Overall, housing starts remain at low levels compared to the two previous decades. “In fact, they are hovering around the levels seen during the low point of the recession in the early 1990’s—a time when the U.S. population was about 20% below where it stands today,” according to the researchers Daniel Hartley and Kyle Fee.
They note that construction of new single-family units “remains quite low, while construction of multifamily units is back near its average in the late 1990s and early 2000s.”
This divergence may reflect the overhang of foreclosed homes on the market, which is constraining single-family building activity.
It also could reflect the “permanent impact of the financial crisis” as people choose between renting and owning. “Some potential homebuyers now realize that rental properties may be a more appropriate housing option for their circumstances. Moreover, underwriting standards have risen, which will delay home purchases for younger families and for individuals with blemished credit records,” the authors say.
Their paper is entitled “Housing Recovery: How Far Have We Come?”
Monday, October 21, 2013
Minorities Treading Water On Mortgage Credit- Recent News
Minorities are treading water at well below their percentage of the population as far as getting mortgages is concerned.
Home Mortgage Data Act data for 2012 from the Federal Financial Institutions Examination Council show $354 billion in home loans was extended to Hispanics, African-Americans, Asian-Americans, American Indians and Native Hawaiians. Total mortgage volume for the whole industry came to $2.1 trillion, a hefty 50% increase from $1.4 trillion in HMDA lending in 2011.
The 16.6% minority share was roughly equal to 2011’s share of 17%. This kind of share is representative of the past several years. In 2011, for example, the share was 16.7%.
Minority lending must be somewhat higher, since there is no requirement to self-identify by race on mortgage applications, and many do not. More than $300 billion in mortgages, or about 15%, was not associated with any race.
But even if you assume all the unidentified loans were to minorities (extremely unlikely), that would still be less than their percentage of the population (one third, and growing).
Breaking it down, Asians got the biggest dollar volume of loans, at $165 billion. Hispanics followed, at $109 million. African-Americans received $65 billion in home finance. American Indians got $7.5 billion, just edging out Native Hawaiians, at $7.4 billion.
Hispanics made a big dollar gain last year from 2011, when the total was $74 billion. That’s $35 billion more, or just about 50%. Native Hawaiians made a big percentage jump from the year before, when $4.6 billion was funded. That’s more than a 50% boost.
Wells Fargo ran a clean sweep of the minority categories. Its $50 billion in loans to minorities represented some 15% of all institutions’ volume (more than 7,000 reported HMDA data last year). No other lender made even half as much dollar volume of mortgages last year.
Wells made $24 billion in mortgages to Asians last year, according to the HMDA data. It extended $15 billion in credit to Hispanics, $9 billion to African-Americans, $1 billion to American Indians, and $900 million to Native Hawaiians.
The bottom line here could be relief that loans to minorities haven’t retreated further in an era of tight mortgage credit. But they certainly haven’t gone forward much, either.
Thursday, October 10, 2013
Fed Is Fretting Over Tapering
Minutes from the Federal Reserve’s most recent Federal Open Market Committee meeting suggest key monetary policymakers spent their last gathering pulled in different directions, whipsawed back and forth between the reality of employment growth and the expectations of investors.
Still, at the time, most members thought tapering would end by the close of 2013.
"Most Fed officials still expected to begin tapering before year end and to halt it completely by mid-2014," analysts with Capital Economics said. However, economic data weakened leading up to the meeting, changing the mood a bit.
The minutes, which are from the Sept. 17-18, show a clear divide between FOMC members. A dominant majority decided not to taper the Fed’s monthly purchases of mortgage-backed securities and Treasurys after experiencing months of rising mortgage rates and a general slowing in the housing economy as the market inched toward expectations of a Fed tapering in September.
The housing market's stall combined with improving - but hardly impressive - employment data prompted Fed officials to delay tapering once again. But the full board was not in agreement.
As always some members opposed the FOMC’s decision not to announce some tapering of asset purchases. Other members pushed for a small tapering on the grounds that a failure to taper in September could send a message of pessimism to a market already anticipating some pullback in quantitative easing.
Another FOMC subgroup supported limited tapering, with the recommendation that the Fed carve back Treasury purchases first.
It’s clear when reviewing the minutes that rising mortgage rates over the summer spooked FOMC members, causing them to turn cold on their QE clawback plans.
"Several participants judged that overall financial conditions had tightened notably over the past few months, as seen most importantly in the rise in mortgage rates," the FOMC minutes stated. "While acknowledging that it was too early to assess the effects of such an increase, they expressed concerns that tighter financial conditions might weigh on the recovery in the housing sector."
Other members of the FOMC pointed to higher equity prices and loosening lending standards as signs of improving financial conditions and justification for some tapering.
