving without a doubt. They’re just doing so very slowly.
Monday, April 7, 2014
Black Knight: Originations fall to lowest level in 14 years- 95% of Mods to Reset
Black Knight Financial Services mortgage data for February data showed that monthly mortgage originations dropped to the lowest number in at least 14 years.
Real estate sales, they found, have been mainly buoyed by cash investor transactions.
“February’s data showed the continued trend of declining origination activity we’ve been observing since mid-2013, with monthly originations falling to their lowest recorded point since at least 2000,” said Herb Blecher, senior vice president of Black Knight’s Data and Analytics division. “In spite of this decline, residential real estate sales have remained strong due at least in part to investor activity and the fact that cash sales account for almost half of all transactions.
In addition, while total transaction levels were flat on a year-over-year basis, traditional sales were up almost 15% from last year as the share of distressed transactions continues to decrease.
Credit standards have shown little sign of easing -- only about 30% of 2013 loans went to borrowers with credit scores below 720 -- which indicates that significant opportunity to expand mortgage origination activity is available, if risk appetites allow.
“As the inventory of distressed loans continued to resolve during 2013, loan modification activity also declined significantly, ending the year with near post-crisis lows,” Blecher said. “However, new changes to FHA’s Home Affordable Modification Program have increased such activity in the first months of this year. We continue to see that as industry modification efforts have matured, including offering more effective modification types (including HAMP’s interest rate reductions), far fewer borrowers are experiencing re-defaults than in the early years post-crisis.”
More than 95% of the roughly 2.5 million interest rate reduction modifications still face rate resets, with many of these set to begin adjusting this fall.
“As these are controlled resets, we do not expect drastic changes in monthly mortgage payments at first, but will monitor these loans closely to assess the level of risk. We do see that, even after modification, borrower equity continues to play a significant role, with re-default rates approximately 30% higher for underwater borrowers,” he said.
Black Knight also examined the impact of the implementation of the Consumer Financial Protection Bureau’s new rules in January and observed a sharp shift in the timing of foreclosure starts.
As the CFPB rules dictate that foreclosure cannot begin until after 120 days of delinquency, the data showed foreclosure starts at the 90-day mark have all but ceased, while four-month delinquency starts have risen over 100% since December.
At the same time, foreclosure sales hit the lowest levels since 2007. With fewer loans in the foreclosure process, these numbers will continue to decline, but the result has been an increase in pipeline ratios (the time necessary to clear through the backlog of loans either seriously delinquent or in foreclosure at the current rate of foreclosure sales).
This has been most pronounced in non-judicial states such as California and Nevada where legislative actions have contributed to the slowdown more significantly over the last several months.
Other key findings include:
Real estate sales, they found, have been mainly buoyed by cash investor transactions.
“February’s data showed the continued trend of declining origination activity we’ve been observing since mid-2013, with monthly originations falling to their lowest recorded point since at least 2000,” said Herb Blecher, senior vice president of Black Knight’s Data and Analytics division. “In spite of this decline, residential real estate sales have remained strong due at least in part to investor activity and the fact that cash sales account for almost half of all transactions.
In addition, while total transaction levels were flat on a year-over-year basis, traditional sales were up almost 15% from last year as the share of distressed transactions continues to decrease.
Credit standards have shown little sign of easing -- only about 30% of 2013 loans went to borrowers with credit scores below 720 -- which indicates that significant opportunity to expand mortgage origination activity is available, if risk appetites allow.
“As the inventory of distressed loans continued to resolve during 2013, loan modification activity also declined significantly, ending the year with near post-crisis lows,” Blecher said. “However, new changes to FHA’s Home Affordable Modification Program have increased such activity in the first months of this year. We continue to see that as industry modification efforts have matured, including offering more effective modification types (including HAMP’s interest rate reductions), far fewer borrowers are experiencing re-defaults than in the early years post-crisis.”
More than 95% of the roughly 2.5 million interest rate reduction modifications still face rate resets, with many of these set to begin adjusting this fall.
“As these are controlled resets, we do not expect drastic changes in monthly mortgage payments at first, but will monitor these loans closely to assess the level of risk. We do see that, even after modification, borrower equity continues to play a significant role, with re-default rates approximately 30% higher for underwater borrowers,” he said.
Black Knight also examined the impact of the implementation of the Consumer Financial Protection Bureau’s new rules in January and observed a sharp shift in the timing of foreclosure starts.
As the CFPB rules dictate that foreclosure cannot begin until after 120 days of delinquency, the data showed foreclosure starts at the 90-day mark have all but ceased, while four-month delinquency starts have risen over 100% since December.
