10 Reasons Why People Don't Get A Mortgage

Want to know why mortgage applications continue at historic lows? Well, as it turns out, there are many reasons why homeownership continues to drop.
Even while there is still a widespread preference for homeownership in America, 35% of households still rent, and of them, 20% report no intentions to buy, according to a report from Rachel Bogardus Drew, a post-doctoral fellow with the Harvard Joint Center for Housing Studies.
And when looking at the latest numbers, the U.S. Census Bureau’s third-quarter homeownership report found that the national vacancy rate hovered around 7.4% for rental housing and 1.8% for homeowner housing, barely moving from the second quarter’s results.
So why aren’t people wanting to own a home?
“We know from my prior research that some demographic groups are less likely to expect to own in the future, including whites, older renters, those with lower incomes, and those without families,” Drew said.
“Yet regression analyses based on demographic variables alone can account for only about 10% of the variation in renters’ future tenure plans. Thus we must consider some attitudinal factors when seeking to understand what drives intentions to rent for the long term,” she added.
The chart below lists the 10 main reasons people either don't want or can't get a mortgage.
(Source HJCHS; click to enlarge)

Drew explained that the results show a third of renters, or 10% of all households, rent because of lifestyle and personal preferences. However, more than half of lifetime renters see their tenure as constrained, either by their own financial circumstances or by macroeconomic conditions.
And looking toward future trends, renters and unlikely to change their plans anytime soon due to tight mortgage lending, home prices rising and sluggish income growth.

This is why California is in the middle of another housing crisis-Affordability and mortgage lending issues abound

Decades from now, when history writes the story of the Millennials, they may well be remembered as the first generation for whom using smartphones and social media was as natural as taking a breath. Yet unless things change, there’s a good possibility they’ll also be known as the generation that couldn’t afford to buy or rent a home.
It’s ironic that when the first Millennials were born, their Baby Boomer parents couldn’t afford a home either. Looking back to October 1981, interest rates on a 30-year, fixed-rate mortgage exceeded 18%. It wasn’t until rates fell below 10% in 1986, and to the 7% range in the early 2000s, that affordability ceased to be a major impediment to homeownership.
Today, California’s housing affordability problem is back – only this time it is fueled by rising home prices and lack of access to capital rather than double-digit interest rates.
On Nov. 14, the California Association of Realtors will convene economists, policymakers, and practitioners for “The Real Estate Summit: Partnering for Change in California.” The summit will explore the issue of housing affordability, as well as California’s infrastructure, foreign investment, consumer trends, housing finance, and policy implications.
So how serious is the problem?
CAR’s Housing Affordability Index – which tracks the percentage of households that can afford a median-priced, single-family detached home assuming current interest rates and 20% down – fell from 33% in the first quarter of 2014 to 30% in the second quarter, a 26% decline from a peak of 56% in early 2012. While home buyers needed to earn an annual income of $56,320 to purchase the median-priced house two years ago, today they need an additional $37,270, or $93,590 total annually, to qualify.
The reasons behind the decline in affordability are many:  slower-than-expected economic growth, incomes that haven’t kept pace with rising home prices or rents, pent-up demand, lack of supply, tighter lending criteria in response to new mortgage regulations from Congress, and indecision about the future of Fannie Mae and Freddie Mac, to name a few.
What the numbers don’t reveal is the impact the problem is having on individuals and families. Nationally, more than half of adults surveyed say they’ve taken a second job, postponed retirement contributions, run up credit cards, or moved to a cheaper neighborhood in order to cover their rent or mortgage over the past three years, according to the MacArthur Foundation. Another study reports that 45% of college-educated Millennials have moved back in with their parents because they can’t find a job or the one they have doesn’t cover student loans and a place to live.
A lack of new home construction is likely to cause further affordability issues unless housing starts increase in line with local job gains, according to the National Association of Realtors. Its analysis found that too few homes are being constructed in relation to local job market conditions, and that lack of construction has “hamstrung” supply and slowed home sales.
Here in California, it has been estimated that the post-recovery real estate market could easily absorb 250,000 new units of owner-occupied or rental housing – a need that isn’t even close to being fulfilled.
What's the key reason?
Many small builders continue to experience limited access to credit and rising construction costs. Despite strong demand, the number of single-family housing permits issued in August 2014 declined by nearly 21% from the same month in 2013, while the number of multifamily permits was down almost 24% year over year.
There are some who believe California’s housing affordability problem will work itself out as the economy improves and consumer expectations align with real estate market realities.

