Freddie Mac: Top 5 most improved housing markets- Despite Weak Market, Still Improving

While the housing recovery remains at a snail’s pace, it is still improving, with the markets that exhibit stronger local economies and favorable demographics on an even faster pace of improvement.
Freddie Mac released the June numbers for the Multi-Indicator Market Index, which showed a weak market, improving only .04% from May to June. However, on a year-over-year basis, the U.S. housing market has improved by 7.67%.
“As we see the economy slowly normalizing we’re starting to see its effects in the housing market as well, albeit very slowly. The good news is the big housing markets, of which some were also the hardest hit, continue to improve,” Freddie Mac Chief Economist Frank Nothaft said.
“For example, from the same time last year, California is up 12% and every market MiMi tracks in the state is improving. Meanwhile, Florida is up nearly 15% and Illinois is up nearly 13% over the past year,”
So here is Freddie’s list of the top 5 most improved metros that are faring better than the rest of the nation. (All charts are from Freddie Mac and compare the metro to the nation; click for larger image)
5. Miami

Miami has steadily improved over the year and ranks 32nd, increasing two spots from last month and increasing 11 spots from one year ago. A lot of Miami’s improvement is due to the 14.35% increase in the current on mortgage indicator over the past three months.
4. Chicago

While Chicago stayed in the 44th spot this month, it has increased three spots from one year ago. A 14.89% increase in the metro’s employment indicator over the past three months is a main driver behind the improvement.
3. San Jose

San Jose’s improvement is largely due to the 4.32% jump in its employment indicator over the past three months, moving up two spots to 16 and up 3 spots from one year ago.
2. Riverside

Although the Riverside market is weak, it is improving, moving up two spots from last month to 24. This is up 16 spots from one year ago. Like the other metros, this is due to the metro’s 11.93% increase in the employment indicator over the past three months.
1. Las Vegas  

Despite being ranked 50 out of the top 50 metros, Las Vegas is 92.8% above its all-time low of 25 reached in November 2010. A lot of the metro’s improvement is due to the 12.54% increase in the employment indicator over the past three months. The city ranks 50th and is unchanged since last year.

Realtor Confidence Falls

The July 2014 Realtor Confidence Index shows that Realtors aren’t enthusiastic about current conditions and the outlook for the next six months.

Concerns about federal regulations burdening the process, the drop in demand for middle and lower-cost homes, and rising affordability problems headlined their concerns.

Realtors reported some uptick in inventory in some areas, but generally, supply remained tight relative to demand in many areas, especially for “lower” and “middle-priced” homes, according to the July survey conducted by the National Association of Realtors.

Distressed sales continued to account for a smaller share of the market.

Realtors continued to report about the restrictive effects of the current credit conditions, especially in relation to the credit score and down payment requirements that will qualify buyers for a mortgage.

The home buying process was reported to be “long and difficult” even for “quality borrowers”.

Although the home price recovery has encouraged more listings, the strong price growth amid modest wage income gains has also made homes less affordable, creating a demand for lower-priced homes that are, unfortunately, in short supply.

 

Changes in the Federal Housing Administration mortgage insurance premium regulations, the cost of obtaining flood insurance, and increases in property taxes were also reported to be having a negative impact on potential sales.

 

FHA financing regulations continued to be reported as severely impeding condominium sales.

 

Confidence about current market conditions declined across all markets in July 2014 compared to June 2014.

 

In the single-family market, the Realtors Confidence Index - Current Conditions for single-family homes dipped to 60 (62 in June), indicating that a smaller percentage of Realtor respondents viewed the market as “strong” compared to a month ago.

 

Overall it's not pretty.

 

Confidence about the outlook for the next six months similarly declined in July compared to June. The six-month Outlook Index for single-family homes fell to 60 (63 in June); the index for townhouses edged down to 45 (46 in June); and the index for condominiums dropped to 40 (41 in June).

 

Tight inventory, difficulties in obtaining mortgages, and weak job growth were the main concerns reported by Realtors.

 

In some areas, the uncertainty about flood insurance rates, and the increase in property taxes were also cited as adversely affecting sales. FHA condominium accreditation/financing regulations continued to adversely impact condominium sales.

 

The Buyer Traffic Index declined in July to 55 (58 in June). Meanwhile, although inventory is improving, supply is still broadly tight: the Seller Traffic Index is still below 50 and essentially stayed flat at 45(44 in June) 3.

 

An index above 50 indicates that more than half of Realtors view traffic conditions as “strong”.

 

Realtors reported some uptick in inventory, but supply remained tight relative to demand in many areas, especially for “lower” and “middle- priced” homes.

 

There were reports that some potential sellers are hesitant to sell because of concerns that they will not find an affordable replacement home with adequate mortgage financing in a tight market.

 

Other potential sellers are waiting for further price increases either to increase the equity gain or to move out of a negative equity position.

 

NAR also tracks foot traffic using Sentrilock, data. Lockboxes made by SentriLock, are used in roughly a third of home showings across the nation.

 

This index rose to 54.8 in July (42.5 in June), which indicates that more than half of the roughly 200 markets tracked in this panel reported an increase in foot traffic in July.

 

Fewer Realtors reported rising prices than was the case in J une, but home prices are still broadly rising. Approximately 65% of Realtor respondents reported that the price of their “average home transaction” is higher today compared to a year ago (68% in June).

 

About 23% reported constant prices, and 12% reported lower prices. Tight inventory has sustained the price growth in many areas.

 

With inventory still generally tight and multibidding prevalent, approximately 14% of reported sales were at a net premium compared to the original listing price. In mid-2013, about 20% of Realtor respondents reported selling properties at a premium. About 70% of properties sold at a discount compared to the listing price, with about half reporting a discount of 0 to 10%.