At the same time, foreclosure sales hit the lowest levels since 2007. With fewer loans in the foreclosure process, these numbers will continue to decline, but the result has been an increase in pipeline ratios (the time necessary to clear through the backlog of loans either seriously delinquent or in foreclosure at the current rate of foreclosure sales).
This has been most pronounced in non-judicial states such as California and Nevada where legislative actions have contributed to the slowdown more significantly over the last several months.
Other key findings include:
- While total real estate transactions were essentially flat Y/Y, non-distressed sales were up almost 15%
- Credit standards have shown little sign of easing -- only about 30% of 2013 loans went to borrowers with credit scores below 720
- Loan modification activity ended 2013 near post-crisis lows, but changes to FHA-HAMP regulations have increased such activity in the first months of this year
- Due to more effective loan modification efforts, there have been far fewer re-defaults in recent years, though underwater borrowers are approximately 30% more likely to re-default than those with equity
- More than 95% of the roughly 2.5 million interest rate reduction modifications still face rate resets, with many set to begin adjusting this fall
- Foreclosure sales (completions) hit their lowest level since 2007, resulting in an increase in pipeline ratios (after many months of declines), most pronounced in non-judicial states
Friday, April 4, 2014
Zillow-1 in 3 homes is unaffordable and a bubble is forming
More than half the homes currently on the market in seven major American metros are currently unaffordable for local residents, and one-third of homes for sale are unaffordable by historic standards.
That’s the conclusion from a Zillow (Z) analysis of income, mortgage and home value data in the fourth quarter of 2013, which puts to question the regular industry claim that housing is more affordable than ever because of the current price and interest rate levels coming out of the housing crash.
“As affordability worsens, we’re already beginning to see more of the kinds of worrisome trends we saw en masse during the years leading up to the housing crash. These include a greater reliance on non-traditional home financing, smaller down payments and a greater pressure to move further away from urban job centers in order to find affordable housing options,” said Zillow chief economist Stan Humphries. “We’re not in a bubble yet, but we’re beginning to see the early signs of one in some areas.”
Homebuyers increasingly have to search on the perimeter of the country’s largest metro markets, as downtown properties become out of reach for buyers of typical means, the report found.
Zillow calculated affordability by analyzing the current percentage of an area’s median income needed to afford the monthly mortgage payment on a median-priced home, and comparing it to the share of income needed to afford a median-priced home in the pre-bubble years between 1985 and 2000.
Zillow analysts took that data and if the share of monthly income currently needed to afford the median-priced home is greater than it was during the pre-bubble years, the home was marked as unaffordable.
More than half of homes currently listed for sale in Miami (62.4%), Los Angeles (57.2%), San Diego (55.3%), San Francisco (55.2%), Denver (52.8%), San Jose (50.9%) and Portland, Ore. (50.3%) are unaffordable by historical standards.
Nationally, Zillow found that one-third of homes are currently unaffordable, and in many metro areas, the majority of homes remain more affordable now than they have been historically for buyers making the area’s median income.
But as mortgage interest rates rise along with home values, affordability will worsen, and buyers will need to spend ever-larger shares of their incomes to buy increasingly expensive homes.
Home buyers making the median income in Los Angeles, San Francisco and San Jose should already expect to pay a larger share of their income today toward a mortgage than during the pre-bubble years.
Zillow expects mortgage rates on a 30-year, fixed-rate mortgage to reach or exceed 5% by the first quarter of 2015. Assuming rates at that level and another year of forecasted home value growth, home buyers in San Diego; Riverside, Calif.; Portland, Ore.; Sacramento; and Miami will also soon be paying a larger share of their incomes to their mortgage than they were during the pre-bubble years.
That’s the conclusion from a Zillow (Z) analysis of income, mortgage and home value data in the fourth quarter of 2013, which puts to question the regular industry claim that housing is more affordable than ever because of the current price and interest rate levels coming out of the housing crash.
“As affordability worsens, we’re already beginning to see more of the kinds of worrisome trends we saw en masse during the years leading up to the housing crash. These include a greater reliance on non-traditional home financing, smaller down payments and a greater pressure to move further away from urban job centers in order to find affordable housing options,” said Zillow chief economist Stan Humphries. “We’re not in a bubble yet, but we’re beginning to see the early signs of one in some areas.”
Homebuyers increasingly have to search on the perimeter of the country’s largest metro markets, as downtown properties become out of reach for buyers of typical means, the report found.
Zillow calculated affordability by analyzing the current percentage of an area’s median income needed to afford the monthly mortgage payment on a median-priced home, and comparing it to the share of income needed to afford a median-priced home in the pre-bubble years between 1985 and 2000.