S&P Case-Shiller: Home price growth continues to slow-Gains drop below 6% as Sunbelt reports worst returns since 2012

Home price growth continues to slow, according to the latest S&P/Case-Shiller Home Price Indices for August 2014.
The 10-City Composite gained 5.5% year-over- year and the 20-City 5.6%, both down from the 6.7% reported for July. The National Index gained 5.1% annually in August compared to 5.6% in July.
On a monthly basis, the National Index and Composite Indices showed a slight increase of 0.2% for the month of August.
Detroit, of all places, led the cities with the gain of 0.8%, followed by Dallas, Denver and Las Vegas at 0.5%. Gains in those cities were offset by a decline of 0.4% in San Francisco followed by declines of 0.1% in Charlotte and San Diego.
“After several months in a row of slowing home value growth, it’s fair to say now the market has officially turned a corner and entered a new phase of the recovery. We’re transitioning away from a period of hot and bothered market activity, characterized by low inventory and rapid price growth, onto a more slow and steady trajectory, which is great news,” said Zillow Chief Economist Dr. Stan Humphries. “In housing, boring is better. As appreciation cools and more inventory comes on line, buyers will start to gain a more competitive advantage, after years of sellers being in the driver’s seat. More sedate home value growth, coupled with interest rates that remain incredibly low, will also help housing stay affordable, which is critical to drawing in the next generation of younger, first-time buyers that had been sitting on the sidelines.”
Click the chart to enlarge

The chart above depicts the annual returns of the U.S. National, the 10-City Composite and the 20- City Composite Home Price Indices.
“Homeowners may be disappointed to see home prices slow their monthly gains, but the sky is not falling,” said Quicken Loans vice president Bill Banfield. “Nationally, home prices are still making healthy yearly gains to grow household equity and throw a lifeline to those that may still be underwater.”
The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 5.1% annual gain in August 2014. The 10- and 20- City Composites posted year-over-year increases of 5.5% and 5.6%.
“The deceleration in home prices continues,” says David Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “The Sun Belt region reported its worst annual returns since 2012, led by weakness in all three California cities -- Los Angeles, San Francisco and San Diego. Despite the weaker year-over-year numbers, home prices are still showing an overall increase, as the National Index increased for its eighth consecutive month.
Click the chart to enlarge

“The large extent of slower increases is seen in the annual figures with all 20 cities; the two composites and the national index all revealing lower numbers than last month. The 10- and 20-City Composites gained 5.5% and 5.6% annually with prices nationally rising at a slower pace of 5.1%. Las Vegas continues to see a sharp deceleration in their annual home prices with a 10.1% annual return, down just below three percent from last month. Miami is now leading the cities with a 10.5% year-over-year return. San Francisco, which has shown double-digit annual gains since November 2012, posted an annual return of 9.0% in August.
“Despite softer price data, other housing data perked up. September figures for housing starts, permits and sales of existing homes were all up. New home sales and builders’ confidence were weaker. Continued labor market gains, low interest rates and slower increases in home prices should support further improvements in housing,” Blitzer said.
All cities except Cleveland saw their annual gains decelerate. Las Vegas showed the most weakness in its year-over-year return; it went from 12.8% in July to 10.1% in August. As a result, Las Vegas lost its leadership position as it moved to second place behind Miami with a 10.5% year-over-year gain. San Francisco posted 9.0% in August, down from its double-digit return of 10.5% in July.
All cities except Boston and Detroit posted lower monthly returns in August compared their returns reported for July. San Francisco showed its largest decline since February 2012; it was the only city that showed a negative monthly return two months in a row from -0.3% in July to -0.4% in August.