Housing remained a top concern, with the Fed cognizant of how MBS tapering could impact the overall housing sector.
Some members expressed concern that "an announcement of a reduction in asset purchases at this meeting might trigger an additional, unwarranted tightening of financial conditions, perhaps because markets would read such an announcement as signaling the committee's willingness, notwithstanding mixed recent data, to take an initial step toward exit from its highly accommodative policy."
The minutes also show a Fed fretting over how its communications play out in public.
"With many outside observers expecting a decision to reduce purchases at this meeting, some participants emphasized a need to clearly communicate the rationale behind any decision not to do so, in order to avoid conveying a message of pessimism regarding the economic outlook or to reinforce the distinction between decisions concerning the pace of purchases and those concerning the federal funds rate," the minutes stated.
Still, at the time, most members thought tapering would end by the close of 2013.
"Most Fed officials still expected to begin tapering before year end and to halt it completely by mid-2014," analysts with Capital Economics said. However, economic data weakened leading up to the meeting, changing the mood a bit.
The minutes, which are from the Sept. 17-18, show a clear divide between FOMC members. A dominant majority decided not to taper the Fed’s monthly purchases of mortgage-backed securities and Treasurys after experiencing months of rising mortgage rates and a general slowing in the housing economy as the market inched toward expectations of a Fed tapering in September.
The housing market's stall combined with improving - but hardly impressive - employment data prompted Fed officials to delay tapering once again. But the full board was not in agreement.
As always some members opposed the FOMC’s decision not to announce some tapering of asset purchases. Other members pushed for a small tapering on the grounds that a failure to taper in September could send a message of pessimism to a market already anticipating some pullback in quantitative easing.
Another FOMC subgroup supported limited tapering, with the recommendation that the Fed carve back Treasury purchases first.
It’s clear when reviewing the minutes that rising mortgage rates over the summer spooked FOMC members, causing them to turn cold on their QE clawback plans.
"Several participants judged that overall financial conditions had tightened notably over the past few months, as seen most importantly in the rise in mortgage rates," the FOMC minutes stated. "While acknowledging that it was too early to assess the effects of such an increase, they expressed concerns that tighter financial conditions might weigh on the recovery in the housing sector."
Other members of the FOMC pointed to higher equity prices and loosening lending standards as signs of improving financial conditions and justification for some tapering.
Housing remained a top concern, with the Fed cognizant of how MBS tapering could impact the overall housing sector.
Some members expressed concern that "an announcement of a reduction in asset purchases at this meeting might trigger an additional, unwarranted tightening of financial conditions, perhaps because markets would read such an announcement as signaling the committee's willingness, notwithstanding mixed recent data, to take an initial step toward exit from its highly accommodative policy."
The minutes also show a Fed fretting over how its communications play out in public.
"With many outside observers expecting a decision to reduce purchases at this meeting, some participants emphasized a need to clearly communicate the rationale behind any decision not to do so, in order to avoid conveying a message of pessimism regarding the economic outlook or to reinforce the distinction between decisions concerning the pace of purchases and those concerning the federal funds rate," the minutes stated.
Friday, October 4, 2013
Fannie Mae Updated Underwriting for Short Sales and Foreclosure
Starting Nov. 16, Desktop Underwriter will “offer lenders the ability to instruct DU to disregard the foreclosure information after validating the preforeclosure sale with the borrower,” according to Fannie Mae senior vice president Stephen Pawlowski.
When a borrower completes a short sale, the credit report often reflects a foreclosure and a preforeclosure sale. Currently, DU records it as a foreclosure, which means the borrower has to wait seven years to qualify for a Fannie mortgage.
“By making this change to DU in November, lenders will have the opportunity to get a DU recommendation based on actual foreclosure/preforeclosure credit history and with the appropriate waiting period applied,” Pawlowski said in a FM Commentary.
Thursday, October 3, 2013
Vampire REO's and the fake inventory picture
RealtyTrac has identified two threats that are harming housing recovery efforts right now: vampire REOs and zombie foreclosures.
According to the Irvine, Calif.-based data firm, about 47% of bank-owned homes across the country are still occupied by the previous owner who was foreclosed on by their lender, deemed to be vampire REOs.
These properties often will look like normal, nondistressed homes. But in reality, they represent a shadow inventory that is becoming more imminent as rising home prices motivate banks to sell off these types of homes to try to recoup their losses on soured loans.
Houston, which has a total REO inventory of 6,582 homes, has the highest percentage of vampire REOs with 65%, RealtyTrac said.
Another metropolitan area that has a large volume of vampire bank-owned inventory is Miami. Here, vampire REOs account for 64% of the city’s REO inventory of 30,868 assets.