 

Realtors responding to the survey expect home prices to increase modestly in the next 12 months, with the median expected price increase at 3.4%4. The expected price change is modest compared to the strong price growth in 2012-2013. Local conditions vary, but concerns about how borrowers are finding it difficult to obtain a mortgage and weak job recovery appear to be underpinning the modest price expectation.

 

The map shows the median expected price change in the next 12 months by state of Realtor respondents in the May – July 2014 surveys. Respondents from Florida and Texas were the most upbeat. Tight inventory and the strong growth in Texas metro areas may account for the optimistic outlook. Expected price growth is more modest in other states.

California housing market underperforms in July-Pending home sales drop four months straight

July was not a strong month for the California housing market as the state continued to underperform.
California pending homes sales dropped in July, with the pending home sales index falling 2.3% from 107 in June to 104.5 in July, based on signed contracts, according to the California Association of Realtors. However, the month-to-month drop was consistent with seasonal trends.
This is also down 9.2% from 115.1 in July 2013. “Pending sales have been down year to year since October 2012, but the pace appears to be decelerating as the decrease in July was smaller than the average in the last six months. Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market,” CAR said.
As noted in the 3 facts crippling California’s housing recovery, the combined share of all distressed property sales continued to decrease in July, dropping from 9.7% in June to 9.4% in July.
On the other side, the share of equity sales — or non-distressed property sales — maintained its upward trend, increasing to 90.6% in July, from 90.3% in June.
Equity sales have steadily increased since the start of the year, making up more than 80% of total sales for more than two years and rising above 90% for the second straight month.
Despite the bad month for the market, next year is projected to be the best year yet for the economy since the start of the recovery, according to a report from Beacon Economics, with California's state economy lining up to do better than the nation.

Foreclosures Up/Delinquencies Down

Foreclosure starts in July were up for the third consecutive month even as the overall inventory continues to decline, according to Black Knight Financial Services.
This is Black Knight’s analysis of the July 2014 month-end mortgage performance statistics derived from its loan-level database representing approximately two-thirds of the overall market.
Overall the news looked good.
Click below to enlarge.

The national foreclosure inventory is down 34% from July 2013. At the current rate, it is now the lowest since March 2008, at the start of the housing crisis.
Despite the increase in foreclosure starts, starts are still down almost 20% from July 2013, which is a significant improvement.
Click the image to enlarge.

Further good news, delinquency rate declines after slight increase in June 2014.
Even more good news, the rate of prepayment is up more than 10 percent in July, making it the fifth consecutive monthly increase.

New Home Sales Fall- some are surprised

New-home sales in the U.S. fell unexpectedly in July for the second month as the housing recovery makes only fitful progress.
Sales declined 2.4 percent to a 412,000 annualized pace, the fewest since March and weaker than the lowest estimate of economists surveyed by Bloomberg, after a 422,000 rate in June, the Commerce Department reported today in Washington.
Housing has advanced in fits and starts this year, buffeted by tight credit and slow wage growth. A shortage of skilled labor and supply-chain bottlenecks also have hindered construction even as population growth boosts demand for shelter. Bigger gains in employment and wages would stoke a more-rapid recovery.
“It’s a little bit disappointing,” said Thomas Simons, an economist at Jefferies LLC in New York and the top forecaster of new-home purchases over the past two years, according to data compiled by Bloomberg. “The new-home sales data have no traction whatsoever and doesn’t seem to be gaining at all.”
The median forecast of 70 economists surveyed by Bloomberg called for the pace to accelerate to 430,000. Estimates ranged from 414,000 to 470,000. June’s pace was revised up from a previously reported 406,000.
Stocks held gains after the figures as European equities climbed on prospects for increased stimulus and Burger King Worldwide Inc. rallied on merger activity. The Standard & Poor’s 500 Index advanced 0.5 percent to 1,999.14 at 10:16 a.m. in New York.

Selling Prices

The median sales price of a new house climbed 2.9 percent from July 2013 to $269,800, today’s Commerce Department report showed.
Purchases dropped in three four U.S. regions, led by a 30.8 percent slump in the Northeast. The West declined 15.2 percent and the Midwest fell 8.8 percent. Sales climbed 8.1 percent in the South.
The supply of homes at the current sales rate rose to 6 months, the highest since October 2011, from 5.6 months in June. There were 205,000 new houses on the market at the end of July, the most in almost four years.
New-home sales, which last year accounted for about 5 percent of the residential market, are tabulated when contracts are signed, making them a timelier barometer than transactions on existing homes.

Existing Homes

Existing-home sales picked up last month as low borrowing costs and an increase in inventory drew buyers. The annual pace of purchases climbed to 5.15 million in July, the best showing since September, according to the National Association of Realtors. Residential construction also rebounded, with starts climbing 15.7 percent last month to a 1.09 million annualized rate, the Commerce Department reported last week.
Builders and their suppliers see room for growth as the job market improves. As foreclosures and other distressed property sales become a smaller share of the market, housing growth will accelerate, said Robert A. Niblock, chairman and chief executive officer of home-improvement chain Lowe’s Cos., based in Mooresville, North Carolina.
“Signals from the housing market appear mixed,” Niblock said on an Aug. 20 earnings call. “We believe home-improvement spending will continue to progress in tandem with strengthening job and income growth.”

Truth is, those recent housing numbers aren't so shiny-Housing starts? More like housing stops, amirite?