Foreclosure inventory lowest since February 2008

At 1.76% of active mortgages, the nation’s inventory of loans in foreclosure is now at its lowest point since February 2008, according to the September report from the Data and Analytics division of Black Knight Financial Services.
That equates to 893,000 loans in the foreclosure process, a decline of 435,000 from last year.
Click to image enlarge

Mortgage delinquencies reversed last month’s increase, dropping 3.9% - or 117,000 loans - nearly erasing August’s increase.
Total non-current inventory (30 or more days past due or in foreclosure) declined by 117,000 (almost 400K since last year).
Foreclosure starts rose nearly 12% in September, with 91,000 new (or repeat) foreclosure actions.
The inventory of seriously delinquent loans (those 90 or more days past due) declined by 25,000, reaching its lowest point August 2008.
Click image to enlarge

September’s monthly prepayment rate (historically a good indicator of refi activity) declined by almost a full percentage point.
Looking at the states with the highest and lowest share of non-current inventory, Minnesota entered the top 5 best performing states, knocking out Alaska.
Additionally, Florida, which showed the best rate of improvement over the past 6 months, is now at the bottom of the 5 states with the highest share of non-current loans.

Fitch: U.S. Home Price Growth Stalls for First Time in 2 Years

Fitch Ratings-New York-21 October 2014: The two-year streak of U.S. home price growth appears to have come to a close, according to Fitch Ratings in its latest quarterly index report.
National home prices fell by less than 1% between 1Q'14 and 2Q'14 after more than two years of steady increases. While the magnitude of the decline is benign, the relatively flat prices are in stark contrast to recent price gains. Home prices increased roughly 20% nationally between 4Q'11 and 1Q'14. 'The cooling of the US housing market comes as no surprise after several years of unsustainable growth rates,' said Director Sean Nelson. 'It's also worth noting that nearly all major cities are experiencing the same home price flattening at the same time. 'Most of the metro areas that experienced large home price increases since 2011 saw price growth either slow, stall or reverse in the first two quarters of 2014. The slowed rate of home price appreciation follows a roughly 100 bps increase in mortgage rates in 2013. 'While home price growth has slowed or stopped in most regions, several markets, many of which are in California and Texas, are still overvalued,' said Nelson.Fitch's index is published quarterly and highlights performance trends in legacy and new issue RMBS, house price conditions and mortgage market developments. The HPI index reflects Case-Shiller's seasonally-adjusted national home price index.The Mortgage Market Index -U.S.A. is part of Fitch's quarterly structured finance index reports. It is available at 'www.fitchratings.com' or by clicking on the above link.

Seriously underwater homes hit 2-year low-But it’s not all positive news

The amount of seriously underwater properties plunged to the lowest level in two years, with 8.1 million U.S. residential properties seriously underwater — where the combined loan amount secured by the property is at least 25% higher than the property’s estimated market value, RealtyTrac’s U.S. home equity and underwater report for the third quarter of 2014 said.
This represents 15% of all properties with a mortgage and an estimated $1.4 trillion in negative equity.
Last quarter, 9.1 million residential properties representing 17% of all properties with a mortgage were seriously underwater, and in the third quarter of 2013 10.7 million residential properties representing 23% of all properties with a mortgage were seriously underwater.
"The decrease in underwater properties is promising but the estimated $1.4 trillion in negative equity means that the flood waters are not receding as quickly as they were before, corresponding to slowing home price appreciation,” said Daren Blomquist, vice president at RealtyTrac.
“Slower price appreciation means the 8 million homeowners seriously underwater could still have a long road back to positive equity,” he continued.
Additionally, the universe of equity-rich properties — those with at least 50% equity — grew to 10.8 million representing 20% of all properties with a mortgage in the third quarter, up from 9.9 million representing 19% of all properties with a mortgage in the second quarter of 2014.
Collectively these equity rich homeowners have an estimated $2.9 trillion in positive equity.
Another 8.5 million properties were on the verge of resurfacing in the third quarter, with between 10% negative equity and 10% positive equity. This segment represented 16% of all properties with a mortgage in the third quarter, and was down from 8.7 million properties representing 17% of all properties with a mortgage in the second quarter of 2014.
Fewer distressed properties had negative equity in the third quarter, with 39% of all properties in the foreclosure process seriously underwater — down from 44% in the second quarter of 2014 and down from 56% in the third quarter of 2013.
In comparison, the share of foreclosures with positive equity increased to 38% in the third quarter, up from 34% in the second quarter of 2014.
“We wanted to paint a picture of the typical seriously underwater homeowner and what we found was that homeowners who bought or refinanced during the housing bubble (2004 to 2008), own a home worth less than $200,000, live in the Sun Belt or Rust Belt and live in a Democratic Congressional District were more likely to be seriously underwater,” Blomquist noted.
“On the other end, the highest percentages of equity rich homeowners were those who bought or refinanced between 1994 and 1998, those with properties valued at $500,000 or more, live in NY, CA, DC and these folks also tend to live in Democratic Congressional districts,” he said.