Meanwhile, other notable markets in which vampire REOs are larger than 50% of the city’s bank-owned inventory levels include Los Angeles (61% of its 12,992 REOs), Cincinnati (57% out of 5,398), Cleveland (52% out of 5,523), Philadelphia (52% of the 4,881 bank-owned housing units), Riverside, Calif. (52% of 10,801 REOs), Dallas (51% out of 6,676) and Orlando (half of its 12,614 total REO inventory).
RealtyTrac also said homes that are still deteriorating through the foreclosure process but have been vacated by the homeowner—known as zombie foreclosures—make up 20% of its database. Often, these homes are not maintained properly and represent a threat to the quality of the surrounding neighborhood, therefore causing property values to fall in markets where these assets sit.
Additionally, the homeowner who left the property may not be aware that he or she is still responsible for property taxes and any other expenses that come with homeownership, leaving them in an even tougher financial spot when they discover this reality.
Cities where zombie foreclosure inventory is greater than 25% of the total amount of properties in foreclosure are St. Louis, Indianapolis, Jacksonville, Las Vegas, and the Florida markets of Palm Bay, Tampa, Lakeland, Fort Myers and Sarasota.
“These threats to the housing market can be bargain opportunities for proactive buyers and investors,” RealtyTrac said. “Zombie foreclosures represent a prime opportunity for a short sale that helps the homeowner, the neighborhood and even the hesitant-to-foreclose bank in the process; while vampire bank-owned homes represent imminent inventory that you can act on before other buyers and investors are aware of it.
The following data is based only on 220,000 out of the total 525,000 REOs nationwide that RealtyTrac shows as active.
According to the Irvine, Calif.-based data firm, about 47% of bank-owned homes across the country are still occupied by the previous owner who was foreclosed on by their lender, deemed to be vampire REOs.
These properties often will look like normal, nondistressed homes. But in reality, they represent a shadow inventory that is becoming more imminent as rising home prices motivate banks to sell off these types of homes to try to recoup their losses on soured loans.
Houston, which has a total REO inventory of 6,582 homes, has the highest percentage of vampire REOs with 65%, RealtyTrac said.
Another metropolitan area that has a large volume of vampire bank-owned inventory is Miami. Here, vampire REOs account for 64% of the city’s REO inventory of 30,868 assets.
Meanwhile, other notable markets in which vampire REOs are larger than 50% of the city’s bank-owned inventory levels include Los Angeles (61% of its 12,992 REOs), Cincinnati (57% out of 5,398), Cleveland (52% out of 5,523), Philadelphia (52% of the 4,881 bank-owned housing units), Riverside, Calif. (52% of 10,801 REOs), Dallas (51% out of 6,676) and Orlando (half of its 12,614 total REO inventory).
RealtyTrac also said homes that are still deteriorating through the foreclosure process but have been vacated by the homeowner—known as zombie foreclosures—make up 20% of its database. Often, these homes are not maintained properly and represent a threat to the quality of the surrounding neighborhood, therefore causing property values to fall in markets where these assets sit.
Additionally, the homeowner who left the property may not be aware that he or she is still responsible for property taxes and any other expenses that come with homeownership, leaving them in an even tougher financial spot when they discover this reality.
Cities where zombie foreclosure inventory is greater than 25% of the total amount of properties in foreclosure are St. Louis, Indianapolis, Jacksonville, Las Vegas, and the Florida markets of Palm Bay, Tampa, Lakeland, Fort Myers and Sarasota.
“These threats to the housing market can be bargain opportunities for proactive buyers and investors,” RealtyTrac said. “Zombie foreclosures represent a prime opportunity for a short sale that helps the homeowner, the neighborhood and even the hesitant-to-foreclose bank in the process; while vampire bank-owned homes represent imminent inventory that you can act on before other buyers and investors are aware of it.
The following data is based only on 220,000 out of the total 525,000 REOs nationwide that RealtyTrac shows as active.
Tuesday, October 1, 2013
Detroit Is Turning A Corner- According to Clear Capital
In September, Detroit home prices saw quarterly and yearly growth of 4.3% and 23.3%, respectively, therefore bringing the median home price to $107,500. Comparatively, the national median home price is $215,000.
Through September, Detroit home prices are still down 64.5% from peak values, whereas San Francisco is only 28.2% below its peak.
“Strong performances in San Francisco and Detroit remind us that in a dynamic market, the only constant is change,” said Alex Villacorta, vice president of research and analytics at Clear Capital. “As demand calibrates to local economic environments, markets will start to find their natural equilibriums with moderating gains ahead,” that should invite new markets, such as Detroit, “to share the spotlight as their recoveries continue to evolve.”
Villacorta noted that Detroit’s struggle with relatively high REO saturation over the last several years delayed recovery. But low price points and REO saturation improvements now are driving gains.