The mainstream financial media have something to sell you.
It’s optimism. Or optimistic spin.
It doesn’t matter whether they are servicing, in the "old profession" sense of the word, their Wall Street sugar daddies and insider connections, or working as palace guards for Team Red and/or Team Blue, whichever they favor.
In some cases it’s just overworked writers promoted Peter Principle-style to covering subjects they don’t understand. The rest are market cheerleaders who believe in management of perspective economics – if people hear enough good news about the economy, they’ll spend and invest more.
Today’s housing starts and permits report from the Department of Housing and Urban Development is a prime example.
Take a quick look at the bulk of the headlines. Note the words soar, surge, jump and so on.
And here are the plain facts. After plunging in June, housing starts and housing permits recovered in July, printing at 1,093,000 and 1,052,000, respectively.
And yes, this is a 15.7% gain in starts and permits.
The bad news is that almost all of those gains from June to July in starts and permits are in multifamily rental housing.
That’s not the sign of a housing recovery. That’s the sign of a shift from an ownership society to a rental society.
In permits, almost all of the increase was due to multi-family unit construction, which soared by 73,000 to 382,000, a 24% increase, while single-family residential permits were up by just 6,000, or less than 1%.
And technically, apartments can be homes, but come on. That’s not what they mean when they say things like:

Construction on new U.S. homes jumped 15.7% in July to the highest level in eight months and starts were revised up sharply for June, indicating a pickup in home building after an early-year lull.

Emphasis mine.
And it’s not just the mainstream financial press. Check the wording in this report from Capital Economics.

“The sharp rise in housing starts in July is an encouraging sign that the recovery in construction activity is getting back on track. Booming homebuilder confidence points to further gains to come.”

If you’re feeling déjà vu, there’s a reason. Words to this effect are used every time there’s an uptick in housing starts, pending sales, and existing sales, while every downturn is blamed on everything from the weather to the weather.
It’s never, ever blamed on the tepid economy and the part-time job market that’s the new norm.
A few out there get it.
Brent Nyitray, director of capital markets for iServe Residential Lending, notes that, “Can't complain about the number, which was the highest in eight months. Still, ‘normalcy’ is around 1.5 million units per year, which goes to show how depressed housing still is. We probably will not hit historical numbers until the first time homebuyer returns.”
And that won’t happen until jobs return, and the last couple of monthly jobs reports heralded in the media have been heavy on the part time and low income jobs, and light on full time and middle class.
Retail, wait staff and home health aides accounted for 41% of the positions created over the past couple of years, according to the latest figures from the National Employment Law Project, a left-leaning advocacy group who may be wrong on the minimum wage issue but they’re right that you can’t have a strong economy without strong job growth. (Their solutions are the stuff of college dorm room discussions, but there are better solutions to better job creation than the weak sauce we’ve seen from this administration and Congress.)
Meanwhile, medium-wage manufacturing jobs accounted for just 26% of the new jobs, while white-collar industries generated 33% of the new jobs.
As CNBC notes, since the recession ended, lower-wage jobs have grown by 2.3 million while medium- and higher-wage jobs actually contracted by 1.2 million. This is in line with the ground-losing 2% wage growth the job market is seeing.
Now you see why the big gains in housing starts and permits are pretty much concentrated in apartment construction, not home building.
And you see why housing won’t get its footing back until private enterprise and the economy as a whole is unshackled and unhobbled.

Whle Greater Optimism from builders is wonderful, what will greater inventory do to values? Also, what about the foreclosure inventory?

Housing starts surged in July to the highest level in eight months, underscoring the recent pickup in builder optimism as the U.S. residential real-estate market gains some traction.
Beginning home construction climbed 15.7 percent to a 1.09 million annualized rate following June’s 945,000 pace, which was stronger than previously reported, the Commerce Department said today in Washington. The level exceeded the highest estimate in a Bloomberg survey of economists, whose median projection called for 965,000 starts.
A strengthening job market and cheaper borrowing costs are helping revive residential real-estate after a lull in construction at the start of the year. At the same time, the industry’s recovery has been challenged by slow wage growth and tight credit, which have put homeownership out of reach for some Americans.
“Recent news on the housing front has been relatively encouraging,” Gennadiy Goldberg, a U.S. strategist at TD Securities USA LLC in New York, said in a research note. “‘With affordability remaining high, mortgage rates still low, and labor market activity accelerating, we expect the housing market trajectory to continue gradually improving in the coming months.”

Beginning home construction climbed 15.7 percent to a 1.09million annualized rate following June’s 945,000 pace, which wasstronger than previously reported, the Commerce Departmentreported today in Washington. The level exceeded the highestPhotographer: Luke Sharrett/Bloomberg Close

Beginning home construction climbed 15.7 percent to a 1.09million annualized rate... Read More

Close

Open

Beginning home construction climbed 15.7 percent to a 1.09million annualized rate following June’s 945,000 pace, which wasstronger than previously reported, the Commerce Departmentreported today in Washington. The level exceeded the highestPhotographer: Luke Sharrett/Bloomberg

Permits for future projects advanced 8.1 percent to a 1.05 million pace. The gain reflected the fastest rate of building applications for single-family dwellings since November.
Estimates for annualized starts ranged from 898,000 to 1.03 million after a previously reported 893,000 in June, according to the Bloomberg survey of 75 economists. It was the biggest positive surprise for starts since April 2013. Building permits were projected to advance to a 1 million rate.

Consumer Prices

Another report today showed the cost of living in the U.S. eased in July as energy prices declined. The consumer-price index increased 0.1 percent last month, the smallest gain since February, according to the Labor Department. Costs excluding fuels and food also rose 0.1 percent in July.
Stocks rose after the reports, with the Standard & Poor’s 500 Index advancing 0.2 percent to 1,975.4 at 9:45 a.m. in New York. Home Depot Inc. gained 4.2 percent after earnings topped analysts’ estimates and the company raised its forecast.
Starts of single-family properties rose 8.3 percent to a 656,000 rate in July, the fastest this year, the Commerce Department said. Construction of multifamily projects such as condominiums and apartments rose 28.9 percent to an annual rate of 437,000.