Daily Economic Update

Wednesday's bond market has opened flat as stocks have done also. The Dow and Nasdaq are both up a couple points from yesterday's close while the bond market is nearly unchanged also at 2.22%. This should keep this morning's mortgage rates at yesterday's levels.

This morning's only economic data was September's Consumer Price Index (CPI) at 8:30 AM ET. It gave us mixed results but no big surprises. The overall reading rose 0.1% when it was expected to be unchanged and the core reading that excludes more volatile food and energy costs rose 0.1%, falling just short of the 0.2% forecast. The increase in the overall reading was a bit negative for bonds but the weaker core reading offsets that. Both readings indicate inflationary pressures at the consumer level of the economy remain subdued. That is generally good news for the bond market and mortgage rates. However, since both were close to expectations, we have seen little impact on this morning's trading.

Tomorrow has two pieces of data but neither are considered to be highly important. The first will be last week's unemployment figures at 8:30 AM ET. They are expected to show that 285,000 new claims for unemployment benefits were filed last week, up noticeably from the previous week's 264,000 initial claims. The higher the number of new claims, the better the news it is for mortgage rates because rising claims hints at a softening employment sector. It is worth noting though that because this is only a weekly report, it usually takes a surprisingly weak or strong number for the data to affect mortgage rates.

September's Leading Economic Indicators (LEI) will be released by the Conference Board at 10:00 AM ET tomorrow morning. This index attempts to measure future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.5% from August's reading. This would indicate that economic activity is likely to increase over the next couple of months.

Four Housing Markets That Are OverValued- CoreLogic

Market Condition Indicators designed by CoreLogic (CLGX) identified only four of the top 50 markets in the U.S. as currently overvalued, based on data through August 2014.
CoreLogic also found that despite national home price appreciation gains of 11% in 2013 and 6.5% this year, most markets are still recovering from the crisis.
Earlier this year, CoreLogic released Market Condition Indicators, which evaluate whether individual markets are undervalued, at value or overvalued based on a number of economic variables.
 The analysis expects most markets to continue to lag their long-term sustainable level through 2016.
Click image to enlarge

This first graphic looks at home prices nationwide and shows the population-weighted average of the gaps between home prices and their long-run sustainable level in the largest 50 markets.
CoreLogic notes that during the bubble years from 2005 to 2007, prices were more than 10% above the long-run sustainable levels.
Home prices quickly fell more than 10% below the sustainable price during January 2011 and April 2013.
Subsequently, as home prices have continued to rise, the gap has narrowed to 6% below the long-run sustainable level in August 2014. CoreLogic forecasts the gap to shrink further to 3% by the end of 2016.
Click image to enlarge

This shows the four overvalued markets of the top 50 in CoreLogic’s list.
Topping the list are two metro areas in Texas—Austin and Houston—where an oil and gas boom has fueled job growth and population growth, pushing home prices well above their sustainable levels.
Home prices in these two markets are also well above their historical peak levels: 22.8% for Austin and 16.2% for Houston. The other two overvalued metros are Miami, Fla. and Washington, D.C. As home prices rose significantly since 2013, homes have become less affordable in these two markets, and, therefore, home prices less sustainable.