Zillow analysts took that data and if the share of monthly income currently needed to afford the median-priced home is greater than it was during the pre-bubble years, the home was marked as unaffordable.
More than half of homes currently listed for sale in Miami (62.4%), Los Angeles (57.2%), San Diego (55.3%), San Francisco (55.2%), Denver (52.8%), San Jose (50.9%) and Portland, Ore. (50.3%) are unaffordable by historical standards.
Nationally, Zillow found that one-third of homes are currently unaffordable, and in many metro areas, the majority of homes remain more affordable now than they have been historically for buyers making the area’s median income.
But as mortgage interest rates rise along with home values, affordability will worsen, and buyers will need to spend ever-larger shares of their incomes to buy increasingly expensive homes.
Home buyers making the median income in Los Angeles, San Francisco and San Jose should already expect to pay a larger share of their income today toward a mortgage than during the pre-bubble years.
Zillow expects mortgage rates on a 30-year, fixed-rate mortgage to reach or exceed 5% by the first quarter of 2015. Assuming rates at that level and another year of forecasted home value growth, home buyers in San Diego; Riverside, Calif.; Portland, Ore.; Sacramento; and Miami will also soon be paying a larger share of their incomes to their mortgage than they were during the pre-bubble years.
Wednesday, April 2, 2014
5 best and worst rental return markets
Home prices have increased year-over-year for two years straight and do not show any signs of slowing down, the latest CoreLogic report revealed. So how does this impact the rental community and investors?
While strong cash-flowing rentals are in many U.S. markets, rising home prices are slowly put a dent in the value.
This follow a strong rise in demand for REO-to-rental securitization.
RealtyTrac composed a list of the 5 best and worst markets for rental returns.
The list was created by taking the 2014 fair market rent for a three-bedroom home multiplied by 12 months and then dividing that 12-month total by the median sales price of residential properties in the county.
Here is what they came up with:
Best:
5. Baltimore City County, Md.
Media sales price: $85,000
The average fair market rent sits at $1,599, and the annual gross yield is 23%.
4. Bibb County, Ga.
Median sales price: $50,880
On the lower end of the best five, the average fair market rent is $1,008 and the annual gross yield is 24%.
3. Washington County, Miss.
Median sales price: $42,000
The county’s average fair market rent comes in at $862, posting a 25% annual gross yield.
2. Clayton County, Ga.
Median sales price: $50,750
Ranking in at number two, Clayton’s average fair market rent is $1,187, and the annual gross yield is 28%.
1. Wayne County, Mich.
Median sales price: $44,900
As the best rental market for rental returns, Wayne County posts an average fair market rent of $1,124 and an annual gross yield of 30%.
Now for the 5 worst markets for rental returns:
5. Marin County, Calif.
Median sales price: $745,000
The average fair market rent sits at $2,657, while the annual gross yield comes in at 4%.
4. Kings County, N.Y.
Median sales price: $573,000
One of two New York markets on the list, Kings County reported an average fair market rent of $1,852 and an annual gross yield of 4%.
3. San Francisco County, Calif.
Median sales price: $573,000
Significant above number 4, the average fair market rent hit $2,657, with a 4% annual gross yield.
2. Eagle County, Colo.
Median sales price: $525,000
This Colorado market recorded a $1,545 average fair market rent and a 4% annual gross yield.
1. New York, N.Y
Median sales price: $887,000
Holding the spot for the worst market for rental returns, New York posted a $1,852 average fair market rent and a 3% annual gross yield.
While strong cash-flowing rentals are in many U.S. markets, rising home prices are slowly put a dent in the value.
This follow a strong rise in demand for REO-to-rental securitization.
RealtyTrac composed a list of the 5 best and worst markets for rental returns.
The list was created by taking the 2014 fair market rent for a three-bedroom home multiplied by 12 months and then dividing that 12-month total by the median sales price of residential properties in the county.
Here is what they came up with:
Best:
5. Baltimore City County, Md.
Media sales price: $85,000
The average fair market rent sits at $1,599, and the annual gross yield is 23%.
4. Bibb County, Ga.
Median sales price: $50,880
On the lower end of the best five, the average fair market rent is $1,008 and the annual gross yield is 24%.
3. Washington County, Miss.
Median sales price: $42,000
The county’s average fair market rent comes in at $862, posting a 25% annual gross yield.
2. Clayton County, Ga.
Median sales price: $50,750
Ranking in at number two, Clayton’s average fair market rent is $1,187, and the annual gross yield is 28%.
