t may be sunny in Washington D.C., the site of the Mortgage Bankers Association 100th Annual Convention & Expo, but predictions by the host's economists on mortgage originations turned very gloomy during a group breakfast with the press.
The MBA told journalists over plates of eggs, bacon and sausage that it would revise upwards its predictions for 2013 mortgage originations to $1.7 trillion from $1.6 trillion.
But the good news ended there.
The $1.08 billion in refinances will drop to $463 billion in 2014. The purchase originations will only rise from $661 billion to $723 billion, according to data provided by the MBA.
The MBA believes rates will keep pushing upward, going well above 5%, and remain that way through 2015. This will place downward pressure on refinances, leaving a gap that purchase mortgage originations can't fill.
"The mortgage market is tapering, even if the Federal Reserve is not," said MBA chief economist Jay Brinkman, in reference to the Fed buying large volumes of mortgage-backed securities. "If the Fed continues the pace of $40 billion a month, they will be buying in excess of 50% of every mortgage in the country."
The news comes amid reports that the Federal Reserve would do better holding these mortgages to maturity rather than selling. However, it is widely predicted the Fed will sell early next year, in order to reduce its record balance sheet of nearly $4 trillion.
Michael Fratantoni, vice president of single-family research and policy, said jobs remain a concern, and that not having one is a primary reason Americans aren't buying homes. And, the numbers may not be telling the whole story.
People have effectively stopped looking for work in many cases, it's the "discouraged worker" phenomenon," Fratantoni said. "You won't see a huge re-entry of people into the job market."
Wednesday, October 30, 2013
Tuesday, October 29, 2013
Families Blocked By Investors From Buying Homes- Repost from Bloomberg
Institutional purchases accounted for 14 percent of sales, according to a report today from RealtyTrac. That was the highest share since the real estate data firm began in 2011 to track transactions by that group, which it defines as buyers of 10 or more homes a year. All-cash sales rose to 49 percent from 40 percent in August and 30 percent a year earlier, a sign that rising mortgage rates since May have kept some people out of the market and that smaller investors are stepping up purchases.
“Both investors and traditional buyers are trying to snap up cheap homes before prices go higher, but the investors have the advantage of paying cash and not having to go through a convoluted mortgage process,” said Michael Hanson, a former Federal Reserve economist now working for Bank of America Corp. in New York. “People are being bid out of some markets because of investor demand.”
Wall Street’s influence on the residential real estate market is growing as the biggest investors, Blackstone Group LP (BX) and American Homes 4 Rent (AMH), have together bought about 60,000 homes across the country to benefit from low prices and rental demand from millions of former home owners who have lost properties through foreclosures.
The homeownership rate declined to 65 percent in the first half of this year from a peak of 69.2 percent in June 2004. The level is expected to stabilize at about 63 percent, adding more than 2 million households to the rental population, according to Morgan Stanley analyst Haendel St. Juste.
“The pendulum is swinging too far from the direction we saw during the run-up to the mortgage crisis,” Blomquist said in an interview. “Then, we tried to make everyone an owner. Now, we have people who have the income to pay a mortgage and have the desire to own a home who are stuck being renters.”
Blackstone has led hedge funds, private-equity firms and real estate investment trusts raising about $20 billion to purchase as many as 200,000 homes to rent after home prices plunged 35 percent from the 2006 peak.
The average rate for a 30-year fixed mortgage dropped to 4.13 percent this week. It’s risen from 3.35 percent in May.
“There’s a tremendous pressure on inventory in the areas that are being dominated by investors,” said Keith Gumbinger, vice president of HSH.com, a Riverdale, New Jersey-based mortgage website. “People end up wanting to buy a home, but they can’t. All the homes have been converted into rentals.”
Daryl Dennis spends his days helping investors do that. A general contractor for Waypoint Homes, an Oakland, California-based real estate fund that buys more than 50 homes a month in the metro Atlanta market, Dennis oversees plumbers, painters and landscapers on about 20 single-family projects a month.
“The investors are ruling the market,” said Dennis, interviewed by phone while on the job at a project in Canton, Georgia, outside Atlanta. “The little guy can’t win if he’s up against a deep-pocket investor.”
Las Vegas had the highest share of those sales, at 21 percent. In the California cities of Riverside and San Bernardino the share was 20 percent of the market, in Cleveland it was 19 percent and in Phoenix it was 18 percent, according to the report.
Atlanta was the top market for institutional investors, who accounted for 29 percent of all home purchases there in September, according to the RealtyTrac report. Las Vegas was second at 27 percent, followed by St. Louis at 25 percent, Jacksonville, Florida, at 23 percent, and Charlotte, North Carolina at 17 percent.