RealtyTrac: Foreclosure filings increase first time in 3 years-Rise in foreclosures foreshadows new industry trend

Foreclosure filings, including default notices, scheduled auctions and bank repossessions, were reported on 317,171 U.S. properties in the third quarter, marking the first quarterly increase since the third quarter of 2011, according to RealtyTrac’s latest September and third quarter Foreclosure Market Report.
However, it was just a meager 0.42% increase from the previous quarter and is still down 16% from a year ago.
The quarterly increase in overall foreclosure activity was driven by a 2% increase in default notices and a 7% quarterly increase in scheduled foreclosure auctions. In addition, bank repossessions decreased 12% from the previous quarter.
In September, a total of 106,866 U.S. properties had foreclosure filings, down 9% from the previous month and down 19% from a year ago to the lowest level since July 2006 — a 98-month low.
This also marks the 48th consecutive month where U.S. foreclosure activity decreased on a year-over-year basis.
“September foreclosure activity was back to pre-housing bubble levels nationwide, in large part thanks to a continued slide in bank repossessions,” said Daren Blomquist, vice president at RealtyTrac.
“However, a recent rise in scheduled foreclosure auctions in many markets across the country shows lenders are continuing to clean house of lingering delinquent loans. This rise in scheduled auctions foreshadows a corresponding rise in bank repossessions and auction sales to third party buyers in the coming months,” Blomquist added.
(Source RealtyTrac, click to enlarge)

Is the era of buying homes for cash over? Lowest since August, 2008

Cash sales are slowly turning into the endangered species of the industry, reaching the lowest share since August 2008.
Tumbling 35.9% from July 2013, cash sales made up 32.9% of total home sales in July 2014, according to CoreLogic’s latest report on July’s cash sales.
On a monthly basis, the cash sales share was mostly flat, falling only one tenth of a percentage point from June 2014. But it's important to note that cash sales share comparisons should be made on a year-over-year basis due to the seasonal nature of the housing market.
Cash sales have fallen each month since January 2013, and 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 46.3% of total home sales.
“A trend to watch is the cash share of re-sales, which has fallen almost 15 percentage points from its peak cash share of 47.1% in February 2011,” the report said. “This category will determine the direction of cash sales going forward, since re-sales make up the largest share at 81% of all sales.”
(Source CoreLogic, click to enlarge)

Student debt costs housing $83B a year-Skyrocketing higher ed costs create enormous drag

For more than a year HousingWire has been reporting on the link between high levels of student loan debt and the struggling housing recovery.
Now John Burns Real Estate Consulting has quantified the true measure of this dismal reality: Student debt will cost the housing industry approximately $83 billion in sales in 2014.
With college debt increasing by about 6% every year, there is every reason to believe this trend will continue, and probably worsen, the firm reports.
Their report estimates that heavy college debt will reduce real estate sales by 8% for this year, and that households that pay $750 or more for college loan debt each month are priced out of the housing market entirely.
Given how important debt-to-income ratios are now with the Qualified Mortgage rules.
Another recent study found that when parsing mortgage applications of those with student loan debt, approved borrowers had monthly college loan payments of about $300.
Mortgage applicants paying nearly $500 per month, however, were usually denied.
Click to enlarge

Source: John Burns Real Estate Consulting
“The analysis was quite complicated and involved a few assumptions, but we believe it is conservative, primarily because we looked only at those under the age of 40 with student debt,” analysts Rick Palacios Jr. and Ali Wolf wrote.
Here is the math:

Student debt has ballooned from $241 billion to $1.1 trillion in just 11 years.

29 million of the 86 million people aged 20–39 have some student debt.

Those 29 million individuals translate to 16.8 million households.

Of the 16.8 million households, 5.9 million (or 35%) pay more than $250 per month in student loans, which inhibits at least $44,000 per year in mortgage capability for each of them.

About 8% of the 20–39 age cohort usually buys a home each year, which would be 1.35 million transactions per year.

