Continuing the long-term trend this year, mortgage applications decreased 2.2% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending July 25, 2014.
The Market Composite Index, a measure of mortgage loan application volume, decreased 2.2% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 2% compared with the previous week.
“Despite mortgage backed security issuance being up 38 percent from the first quarter average, the MBA index continues to show declines. This suggests that there are fundamental shifts occurring in the market where big players (reporting to the MBA) may be giving up market share or perhaps not holding as many loans in portfolio, thereby pushing up the bond issuance,” said Quicken Loans Vice President Bill Banfield. “In either case, the current level of activity for purchases and refinances has been directional stronger in recent months based on actual security issuance. With home prices stabilizing from a rapid level of appreciation and interest rates either falling or holding steady recently, I expect to see continued improvements in the purchase arena.”
The Refinance Index decreased 4% from the previous week. The seasonally adjusted Purchase Index increased 0.2% from one week earlier.
The unadjusted Purchase Index increased 1% compared with the previous week and was 12% lower than the same week one year ago.
The refinance share of mortgage activity decreased to 53% of total applications from 54% the previous week. The adjustable-rate mortgage share of activity remained unchanged at 8% of total applications.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 4.33%, with points increasing to 0.24 from 0.23 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 4.22% from 4.21%, with points increasing to 0.23 from 0.20 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 4.03%, with points decreasing to 0.00 from 0.15 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 3.47%, with points decreasing to 0.25 from 0.28 (including the origination fee) for 80% LTV loans. The effective rate remained unchanged from last week.
The average contract interest rate for 5/1 ARMs increased to 3.31% from 3.21%, with points increasing to 0.40 from 0.32 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
Wednesday, July 30, 2014
Bloomberg: Blackstone rental home bonds have highest LTV
Bloomberg real estate ace Jody Shenn reports that Blackstone’s rental home bonds have the highest Loan-to-Value of any on the market.
Loan to BPO values of 79% in offering, vs. 65% for Silver Bay deal in market, 70% for second Colony American Homes issuance, 75% for first 2014 deal by Blackstone’s Invitation Homes deal, according to ratings firm presale reports.
Issuer indicated principal-only Class G included in structure to comply with European Banking Authority risk-retention regulations, according to Kroll.
“While risk retention can be viewed as a credit positive,” Kroll [reports] “does not believe it mitigates the impact of increased leverage, as the entire loan proceeds will need to be refinanced at maturity.”
Tuesday, July 29, 2014
Blackstone adviser: Investors worried about ‘serious correction’
A global economic advisor to private equity firm Blackstone (BX) is warning that he may need to change his positive outlook on 2014 if housing stays slow.
Furthermore, he’s not the only one.
Vice Chairman of Blackstone Advisory Partners, Byron Wien’s monthly market commentary for August cites positive to complacent attitudes of secondary market investors, but also fires a warning.
“The indicators are not universally positive,” he writes. He then cites slow housing data before moving onto monetary policy changes from the Federal Reserve.
“Many investors are worried about a shift in Federal Reserve policy triggering a serious correction in the market,” Wien said.
The housing numbers first. Housing starts dropped to 893,000 in June. Building permits also declined.
“For the economy to move toward 3% real growth in the second half and for unemployment to continue heading to lower levels, housing has to be strong,” he said.
“But there are enough other positive signs that I am not altering my favorable forecast,” he adds. “If housing continues to be weak, I will probably have to change my view.”
Wien also sources a Bloomberg Global Poll that found 47% of stock investors think the market is close to a bubble, with 14% saying we are already in one.
Going into the Federal Open Markets Committee meeting later this week, one of two major data points that may make or break housing, Wien said reserve Chair Janet Yellen’s recent comments toward the zero-interest rate policy are ambiguous at best.
Wien said that when Yellen gave testimony to the Senate Banking Committee that “a high degree of monetary accommodation remains appropriate,” later became countered with “if labor market conditions improve more quickly than anticipated, then increases in the Federal Funds rate target likely would occur sooner and be more rapid than currently envisioned.”
“Based on Chairman Yellen’s comments on the economy, I do not think an increase in short-term rates is imminent, but if GDP growth looks like it will exceed 3% sometime in the second half, a rate hike is possible,” Wien interprets.
“My own view is that we won’t see a rise in rates until mid-2015,” he concluded.
Furthermore, he’s not the only one.
Vice Chairman of Blackstone Advisory Partners, Byron Wien’s monthly market commentary for August cites positive to complacent attitudes of secondary market investors, but also fires a warning.
“The indicators are not universally positive,” he writes. He then cites slow housing data before moving onto monetary policy changes from the Federal Reserve.
“Many investors are worried about a shift in Federal Reserve policy triggering a serious correction in the market,” Wien said.
The housing numbers first. Housing starts dropped to 893,000 in June. Building permits also declined.
“For the economy to move toward 3% real growth in the second half and for unemployment to continue heading to lower levels, housing has to be strong,” he said.
“But there are enough other positive signs that I am not altering my favorable forecast,” he adds. “If housing continues to be weak, I will probably have to change my view.”
Wien also sources a Bloomberg Global Poll that found 47% of stock investors think the market is close to a bubble, with 14% saying we are already in one.
Going into the Federal Open Markets Committee meeting later this week, one of two major data points that may make or break housing, Wien said reserve Chair Janet Yellen’s recent comments toward the zero-interest rate policy are ambiguous at best.