“When financing became difficult, that pushed the entire lower tier of buyers into rentals,” Luesse said. “They either don’t have the down payment or they don’t have the credit score.”
Nationally, the median monthly rent was at an all-time high of $735 in the second quarter, according to U.S. government data. The rental vacancy rate, which measures the number of empty units, fell to 8.2 percent, the lowest since the first quarter of 2001.
The median price of a distressed residential property, meaning a property in foreclosure or a home already seized by a bank, was $112,000 in September, a discount of 41 percent from the $189,000 median price of a non-distressed property, according to the RealtyTrac report.
Investor demand for foreclosed homes has driven up prices at a pace not seen since the boom that ended in mid-2006. The S&P/Case-Shiller index of property values in 20 cities increased 12.4 percent in July from a year earlier, the biggest advance since February 2006.
While real estate values nationally are still 21 percent below their peak, investors’ mass purchases are helping push up values in cities hardest hit by the property crash, with a 27.5 percent surge in Las Vegas and gains of 18.5 percent in Atlanta in July from a year earlier.
“The housing market is tilting in favor of deep-pocket institutional investors, especially in cities that were hard-hit with foreclosures,” said RealtyTrac’s Blomquist “These guys will pay as much as they need to get a property and that’s squeezing out families looking for a home to live in.”
“Both investors and traditional buyers are trying to snap up cheap homes before prices go higher, but the investors have the advantage of paying cash and not having to go through a convoluted mortgage process,” said Michael Hanson, a former Federal Reserve economist now working for Bank of America Corp. in New York. “People are being bid out of some markets because of investor demand.”
Wall Street’s influence on the residential real estate market is growing as the biggest investors, Blackstone Group LP (BX) and American Homes 4 Rent (AMH), have together bought about 60,000 homes across the country to benefit from low prices and rental demand from millions of former home owners who have lost properties through foreclosures.
The homeownership rate declined to 65 percent in the first half of this year from a peak of 69.2 percent in June 2004. The level is expected to stabilize at about 63 percent, adding more than 2 million households to the rental population, according to Morgan Stanley analyst Haendel St. Juste.
Pendulum Swings
Families are still able to live in single-family homes with a yard for their kids to play in, said Daren Blomquist, a RealtyTrac vice president. However, they’re sending their money to investor-landlords, rather than paying off a mortgage.“The pendulum is swinging too far from the direction we saw during the run-up to the mortgage crisis,” Blomquist said in an interview. “Then, we tried to make everyone an owner. Now, we have people who have the income to pay a mortgage and have the desire to own a home who are stuck being renters.”
Blackstone has led hedge funds, private-equity firms and real estate investment trusts raising about $20 billion to purchase as many as 200,000 homes to rent after home prices plunged 35 percent from the 2006 peak.
Mortgage Rates
The ability of investors and cash buyers to outbid traditional home purchasers has grown after a spike in mortgages rates that began in May. The average fixed rate for a 30-year home loan jumped almost a percentage point to a two-year high of 4.58 percent in mid-October, according to data from Freddie Mac.The average rate for a 30-year fixed mortgage dropped to 4.13 percent this week. It’s risen from 3.35 percent in May.
“There’s a tremendous pressure on inventory in the areas that are being dominated by investors,” said Keith Gumbinger, vice president of HSH.com, a Riverdale, New Jersey-based mortgage website. “People end up wanting to buy a home, but they can’t. All the homes have been converted into rentals.”
Daryl Dennis spends his days helping investors do that. A general contractor for Waypoint Homes, an Oakland, California-based real estate fund that buys more than 50 homes a month in the metro Atlanta market, Dennis oversees plumbers, painters and landscapers on about 20 single-family projects a month.
“The investors are ruling the market,” said Dennis, interviewed by phone while on the job at a project in Canton, Georgia, outside Atlanta. “The little guy can’t win if he’s up against a deep-pocket investor.”
Biggest Chance
The biggest chance for profit comes from buying bank-owned properties that often are sold in bulk, Dennis said. About 10 percent of September sales nationwide were properties that had been repossessed in foreclosures, according to the RealtyTrac report.Las Vegas had the highest share of those sales, at 21 percent. In the California cities of Riverside and San Bernardino the share was 20 percent of the market, in Cleveland it was 19 percent and in Phoenix it was 18 percent, according to the report.