“Using previous academic literature as a benchmark for our own complicated calculation, we then estimated that today's purchase rate is reduced from the normal 8% depending on the level of student debt—ranging from 6.9% for those paying less than $100 per month in student loans to less than 1% for those paying over $1,300 per month. Other factors contribute to even less entry-level buying today,” they wrote.
John Burns Real Estate Consulting raised the red flag on student debt back in 2011 and continues to believe that this debt will delay homeownership for many, or at least require that they buy a less expensive home.

Fannie Mae to raise modification interest rate-New rate effective on Oct. 14

Fannie Mae is set to raise the benchmark interest rate for its Standard Modification program. Beginning Oct. 14, Fannie Mae will raise its required interest rate for standard modifications from 4.375% to 4.5%.
The rate was lowered from 4.5% to 4.375% on Sept. 15, but will now rise again in one week.
Fannie Mae announced the change on Tuesday in an email sent to its servicers.
According to Fannie Mae’s website, the Standard Modification program is “designed to help those borrowers who are ineligible for the Home Affordable Modification Program.”
When the program began in Jan. 2012, Fannie’s benchmark interest rate was 4.625%. Fannie lowered the interest rate to 4.25% in Sept. 2012, before dropping it to 4% on Dec. 1, 2012.
The interest rate stayed at 4% until Sept. 2013, when Fannie raised it back to 4.625%, before dropping it back to 4.5% in July of this year.
“The Fannie Mae Standard Modification interest rate is not determined on a preset schedule,” Fannie said in the note to its servicers. “The interest rate is subject to periodic adjustments based on an evaluation of prevailing market conditions.”
Fannie also noted that any loan modification requests that were approved at the previous rate are not eligible to be resubmitted for approval under the new modification rule

Is mortgage credit loosening or not?-Myth or reality, the debate continues

The Federal Reserve Board's Quarterly Senior Loan Officer Survey of credit conditions indicates that mortgage credit loosened in Q2 2014.
BofA Merrill Lynch Global Research 4 Comments score trends of actual purchase mortgages closed on a monthly basis, and they find the opposite is true: aggregate FICO scores for purchase mortgages continue to move higher.
“We think the explanation of the difference is that while FICO trends are lower in all financing channels (such as conventional or government), the highest quality channels are increasing share of mortgages closed, hence the aggregate score is rising,” BAML analysts say.
James Frischling, President of NewOak, weighed in Monday in a note to clients, and he says it’s too tight.
“The housing recovery continues to face challenges, and the imposition of stricter mortgage rules has created a very tight credit market. It’s of course understandable that banks should only lend to people that have the wherewithal to pay them back, but the obsessive focus on income, as opposed to assets or the overarching ability-to-repay, is going to shut many people out of the housing market,” he says in the note.
American Bankers Association’s chief executive Frank Keating spoke about some of the issues that are keeping credit tight recently, and he said that in addition to federal mortgage rules that are hindering the recovery and the importance of a strong jobs market, heavy student loan debt burdens will inhibit many from buying a home.
“Current mortgage rules have created a standardized and automated world of mortgage finance that borrowers must be able to meet, and have left banks little flexibility under the qualified mortgage/ATR rules,” Fischling says. “The concept of ‘character lending,’ which requires the lender to gain an understanding of the specific borrower, is dead."
Now even former Federal Reserve Chairman Ben Bernanke, who was recently turned down for a refinancing of his mortgage, says he feels the banks may have gone a little too far on mortgage credit conditions.
“The banks are being extremely cautious in response to the new mortgage rules and the mountain of mortgage litigation they’ve faced since the financial crisis. As a result, nonbank lenders will continue to find their place in the mortgage market because, even if bank credit standards are tight, the demand for mortgage loans remains high,” Bernanke said.