Wien said that when Yellen gave testimony to the Senate Banking Committee that “a high degree of monetary accommodation remains appropriate,” later became countered with “if labor market conditions improve more quickly than anticipated, then increases in the Federal Funds rate target likely would occur sooner and be more rapid than currently envisioned.”
“Based on Chairman Yellen’s comments on the economy, I do not think an increase in short-term rates is imminent, but if GDP growth looks like it will exceed 3% sometime in the second half, a rate hike is possible,” Wien interprets.
“My own view is that we won’t see a rise in rates until mid-2015,” he concluded.
Monday, July 28, 2014
Existing Home Sales Fall 7.3% Year over YEar
Pending home sales dropped off in June, according to the National Association of Realtors, dropping 1.1% from May and falling 7.3% from June 2013 in the biggest decline in 2014 and the biggest miss of expectations in 2014 as well.
This comes a week after new home sales plummeted in June and May’s supposed 19% surge was revised out of existence.
The NAR pending home sales index fell 1.1% to 102.7 in June, from 103.8 in May.
The index at 100 is considered an average level of contract activity.
Click to enlarge the graphic.
Pictured: Recovery
The median existing home price continues to rise, up 4.3% from June 2013 to June 2014, but this is the slowest rate of appreciation since March 2012.
Lawrence Yun, NAR chief economist, says the housing market is stabilizing, but ongoing challenges are impeding full sales potential.
“Activity is notably higher than earlier this year as prices have moderated and inventory levels have improved,” he said. “However, supply shortages still exist in parts of the country, wages are flat, and tight credit conditions are deterring a higher number of potential buyers from fully taking advantage of lower interest rates.”
Yun said he ultimately expects a slight uptick in sales during the second half of the year.
“The good news is that price appreciation has decreased to its slowest pace since March 2012 behind much-needed increases in inventory,” he said. “With rents rising 4% annually, potential buyers are less likely to experience sticker shock and can make smart decisions on whether or not it makes sense to buy or continue renting.”
The regional breakdown shows a dip in the South but a gain for the Midwest and a fractional gain for the West.
The index in the Northeast fell 2.9% to 83.8 in June, and is 3.2% below a year ago. In the Midwest the index rose 1.1% to 106.6, but remains 5.5% below June 2014.
Pending home sales in the South dipped 2.4% to an index of 113.8 in June, and is 4.3% below a year ago. The index in the West inched 0.2% in June to 95.7, but remains 16.7% below June 2014.
Yun forecasts existing-homes sales to be down 2.8% this year to 4.95 million, compared to 5.1 million sales of existing homes in 2013. The national median existing-home price is projected to grow between 5 and 6% this year and in 2015.
This comes a week after new home sales plummeted in June and May’s supposed 19% surge was revised out of existence.
The NAR pending home sales index fell 1.1% to 102.7 in June, from 103.8 in May.
The index at 100 is considered an average level of contract activity.
Click to enlarge the graphic.
Pictured: Recovery
The median existing home price continues to rise, up 4.3% from June 2013 to June 2014, but this is the slowest rate of appreciation since March 2012.
Lawrence Yun, NAR chief economist, says the housing market is stabilizing, but ongoing challenges are impeding full sales potential.
“Activity is notably higher than earlier this year as prices have moderated and inventory levels have improved,” he said. “However, supply shortages still exist in parts of the country, wages are flat, and tight credit conditions are deterring a higher number of potential buyers from fully taking advantage of lower interest rates.”
Yun said he ultimately expects a slight uptick in sales during the second half of the year.
“The good news is that price appreciation has decreased to its slowest pace since March 2012 behind much-needed increases in inventory,” he said. “With rents rising 4% annually, potential buyers are less likely to experience sticker shock and can make smart decisions on whether or not it makes sense to buy or continue renting.”
The regional breakdown shows a dip in the South but a gain for the Midwest and a fractional gain for the West.
The index in the Northeast fell 2.9% to 83.8 in June, and is 3.2% below a year ago. In the Midwest the index rose 1.1% to 106.6, but remains 5.5% below June 2014.
Pending home sales in the South dipped 2.4% to an index of 113.8 in June, and is 4.3% below a year ago. The index in the West inched 0.2% in June to 95.7, but remains 16.7% below June 2014.
Yun forecasts existing-homes sales to be down 2.8% this year to 4.95 million, compared to 5.1 million sales of existing homes in 2013. The national median existing-home price is projected to grow between 5 and 6% this year and in 2015.
Friday, July 18, 2014
Is the investor rush on single-family homes the next housing bubble?
Private equity firms are driving toward a second housing bubble, spending more than $20 billion on single-family homes since 2012, according to a new report released Thursday by national housing activist group Right to the City Alliance entitled Rise of the Corporate Landlord: The Institutionalization of the Single Family Rental Market and its impact on Renters.
The report, which is critical of the rise of REO-to-rental and single-family rentals, says the proliferation of such rental properties have “proven disastrous for many low-income communities – with rents skyrocketing and corporate, absentee landlords proliferating in urban areas across America.”
While investor purchases of single-family homes peaked in 2012, it’s still abnormally high. Cash sales peaked in 2011 and are also still high.