Photographer: Luke Sharrett/Bloomberg

Beginning home construction climbed 15.7 percent to a 1.09 million annualized rate following June’s 945,000 pace, which was stronger than previously reported, the Commerce Department said today in Washington. Close

Beginning home construction climbed 15.7 percent to a 1.09 million annualized rate... Read More

Close

Open

Photographer: Luke Sharrett/Bloomberg Beginning home construction climbed 15.7 percent to a 1.09 million annualized rate following June’s 945,000 pace, which was stronger than previously reported, the Commerce Department said today in Washington.

Northeast Jump

Three of four regions showed an increase in groundbreaking last month, led by a 44 percent jump in the Northeast to the highest level since July 2008. Starts rebounded 29 percent in the South and climbed 18.6 percent in the West.
Today’s figures corroborate a report yesterday showing builder confidence rose in August to the highest level in seven months. The National Association of Home Builders/Wells Fargo said its sentiment measure climbed to 55 from 53 in July.
Weather dealt a setback to builders at the beginning of the year as snow blanketed construction sites in parts of the country and bitter cold kept some would-be buyers at home. Homebuilding bounced back in the second quarter, climbing at a 7.5 percent annualized rate in the second quarter after a 5.3 percent slump in the first three months of the year, data from the Commerce Department showed on July 30.
More hiring and cheap borrowing costs are helping some Americans take the plunge. The economy added more than 200,000 jobs for a sixth straight month in July, the longest such stretch since 1997, according to Labor Department figures.

Interest Rates

Borrowing costs have declined this year. The average 30-year, fixed-rate mortgage was 4.12 percent in the week ended Aug. 14, down from 4.53 percent at the start of January, according to data from Freddie Mac in McLean, Virginia.
While the market recovers, demand is outpacing construction. The U.S. requires between 1.6 million and 1.9 million new units a year just to accommodate population growth and household formation, according to the Harvard Joint Center for Housing.
New orders at the Ryland Group Inc. climbed 1.7 percent, to 2,228 homes, in the three months ended June 30. It was the best quarter in seven years for the Westlake Village, California-based company and President and Chief Executive Officer Larry Nicholson said he is optimistic about the outlook.
“We remain confident about the future of housing,” Nicholson said on a July 31 earnings call. “We see the markets continue to move forward. We have good traffic. We’re making sales. We’re making margin. We’re pretty upbeat for what we see for the rest of the year.”

Some pretty smart people worried about stock bubble- what do you think will happen when people feel less rich?

Some of the brightest minds in finance are sounding the alarm about a stock market bubble.

They aren't warning of an imminent crash, but their comments should remind investors that the current bull market -- over five years long -- can't last forever.

1. Nobel Prize-winning economist Robert Shiller: Valuations at "worrisome" levels.
"The United States stock market looks very expensive right now," Robert Shiller wrote in a recent column for The New York Times.
Shiller, a Yale University professor who is often cited as one of the most influential people in economics and finance in the world, created a metric that compares stock prices with corporate profits. The metric recently climbed above 25. That level has only been surpassed three times since 1881: 1929, 1999 and 2007.
Steep market tumbles followed each instance, including the bursting of the dotcom bubble in the early 2000s. The Nasdaq still hasn't fully recovered from that meltdown.
The Yale professor sounds bewildered by the lofty valuations for the stock market, which has nearly tripled since the March 2009 bear market lows.
Related: Get ready for lousy stock returns
But none of this means it's time to sell everything. Shiller notes that his gauge is a "very imprecise timing indicator" and said the market could "remain at these valuations for years."
2. Hedge fund king Carl Icahn believes there's a bubble.
"We can no longer simply depend on the Federal Reserve to keep filling the bunch bowl," the hedge fund billionaire wrote on Tumblr last week, referring to the numerous measures the Fed has taken to stimulate the U.S. economy.
Icahn described a "dangerous financial situation" that includes challenges tied to monetary policy, unemployment and income inequality.
He also said recent comments from Fed chief Janet Yellen at the International Monetary Fund "suggest, and I agree, that we are in an asset bubble."
Related: Beware of social media, biotech stocks
Still, Icahn isn't calling for an imminent crash by any means. He acknowledged a bubble might not burst for "the next one, five, ten or 20 years."
It's also important to recall that Icahn currently owns billions of dollars worth of stocks. During the second quarter he even raised his stake in eBay (EBAY, Tech30) and added a new investment in Gannett (GCI). He still thinks there's value out there.
3. Ex-Treasury secretary Robert Rubin: Low rates could spark another financial crisis.
"The risk of excesses and the consequent instability have increased substantially," Rubin and Harvard professor Martin Feldstein wrote in an Op-Ed in The Wall Street Journal last week.
These financial luminaries (Feldstein served as chief economic adviser to President Ronald Reagan) didn't explicitly say whether a bubble already exists or if the Fed needs to hike rates now to prevent one.
However, they did advise the central bank to consider the possibility that the "excesses" caused by extremely low interest rates could "create financial crises."
Rubin and Feldstein pointed to record high stock prices, "dramatically" lower spreads on low-quality junk bonds and surging volumes of high-risk leveraged loans as alarming signs.
Related: Is it time for Wall Street to issue a correction?
If hedge funds are holding assets that suddenly pop in a bubble, there's a risk of "contagion and snowballing effect" when they all hit the exits at the same time, the duo wrote.
Rubin should know about this threat. He was in charge of Treasury in 1998 when collapsing hedge fund Long-Term Capital Management imperiled the whole system. Ultimately Wall Street was forced to come to the rescue with a $3.6 billion industry-funded bailout.