Foreclosure inventory down 32.8% from August 2013-CoreLogic: 45,000 foreclosures in August

There were 45,000 completed foreclosures nationally, down from 58,000 in August 2013, a year-over-year decrease of 22.2%, according to the latest data from CoreLogic.
On a month-over-month basis, completed foreclosures were up slightly by 1.1% from the 44,000 reported in July 2014.
Before the housing crash, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006.
“Clearly there has been a large improvement in the market the last few years, but five years into the economic expansion the foreclosure inventory remains at nearly three times the normal level,” said Sam Khater, deputy chief economist at CoreLogic. “Since homeownership rates peaked in the second quarter of 2004, there have been 7 million completed foreclosures, which account for 15% of all mortgages.”
Completed foreclosures are an indication of the total number of homes actually lost to foreclosure. Since the financial crisis began in September 2008, there have been approximately 5.2 million completed foreclosures across the country.
As of August 2014, approximately 629,000 homes nationally were in some stage of foreclosure, known as the foreclosure inventory, compared to 936,000 in August 2013, a year-over-year decrease of 32.8%. The foreclosure inventory as of August 2014 made up 1.6% of all homes with a mortgage, compared to 2.4% in August 2013. The foreclosure inventory was down 2.6% from July 2014, representing 34 months of consecutive year-over-year declines.
“The number of foreclosures completed during the last 12 months is at the lowest level since November of 2007,” said Anand Nallathambi, president and CEO of CoreLogic. “At current foreclosure rates, the shadow inventory could fall below 500,000 units by year-end which could provide a solid boost to the recovery in housing in 2015.”
Highlights as of August 2014 from CoreLogic:

• August represents 19 consecutive months of at least a 20% year-over-year decline in the national inventory of foreclosed homes.
• All but two states posted double-digit declines in foreclosures year over year. The District of Columbia saw a 2.5% decline and the state of Wyoming saw a 13.4% increase in foreclosures year over year.
• Twenty-eight states show declines in year-over-year foreclosure inventory of greater than 30%, with Utah and Idaho experiencing the largest declines at 46% each.
• The five states with the highest number of completed foreclosures for the 12 months ending in August 2014 were: Florida (121,000), Michigan (43,000), Texas (36,000), California (32,000) and Georgia (28,000).These five states account for almost half of all completed foreclosures nationally.
• The four states and the District of Columbia with the lowest number of completed foreclosures for the 12 months ending in August 2014 were: South Dakota (65), the District of Columbia (110), North Dakota (296), West Virginia (462) and Wyoming (650).
• The five states with the highest foreclosure inventory as a percentage of all mortgaged homes were: New Jersey (5.8%), Florida (4.6%), New York (4.2%), Hawaii (3%) and Maine (2.7%).
• The five states with the lowest foreclosure inventory as a percentage of all mortgaged homes were: Nebraska (0.4%), Alaska (0.5%), Arizona (0.5%), North Dakota (0.5%) and Wyoming (0.5%).