“While cash sales are down from their July 2011 high of 42.8%, they are still very high (at 38.4%) compared to the 2001-2007 average of 25%,” said Mark Fleming, chief economist for CoreLogic (CLGX), at a conference on the topic two weeks ago. “Investors in general, whether institutional or 'mom and pop,' are primarily concentrated on two types of assets: distressed (real estate owned and short sales) and existing homes, rather than new builds.”
The report from Right to the City says the cities hardest hit by rental speculation include Atlanta, Phoenix, Los Angeles, Chicago, Las Vegas, Tampa, and Charlotte.
“The same kinds of financial institutions that drove the foreclosure crisis and bankrupted families across America have a new target: the rental market,” said Rachel Laforest, executive director of Right to the City, “The transformation of single-family rental housing from a ‘mom and pop’ industry to a global investment opportunity needs to be closely studied and regulated. If we don’t act fast, we could be facing another bubble and another crash.”
Among other highlights:
“Rental costs are getting further and further out of reach for working families. Wall Street's purchasing of hundreds of thousands of foreclosed homes for the purpose of converting the properties into rentals and securitizing them into bonds, is troubling and must be closely monitored by the federal government. This confirms and expands upon what my office found earlier this year,” he said.
"Nearly two-thirds of the tenants in these corporate rentals surveyed in my district are burdened with unaffordable rent. If there is anything that we should have learned from the housing crisis, it is that Wall Street's top priority is increasing its bottom line, not improving communities or creating products that provide long-term benefits to consumers,” Takano said. “The actions by these investors must be monitored to ensure that renters and local communities are treated fairly. I call on the House Financial Services Committee and other government agencies to take a close look at Blackstone and the other corporations following their lead.”
The report recommends the following 3 solutions:
1. Expand research
Private equity firms are opaque, thinly regulated, high-risk investors, so the need for publicly funded research is urgent to shed light on their impacts.
2. Rethink tenants’ rights for the era of big data
Tenants should know and have a say in how investor-landlords collect and use data, and how that could impact their credit score. The Consumer Financial Protection Bureau should aid tenant access to data and ensure that inconsistencies can be corrected.
3. Generate resources for tenants
Implementing a financial transaction fee on rental bonds.
The report, which is critical of the rise of REO-to-rental and single-family rentals, says the proliferation of such rental properties have “proven disastrous for many low-income communities – with rents skyrocketing and corporate, absentee landlords proliferating in urban areas across America.”
While investor purchases of single-family homes peaked in 2012, it’s still abnormally high. Cash sales peaked in 2011 and are also still high.
“While cash sales are down from their July 2011 high of 42.8%, they are still very high (at 38.4%) compared to the 2001-2007 average of 25%,” said Mark Fleming, chief economist for CoreLogic (CLGX), at a conference on the topic two weeks ago. “Investors in general, whether institutional or 'mom and pop,' are primarily concentrated on two types of assets: distressed (real estate owned and short sales) and existing homes, rather than new builds.”
The report from Right to the City says the cities hardest hit by rental speculation include Atlanta, Phoenix, Los Angeles, Chicago, Las Vegas, Tampa, and Charlotte.
“The same kinds of financial institutions that drove the foreclosure crisis and bankrupted families across America have a new target: the rental market,” said Rachel Laforest, executive director of Right to the City, “The transformation of single-family rental housing from a ‘mom and pop’ industry to a global investment opportunity needs to be closely studied and regulated. If we don’t act fast, we could be facing another bubble and another crash.”
Among other highlights:
- Private Equity Firms have invested $20 billion in single family homes since 2012, buying mostly foreclosed properties in low-income communities and raising rents and security deposits to astronomical levels.
- Some analysts estimate the value of the rental market as a $1.5 trillion opportunity.
- This cycle of rental speculation could lead to yet another bust.
- In the meantime, families are left with absentee corporate landlords that have little incentive to make repairs, deal with pests, or discuss issues with rent.
“Rental costs are getting further and further out of reach for working families. Wall Street's purchasing of hundreds of thousands of foreclosed homes for the purpose of converting the properties into rentals and securitizing them into bonds, is troubling and must be closely monitored by the federal government. This confirms and expands upon what my office found earlier this year,” he said.
"Nearly two-thirds of the tenants in these corporate rentals surveyed in my district are burdened with unaffordable rent. If there is anything that we should have learned from the housing crisis, it is that Wall Street's top priority is increasing its bottom line, not improving communities or creating products that provide long-term benefits to consumers,” Takano said. “The actions by these investors must be monitored to ensure that renters and local communities are treated fairly. I call on the House Financial Services Committee and other government agencies to take a close look at Blackstone and the other corporations following their lead.”
The report recommends the following 3 solutions:
1. Expand research
Private equity firms are opaque, thinly regulated, high-risk investors, so the need for publicly funded research is urgent to shed light on their impacts.
2. Rethink tenants’ rights for the era of big data
Tenants should know and have a say in how investor-landlords collect and use data, and how that could impact their credit score. The Consumer Financial Protection Bureau should aid tenant access to data and ensure that inconsistencies can be corrected.
3. Generate resources for tenants
Implementing a financial transaction fee on rental bonds.
Wednesday, July 16, 2014
California Housing Prices Simmer Down- ALOT
Although the median price of a California home in June reached the highest level since December 2007, up $5,000, or 1.3%, to $390,000, the pace of increase is finally starting to simmer down, according to the Real Property Report from PropertyRadar.