RealtyTrac: Cash purchases disappearing from home sales-Institutional investors keep cooling down

All-cash sales made up 37.9% of the single-family property sales in the second quarter of 2014, a fall from 42% in the first quarter, which marked a three-year high for cash sales.
But cash sales in the second quarter of 2014 were still above 2013’s second quarter, when 35.7% of all sales were in cash, according to the Q2 2014 U.S. Institutional Investor & Cash Sales Report from RealtyTrac.
While the cash sales decline is moderate, the share of those sales from institutional investors, entities that purchase at least 10 properties in a calendar year, fell in the second quarter to 4.7%, which marks the lowest level since the first quarter of 2012.
“The flurry of purchases by institutional investors and other cash buyers that kicked off two years ago when U.S. home prices hit bottom is finally showing signs of subsiding,” said Daren Blomquist, RealtyTrac vice president, noting that the U.S. median home prices bottomed out in March 2012.
“Over the past 10 quarters cash sales have accounted for 39% of all home sales on average, and institutional investor purchases have accounted for 5.3% of all home sales on average,” Bloomquist added.
“Prior to that, from 2001 to 2011, the average quarterly cash share was 30%, and the average quarterly institutional investor share was 2.6%. This is a classic good news/bad news scenario for the housing market.”
According to RealtyTrac’s report, cash sales account for larger share of very high-end, low-end and distressed sales. The report shows that U.S. cash sales hit a recent peak of 45.8% of all home sales in the first quarter of 2012, when home prices bottomed out, but were down to as low as 34% of all sales in the third quarter of 2013 before jumping to 36.6% in the fourth quarter.
That was on the heels of the rise in interest rates and then the share of cash sales jumped again to 42% of all sales in the first quarter of 2014, when new qualified mortgage rules from the Consumer Financial Protection Bureau took effect.
“The good news is that fewer cash buyers should help loosen up inventory of homes for sale and reduce competitive bidding, giving first time homebuyers and other non-cash buyers more opportunities,” Bloomquist said. “The bad news is that some of those first time homebuyers and other non-cash buyers may already be priced out of the market thanks to the rapid run-up in home prices over the past two years in many areas.”
Cash sales in the second quarter were skewed higher on both ends of the home price spectrum. Cash sales accounted for 67% of purchases of homes selling for $100,000 or less, and cash sales accounted for 45% of purchases of homes selling for more than $2 million.
Cash sales represented a larger share of distressed sales, with 49% of bank-owned sales, 61% of sales of properties in the foreclosure process, and 96% of sales at the foreclosure auction. By comparison, non-distressed home sales were 36% all-cash.
Among metropolitan statistical areas with a population of at least 500,000, those with the top six highest percentages of cash sales were all in Florida: Miami-Fort Lauderdale-Pompano Beach (64.1%), Cape Coral-Fort Myers (62.1%), Sarasota-Bradenton-Venice (61.5%), Tampa-St. Petersburg-Clearwater (54.6%), Lakeland (53.0%), and Orlando-Kissimmee (52.2%). All six metros posted a lower all-cash share of sales than the previous quarter and a year ago.
Other major metro areas with an all-cash share among the top 20 highest nationwide were Las Vegas (50.7%), New York (48.2%), Detroit (47.7%), Kansas City (46.8%), Philadelphia (45.1%), and Cleveland (45.1%).
Among metropolitan statistical areas with a population of at least 500,000, those with the highest share of institutional investor purchases in the second quarter were Atlanta-Sandy Springs-Marietta (15.6%), Las Vegas-Paradise (14.4%), Jacksonville, Fla., (12.5%), Memphis, Tenn. (12%), and Charlotte-Gastonia-Concord (11.3%).
Although Atlanta documented the highest share of institutional investor sales in the second quarter, its 15.6% share was down from a 20.6% share in the first quarter and a 16.5% share in the second quarter of 2013 — following nine consecutive quarters with year-over-year increases in Atlanta’s institutional investor share.
The institutional investor share of home purchases were also down from a year ago in Memphis and Charlotte, but increased from a year ago in Las Vegas and Jacksonville, bucking the national trend.
Other metro areas among the top 10 for institutional investor share with increases from a year ago were Knoxville, Tenn., (10% compared to 6.9% a year ago); Columbus, Ohio (9.2% compared to 6.9% a year ago); and Miami (8.2% compared to 6.7% a year ago).
The report shows that the second quarter share of institutional investor purchases was the lowest since the first quarter of 2012, when they represented 4.6% of all U.S. home sales. The peak in institutional investor share of all sales was 6% in the first quarter of 2013.
In the second quarter institutional investors purchased homes at an average sale price of $147,017, while the average estimated full market value of the homes purchased was $164,553 at the time of the sale.
The majority of purchases made by institutional investors in the second quarter were all-cash (79%) and not in any stage of foreclosure or bank-owned (80%). Of the remaining 20%, 7% were bank-owned, 11% were scheduled for a foreclosure auction, and 2% were in default with no foreclosure auction date set.

Cash sales drop to lowest level since May 2010-Continues 18-month streak of year-over-year decreases

The share of homes purchased in cash continued its decline in May, falling to 34.4% of total home sales, which represents the lowest share of cash sales since May 2010.
May’s cash sales were down from April, when 36.9% of the sales were all-cash, and down from May 2013, when cash sales made up 37.4% of the total home sales, according to a new report from Corelogic (CLGX).
“The share has fallen on a year-over-year basis each month since January 2013,” Corelogic said in the report. “Prior to the housing crisis, the cash sales share of total home sales averaged approximately 25%. The peak occurred in January 2011, when cash transactions made up 46.2% of total home sales.”
Of the 34.4% of total sales that were made in cash, 55.5% were of real estate owned homes.
Re-sales made up 34%, short sales were 32.8% and newly constructed homes were 16.8%.
“While the percentage of REO sales that were cash transactions remained high, REO transactions made up only 8.2% of total sales in May and therefore did not have a large influence on the overall cash sales share,” Corelogic said. “In January 2011, when the cash sales share was at its peak, REO sales made up 24% of total sales.”
The state of Florida, which has long ranked at or near the top of the cash sales rankings, had the largest share of cash sales in May at 53.4% of total sales. New York ranked second at 50.3%, Alabama was third with 48.9%, West Virginia was fourth at 48.3% and South Dakota rounded out the top five with 46.3%.
Of the nation's largest 100 Core Based Statistical Areas measured by population, Nassau County-Suffolk County, New York had the highest share of cash sales at 66.4%, followed by Cape Coral-Fort Myers, Florida (64%), West Palm Beach-Boca Raton-Delray Beach, Florida (62.8%), North Port-Sarasota-Bradenton, Florida (62.7%) and Detroit-Livonia-Dearborn, Michigan (61.1%).