More signs of a sliding housing market

What a “coincidence” it is that the 2Q GDP estimate of 4.6% was reported last week by the Bureau of Economic Analysis so close to election day. Just as was the case in late 2012… just ahead of the national elections, economic “news” comes out that the recovery is strengthening. Really?
Oh, I won’t quibble about there seeming to be a general sense that the economy is improving, but a temporary feeling of relief does not change reality. And the most important piece to seeing longer-term growth and steady improvement in the general economy (and therefore the housing market) will only happen when the jobs picture improves significantly – accompanied by a rise in middle-class wages.
I would also like to state the obvious here: one quarter’s GDP numbers does not a trend make.
There are still enough indicators out there that suggest that another round of foreclosures is near (and the general economy is weak): Affordability issues; looming interest rate hikes as have been predicted by Federal Reserve Chairman Janet Yellen; too many FHA loans being made (this is the “new” sub-prime market); federal emphasis being placed on low-income borrowers, and other factors are causing house prices to decline once again in many markets.
Take, for example, this news reported by Trey Garrison in HousingWire on Sept. 30, “ZeroHedge: America’s most important housing metro flashing red,” that the Chinese housing bubble has burst and ZeroHedge’s long-stated belief that “San Francisco is the canary in the American housing coal mine, and after a double round of bad housing news, that canary is looking green around the gills.”
Garrison goes on to quote ZeroHedge as saying that San Francisco’s proximity to both Silicon Valley and China has helped it benefit not only from the Fed-driven liquidity bubble, but also two other bubbles: tech and the behemoth Chinese $25 trillion financial debt that caused Chinese money to pour into the San Francisco market. House prices had been driven up significantly as a result.
But, and that is a BIG but, as Garrison’s article notes, there is data now out that indicates there is little if any doubt that the San Francisco housing price “bubble” is losing air. Prices are no longer rising at a breakneck pace and could actually decline for the first time in several years.
This appears to indicate that now even the ultra-high end of the U.S. housing market, San Francisco at least, which has seemed to those blinded by housing price increases in recent months to be impervious to price corrections, is now on the verge of coming back to reality.
In other news, Case-Shiller has reported that their home price index fell 0.5% in July, which is the steepest drop since late in 2011 and the third consecutive month of declines.
There are numerous reports out there about the housing market today. Without reading as much information as you can to help you make up your mind as to whether it is trending up or down, I don’t know how anyone could claim to know in which direction the market is actually headed. Suffice it to say here that it depends on which housing market or markets you are talking about. In some markets prices are still rising, but in others quite the opposite is true. Local housing markets vary across the country for numerous reasons, but chief among them are the state of the local job market and the level of available inventory. Did I mention jobs?
When it comes to home price growth, even members of the National Association of Realtors expect house prices to increase only modestly over the next 12 months, according to data collected from the August 2014 Realtor Confidence Index Survey, as reported recently in HousingWire. And when NAR puts out information that doesn’t scream “Now is a great time to buy or sell real estate,” but instead speaks the truth, it is certainly worth noting — especially so close to another election day.

Trulia: Home prices 3% undervalued by historic measure-Only 7% of 100 largest metros are more than 10% overvalued

Trulia (TRLA) Chief Economist Jed Kolko says that despite the current deceleration in home prices worrying some, and claims from others that home prices are too high, home prices nationally are actually 3% undervalued in the third quarter of 2014.
“In 2006 Q1, during the past decade’s housing bubble, home prices soared to 34% overvalued before dropping to 13% undervalued in 2012 Q1,” Kolko writes. “One quarter ago (2014 Q2), prices looked 5% undervalued; one year ago (2013 Q3), prices looked 6% undervalued.”
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Source: Trulia Bubble Watch
This is his conclusion in the latest Trulia Bubble Watch. Bubble Watch shows whether home prices are overvalued or undervalued relative to their fundamental value by comparing prices today with historical prices, incomes, and rents.
When home prices are overvalued relative to fundamentals, the housing market approaches a bubble, with the consequent bigger risk of a price crash.
“Sharply rising prices aren’t necessarily a sign of a bubble. By definition, a bubble develops when prices look high relative to fundamentals,” Kolko says.
Kolko says that three out of five Housing Barometer measures are getting close to normal. But the two measures that hitch housing to the broader economy are still struggling, so the job market and housing market aren’t helping each other as they should.
The Bubble Watch report posts the following conclusions:

Texas and California Metros Look Most Overvalued

The most overvalued market is now Austin, at 19%, followed by the California metros of Los Angeles, Orange County, San Francisco, and Riverside-San Bernardino. The California metros on the top-10 list were all significantly overvalued during the past bubble, ranging from 46% overvalued in San Francisco to a dizzying 87% in Riverside-San Bernardino. By contrast, Austin and Houston are the only metros out of the 100 largest that look more overvalued today than in 2006. Texas markets avoided the worst of the housing bubble during the past decade. Recently, they’ve had double-digit home-price increases.

Almost all of the most undervalued metros today are in the Midwest and New England, led by Dayton and Cleveland. One year ago, Las Vegas and two Florida metros, Lakeland-Winter Haven and Palm Bay- Melbourne-Titusville, were on the most-undervalued list. Since then, price gains have lifted them off this list. In the past year, price gains in the undervalued Midwestern markets like Detroit have outpaced price gains in the undervalued New England markets like New Haven.

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Source: Trulia Bubble Watch
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