The median price of non-distressed homes only grew 0.8% from 2013, indicating the 10% overall gain in median home prices was primarily due to a shift from distressed to non-distressed sales.
Sales volume of higher priced non-distressed properties increased 2.8% in June, which accounted for nearly 83% of total sales, while sales of distressed properties fell 9.1%.
“The nearly uninterrupted double-digit monthly increases in median home prices from August 2012 through March 2014 has slowed considerably,” said Madeline Schnapp, director of economic research for PropertyRadar. “That’s good news for buyers who were finding themselves rapidly priced out of the market.”
The deceleration in price increases is even more apparent at the county level, where double-digit price increases occurred in 16 of the 26 largest California counties in March but fell to eight in June.
California single-family home and condominium sales escalated 0.6% in June but were down 12.6% from June 2013. Year-to-date sales for the first six months of the year are the lowest since 2008.
“June marks the sixth consecutive month that sales have been lower on a year-over-year basis. The lack of distressed property inventory and rapid increase in median prices has definitely taken a toll on demand,” Schnapp said.
“Affordability and tight credit have slowed or stopped price increases despite lack of inventory. Going forward, we expect low sales volumes and flat prices until increased supply forces prices lower or looser credit makes current prices more affordable,” she added.
Meanwhile, according to the recent VeroFORECAST from Veros Real Estate Solutions, the nation’s home prices are still on the rise, but the rate of growth is slowing considerably. Home prices are expected to rise 2.5% in the nation’s 100 top metro areas between now and June 1, 2015.
The median price of non-distressed homes only grew 0.8% from 2013, indicating the 10% overall gain in median home prices was primarily due to a shift from distressed to non-distressed sales.
Sales volume of higher priced non-distressed properties increased 2.8% in June, which accounted for nearly 83% of total sales, while sales of distressed properties fell 9.1%.
“The nearly uninterrupted double-digit monthly increases in median home prices from August 2012 through March 2014 has slowed considerably,” said Madeline Schnapp, director of economic research for PropertyRadar. “That’s good news for buyers who were finding themselves rapidly priced out of the market.”
The deceleration in price increases is even more apparent at the county level, where double-digit price increases occurred in 16 of the 26 largest California counties in March but fell to eight in June.
California single-family home and condominium sales escalated 0.6% in June but were down 12.6% from June 2013. Year-to-date sales for the first six months of the year are the lowest since 2008.
“June marks the sixth consecutive month that sales have been lower on a year-over-year basis. The lack of distressed property inventory and rapid increase in median prices has definitely taken a toll on demand,” Schnapp said.
“Affordability and tight credit have slowed or stopped price increases despite lack of inventory. Going forward, we expect low sales volumes and flat prices until increased supply forces prices lower or looser credit makes current prices more affordable,” she added.
Meanwhile, according to the recent VeroFORECAST from Veros Real Estate Solutions, the nation’s home prices are still on the rise, but the rate of growth is slowing considerably. Home prices are expected to rise 2.5% in the nation’s 100 top metro areas between now and June 1, 2015.
Best Markets For Real Estate
Now that the World Cup is behind us and hipsters everywhere can stop pretending that they like sports, we turn our attention to a game that Germany has never won – the Major League Baseball All-Star game.
The All-Star game is scheduled for Tuesday at 7 p.m. ET in Minneapolis, and in honor of that ZIpRealty sent us this breakdown of the housing market all-stars – breaking them down by biggest hitters, best batting averages, and the lowest earned run averages.
ZipRealty surveyed real estate conditions among rival "teams" in Baltimore, Washington, D.C., Chicago, Los Angeles County, Orange County, New York City, Long Island, Westchester County, San Francisco and Oakland, California.
“Baseball rivalries are heating up this time of year, so we wanted to see how these areas of the country − with major league teams representing the National League and American League − compare,” said Lanny Baker, CEO of ZipRealty. “But no matter where your allegiance lies, scoring a new home is easy when you search on our real estate apps and website. These tools, along with the guidance of a ZipRealty real estate agent, can give you a jump on the competition, especially in such high-velocity housing markets.”
Metro areas with the highest median home sales prices, or biggest hitters, are mostly on the West Coast, according to data collected through May 31 by ZipRealty. Here’s how the biggest hitters stack up:
This is the American Dream the way America America'ed it, America.
The All-Star game is scheduled for Tuesday at 7 p.m. ET in Minneapolis, and in honor of that ZIpRealty sent us this breakdown of the housing market all-stars – breaking them down by biggest hitters, best batting averages, and the lowest earned run averages.
ZipRealty surveyed real estate conditions among rival "teams" in Baltimore, Washington, D.C., Chicago, Los Angeles County, Orange County, New York City, Long Island, Westchester County, San Francisco and Oakland, California.
“Baseball rivalries are heating up this time of year, so we wanted to see how these areas of the country − with major league teams representing the National League and American League − compare,” said Lanny Baker, CEO of ZipRealty. “But no matter where your allegiance lies, scoring a new home is easy when you search on our real estate apps and website. These tools, along with the guidance of a ZipRealty real estate agent, can give you a jump on the competition, especially in such high-velocity housing markets.”