Foreclosures Rise In July

Foreclosures of all types were filed on 109,434 properties in July, an increase of 2% from June, but the figure is still down 16% from one year ago, according to July’s Foreclosure Market Report from RealtyTrac.
July’s report shows that one out of every 1,203 homes in the U.S. had a foreclosure filing during the month of July.
Foreclosure activity recorded includes all default notices, scheduled auctions and bank repossessions.
“July was the 46th consecutive month where U.S. foreclosure activity was down on a year-over-year basis,” said Daren Blomquist, vice president at RealtyTrac. “After nearly four years of falling foreclosures, we are starting to see evidence that foreclosure numbers are normalizing at the national level. The 16% decrease in July was exactly half the annual decrease we saw a year ago in July 2013, when U.S. foreclosure activity was down 32% on a year-over-year basis.”
Per RealtyTrac’s report, a total of 49,624 U.S. properties started the foreclosure process for the first time in July, which represents a 5% increase from June. But the figure is still down 18% from a year ago, which marks the 24th consecutive month with a year-over-year decrease in U.S. foreclosure starts.
Other highlights from the RealtyTrac report:

Despite the annual decrease nationally, foreclosure starts increased from a year ago in 14 states, including Nevada (up 128%), Texas (up 29%), New York (up 17%), Massachusetts (up 12%), and Michigan (up 6%).

A total of 51,595 U.S. properties were scheduled for foreclosure auction in July, up 10% from the previous month but still down 3% from a year ago. Non-judicial foreclosure auctions increased 26% from June to July, but were still down 7% on a year-over-year basis.

Despite the annual decrease nationally, scheduled foreclosure auctions increased from a year ago in 20 states, including New Jersey (up 105%), Oregon (up 50%), Louisiana (up 32%), Utah (up 30%), Connecticut (up 18%), and New York (up 16%).

Lenders repossessed a total of 25,937 U.S. properties via foreclosure in July, down 4% from the previous month and down 30% from a year ago to the lowest level since April 2007.

Bank repossessions were up in seven states, including Maryland (up 77%), California (up 22%), Oregon (up 13%), and New Jersey (up 12%).

Click next to see a breakdown of the cities and states that saw the largest rises and falls in foreclosure activity in July.

21 years to save for the down payment on a house?

Guardian reporter Jessica Glenza and her boyfriend are buying a house and decided to go with a Federal Housing Authority loan. Glenza explains (in a satirical way that catches your eye), how she can finally afford a home and why some might think this is a bad thing.

It was over a plate of linguine and cream sauce that I learned I could afford a home. The government-run program allows buyers to put down as little as 3.5% of the property’s sales price.
What I found out is that the Federal Housing Authority finances about one in five homes in the US, a huge proportion. FHA financing works by allowing people to finance part of the traditional 20% down payment. 

Previously, Glenza assumed she would be forced to save for 10 to 15 years in order to pull together a 20% down payment.
However, as she learned about this new program, she also realized the opposition to it. This is where people like Norbert Michael from the Heritage Foundation, who would rather do away with Fannie, Freddie and the FHA, come in.

“The [government-sponsored enterprise] system has blown up more than once already in history,” said Michael. “I don’t think you should have the federal government in the business of insuring people’s mortgages,” he said.

In Michael’s view, eliminating programmes like the FHA would eliminate debt, something that financial types would refer to as “risk”. Like people, debt is more likely to experience health problems with age, and missed payments, or default, is a function of time.

As a result, this would be counterbalanced by home prices – which Michael believes are currently inflated, and would come down if the government got out of the way.
But this would also significantly impact people's ability to become homeowners.

An analysis by the Centre for Responsible Lending found that it would take a family earning the median income, or $50,046, 21 years to save for a 10% down payment and closing costs on a house of median value ($158,100), both using 2010 census numbers. That’s derived from Americans’ average savings rate of 3.9%. It would take even longer for African-American and Latino families to do the same – 31 and 26 years respectively.

Default Mortgage Demand is Up

According to an article in Bloomberg, sales of delinquent mortgages are accelerating as lenders rush to meet demand from hedge funds and private-equity firms that has sent prices surging.

The market for defaulted mortgages is heating up as Wall Street firms try to profit from the housing recovery, banks seek to avoid the added costs of holding delinquent debt and the Department of Housing and Urban Development sells loans to reduce losses at the financially troubled Federal Housing Administration. 

“This market is getting very heady and you are seeing the supply come out in response to these prices,” Laurence Penn, CEO of Ellington Financial, said. 