Over the last four years, REO saturation in Detroit has been cut in half, but it still remains relatively high at 31.7%. Furthermore, the Truckee, Calif.-based data firm said that since March, the saturation rate for the Motor City has fallen by 11.5 percentage points.
As metro Detroit and its dilapidated housing market starts to emerge from years of a full-blown crisis several local and national organizations are gathering to contemplate the validity of past and future economic development strategies.
And For the first time the National Alliance of Community Economic Development Associations is not holding its annual summit in Washington, but in Detroit from Oct. 2-4.
NACEDA’s 7th Annual Summit brings to Michigan national experts in financial empowerment, housing development, land banks and land trusts, community benefit agreements, and place-making who will meet with local community leaders to discuss future community development options.
After filing for bankruptcy earlier this year city officials are concentrating on new solutions. The summit’s logo reads: “With necessity comes ingenuity!”
Speakers include Matt Cullen, president and CEO of Rock Ventures, the subsidiary of Quicken Loans that has invested more than a $1 billion in revitalizing Detroit. Rock Ventures moved 10,000 employees to Detroit's urban core and recruited 100 companies to join them.
Since Detroit’s low-income neighborhoods were the hardest hit by the city’s downfall and continue to face major challenges, Sheila Crowley, president and CEO of the National Low Income Housing Coalition, will share with the audience NLIHC’s expertise as one of the leading supporters of the United for Homes campaign, whose stated goal is to reform the Mortgage Interest Deduction, achieve a fairer tax policy and increase the efficiency of the National Housing Trust Fund.
Also in attendance will be the commissioner of New York City’s department of consumer affairs, Jonathan Mintz, who is credited for launching the Office of Financial Empowerment, a local coalition designed to help leverage the power of municipal government to reduce poverty while promoting long-term financial stability and asset building.
Mintz is expected to offer insights about how to maximize city government-based financial empowerment initiatives.
Up to 100 economic development professionals from across the U.S. are also expected to attend.
The Latest From Global Association of Risk Professionals (GARP)
The recovery in the U.S. housing market could run out of steam if it depends on investors to carry it along, an economic report explains.
In a report titled "Opening the Credit Box," Moody's Analytics economist Mark Zandi and Urban Institute market analyst Jim Parrott say rising home prices and interest rates will force the recovery to rely on first-time buyers, as investment buyers will begin to back away. But first time buyers are not yet in a position to keep the recovery strong, Zandi and Parrott claim. The Housing Wire reported Monday that the housing market's recovery has produced some positive data. Zandi and Parrott report home prices are up 15 percent from two years ago and housing starts have doubled since their low point in the 2008-09 recession. However, the average credit score among first-time home buyers is near 750, about 50 points higher than it was 10 years ago, the report said. "Lenders have reassessed how much risk they are willing to take on, in part because they were burned badly in the crisis and in part because they have come to recognize a range of costs associated with riskier lending not fully appreciated before," the report says. The costs that are now influencing lenders include the expenses associated with handling distressed loans, potential costs of litigation and risks to a firm's reputation, the report says. Succinctly put, lending is tight. "Lenders are only willing to make loans intended for purchase by Fannie [Mae -- Federal National Mortgage Association] or Freddie [Mac -- Federal Home Loan Mortgage Corp.] or insurance by the FHA [Federal Housing Administration] if there is little prospect of default, so that they do not expose themselves unwittingly to the risk that they will bear the cost," the report says.
In a report titled "Opening the Credit Box," Moody's Analytics economist Mark Zandi and Urban Institute market analyst Jim Parrott say rising home prices and interest rates will force the recovery to rely on first-time buyers, as investment buyers will begin to back away. But first time buyers are not yet in a position to keep the recovery strong, Zandi and Parrott claim. The Housing Wire reported Monday that the housing market's recovery has produced some positive data. Zandi and Parrott report home prices are up 15 percent from two years ago and housing starts have doubled since their low point in the 2008-09 recession. However, the average credit score among first-time home buyers is near 750, about 50 points higher than it was 10 years ago, the report said. "Lenders have reassessed how much risk they are willing to take on, in part because they were burned badly in the crisis and in part because they have come to recognize a range of costs associated with riskier lending not fully appreciated before," the report says. The costs that are now influencing lenders include the expenses associated with handling distressed loans, potential costs of litigation and risks to a firm's reputation, the report says. Succinctly put, lending is tight. "Lenders are only willing to make loans intended for purchase by Fannie [Mae -- Federal National Mortgage Association] or Freddie [Mac -- Federal Home Loan Mortgage Corp.] or insurance by the FHA [Federal Housing Administration] if there is little prospect of default, so that they do not expose themselves unwittingly to the risk that they will bear the cost," the report says.
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