Atlanta was the top market for institutional investors, who accounted for 29 percent of all home purchases there in September, according to the RealtyTrac report. Las Vegas was second at 27 percent, followed by St. Louis at 25 percent, Jacksonville, Florida, at 23 percent, and Charlotte, North Carolina at 17 percent.
Flipping Houses
Adam Luesse is an investor in St. Louis who paid cash for five houses he turned into rentals. He also buys properties to renovate and resell at a profit, called flipping. He planned to list his latest flip, a two-bedroom home on the west side of the city, for sale today for $140,000.“When financing became difficult, that pushed the entire lower tier of buyers into rentals,” Luesse said. “They either don’t have the down payment or they don’t have the credit score.”
Nationally, the median monthly rent was at an all-time high of $735 in the second quarter, according to U.S. government data. The rental vacancy rate, which measures the number of empty units, fell to 8.2 percent, the lowest since the first quarter of 2001.
The median price of a distressed residential property, meaning a property in foreclosure or a home already seized by a bank, was $112,000 in September, a discount of 41 percent from the $189,000 median price of a non-distressed property, according to the RealtyTrac report.
Foreclosed Properties
About 49 percent of homes were bought with cash, up from 40 percent in August and 30 percent a year earlier, the report said.Investor demand for foreclosed homes has driven up prices at a pace not seen since the boom that ended in mid-2006. The S&P/Case-Shiller index of property values in 20 cities increased 12.4 percent in July from a year earlier, the biggest advance since February 2006.
While real estate values nationally are still 21 percent below their peak, investors’ mass purchases are helping push up values in cities hardest hit by the property crash, with a 27.5 percent surge in Las Vegas and gains of 18.5 percent in Atlanta in July from a year earlier.
“The housing market is tilting in favor of deep-pocket institutional investors, especially in cities that were hard-hit with foreclosures,” said RealtyTrac’s Blomquist “These guys will pay as much as they need to get a property and that’s squeezing out families looking for a home to live in.”
Monday, October 28, 2013
Pending Home Sales Fall On Declining Home Affordability
Pending home sales fall on declining home affordability
The number of real estate contracts signed and recorded declined 5.6% from August to September, as home affordability receded under the influence of higher mortgage rates, home prices and consumer uncertainty, the National Association of Realtors concluded Monday.
The NAR Pending Home Sales Index – a barometer of real estate contract signings – fell from an index score of 107.6 in August to 101.6 in September. It also declined 1.2% from year ago levels when the index hovered at 102.8.
This is the lowest index level reached since December of last year, and NAR is blaming the influence of declining home affordability, lower consumer confidence and a government shutdown that shook up both construction activity and home sales.
"Declining housing affordability conditions are likely responsible for the bulk of reduced contract activity," said Lawrence Yun, NAR’s chief economist. "In addition, government and contract workers were on the sidelines with growing insecurity over lawmakers’ inability to agree on a budget. A broader hit on consumer confidence from general uncertainty also curbs major expenditures such as home purchases."
The numbers suggest a lackluster fourth quarter, with Yun saying for the first time in 29 months pending home sales failed to come in above year ago levels.
"This tells us to expect lower home sales for the fourth quarter, with a flat trend going into 2014," he said. "Even so, ongoing inventory shortages will continue to lift home prices, though at a slower single-digit growth rate next year."
Regionally, the pending home sales index fell the most in the Northeast, declining 9.6% to an index score of 76.7. The Midwest index declined 8.3% to 102.3, but remained 5.7% above year ago levels. The South also saw sales slip 0.4% to an index score of 116.2 even though the index is still 2% above year ago levels.
The West sales index fell 9% in September to an index score of 97.3, also down 9.8% from a year earlier.
However, 2013 was a solid year for home sales overall. Numbers recorded in the first part of the year will make 2013 a high performing 12-month period overall.
NAR says total existing-home sales will end up 10% higher when compared to 2012 levels, with 5.1 million sales expected. This could even hold heading into 2014, the latest NAR report says.
Meanwhile, the national median existing-home price is expected to rise 11% to 11.5% for all of 2013, while experiencing a moderate 5% to 6% gain next year.
The NAR Pending Home Sales Index – a barometer of real estate contract signings – fell from an index score of 107.6 in August to 101.6 in September. It also declined 1.2% from year ago levels when the index hovered at 102.8.
This is the lowest index level reached since December of last year, and NAR is blaming the influence of declining home affordability, lower consumer confidence and a government shutdown that shook up both construction activity and home sales.