Metro areas with the highest median home sales prices, or biggest hitters, are mostly on the West Coast, according to data collected through May 31 by ZipRealty. Here’s how the biggest hitters stack up:
- San Francisco home price: $1 million
- Orange County home price: $550,000
- The Bronx, N.Y./Westchester County, N.Y. home price: $485,000
- Oakland, California home price: $448,725
- Los Angeles County home price: $445,00
- Queens, N.Y./Nassau County home price: $415,000
- Washington, D.C. home price: $363,500
- Chicago’s North Side home price: $266,750
- Baltimore home price: $235,000
- Chicago’s South Side home price: $55,000
- Oakland, Calif. home price growth: 25%
- Chicago’s South Side home price growth: 22%
- San Francisco home price growth: 20%
- Chicago’s North Side and Los Angeles County home price growth: 16%
- The Bronx, N.Y./Westchester County, N.Y. home price growth: 12%
- Orange County home price growth: 10%
- Queens, N.Y./Nassau County N.Y. home price growth: 6%
- Washington, D.C. home price growth: 4%
- Baltimore home price growth: 1%
- Oakland, Calif.: 16 days
- Washington, DC: 19 days
- Chicago’s North Side: 25 days
- Los Angeles County and Orange County: 27 days
- San Francisco: 31 days
- Baltimore: 44 days
- Chicago’s South Side: 48 days
- Queens, N.Y./Nassau County, N.Y.: 83 days
- The Bronx, N.Y./Westchester County, N.Y.: 125 days
This is the American Dream the way America America'ed it, America.
Monday, July 14, 2014
Phoenix Market Showing Signs of Weakness
The Phoenix housing market has a special
place in the heart of housing bubble watchers: together with Las Vegas and
various California MSAs, this is the place where the last housing bubble was
born and subsequently died a gruesome death which nearly brought down the
entire financial system. Which is why the monthly WP Carey report on the
Greater Phoenix Housing Market is of peculiar interest for those who want to
catch a leading glimpse into the overall state of the bubble US housing market.
As hoped, this month's letter does not disappoint. What we find is that while
equilibrium prices have been largely flat month over month, and are up 6% on an
average square foot basis from a year ago, something very bad is happening with
a key component of the pricing calculation: demand has fallen off a cliff.
Some of the disturbing findings from the report:
Demand has been much weaker since July 2013. The slight recovery in demand that had been
developing over the last two months dissipated again in May. While move-up
owner occupiers and second home buyers are starting to compensate for the
departure of investors, activity by first time home buyers is unusually low.
At the top end of the market sales of single family homes
over $500,000 grew 1% over May 2013. Sales of single family homes below
$150,000 fell 37%. This fall was partly caused by the lack of distressed
supply, but mostly by the reduction in demand from investors.
The market over $500,000 was much weaker in May than it
was in April, with a 15% drop in dollar volume compared with a year earlier. However it is the market below $150,000 that has
contracted the most dramatically. The relatively low volume of low-priced home
sales is causing the monthly median sales price to rise.
Luxury homes over $500,000 went back to a 24% market
share, the same as in May 2013. The lowest-priced homes under $150,000 fell
from 15% to 11%. The mid range has increased its share of spending from 61% to
65%, despite a 9% decline in dollars spent. Contrary to what is often stated in
the national media, demand is nowhere inhibited by supply shortages, unlike in
April 2013 when supply was severely constrained.
So how is it that prices aren't crashing to keep up with
(lack of) demand? For now the sellers are simply staying put, and not rushing
to lower their prices even as supply remains largely stable despite slumping
demand for housing. As the Carey report summarizes "Although buyers now
have more homes to choose from and much less competition from other buyers than
in 2013, supply has not become excessive." At least not yet.
Here one could be philosophical and note that just like
the S&P 500, the leading bubble housing market is merely suffering from a
case of the CYNK (henceforth halted until perpetuity just so the SEC can stick
its head in the sand and pretend it never heard of that particular fraud): with
a plunging number of transactions, price discovery is becoming a farce.
And plunging they are:
- The
percentage of residential properties purchased by investors continued to
decline from 16.3% in April to 16.1% in May.
- Single family home sales decreased year over year
across every sector:
- Normal re-sales (down 2%)
- New homes (down 4%)
- Investor flips (down 53%)
- Short sales and pre-foreclosures (down 73%)
- Bank owned homes (down 20%)
- GSE (Fannie Mae, Freddie Mac, etc.) owned homes
(down 44%)
- HUD sales
(down 76%)
- Third party purchases at trustee sale (down 59%)
- Foreclosure starts on single family and condo homes
fell 8% between April and May, which confirms a continued declining trend.
They were down 47% from May 2013.
- Recorded trustee deeds (completed foreclosures) on
single family and condo homes were up 9% between April and May but down
50% from May 2013.
What is just as interesting is the ongoing decline in out
of state purchasers, cash buyers and investors:
Out of State Purchasers
The percentage of residences in Maricopa County sold to
owners from outside Arizona was 20.1% in May, down from 20.8% in April but
still the second highest percentage since June 2013, though lower than the
22.0% we saw in May 2013. Californians have reduced their market share from
4.7% to 4.1% over the last year but retained their normal position as the
largest group of out of state buyers. Canadian demand has plummeted from
2.6% to 1.5% over the last 12 months, which about the same as buyers from
Colorado which was the source of an unusually large number of buyers in May. Washington,
Illinois, Minnesota, Texas, Michigan and New York provided the next most
numerous home locations for home buyers in Greater Phoenix during May.