Top 10 Markets Expected To Do Well

Although home price growth has slowed dramatically from last year and will continue to slow into mid-2015 are now enjoying the advantage of price increases, while buyers have more choices.
In 10 key markets, strong price appreciation and increases in housing inventory increase are an early sign of potential strong home sales, in contrast to what’s happening in the rest of the housing market nationwide, realtor.com reports in its June National Housing Trend Report.
“National housing trends are masking some of the excitement we’re seeing in individual markets,” said Jonathan Smoke, chief economist for realtor.com. “For the last two years, listing shortages constrained home sales and frustrated buyer demand. Our June data shows monthly inventory picking up in markets already experiencing price increases and fast property turnover.
“These dynamics will result in strong home sales and extend the buying season past the usual June/July peak to later in the third quarter,” Smoke said.
Homes in the Charlotte, N.C. region are selling 14 days faster compared to a year ago – the most improved in median inventory age among these markets.
Meanwhile Reno, Nevada, the “biggest little city in America,” has the biggest year-over-year home price increase at nearly 18.5%.
“The markets where we expect significant third quarter home sales are all very different – ranging from small to large, affordable to expensive, previously distressed to minimally affected by the downturn,” Smoke said. “Diversification in the areas experiencing healthy real estate economies is a key indicator that the housing recovery has become more sustainable.”
Median list prices are up 7.6 percent in June over last year. Month-over-month price acceleration is slower compared to April, when the home-buying season traditionally starts.
National housing inventory is now roughly in line with June 2013 levels when rising home prices first generated a surge in market supply. Additionally, homes in June sold 5 percent faster than last year.
  Top Markets Set for Significant Growth in Home Sales
(Listed in alphabetical order)

 

MSA	Median Listing Price	% YY	% MM	Total Listings	% YY	% MM	Median Age of Inventory	% YY	% MM
Albany-Schenectady-Troy, NY	$226,025	0.50%	0.50%	6,145	1.10%	9.83%	80 days	-4.76%	-3.61%
Baton Rouge, LA	$188,000	4.50%	1.62%	3,630	1.79%	7.27%	74 days	-8.64%	-6.33%
Charlotte-Gastonia-Rock Hill, NC-SC (NC)	$209,000	7.18%	2.00%	12,906	-2.15%	3.53%	64 days	-17.95%	-7.25%
Columbia, SC	$162,500	2.20%	0.03%	5,190	-0.63%	2.98%	83 days	-8.79%	-13.54%
Des Moines, IA	$179,900	7.47%	0.50%	3,654	-4.09%	5.97%	59 days	-4.84%	-1.67%
Philadelphia, PA-NJ (NJ)	$187,000	1.14%	1.14%	12,233	-4.75%	3.59%	97 days	-9.35%	-1.02%
Portland-Vancouver, OR-WA (WA)	$299,000	11.15%	1.05%	2,207	-3.79%	15.55%	59 days	-16.90%	-4.84%
Reno, NV	$295,000	18.47%	1.76%	2,539	2.01%	6.82%	60 days	-1.64%	-1.64%
Spokane, WA	$198,000	7.06%	4.27%	3,986	8.20%	7.90%	61 days	-3.17%	-14.08%
Washington, DC-MD-VA-WV (VA)	$429,000	4.63%	0.00%	14,776	4.06%	6.34%	53 days	-8.62%	-7.02%

Each market listed demonstrates strong supply and demand dynamics including:
Inventory increases:  For-sale inventory shortages have played a significant role in limiting home sales during the past two years. Each community listed is getting its supply in check with month-over-month inventory growth. Additionally, half of these markets also are increasing on a yearly basis.  
Median list price increases: Price increases encourage sellers to put homes on the market and indirectly keep inventory levels more sustainable. While each region listed had price increases on a monthly and yearly basis, they vary from hot markets with fast price acceleration, such as Reno, Nevada, to communities just beginning to see appreciation, such as Albany, N.Y
Median age of inventory decreases: Declining median age of inventory indicates listings growth has not satisfied demand. Properties in these areas are selling faster than last year, demonstrating continuing homebuyers’ interest that will propel sales.

Home Affordability Down- and why values will adjust

As of the second quarter of 2014, one-third of counties surveyed by RealtyTrac have surpassed their historical averages for income-to-price home affordability percentages since 2000 — making residential properties less affordable now than they have been on average over the last 14 years.
The survey analyzed the affordability for buying a residential property in more than 1,000 counties nationwide.
It is important to note that none of the nearly 1,200 counties analyzed have regressed to the dangerously low affordability levels reached during the housing price bubble, and even if interest rates increased 1 percentage point, only 59 counties representing 2% of the U.S. population would be at or above bubble levels in terms of affordability.
“But the scales are beginning to tip away from the extremely favorable affordability climate we’ve seen over the last two years, with one-third of the counties analyzed — representing 19 percent of the total population in those counties — now less affordable than their long-term averages,” said Daren Blomquist, vice president at RealtyTrac.
Additionally, counties still more affordable than their long-term averages in the second quarter included Los Angeles County (by less than a half a percentage point), Cook County, Illinois, Maricopa County, Arizona, San Diego and Orange counties in Southern California, Miami-Dade County in South Florida and the New York City boroughs of Kings County and Queens County.
Counties less affordable than their long-term averages included San Francisco County, California, Multnomah County, Oregon, Travis County, Texas, Bexar County, Texas, Harris County, Texas and Fulton County, Georgia.