"Declining housing affordability conditions are likely responsible for the bulk of reduced contract activity," said Lawrence Yun, NAR’s chief economist. "In addition, government and contract workers were on the sidelines with growing insecurity over lawmakers’ inability to agree on a budget. A broader hit on consumer confidence from general uncertainty also curbs major expenditures such as home purchases."
The numbers suggest a lackluster fourth quarter, with Yun saying for the first time in 29 months pending home sales failed to come in above year ago levels.
"This tells us to expect lower home sales for the fourth quarter, with a flat trend going into 2014," he said. "Even so, ongoing inventory shortages will continue to lift home prices, though at a slower single-digit growth rate next year."
Regionally, the pending home sales index fell the most in the Northeast, declining 9.6% to an index score of 76.7. The Midwest index declined 8.3% to 102.3, but remained 5.7% above year ago levels. The South also saw sales slip 0.4% to an index score of 116.2 even though the index is still 2% above year ago levels.
The West sales index fell 9% in September to an index score of 97.3, also down 9.8% from a year earlier.
However, 2013 was a solid year for home sales overall. Numbers recorded in the first part of the year will make 2013 a high performing 12-month period overall.
NAR says total existing-home sales will end up 10% higher when compared to 2012 levels, with 5.1 million sales expected. This could even hold heading into 2014, the latest NAR report says.
Meanwhile, the national median existing-home price is expected to rise 11% to 11.5% for all of 2013, while experiencing a moderate 5% to 6% gain next year.
Friday, October 25, 2013
GSE's report 21.5% drop in purchases from August
The government-sponsored enterprise reports purchases of single-family and multifamily loans totaled $28 billion in September, down 21.5% from August.
Single-family refinancings totaled $16 billion or 62% of all mortgage purchases in September. In August, Freddie purchased or guaranteed $21 billion in refinancing.
Freddie says “relief refinancings” comprised 39% of the $16 billion in refis in September. During the first half of this year, HARP refis made up 56% of relief refinancings.
The GSE purchased $1 billion in multifamily loans in September, which brings the total for the first nine months of this year up to $19 billion.
The GSE also reports that the serious delinquency rate on its single-family guaranty portfolio continued to decline.
The percentage of loans that are 90 days or more past due fell to 2.54% in September, down 6 basis points from August. A year ago, Freddie had a 3.2% serious delinquency rate.
Single-family refinancings totaled $16 billion or 62% of all mortgage purchases in September. In August, Freddie purchased or guaranteed $21 billion in refinancing.
Freddie says “relief refinancings” comprised 39% of the $16 billion in refis in September. During the first half of this year, HARP refis made up 56% of relief refinancings.
The GSE purchased $1 billion in multifamily loans in September, which brings the total for the first nine months of this year up to $19 billion.
The GSE also reports that the serious delinquency rate on its single-family guaranty portfolio continued to decline.
The percentage of loans that are 90 days or more past due fell to 2.54% in September, down 6 basis points from August. A year ago, Freddie had a 3.2% serious delinquency rate.
Thursday, October 24, 2013
Half of Foreclosed Homes Occupied
Foreclosure sounds like the end of the line, but actual eviction can take months or years -- even after the bank has repossessed a home.
RealtyTrac estimates that 47% of the nation's foreclosed homes are currently occupied. The percentage actually tops 60% in some hot housing markets, like Miami and Los Angeles.
To arrive at its estimate, RealtyTrac compared its database of foreclosed homes with postal records showing whether mail was still being collected and whether change-of-address forms had been filed.
Even when occupants leave voluntarily, old owners typically take about two months to vacate.
With renters, it can take a year or more. "If someone has a bona fide rental agreement, we have to abide by that," said Amy Bonitatibus, a spokeswoman for JP Morgan Chase.
Related: California city's drastic foreclosure remedy
One issue, according to Wells Fargo spokesman Tom Goyda, is that the eviction process can take months as it winds through the legal process. The timing varies widely based on local laws and the backlog of cases in individual courts.
Goyda said the bank has been trying to speed up the process by offering cash to prompt occupants to leave.
Related: Surprising foreclosure hotspots
And banks may be in no rush to kick people out. They will take their time in markets with a lot of homes for sale and depressed prices. Plus, letting homeowners stick around can help protect homes from abuse.
"Although one thinks lenders take losses by not moving evictions forward, they're still faring better by keeping the properties occupied," said Pauliana Lara of the Consumer Action Law Group in Los Angeles, which works with homeowners to fight foreclosures. "Many foreclosed homes get vandalized or squatters move in."
Monday, October 21, 2013
Single-Family Recovery Is ‘Uneven and Below Par’
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?”
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?”
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.
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