1. Wayne County, Mich.
Median sales price: $44,900
As the best rental market for rental returns, Wayne County posts an average fair market rent of $1,124 and an annual gross yield of 30%.
Now for the 5 worst markets for rental returns:
5. Marin County, Calif.
Median sales price: $745,000
The average fair market rent sits at $2,657, while the annual gross yield comes in at 4%.
4. Kings County, N.Y.
Median sales price: $573,000
One of two New York markets on the list, Kings County reported an average fair market rent of $1,852 and an annual gross yield of 4%.
3. San Francisco County, Calif.
Median sales price: $573,000
Significant above number 4, the average fair market rent hit $2,657, with a 4% annual gross yield.
2. Eagle County, Colo.
Median sales price: $525,000
This Colorado market recorded a $1,545 average fair market rent and a 4% annual gross yield.
1. New York, N.Y
Median sales price: $887,000
Holding the spot for the worst market for rental returns, New York posted a $1,852 average fair market rent and a 3% annual gross yield.
Tuesday, April 1, 2014
Housing's bad month, via the letter 'L'
Some pretty lackluster news from the housing market today.
Construction spending rose a measly .1% in February. Part of that was because of the wild weather we saw this winter, but economists say that only accounts for part of the lacklusterness. It seems we’re not building or buying homes like we used to. Pending home sales fell in February to their lowest level in more than 2 years. The housing market made big gains last year, but so far 2014 isn’t looking so hot.
The reason?
Brought to you by the letter "L" (and the number "3").
L is for Labor: The lackluster labor market means people don’t want to make big investments, like buying a house, says Susan Wachter, professor of real estate and finance at Wharton. "Jobs and affordability of mortgages are the two fundamental drivers of the housing market and they’re both weak right now."
L is for Loans: Namely, it's not easy to get a loan these days. Nicolas Retsinas teaches real estate at Harvard Business School. "The bread and butter of the housing market is first time homebuyers. They continue to have increasing difficulty getting a mortgage, accessing credit."
Those loans have to be a little larger because of the third L...
L is for Lumber: "Costs have been going up. The cost of lumber’s been going up," says Patrick Newport, an economist with IHS. He says demand from China and other elements have lifted lumber prices, making building less lucrative for builders and a lot costlier for buyers.
L is also for : Undeveloped or ripe for development real estate is getting expensive too, especially in urban areas.
And let's not forget the L for Lousy Weather: The winter freeze clamped a lid on the housing market on most of the Eastern Seaboard this year, and sales in the West and South just weren't enough to make up for it.
All of this is a big deal for the overall economy, says Newport, because it is (I know, you may be going into acute sugar shock at this moment) an economic...
L for Lynchpin: "Basically, the housing market has been sideways for the past six months and that’s very disappointing, because housing is supposed to be one of the key lynchpins that will get the economy back on track."
That's largely because it creates a lot of Lucrative construction jobs.
Construction spending rose a measly .1% in February. Part of that was because of the wild weather we saw this winter, but economists say that only accounts for part of the lacklusterness. It seems we’re not building or buying homes like we used to. Pending home sales fell in February to their lowest level in more than 2 years. The housing market made big gains last year, but so far 2014 isn’t looking so hot.
The reason?
Brought to you by the letter "L" (and the number "3").
L is for Labor: The lackluster labor market means people don’t want to make big investments, like buying a house, says Susan Wachter, professor of real estate and finance at Wharton. "Jobs and affordability of mortgages are the two fundamental drivers of the housing market and they’re both weak right now."
L is for Loans: Namely, it's not easy to get a loan these days. Nicolas Retsinas teaches real estate at Harvard Business School. "The bread and butter of the housing market is first time homebuyers. They continue to have increasing difficulty getting a mortgage, accessing credit."
Those loans have to be a little larger because of the third L...
L is for Lumber: "Costs have been going up. The cost of lumber’s been going up," says Patrick Newport, an economist with IHS. He says demand from China and other elements have lifted lumber prices, making building less lucrative for builders and a lot costlier for buyers.
L is also for : Undeveloped or ripe for development real estate is getting expensive too, especially in urban areas.
And let's not forget the L for Lousy Weather: The winter freeze clamped a lid on the housing market on most of the Eastern Seaboard this year, and sales in the West and South just weren't enough to make up for it.
All of this is a big deal for the overall economy, says Newport, because it is (I know, you may be going into acute sugar shock at this moment) an economic...
L for Lynchpin: "Basically, the housing market has been sideways for the past six months and that’s very disappointing, because housing is supposed to be one of the key lynchpins that will get the economy back on track."
That's largely because it creates a lot of Lucrative construction jobs.
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