An Opinion Why The Housing Recovery Is Not Real

As I continue to follow and write about developments affecting the housing market I cannot help but notice an increase in reports and supporting articles that question the strength of this important component of the general economy in America.
In a piece authored by John Mason in The Street dated Jul. 31, “How Fast Can the U.S. Economy Grow With So Many Delinquent Loans?” Mr. Mason points to a recent report by the Urban Institute, “… that analyzed the credit files of 7 million Americans shows why the U.S. economy may not be as strong as [another recent] report from the Commerce Department on second-quarter growth may have indicated.”
Mason’s article continues to state that the government reported that GDP rose at a seasonally adjusted 4% annual rate in the second quarter, as compared to a decline of 2.1% during the first quarter, which as we know was revised downward to a staggering 2.9% contraction. I have also reported on this here at HousingWire. There continues to be conflicting reports about just how “strong” our economic recovery is, or has been.
The Urban Institute, as noted by Mason, reported that about one-third of adults in America who have a credit file have a report of debt that is in collection.
And what is also noteworthy is that many low-income individuals and families do not have access to credit but still might well be delinquent on debts. It is estimated, according to the Urban Institute’s report that it is possible that as many as 40% of adults in the U.S. are delinquent on loans of one type or another, or several others.
This fact undermines the government’s rosy report regarding second quarter GDP growth. But that is hardly news in and of itself.
However, also taking a look at future housing prices across the nation, another article, this one penned by Mike Sorohan featured in MBA NewsLink on Aug. 4, “Housing Reports Mixed on Prices, Delinquencies,” quotes Clear Capital from their Home Data Index Market Report showing a “major shift” in home sales types. Sorohan noted that “… distressed sales fell in July to 18%, a ‘stark’ reduction since its peak of 40.8% in March 2011.”
But a key indicator in this article that the so-called housing “recovery” has been illusory is that Clear Capital noted that national yearly growth fell from 9% in June to 8.4% in July. Sorohan said in his piece that Clear Capital’s “forecast shows national home prices could rise by 1.5%, suggesting prices might not have the strength to stabilize.”
A vice president of research and analytics from Clear Capital was quoted by Sorohan as stating that, “Relatively speaking a national yearly growth rate of 8.4% is not alarming, but it’s the path by which we got there that is of concern.”
I completely agree, since the growth rate today is more than 3% lower than it was at the beginning of this year. And historically the summer months are among the most conducive to increases in sales, pushing economic growth.
Unfortunately, the housing market of recent years cannot be compared to previous cycles.
It is also important to note that many such reports do not take into full consideration the differences in market conditions from one part of the country to another. The inexplicable rise in house prices in the West, for example, is not replicated in other parts of the nation.
But because of space limitations and other factors, such as trends, looking at the nation as a whole still provides a good barometer for what is “real” and what is “Memorex.”

In Case You Wanted To Buy The Next Rental- Vacancies and Delinquencies Spike

The vacancy rate for the single-family rental homes in Colony American Homes’ $513.6 million securitization is rising and it’s rising quickly.
In the last two months, the month-end vacancy rate has risen nearly 77%, from 3.9% in April to 6.9% in June. There are 3,396 single-family rental properties that support Colony American Homes’ first securitization, which launched in March.
The number of vacant properties has jumped from 132 in April, to 184 in May, to 236 in June.
That means vacancies jumped from less than 4% to around nearly 7%.
In terms of vacancies determined by the amount of cash collected, the vacancy rate is lower, but still increased 72.2% — from 3.6% in April to 6.2% in June.
Additionally, the month-end delinquency rate has more than doubled in the last month. In May, the delinquency rate was 0.7%. It rose to 1.5% in June, which represents an increase of 114%.
By comparison, the delinquency rate actually dropped from April to May, by 0.1%.
In total, the vacancy and delinquency rate by property count has risen nearly 81% in the last two months, from 4.7% in April to 8.5 in June.
On the securitization’s cutoff date of February 1, the underlying properties were 100% rented and had no delinquencies.
But according to a performance update from Morningstar, the net cash flow based on the total rent collected is still sufficient to cover the bond obligations. Morningstar factors in an expected vacancy rate of 9% for the underlying properties, so despite the drastic increase, the vacancy rate is still below Morningstar’s expected threshold.
Perhaps these fluctuations are to be expected, considering the fickle nature of renters. In the last few months, the vacancy rate for the homes that make up the $1 billion REO-to-rental securitization from Invitation Homes has seesawed between 5.5% in April, to 7.3% in May and back down to 6.8% in June.
Morningstar expects these jumps to subside in time. “Initial lease expirations are anticipated to peak in July and August this year,” Morningstar reported. “As the number of expiring leases declines following this peak and vacant properties become occupied, Morningstar expects the month-end vacancy rate to stabilize and to potentially decline.”
Morningstar does caution that it reviews the vacancy rates at the end of the respective months, when vacancies tend to be higher than in other points in the month.
Morningstar also provided a report on Colony American Homes’ second REO-to-rental securitization, which was brought to market in June. CAH 2014-2 was a $558.5 million single-family rental securitization based on 3,719 income-producing properties.
The vacancy rate for CAH 2014-2 stands at 0.9% as of June 30. Of the 3,719 properties, 35 were vacant at the end of June.
The delinquency rate was even lower, at 0.1% for June, with only four properties reported as delinquent.
Of note is the fact that more than a third of the vacant properties are located in Tampa/St. Petersburg/Clearwater, Florida.
“Initial lease expirations are anticipated to gradually increase through the remainder of 2014 before peaking in February 2015,” Morningstar’s report states.
“As the number of expiring leases increases, Morningstar expects the month-end vacancy rate to steadily rise through the February 2015 peak, after which time, the vacancy percentage should stabilize and potentially decline. Morningstar’s expected stabilized vacancy rate is 10.3% for this transaction.”
As with Colony American’s first rental securitization, Morningstar reports that the net cash flow based on the total rent collected is sufficient to cover the bond obligations.

Mortgage Lending Standards Ease Up

Mortgage-lending standards eased up during the second quarter, indicating a gradual thaw and potentially helping boost a sluggish housing recovery, according to an article in The Wall Street Journal.

In the Federal Reserve's latest quarterly survey of banks' senior loan officers, nearly one-quarter of respondents said they had eased standards modestly on prime mortgages, the first such sign of a thaw in any of the Fed's surveys since the housing bust hit in 2007.
Still, the survey showed that lending standards remain stringent, historically speaking. The Fed asked banks how standards for various types of lending have varied since 2005, and nearly half of lenders said mortgage standards were tighter than their median requirements for the past decade.