Cash Buyers
For some considerable time, cash purchases have been
running at an unusually high level but this has been on a declining trend over
the past year. In Maricopa County the percentage of properties recording an
Affidavit of Value and purchased without financing was 25.0% in May 2014,
significantly down from 32.3% in May 2013. We consider 7% to 12% the normal
range for cash buyers, so mortgage lending still has a long way to go to get
back its normal share of the market.
Investor Purchases
The percentage of individual single family and
townhouse/condo parcels acquired by investors in May 2013 and May 2014 are as
follows:
These percentages are the lowest we have seen for many
years and are now close to the historical norm. The steep decline over the last
12 months confirms that investors are no longer driving the market the way they
did between early 2009 and mid 2013.
Finally, the Outlook:
The resale market is currently delivering a fairly low
number of new listings to market compared with historic norms over the last 15
years. Some home sellers appear to be cancelling their listings and waiting
for another time when buyers have a greater sense of urgency. Many families are
choosing to stay in their homes longer than they used to 10 to 15 years ago. Some
owners still have either negative equity or only a small equity position which
discourages both buying and selling. Others have low interest rates that they
don’t want to lose, and as they cannot apply their mortgage to a new home, it
is cheaper to stay put. These trends are likely to stay in place for a while
now that house prices have stabilized.
In May 2014 the Greater Phoenix housing market had
sellers outnumbering buyers but the numbers of both were well below normal. For
the prime spring selling season things were remarkably quiet. Supply has
stabilized at a level which is about 10% below normal and is starting to
weaken, an encouraging sign for sellers. However, except at the lowest price
ranges, we still have more supply than necessary to meet the weak demand which
is about 20% below normal. In May 2014 every category of single family sales
had lower volume than in May 2013, even normal re-sales which were down 2%.
Currently there is little movement on home prices in
either direction. However the mix of homes that are selling has changed a lot
in the past 12 months. There are fewer distressed homes and far fewer homes
priced under $150,000. This tends to push the averages and medians upward even
if prices are stable.
Compared with April, sales of luxury homes were weaker in
May, but we think this is mostly normal month to month variation and expect
them to recover somewhat in June. However it is likely that this will fade
during the hottest months of July through September when the luxury, snowbird
and active adult markets tend to go relatively quiet.
...
Single family new home construction and sales are well
down from last year, contrary to everyone’s expectations in Q4 2013, and they
remain about 65% below what would be considered normal for Central Arizona.
Population and job growth are not back to their peak levels but have recovered
much further than home construction has. People have been sharing homes and
renting instead of moving out and buying. All trends in housing tend to be
cyclical and this one is probably no exception.
With investors pulling back from the low end, the weak
demand from first time home buyers has come into sharp focus. But as lenders start to ease up on underwriting
restrictions this market is likely to expand from its current extreme lows.
Once this happens we shall probably be talking about the low supply again.
Between 2012 and 2013 we experienced a chronic housing shortage in Greater
Phoenix. This shortage has not gone away. It has just been masked by the
unusually low demand between July 2013 and now, and this state of affairs is
likely to be temporary.
Here one could be an optimist and agree with the
following: "There is plenty of pent-up demand which could emerge at any
time... But for the time being, the market remains unbalanced in
favor of buyers and if demand does not pick up soon then the next likely
alternative will be a fall in the supply as more sellers decide to wait for
better times. Unlike 2006 there is very little likelihood of a massive
increase in supply creating strong downward pressure on prices."
That is, unless all those who are locked in their houses
max out their credit cards and run out of ways to fund their lifestyle and,
contrary to traditionally wrong expectations, are forced to sell. Considering
the collapse in demand, what would happen then would be nothing short of an
avalanche.
Regardless of what a plunge in demand translates into on
the pricing front, it is becoming evident that little by little not only
fraudulent microcaps (which succeed in ballooning their market cap to over $5
billion before being halted), but also the S&P 500 and the US housing
market itself, are becoming "Level 3" assets: with virtually no
transactions to determine the equilibrium price, the value of ever more assets
is now in the eyes of the central-planner.
Thursday, July 10, 2014
Foreclosure Inventory Increases in Florida
Foreclosure inventory continues to decrease nationally, down 4.8% in May. That marked 31 consecutive months of year-over-year declines. But as HousingWire reported on Tuesday, the divide between the amount of foreclosures in judicial states and the amount in non-judicial states is massive.
The top non-judicial states, Michigan, Texas and California, recorded a .7%, .7% and .6% foreclosure inventory, with 44,402, 38,649 and 33,940 completed foreclosures in the last 12 months, respectively, according to the latest CoreLogic [CLGX] May National Foreclosure Report.
Meanwhile, the top judicial states, Florida, Ohio and Illinois, posted a 5.2%, 1.7% and 2.4% foreclosure inventory, with 122,059, 28,609 and 21, 558 completed foreclosures in the last 12 months, respectively.
And according to a new report from the Wall Street Journal, the amount of foreclosure inventory held by Fannie Mae and Freddie Mac in Florida has reached a new high, topping the previous peak which was reached at the height of the foreclosure crisis in 2010.
"The pace of completed foreclosures slowed in May compared to last month but I expect this to be a temporary respite," said Anand Nallathambi, president and CEO of CoreLogic.
"There is still much more hard work to do to clear the backlog of foreclosed properties. Although difficult, we need to continue to aggressively clear distressed homes to ensure the return of a healthy housing market."
The top non-judicial states, Michigan, Texas and California, recorded a .7%, .7% and .6% foreclosure inventory, with 44,402, 38,649 and 33,940 completed foreclosures in the last 12 months, respectively, according to the latest CoreLogic [CLGX] May National Foreclosure Report.
Meanwhile, the top judicial states, Florida, Ohio and Illinois, posted a 5.2%, 1.7% and 2.4% foreclosure inventory, with 122,059, 28,609 and 21, 558 completed foreclosures in the last 12 months, respectively.
And according to a new report from the Wall Street Journal, the amount of foreclosure inventory held by Fannie Mae and Freddie Mac in Florida has reached a new high, topping the previous peak which was reached at the height of the foreclosure crisis in 2010.
Foreclosures dropped sharply throughout 2011 as banks withdrew cases to correct those foreclosure filings. Foreclosed property holdings at Fannie and Freddie dropped from around 28,000 as of October 2010 to less than 12,000 one year later. Inventories have grown steadily over the last three years, to surpass 30,000 at the end of March.
Many of the properties going back to Fannie and Freddie today are likely mortgages that have been delinquent for a long time, as opposed to newly delinquent borrowers, which would be an arguably bigger concern for the housing market. Florida loans that completed the foreclosure process in the first quarter at Fannie hadn’t made any payments in more than 1,300 days.
As of May 2014, there were approximately 660,000 homes in the U.S. in some stage of foreclosures, compared to 1 million in May 2013, a year-over-year decrease of 37%."The pace of completed foreclosures slowed in May compared to last month but I expect this to be a temporary respite," said Anand Nallathambi, president and CEO of CoreLogic.
"There is still much more hard work to do to clear the backlog of foreclosed properties. Although difficult, we need to continue to aggressively clear distressed homes to ensure the return of a healthy housing market."
Tuesday, July 8, 2014
Monday, July 7, 2014
Here’s where Realtors expect home prices to grow the most
Home price appreciation is slowing markedly, and a survey of members of the National Association of Realtors shows they generally expect home prices to increase in all states and the District of Columbia over the next 12 months, with most of the heavy growth in Florida, Texas, and California, among other states.
That’s the consensus from the May 2014 Realtors Confidence Index.
The median expected price increase is 4%.
Expected price movements depend on local conditions relating to housing demand and supply, demographics, and job growth, the survey says.
Click the map to enlarge.
The difficulty in accessing mortgage financing and modest expectations about overall economic and job prospects are factors underpinning the modest price expectation.
The expected price growth was highest (red) in states with low inventory levels, strong cash sales, and strong growth sectors (e.g., technology, oil).
That’s the consensus from the May 2014 Realtors Confidence Index.
The median expected price increase is 4%.
Expected price movements depend on local conditions relating to housing demand and supply, demographics, and job growth, the survey says.
Click the map to enlarge.
The difficulty in accessing mortgage financing and modest expectations about overall economic and job prospects are factors underpinning the modest price expectation.
The expected price growth was highest (red) in states with low inventory levels, strong cash sales, and strong growth sectors (e.g., technology, oil).
Sunday, July 6, 2014
Check out the Redefaults on the Permanent Modifications- By Region
Special Inspector General, Troubled Asset Relief Program quarterly report to Congress. April 30, 2014
Wednesday, July 2, 2014
Homeowner's Brace For Another Wave of Foreclosures
In the thick of the housing crisis, some lenders slashed borrowers’ interest rates to as little as 2 percent. But rates start to rise again this year, and that will be hard for homeowners who are still struggling.
That group includes Adriana Martinez. She and her husband bought their dream house, in Olney, Maryland, in 2005. Right now, their monthly mortgage payment is about $2,200, thanks to an interest rate cut they got in 2010, through the government’s Home Affordable Loan Modification Program, which is referred to as HAMP. But even that payment has been tough, since Martinez lost her job last November.
“I need to find a job because, you know, it’s hard. It’s hard,” she says, holding back tears.
Martinez’s 16-year-old daughter, Julie, tries to help. She works part time at a gift shop. Julie says she and her mom were at the bank last week, confronted with a zero balance after the mortgage payment was deducted.
“I gave my mom my entire paycheck -- it was like $150 -- because she really actually needed it," she says.
And Martinez’s mortgage payment will rise by about $240 a month next year, because the HAMP interest rate cut is only temporary. After five years, the rate goes up by one percentage point a year, until it reaches the average interest rate at the time the loan was modified. Now, Martinez is afraid she’ll lose her home.
She is trying to get help, meeting with a housing counselor at the non-profit Housing Initiative Partnership, or HIP. They talk about how Martinez can pare expenses, maybe try to get the principle on her loan reduced.
HIP counseling director Mary Hunter says they have a lot of clients like Martinez, who are already struggling and now face rising interest rates.
“If the mortgage payment goes up but their income hasn’t gone up, they’re going to be stretched,” she says, adding that some my lose their homes. “I am worried that there’ll be a new wave of foreclosures in the next year.”
It’s already happening. More than a million homeowners got a mortgage interest rate reduction through the HAMP program. But since the program began in 2009, about a third of them have dropped out.
“Well, over 350,000 were not able to make their payments," says Christy Romero, inspector general of the Treasury Department’s Troubled Asset Relief Program. "And more than a third of those lost their home in foreclosures. Others lost their home in other ways, like short sales.”
Romero says the Treasury still hasn’t spent about $26 billion that was supposed to be used to help homeowners. Recently, Treasury announced it’ll use some of that money to extend the HAMP program to more people, through 2016. But Romero says Treasury should focus on homeowners already in HAMP, to keep them from dropping out, and causing that new foreclosure wave.
That group includes Adriana Martinez. She and her husband bought their dream house, in Olney, Maryland, in 2005. Right now, their monthly mortgage payment is about $2,200, thanks to an interest rate cut they got in 2010, through the government’s Home Affordable Loan Modification Program, which is referred to as HAMP. But even that payment has been tough, since Martinez lost her job last November.
“I need to find a job because, you know, it’s hard. It’s hard,” she says, holding back tears.
Martinez’s 16-year-old daughter, Julie, tries to help. She works part time at a gift shop. Julie says she and her mom were at the bank last week, confronted with a zero balance after the mortgage payment was deducted.
“I gave my mom my entire paycheck -- it was like $150 -- because she really actually needed it," she says.
And Martinez’s mortgage payment will rise by about $240 a month next year, because the HAMP interest rate cut is only temporary. After five years, the rate goes up by one percentage point a year, until it reaches the average interest rate at the time the loan was modified. Now, Martinez is afraid she’ll lose her home.
She is trying to get help, meeting with a housing counselor at the non-profit Housing Initiative Partnership, or HIP. They talk about how Martinez can pare expenses, maybe try to get the principle on her loan reduced.
HIP counseling director Mary Hunter says they have a lot of clients like Martinez, who are already struggling and now face rising interest rates.
“If the mortgage payment goes up but their income hasn’t gone up, they’re going to be stretched,” she says, adding that some my lose their homes. “I am worried that there’ll be a new wave of foreclosures in the next year.”
It’s already happening. More than a million homeowners got a mortgage interest rate reduction through the HAMP program. But since the program began in 2009, about a third of them have dropped out.
“Well, over 350,000 were not able to make their payments," says Christy Romero, inspector general of the Treasury Department’s Troubled Asset Relief Program. "And more than a third of those lost their home in foreclosures. Others lost their home in other ways, like short sales.”
Romero says the Treasury still hasn’t spent about $26 billion that was supposed to be used to help homeowners. Recently, Treasury announced it’ll use some of that money to extend the HAMP program to more people, through 2016. But Romero says Treasury should focus on homeowners already in HAMP, to keep them from dropping out, and causing that new foreclosure wave.
Tuesday, July 1, 2014
Vacancies surge in Invitation Homes $1 billion rental securitization
The vacancy rate for the homes in Invitation Homes’ $1 billion rental securitization is rising. According to the latest data from Morningstar, the properties’ cash-flow vacancy rate rose from 5.4% in April to 7% in May, an increase of nearly 30%.
By property count, the month-end vacancy rate as of May 31 was 7.3%, up from 5.5% as of April 30. That’s an increase of nearly 33%.
The securitization is backed by a single floating rate loan secured by mortgages on 6,473 single-family rental properties. Initial reports listed the total number of properties in the securitization as 6,537.
According to Morningstar’s report, there were 475 vacant properties as of May 31, up from 353 in April and up from 348 as of the property cutoff date of April 22.
There are also 29 delinquent properties as of May 31, which is 0.4% of the total properties. In previous months, there were no delinquent properties in the securitization.
In its presale report, Morningstar said that it expected high renewal rates for the properties.
“The overall estimated renewal rate was 75.2% in April 2014,” Morningstar wrote in its performance update. “Morningstar had an expected renewal rate of 60.0% at issuance. As the number of lease expirations declines and vacant properties are occupied following the peak months of lease expiration in May 2014 and June 2014, Morningstar expects the vacancy rate to stabilize and to potentially decline.”
In its presale ratings, Kroll Bond Rating Agency factored in an expected vacancy rate of 10% and still awarded AAA ratings to the largest tranche of the deal, $483 million.
Despite the increase in vacancies and delinquencies, Morningstar’s opinion is that the net cash flow based on the total rent collected is sufficient to cover the bond obligations.
By property count, the month-end vacancy rate as of May 31 was 7.3%, up from 5.5% as of April 30. That’s an increase of nearly 33%.
The securitization is backed by a single floating rate loan secured by mortgages on 6,473 single-family rental properties. Initial reports listed the total number of properties in the securitization as 6,537.
According to Morningstar’s report, there were 475 vacant properties as of May 31, up from 353 in April and up from 348 as of the property cutoff date of April 22.
There are also 29 delinquent properties as of May 31, which is 0.4% of the total properties. In previous months, there were no delinquent properties in the securitization.
In its presale report, Morningstar said that it expected high renewal rates for the properties.
“The overall estimated renewal rate was 75.2% in April 2014,” Morningstar wrote in its performance update. “Morningstar had an expected renewal rate of 60.0% at issuance. As the number of lease expirations declines and vacant properties are occupied following the peak months of lease expiration in May 2014 and June 2014, Morningstar expects the vacancy rate to stabilize and to potentially decline.”
In its presale ratings, Kroll Bond Rating Agency factored in an expected vacancy rate of 10% and still awarded AAA ratings to the largest tranche of the deal, $483 million.
Despite the increase in vacancies and delinquencies, Morningstar’s opinion is that the net cash flow based on the total rent collected is sufficient to cover the bond obligations.
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